Wall Street Breakfast: Must-Know News

• Geithner's big rescue. Treasury's Geithner unveiled a much-anticipated financial rescue plan yesterday. As expected, the rescue includes bank stress tests, greater transparency, a Public-Private Investment Fund to soak up as much as $1T in toxic assets, expanding TALF to up to $1T, and a comprehensive housing program which will be announced in the coming weeks. The aim is to get $1T-$2T in financing flowing through the economy to revive both consumer and business lending. The Treasury unveiled a new website, FinancialStability.gov, which will detail where all the money is going and how it's being used. Geithner said "our nation faces the most severe financial crisis since the Great Depression. It is a crisis of confidence, of capital, of credit, and of consumer and business demand." (Read the Financial Stability Plan factsheet (.pdf)) (Read Geithner's statement)
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• New plan gets panned. Lack of details in Geithner's rescue plan helped push markets down nearly 5% (Dow -4.6%, S&P -4.9%, Nasdaq -4.2%) in the worst selloff since Obama became president. The particulars of a $50B home foreclosure program were left to be settled in the next few weeks, along with just how a planned Public-Private Investment Fund would work. Several key questions remained unaddressed, including whether ailing banks will be forced to fail, how illiquid assets will be removed from banks' balance sheets and how to stop falling house prices. Although Obama officials called the minimal details intentional and said they'll work with Congress and the public to solidify aspects of the rescue, investors and economists were less sure. Kenneth Rogoff, formerly of the IMF, said there's a risk market reaction could sabotage the plan before it gets underway, so this version of the rescue plan "may just end being an interim step." Tom Petruno took the opposite approach, saying "the success of the new plan will rest in part on whether the government can persuade investors that it will stick with the idea, and won't switch gears as it has with other bailout efforts since last fall."
• With Senate okay, stimulus moves to next round. Moving forward with the second prong of Obama's economic rescue plan, the Senate approved an $838B stimulus bill. Three Republicans threw their support behind the bill, bringing the final vote to 61-37. Aside from the differences House and Senate members will have to work out with each other to create one streamlined bill, Obama has his own requests and wants to restore some of the stimulus spending cut from the Senate's version. Congressional negotiators met late last night with White House officials to try and work out their disagreements over spending and tax cuts. Meanwhile, top lawmakers are struggling to bring the price of the two-year package down to the $800B mark.
• Bank chiefs make their case. The CEOs of eight of the largest U.S. banks will meet before Congress today to defend the use of $165B in rescue funds. Critics are livid with the industry for handing out $18.4B in bonuses even as the companies reported losses and accepted government funds, and for lavish expenditures including private jets and expensive retreats. While acknowledging 'broad public anger,' bank execs are expected to defend their actions and point to increased lending. On tap to testify: Lloyd Blankfein of Goldman Sachs (GS), James Dimon of JPMorgan Chase (JPM), Robert Kelly of Bank of New York Mellon (BK), Ken Lewis of Bank of America (BAC), Ronald Loque of State Street Corporation (STT), John Mack of Morgan Stanley (MS), Vikram Pandit of Citigroup (C) and John Stumpf of Wells Fargo (WFC). (Watch the live hearing at 10:00 ET.)
• GM slashes staff. General Motors (GM) will cut 10,000 white-collar jobs from its global workforce this year, or roughly 14% of its salaried staff. The announcement comes as GM rushes to pull together its restructuring plan by the Feb. 17 deadline, and could help push the company's main union into making larger concessions. Along with the job cuts, salaried workers remaining with the company will see their paychecks reduced by 3-10%. If GM doesn't win government approval of its plan, it could be forced to repay $13.4B of loans in April, triggering a possible bankruptcy filing.
• Suisse miss. Credit Suisse (CS) posted a larger-than-expected Q4 loss of 6.02B Swiss francs ($5.2B), and a total 2008 deficit of 8.2B francs. The investment banking unit had a pretax loss of 7.8B francs in Q4 on 3.2B francs of writedowns on leveraged loans and structured products. The bank attracted 2B francs of net new money from wealthy clients in Q4, down from 11.3B francs in Q3, and saw 'positive' net new assets in January. The dividend was cut to 10 centimes for 2008 vs. 2.5 francs the previous year. CEO Brady Dougan tried to focus on the positive, telling investors "we have had a strong start to 2009 and were profitable across all divisions year to date. We have positioned our businesses to be less susceptible to negative market trends if they persist in the coming months." Shares +1.1% in Zurich (7:00 ET).
• Steeled for loss at ArcelorMittal. ArcelorMittal (MT), the world's largest steelmaker, posted an unexpected Q4 loss of $2.63B vs. net income of $2.44B the year before (see earnings details below). The loss followed a one-off charge of $4.4B which included writedowns on inventories and raw-material contracts. The company expects the operating climate to remain 'challenging,' but sees Q1 Ebitda of around $1B. Shares +8.4% premarket (7:00 ET).
• Wholesale inventories fall. Wholesale Inventories -1.4% in December, more than the -0.7% consensus, but remain up 3.4% vs. a year ago. Wholesale sales fell 3.6%, and are down 10.7% vs. a year ago. The surprise drop in inventories probably means initial Q4 GDP estimates of -3.8% - which factored-in a 1.6% boost from inventory levels - were too high. Estimates of -4.6% now seem more likely.
• Retail sales. Retail chain store sales were unchanged compared to last week, ICSC reported, and declined 1.8% Y/Y. "Milder weather helped traffic flow a tad this past week, but consumers remain focused on staples... and continue to stretch their dollar by shopping at dollar stores." Redbook reported that national chain store sales fell 0.7% in the first week of February, slightly worse than the expected 0.5% fall. Sales were down 1.7% Y/Y.

Earnings: Wednesday Before Open

• Agrium (AGU): Q4 EPS of $0.79 beats by $0.15. Revenue of $1.985B (+33.0%) vs. $1.96B. (PR)
• Allegheny Energy (AYE): Q4 EPS of $0.51 misses by $0.01. Revenue of $707M (-10.0%) vs. $1.0B. (PR)
• ArcelorMittal (MT): Q4 EPS of $0.34 misses by $0.10. Revenue of $22.1B (-21.1%) vs. $19.7B. (PR)
• BCE (BCE): Q4 EPS of $0.55 beats by $0.04. Revenue of $4.5B (-0.7%) in-line. (PR)
• Coca-Cola Enterprises (CCE): Q4 EPS of $0.22 beats by $0.03. Revenue of $5.2B (-1.2%) in-line. (PR)
• Dean Foods Company (DF): Q4 EPS of $0.46 beats by $0.07. Revenue of $3.1B (-4.7%) vs. $3.2B. (PR)
• Genzyme (GENZ): FQ3 EPS of $1.04 beats by $0.02. Revenue of $1.17B (+13.2%) vs. $1.18B. (PR)
• Ingersoll-Rand (IR): Q4 EPS of $0.53 beats by $0.25. Revenue of $3.67B (+58.0%) vs. $3.75B. (PR)
• Jones Apparel Group (JNY): Q4 EPS of -$0.04 beats by $0.01. Revenue of $847M (+1.0%) vs. $827M. (PR)
• Level 3 Communications (LVLT): Q4 EPS of -$0.03 beats by $0.05. Revenue of $1.05B (-4.6%) vs. $1.08B. (PR)
• Macerich Company (MAC): Q4 EPS of $2.08 beats by $0.15. Revenue of $243.25M (-1.2%) vs. $229.55M. (PR)
• Marsh & McLennan Companies (MMC): Q4 EPS of $0.37 beats by $0.05. Revenue of $2.7B (-8.7%) vs. $3.0B. (PR)
• Millicom International Cellular (MICC): Q4 EPS of $0.61 misses by $0.91. Revenue of $907M (+18.4%) vs. $977M. (PR)
• Reynolds American (RAI): Q4 EPS of $1.27 beats by $0.11. Revenue of $2.2B (-2.4%) in-line. (PR)

Earnings: Tuesday After Close

• Applied Materials (AMAT): FQ1 EPS of $0.00 in-line. Revenue of $1.33B (-36%) in-line. "We acted early and decisively to reduce costs in line with economic conditions that have resulted in an unprecedented decline in demand. With our leading technology and strong balance sheet, Applied is positioned to weather this recession and invest in new products and services." Shares -3% AH. (PR, earnings call transcript)
• CB Richard Ellis Group (CBG): Q4 EPS of $0.37 beats by $0.10. Revenue of $1.28B (-30.1%) vs. $1.4B. Shares +11.4% AH. (PR)
• Cerner (CERN): Q4 EPS of $0.65 beats by $0.04. Revenue of $466M (+18.1%) vs. $445M. Shares +5.2% AH. (PR, earnings call transcript)
• CF Industries (CF): Q4 EPS of $3.59 vs. consensus of $2.11. Revenue of $1.07B vs. $892M. Shares +5.4% AH. (PR)
• Choice Hotels (CHH): Q4 EPS of $0.41 beats by $0.04. Revenue of $154.5M (-8.6%) vs. $158.5M. Sees Q1 EPS of $0.24 vs. $0.27, but 2009 EPS of $1.68 vs. $1.64. Shares +2.6% AH. (PR)
• Computer Sciences (CSC): FQ3 EPS of $1.06 beats by $0.04. Revenue of $3.95B (-5%) vs. $4.15B. Shares -0.2% AH. (PR, earnings call transcript)
• DaVita (DVA): Q4 EPS of $0.94 beats by $0.04. Revenue of $1.46B (+7.8%) in-line. (PR)
• Douglas Emmett (DEI): Q4 FFO of $0.38 beats by $0.05. Revenue of $156M (+11.9%) vs. $147M. Sees 2009 FFO of $1.24-1.30 vs. $1.34. (PR)
• General Cable (BGC): Q4 EPS of $0.34 vs. consensus of $0.55. Revenue of $1.29B (-0.4%) vs. $1.38B. Shares +0.1% AH. (PR)
• Great Plains Energy (GXP): Q4 EPS of $0.08 misses by $0.16. Revenue of $444M vs. $584M. Sees 2009 EPS of $1.10-1.40 vs. $1.44. Shares -21% AH. (PR)
• Macrovision (MVSN): Q4 EPS from continuing operations of $0.09 vs. consensus of $0.21. Revenue of $118M (+182.1%) vs. $111M. Shares +2.7% AH. (PR, earnings call transcript)
• Nvidia (NVDA): Q4 EPS of -$0.18 misses by $0.09. Revenue of $481M vs. $491. "The environment is clearly difficult and uncertain. Our first priority is to set an operating expense level that balances cash conservation while allowing us to continue to invest in initiatives that are of great importance." Shares -3.4% AH. (PR, earnings call transcript)
• Protective Life (PL): Q4 EPS of $0.80 misses by $0.01. Due to extraordinary market volatility and potential impact of fair value accounting on reported results, won't provide 2009 earnings guidance. (PR)
• Siliconware Precision Industries (SPIL): Q4 EPS of -$0.05 misses by $0.14. Revenue of $377.5M (-30.9%). (PR)
• Quest Software (QSFT): Q4 EPS of $0.37 beats by $0.05. Revenue of $202M vs. $199M. Shares flat AH. (PR, earnings call transcript)
• V.F. Corp. (VFC): Q4 EPS of $1.05 beats by $0.03. Revenue of $1.89B (-2.1%) vs. $1.92B. Sees Q1 EPS of $1.10-1.15 vs. $1.23, and revenue down 5-7%. Shares +0.2% AH. (PR, earnings call transcript)
• XL Capital (XL): Q4 EPS of $0.58 beats by $0.20. Revenue of $1.11B vs. $1.66B. $990M non-cash goodwill impairment charge. Will reduce workforce by 10%. Shares +15.2% premarket. (PR)

Today's Markets

• Asia markets reacted poorly to the U.S. financial rescue plan. Hang Seng -2.5% to 13,539. Shanghai -0.2% to 2,261. BSE -0.3% to 9,619. Kospi -0.7% to 1,191. Nikkei closed.
• In Europe at midday, London +0.1%. Paris -0.2%. Frankfurt +0.4%.
• U.S. futures: Dow +0.5%. S&P +0.05%. Nasdaq +0.3%. Crude +0.9% to $37.88. Gold +1.3% to $926.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  8:30 International Trade
  10:00 Geithner testifies on financial and housing markets crises
  10:00 Bank CEOs testify on TARP use
  10:30 EIA Petroleum Status
  1:00 PM Fed's Evans speaks on the economic outlook
  2:00 PM Treasury Budget
• Notable earnings before Wednesday's open: AGU, AYE, BCE, CCE, DF, DVA, GENZ, IR, JNY, LVLT, MAC, MICC, MMC, MT, RAI, SPIL
• Notable earnings after Wednesday's close: ARRS, ATVI, BMR, EQIX, GIL, HIW, ICO, JAH, LVS, NTAP, O, OFC, PPS, SQNM, STR, TCO, TEX, TQNT, WSH

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[James Wilson:]

So those who profited most are unwilling to step in and take on some of the burden of the recovery just because it will have lower profits ?

Well fork you then.

Feb 11 07:30 AM

[daffy:]

James,

since when did you believe it would be anything but?

Seriously, the political and financial elite could care less about you. It is just becoming more obvious.

Feb 11 08:22 AM

[know nothing:]

The elite don't care about anyone but themselves! Why is everyone running around like chicken little? We've out spent our means, and now it's time for pay back. Hurts don't it.

Feb 11 08:34 AM

[axelrod608:]

Talk about a major missed opportunity - all those perps in one location and no tar or feathers....

Feb 11 09:03 AM

[ChipSeal:]

"Obama officials called the minimal details intentional"

This is because they are in campaign mode. Be vague, make general statements about your goals but don't commit to specifics. This way, each member of your audience will impute his own favored solution into your remarks and support the idea! Once it is being implemented, it will be too late.

"Critics are livid with the industry for handing out $18.4B in bonuses even as the companies reported losses and accepted government funds, and for lavish expenditures including private jets and expensive retreats."

I thought all that money was to stimulate the economy. What is the "stimulative" difference between loaning out the money and buying jets and paying bonuses? I dare say the bank executives seem to spend taxpayers money just as responsibly as our elected officials!

Feb 11 09:07 AM

[Speedspirit:]

It is about time the U.S taxpayer starts to take notice of the games being played by the power elite. How much longer before main street get pissed and angry enough to do something about it. When? When they are broke and hungry. It shouldnt have to come to that but it probally will. They know it will get worse before it gets better they are just trying to steal every little bit before they go.

Feb 11 09:27 AM

[scotty1560:]

axelrod is so correct..
major major missed opportunity and so far Obama is missing the ball
at every angle...appointees, policy.

Obama has only a few swings at the plate before the money runs dry
and the window of opportunity vanishes....government refuses to get
serious about regulation and has yet to come up with a strategy that
makes any sense.... all paths lead down.

Feb 11 10:09 AM

[Jake Berzon:]

Some of those earnings results are much better than my worst fears. Hope is alive! :)

Feb 11 10:09 AM

[perki's:]

You have to see Rogers on Bloomberg this am. Oh my gosh. He is going nuts.

tinyurl.com/2r3359

Feb 11 10:13 AM

[Speedspirit:]

February 11, 2009 (LPAC)--Treasury Secretary Tim Geithner unveiled the Obama Administration's new bank bailout plan today, claiming that "we are fundamentally reshaping the government's program to repair the financial system." The plan he described, however, fell far short of that aim--far from being a fundamental change, it is more of the same old crap. There are changes, but they are irrelevant. The necessary first step in any meaningful recovery plan is to put the dead financial system through bankruptcy, writing off the quadrillion-dollar-plu... derivatives market, freezing the rest of the unpayable debt, and reorganizing the banking system into a new, highly regulated system where speculation is not allowed. This is the approach recommended by Lyndon LaRouche and codified in his Homeowners and Bank Protection Act. It is a step the Obama Administration is obviously reluctant to take

Feb 11 10:34 AM

[klaus914@ya...:]

I think they should relegislate the 91% Fedral Income Tax on all bonuses exceeding $1mil, no exceptions, no deductions and no exemptions - stick that up their craw - take the incentive out of these items of corporate squalor

Feb 11 10:37 AM

[jackooo:]

What if the government went into the banking business? One large government bank with mortgages at 3%. Everyone in the U.S. could use it for home buying.
This would automaticly FORCE other banks to lend at the same rate or lose customers.
Eventually the rate would rise but it has to be cheaper then giving banks billions for perks.
Think about it.

Feb 11 10:50 AM

[Drew Horn:]

The "experts" ( Krugman, Rogoff, etc.) admit that they don't have the "tools" needed to predict the future of this economy. One very important reason is globalization. All prior economic downturns were in economies wherin economic activity was primarily domestic. Globalization has made things worse and unpredictable. Countries that have less global economic activity will fare better.

If we provide liquidity to GMAC and people buy cars on credit, the resulting economic activity will benefit people in other countries more than us. If those loans default, only Americans will pay the bill. In effect, USA tax money used to pump retail sales (70% of the economy) will benefit global others more than us.

Geithner, et al, are using US money to stimulate a world economy. Unfortunately, we don't have enough money to effectively do so and printing more will cause such high inflation that it will make our current problems seem trivial. It is probable that we will have to create a new economic paradigm.

The real problem is that our "leaders" are unwilling to see or admit that we cant go back to 2007 and they are not prepared to lead us into the future.

Feb 11 11:50 AM

[AndrewBaker:]

Yeah, it's been said: the political and financial elite don't care beyond their need to save themselves. Prepared statements and speeches saying how dreadful it is and we must all work together to overcome; yet they carry on in place, without real restitution, whilst we have to work that much harder to cover the money being handed out to people who caused the mess in the first place. I wish I had an answer, and if I did, they would not be in it!

Feb 11 12:13 PM

[bbowen7:]

Lots of populist anger. I particularly enjoyed the complaints about bankers spending eminating from last week's Democrat retreat in Williamsburg.

Feb 11 12:13 PM

[PainfullyAware:]

The Government can not go into banking - That would compete with the Fed. (Power Given Is Not So Easily Taken Back)

All they can do is create another Bureaucratic Shell, that costs more to run than the benefit it provides, to shuffle the money and assets keeping as many balls in the air as it can.

Those who make peaceful revolution impossible make violent revolution inevitable. Preparations are being hastened for both options in the American Government and elsewhere.

Those that abandon their neighbors will suffer the same fate at a later time.

Things are not so well in OZ since the curtain became tattered.


On Feb 11 10:50 AM jackooo wrote:

> What if the government went into the banking business? One large
> government bank with mortgages at 3%. Everyone in the U.S. could
> use it for home buying.
> This would automaticly FORCE other banks to lend at the same rate
> or lose customers.
> Eventually the rate would rise but it has to be cheaper then giving
> banks billions for perks.
> Think about it.

Feb 11 01:42 PM

[xmichaelx:]

Has any president in your lifetime ever acted differently? Is so, you're much, much older than I.

Politicians are identical: People very good at fundraising and very little else.

On Feb 11 09:07 AM ChipSeal wrote:

> "Obama officials called the minimal details intentional"
>
> This is because they are in campaign mode. Be vague, make general
> statements about your goals but don't commit to specifics. This way,
> each member of your audience will impute his own favored solution
> into your remarks and support the idea! Once it is being implemented,
> it will be too late.

Feb 11 02:06 PM

[Rikiki:]

Herr Klaus,

You are on a slippery slope Freund. Do you remember the AMT...Alternative Minimum Tax... meant to snare a few hundred non tax payers. The folly is that raw numbers, as opposted to percentage based calculated numbers, do not allow for INFLATION. And once congress has tasted blood with this program they will be just as loathe to fix it as the have the AMT.

However, I totaly agree that the NY financial instutions are totally out of whack with the rest of the world in that peple get paid way more than virtually all other industries. Better just tax income and not distinguish the source.

Rikiki


On Feb 11 10:37 AM [e-mail] wrote:

> I think they should relegislate the 91% Fedral Income Tax on all
> bonuses exceeding $1mil, no exceptions, no deductions and no exemptions
> - stick that up their craw - take the incentive out of these items
> of corporate squalor

Feb 11 03:09 PM

[bobbobwhite:]

A bomb not dropped on congress today, with all the big bank CEO's there, may be thought of as a tragically missed opportunity, or a missed two-fer(gets congress too).

Great chances like this don't come along too often, but it will surely pass by like most of them do.

Feb 12 11:21 AM