U.S. stock futures ignore European turmoil following Italian poll. The inconclusive Italian election, in which an anti-austerity comedian won the most votes, has sent Asian and European markets into turmoil. At midday in Europe, the main indices were uniformly lower, while yields on 10-year Italian bonds were +28 bps at 4.75%. However, U.S. stock futures were up premarket ahead of a two-day appearance by Ben Bernanke in Congress. Are investors banking on some soothing words about money printing? (See below for more details)
H-P investor drops bid to oust Chairman. One of H-P's (HPQ) largest stockholders, CtW Investment Group, has dropped its campaign to unseat Chairman Raymond Lane at the company's annual meeting in March following a shareholder's meeting yesterday, although CtW will still lobby to remove two directors. H-P reportedly told the meeting that it's investigating its ill-fated purchase of Autonomy and that it has created an informal committee to advise CEO Meg Whitman.
Superstorm Sandy helps boost Home Depot's earnings. Home Depot's (HD) Q4 earnings topped forecasts as EPS came in at $0.68, net profit jumped 29% to $1B, and revenue climbed 13.9% to $18.2B. Earnings were boosted by the impact of Superstorm Sandy, an improving housing sector, and an extra week of sales. Home Depot plans to repurchase up to $17B in stock and raise its dividend 35% to $0.39 a share. The retailer forecast 2013 EPS of $3.37, below consensus of $3.49.
Top Stock News
AB InBev, DOJ advance towards Modelo deal. AB InBev (BUD) and the Justice Department are reportedly moving closer to an agreement that would persuade the DOJ to approve AB InBev's acquisition of control in Grupo Modelo. Discussions are focusing on the company's offer to sell a Modelo brewery, which is similar to InBev's sale of Labatt USA when it bought Anheuser-Busch for $52B in 2009.
Europe's top court to hear Google privacy case. Google (GOOG) and Spain's data protection authority were due before Europe's highest court today over whether the company should have to delete damaging information from its search index. The case involves a Spanish man who wants his non-payment of social security several years ago erased from Google's results. The case throws up all sort of issues such as rights to privacy, as well as transparency and potential manipulation of the Internet.
Jury to decide punitive fine for J&J over mesh. A jury is due to start hearing arguments today about the punitive damages that Johnson & Johnson (JNJ) should pay for harm caused to a South Dakota patient by the company's Gynecare Prolift vaginal mesh. The jury yesterday ordered J&J to pay Linda Gross $3.35M in an initial award. The firm faces 4,000 lawsuits over the product in the U.S., although Morningstar analyst Damien Conover reckons the company should be able to withstand any further penalties.
Talks over BP Gulf settlement not looking good. Negotiations between BP (BP) and states to settle the latter's claims over the Gulf oil spill are reportedly being made more difficult by the competing interests of the states. At the opening of the civil trial yesterday, the Justice Department's Michael Underhill accused BP of "willful misconduct," which is an even higher standard than gross negligence and would leave BP open to fines of up to $17.6B.
Corporate pension deficits soar. The WSJ shines a light on the significant financing gap in corporate pension plans, with the deficit among Russell 3000 companies rising to $441B in 2012 from $392B in 2009 despite the funds adding $1T in assets. The causes of the problems include the Fed's record low interest rates, Moody's downgrade of several major banks last summer, and increasing life expectancy.
Firms raise $9.9B in bonds. Low interest rates may be hurting corporate pension funds, but companies continue to exploit the opportunity to issue debt on the cheap, with eight yesterday selling $9.9B in bonds. Pepsi (PEP) led the way by raising $2.5B, followed by UnitedHealth (UNH) with $2.25B and Caterpillar Financial Services (CAT) with $1.1B.
Top Economic & Other News
Yields spike in Italian debt auction. The results of the Italian election have immediately hit the government where it hurts, with yields jumping to 1.24% in an auction of €8.75B in 6-month sovereign bonds from 0.73% in a sale in January. The bid-to-cover ratio fell to 1.44 from 1.65.
Obama, GOP senators to meet as automatic cuts loom. President Obama is due to meet Republican Senators John McCain and Lindsey Graham today, ostensibly to talk about immigration reform, although you'd expect the $85B in automatic spending cuts to crop up in conversation, especially as the deadline is on Friday. There's otherwise little indication that Washington's making too much effort to cancel or postpone the sequestration.
MSCI: Fed's holdings could plummet in adverse scenario. Ahead of Ben Bernanke's testimony to Congress, MSCI has calculated that the bank could take mark-to-market losses of $547B on its holdings within three years if GDP contracts and rates rise sharply along with inflation. Using Fed stress-test scenarios, MSCI reckons the losses would be $216B if the economy performs in line with consensus. It might be worth noting, though, that the Fed doesn’t mark its portfolio to market.
In Asia, Japan -2.3% to 11399. Hong Kong -1.3% to 22520. China -1.4% to 2293. India -1.6% to 19015.
In Europe, at midday, London -1.3%. Paris -2.4%. Frankfurt -1.9%.
Futures at 7:00: Dow +0.2%. S&P +0.2%. Nasdaq +0.15%. Crude -0.7% to $92.43. Gold +0.3% to $1591.10.
Today's economic calendar:
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 New Home Sales
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:00 Richmond Fed Mfg.
10:00 Bernanke delivers semi-annual monetary policy testimony
1:00 PM Results of $35B, 5-Year Note Auction
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