Wall Street Breakfast: Must-Know News

• Stimulus bill becomes law. Obama signed the $787B economic stimulus package into law yesterday, less than a month after taking office. The signing was accompanied by a relatively upbeat speech in which Obama focused on a positive future and said "we have begun the essential work of keeping the American dream alive in our time." Obama also said the stimulus doesn't "constitute all of what we must do to turn our economy around," and Press Secretary Robert Gibbs added that Obama has not ruled out the possibility of a second stimulus package. (Read Obama's remarks at the signing)
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• Next up: fighting foreclosure. Obama will outline his estimated $50B housing plan today. The centerpiece of the plan will likely be loan modifications, and bankruptcy judges will also get more power to help keep borrowers in their homes. Government subsidies to mortgage servicers and lenders will aim to encourage them to lower payments for borrowers in distress. Banks including Citigroup (C), JPMorgan Chase (JPM), PNC Financial Services (PNC) and Bank of America (BAC) have agreed to suspend foreclosure proceedings until Obama's plan is adopted.
• Guzzling automakers ask for more. General Motors (GM) and Chrysler are seeking up to $16.6B and $5B respectively in additional federal aid, warning bankruptcy could cost the U.S. five times as much. Both companies met yesterday's deadline to report their progress in revamping operations. GM plans on cutting 47,000 more jobs, shedding brands, closing additional plants, and slashing executive pay, but said it needs additional money by next month to survive. It's also hoping to obtain $6B in foreign aid from the governments of Canada, Germany, the U.K., Sweden and Thailand. Chrysler will cut another 3,000 jobs in addition to the 32,000 shed last year. Both companies offered pessimistic outlooks for 2009 U.S. auto sales but brushed off the idea of bankruptcy as overly-prohibitive and too expensive. (Highlights of GM's restructuring plan) (Highlights of Chrysler's restructuring plan)
• SEC charges Stanford on scam. The SEC has charged Allen Stanford and three of his companies with a 'massive' $8B fraud, alleging the financier lured investors with promises of high returns on CDs but poured the money into a 'black-box' of hard-to-trade assets. Most of the money allegedly went into real estate and private equity, with just Stanford and one other person reviewing the investments instead of the more than 20 analysts Stanford claimed were monitoring the portfolio. Stanford also said Antiguan regulators verified the assets, a claim the SEC rejects. U.S. marshals led by the SEC raided the Houston offices of his Stanford Financial Group yesterday morning; the company remained open for business, but a sign was taped to the door that read "under the management of a receiver." (Read the SEC's complaint (.pdf))
• Recession grounds Honda's jet plans. Honda (HMC), facing its first quarterly loss in at least 15 years, plans to scale back its business jet production and may offer voluntary retirement in the U.S. for the first time. The company expects a loss of ¥243B ($2.6B) in the current quarter as plunging demand eats into sales and a stronger yen eats into overseas earnings. Jet production will be reduced to 70-80 annually from the end of 2010 instead of 100 planes a year. As a result of the scale-back in production, it will take Honda an extra year to recoup its investment.
• SocGen posts profit. Societe Generale (SCGLY.PK) posted a Q4 profit as earnings from French consumer lending outweighed losses at the international retail banking and asset management divisions. Net income was €87M ($110M), below consensus of €122M but a strong rebound from last year's €3.35B deficit following a trading scandal. The dividend was raised by 33% to €1.2 per share. SocGen predicted 2009 will 'probably remain challenging,' but investors showed confidence, pushing the stock up as much as 7.1% in Paris trading.
• Germany okays forced nationalization. Germany's cabinet approved a bill that would allow the forced nationalization of banks as a last resort to prevent a systemic banking crisis. The bill has a short time-frame, allowing forced nationalization only until Oct. 31, 2009, and comes as the government seeks control over troubled Hypo Real Estate.
• NY manufacturing weakens. The Empire State Manufacturing survey showed NY manufacturing deteriorated significantly in February. Business conditions and new orders fell to record lows. Employment indexes remained deep in negative territory.
• Treasury International Capital. Net foreign purchases of long-term securities were $34.8B in December, exceeding consensus of $20B. Breakdown: foreigners bought net $22.4B of U.S. securities, while Americans sold net $12.4B of foreign securities.
• Homebuilders remain grim. NAHB's Housing Market Index inched up 1 point to 9 from January's record low, indicating homebuilders have seen essentially no improvement. Despite the rise, six-month expectations fell as homebuilders worry about the "continually rising number of foreclosures and short sales."

Earnings: Wednesday Before Open

• Cimarex Energy Co (XEC): Q4 EPS of $0.32 misses by $0.13. Revenue of $299M (-31.9%) vs. $313M. (PR)
• Constellation Energy Group (CEG): Q4 EPS of $0.03 misses by $1.21. Revenue of $4.9B (-7.9%) vs. $5.9B. (PR)
• Deere (DE): FQ1 EPS of $0.48 misses by $0.15. Revenue of $5.15B (-1.1%) vs. $4.6B. (PR)
• Goodyear Tire & Rubber Company (GT): Q4 EPS of -$1.22 misses by $0.19. Revenue of $4.1B (-19.9%) vs. $4.4B. (PR)
• Host Hotels & Resorts (HST): Q4 EPS of $0.53 beats by $0.06. Revenue of $1.65B (-8.7%) vs. $1.61B. (PR)
• Incyte (INCY): Q4 EPS of -$0.50 misses by $0.02. Revenue of $0.94M (-90.4%) vs. $0.74M. (PR)
• OfficeMax (OMX): Q4 EPS of $0.02 misses by $0.13. Revenue of $1.9B (-14.3%) in-line. (PR)
• Suntech Power (STP): Q4 EPS of -$0.27 misses by $0.01. Revenue of $414M (+4.3%) vs. $380M. (PR)

Earnings: Tuesday After Close

• Agilent Technologies (A): FQ1 EPS of $0.20 misses by $0.08. Revenue of $1.17B (-16%) vs. $1.26B. "Forecasting in the current environment is almost futile, as visibility is virtually nil. Our current best guess is that second quarter revenues and operating earnings, which are normally seasonally stronger, will be roughly in line with first quarter results..." Shares -7.6% AH. (PR)
• Chesapeake Energy (CHK): Q4 EPS of $0.73 misses by $0.01. Revenue of $2.98B vs. $2.58B. Takes $1.8B impairment on asset values. Shares -4.8% AH. (PR)
• Ultra Petroleum (UPL): Q4 EPS of $0.43 misses by $0.05. Revenue of $207M (+28%) vs. $243M. Shares -2.8% AH. (PR)

Today's Markets

• Asia markets closed mostly down. Nikkei -1.45% to 7,534. Hang Seng +0.55% to 13,016. Shanghai -4.7% to 2,210. BSE -0.2% to 9,015.
• In Europe at midday, London -0.8%. Paris -0.4%. Frankfurt -0.9%.
• U.S. futures: Dow +0.6%. S&P +0.7%. Nasdaq +0.5%. Crude +0.5% to $38.73. Gold -0.3% to $965.50.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  7:45 ICSC Retail Store Sales
  8:30 Housing Starts
  8:30 Import/Export Prices
  8:55 Redbook
  9:15 Industrial Production
  10:30 EIA Petroleum Status
  2:00 PM FOMC Minutes
• Notable earnings before Wednesday's open: CEG, CMCSA, DE, GT, HST, INCY, OMX, STP, XEC
• Notable earnings after Wednesday's close: AAP, ADI, AEM, BDN, BIDU, BMRN, CBS, EXR, FRT, HPQ, IM, KGC, NHP, NM, ORLY, PAAS, PCLN, SNPS, TRN, WFMI

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[BlueOkie:]

Well, Obama did say he wanted to spread the wealth.

Feb 18 08:12 AM

[tginomorebush:]

And to think that king george iii bush-it sits on his new throne in crawford happily reviewing his "decision-making" and "missions accomplished" "errorless" legacy .......... living happily ever after...

Feb 18 08:42 AM

[slackwatercove:]

Get your head out of the sand and off the Bush blame game train... Democrats pushed banks into this mess by requiring them to lower lending standards so that "everyone" could enjoy the American dream... whether they could afford it or not... Bush and the Republicans just didn't do enough to stop it - although they did warn everyone...


On Feb 18 08:42 AM tginomorebush wrote:

> And to think that king george iii bush-it sits on his new throne
> in crawford happily reviewing his "decision-making" and "missions
> accomplished" "errorless" legacy .......... living happily ever after...

Feb 18 09:06 AM

[JasonR:]

Since when was the natural change in economic cycles anyone's fault? The problem is we're a bunch of pansies who think it should always be sunny outside.

Feb 18 09:22 AM

[notsosmart:]

& who sent money by the ton to iraq? fannie may & mac?LOL.

Feb 18 10:26 AM

[darlowsenigm:]

JasonR, do you also believe global climate change is not anyone's fault?

Feb 18 10:28 AM

[AndrewBaker:]

Regardless of politics - though all the politicians must share the blame along with the bankers - we need to see something worthwhile being done. And I don't see it. Much of the plans outlined are just political dogma wrapped in a bail-out guise. Sure, we need good education, good road, bridges and the like, more jobs, and less people thrown out of their homes, and companies surviving not going into bankrupcy; but what's been presented so far doesn't show anything to me anyway that it's going to happen, that anything proposed will lead to the desired result. No wonder financials are in meltdown. If the government does not very soon put up something that shows they are really on the case, then we'll all know that much sooner that it's gonna get a lot worse before it gets any better.

Feb 18 10:57 AM

[bbowen7:]

Good comment, AndrewBaker. The market's malaise comes from disappointment that we haven't heard anything about clearly identifying problems and solving them. How do we deal with the toxic assets and the legacy healthcare costs in the auto industry? Instead we get a little of this and a litle of that that the politicians want.

Feb 18 01:00 PM

[AndrewBaker:]

You are Right in San Francisco - the politicians are just dressing up what they would do anyway in the clothes of a supposed financial rescue plan. Obama reminds me of a British politician called Tony Blair who came to power in 1997 claiming to have a great new deal, was a good orator, and he and his pals proceeded to rip off the British economy for years because the good times allowed it without showing a deficit. Now look at what's happening there. Their financial boss Gordon Brown has moved up, unelected, to Prime Minister, and the country is almost bankrupt. I hope the US doesn't go the same way. We need clear policies and plans that we can see will work. Let's have them now.

Feb 18 01:55 PM

[Rob Viglione:]

Note that 30-Year Treasuries peaked in December, reaching 2.519%. This corresponds with the surge in foreign purchases, but note that current prices have declined quite a bit, now yielding 3.52%. This would indicate foreign purchases are trailing off, as expected.

Feb 18 04:05 PM

[Joseph Sherman:]

"Guzzling automakers ask for more" - Automakers should look to the capital markets and private ownership for funding. High levels of government intervention are not efficient for long term viability of firms.

Feb 19 03:10 AM

[robert.b.fe...:]

GM and Chrysler need to get prepackaged bankruptcy packages instead of bail out packages. The 1977 CRA should be repealed immediately along with Sorbanes/Oxley. None of this will happen though because the democrats are repaying thier debts to the unions and community organizers that got them elected.

Feb 19 09:25 AM

[bobbobwhite:]

All of these bailouts are just warmups for more begged money down the line. I can hear them now........"That was too easy. Let's get more." Is anyone still fooled about this fraud?

When Detroit finally goes BK and it will, it will have billions of free taxpayer dollars stashed away somewhere for the Bigs there and in Washington. Duh. "Why earn it when you can get it free?"

The artificial middle class in America, created after WWII, is just about tapped out, which was the plan all along. "Let them save the money for years, then we will take it from them." We will always have the poor existing mainly on social charities, and also the very rich with their fat excesses taken from others. The ones in between are in big trouble.

Also, if an "investor" puts his money with any one man firm, he deserves to get it taken from him under the "a fool and his money are soon parted" provision of the cosmic rules of wisdom.

Feb 19 11:15 AM