Wall Street Breakfast: Must-Know News

• Obama sees opportunity in crisis. In his first address to a joint session of Congress, Obama framed the economic crisis as an opportunity to solve some of the nation's problems, including overhauling the banking and health care systems. Though he acknowledged the heavy costs the country is paying during the current recession, Obama tried to change the tone of his message, reassuring listeners that "we will rebuild, we will recover, and the United States of America will emerge stronger than before." All the rebuilding and recovery carries a price tag, however, and Obama signalled more taxpayer money will be needed to pull the country out of the credit crisis. (Read Obama's remarks)
• Banks bounce on Bernanke comments. Bernanke helped give bank stocks a boost yesterday after making the strongest comments yet against nationalizing U.S. banks. Speaking to the Senate Banking Committee, Bernanke said he doesn't "see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalize a bank when that just isn't necessary." Looking forward, Bernanke held out hope for an economic recovery by 2010 but said recovery depends on whether policymakers can break the 'destructive power' of the interconnected crises in banking and the broader economy.
• Merrill's larger-than-expected loss. Merrill Lynch reported a Q4 loss of $15.84B, around $533M more than estimated by Bank of America (BAC). Merrill also revealed material weaknesses in its controls over financial reporting as of the end of its fiscal year in December 2008. The larger-than-expected loss is unwelcome news for Bank of America as it tries to integrate Merrill and prepares for a government 'stress test' set to begin this week.
• AIG asset sales unworkable. Sources say Edward Liddy, CEO of AIG (AIG), has concluded that selling assets to repay government loans is not a viable plan. AIG has lost more than 85% of its market value in the last five months, the price it can fetch for many of its units has fallen dramatically and fewer companies are in a strong enough position to bid on AIG's assets. In addition to an earlier idea of converting the government's preferred shares into common stock holdings, one alternative under discussion is for AIG to hand over some of its non-U.S. life insurance businesses to the government in return for forgiveness of part of the loans.
• Ballmer reaches out to Yahoo. Microsoft (MSFT) CEO Steve Ballmer defended the company's investments in research and development, despite a gloomy financial outlook. Expected to total $9B during the current fiscal year, Microsoft's R&D spending is a sore point among some investors who would like to see a quicker payoff, especially from money-losing units like Microsoft's internet search business. Ballmer also reiterated that he's interested in speaking to new Yahoo (YHOO) CEO Carol Bartz about how the two can become stronger competition for Google (GOOG) by reaching an internet search deal. Shares fell 2.7% after hours when Ballmer failed to announce any acceleration in cost cutting.
• SF Chronicle joins the endangered list. In a further sign of the deterioration of the news industry, Hearst Corp. has said it will close or sell the San Francisco Chronicle unless it can rapidly cut costs. Hearst will dramatically reduce the Chronicle's work force of 1,500 but if its cost-saving target isn't reached 'within weeks,' it will try to sell the paper. Since few investors are willing to make such purchases in the current economic crisis, Hearst said it will close the paper if it can't find a buyer. The Chronicle is the 12th largest paper in the U.S. and the largest daily in Northern California.
• Biogen sets sights on new MS drug. Biogen Idec (BIIB) is reportedly in talks to buy Acorda Therapeutics (ACOR) in order to gain access to an experimental pill for people with multiple sclerosis. Acorda announced that the drug, Fampridine, helped MS patients walk and Biogen, the world's largest maker of MS medicines, is in talks to buy the marketing rights to Fampridine as well. MS is currently managed by injecting medicines, so Biogen faces competition from firms like Merck (MRK) and Novartis (NVS) to produce the first MS pill.
• U.K. economy shrinks... The U.K. economy contracted the most since 1980 in Q4 as corporate and consumer spending plunged. GDP fell 1.5% from Q3, with consumer spending -0.7% and fixed investment -2.3%.
• ...while falling pound causes trouble. EU officials are concerned the pound's slide to a record low against the euro could destabilize the British economy. According to a document prepared last month by officials of the European Commission and EU finance ministries, the pound's 'very rapid' drop 'raises questions about the financial stability of the British economy,' and is a 'source of concern for the euro area.' The report also contradicts a claim by U.K. Prime Minister Gordon Brown that a weaker currency helps the economy more than it hurts it.
• Retail sales rise. Retail chain store sales rose 0.6% from a week ago, ICSC said, and declined 0.8% Y/Y. "Sales improved again this past week and extended its non-negative trend to four weeks - a welcome sign for retailers." According to Redbook, national chain store sales rose 0.9% in the first three weeks of February, better than the expected 0.5% bump. Sales -1.5% Y/Y.
• Home prices at new lows. Home prices closed out 2008 at record lows, S&P/Case-Shiller reported, with its 20-city composite index dropping 18.5% vs. a year ago in December. "There are very few, if any, pockets of turnaround that one can see in the data," index chairman David Blitzer said.
• Mtg. apps decrease. Mortgage applications fell 15.1% from a week ago, MBA reports, while 30-year fixed mortgage rates increased to 5.07% from 4.99%.
• Consumer confidence falls. Conference Board's Consumer Confidence Index fell to a new all-time low of 25.0 from January's 37.4. Expectations dropped to 27.5 from 42.5. "Not only do consumers feel overall economic conditions have grown more dire, but... they anticipate no improvement in conditions over the next six months."

Earnings: Wednesday Before Open

• Ambac (ABK): Q4 EPS of -$6.97 misses by $6.79. "Our financial results continue to be affected by the disappointing housing market and other economic conditions... We continue to place significant emphasis on de-risking our portfolio." (PR)
• CenterPoint Energy (CNP): Q4 EPS of $0.25 misses by $0.02. Revenue of $2.77B (+6.6%) vs. $2.71B. Sees 2009 EPS of $1.05-1.15 vs. $1.29. (PR)
• CMS Energy (CMS): Q4 EPS of $0.30 beats by $0.06. Revenue of $1.84B in-line. (PR)
• Del Monte Foods (DLM): FQ3 EPS of $0.30 beats by $0.088. Revenue of $942M (+8.4%) vs. $956M. Sees 2009 EPS of $0.64-0.68 vs. $0.59 and sales up 9-11% vs. a previous 8-10%. (PR)
• Denbury Resources (DNR): Q4 EPS of $0.18 beats by $0.05. Revenue of $224M (-30.7%) vs. $240M. (PR)
• Discovery Co (DISCA): Q4 EPS of $0.25 misses by $0.05. Revenue of $904M (+0.1%) vs. $935M. (PR)
• Dollar Tree Stores (DLTR): Q4 EPS of $1.15 beats by $0.02. Revenue of $1.4B (+6.8%) in-line. (PR)
• Frontier Communications (FTR): Q4 EPS of $0.11 misses by $0.04. Revenue of $547M (-5.2%) vs. $555M. (PR)
• J.M. Smucker Company (SJM): FQ3 EPS of $0.88 beats by $0.01. Revenue of $1.2B (+77.7%) in-line. (PR)
• KBR Inc. (KBR): Q4 EPS of $0.54 beats by $0.14. Revenue of $3.4B (+41.7%) vs. $3.0B. (PR)
• Lexington Realty Trust (LXP): Q4 FFO of $0.37 misses by $0.03. Revenue of $105M (-11.9%) vs. $101M. (PR)
• Pennsylvania REIT (PEI): Q4 FFO of $1.08 beats by $0.06. Revenue of $130M vs. $79M. Sees 2009 FFO of $2.75-2.95 vs. $3.34. (PR)
• Petrohawk Energy (HK): Q4 EPS of -$0.04 misses by $0.07. Revenue of $271M (+19.1%) vs. $226M. (PR)
• Quicksilver Resources (KWK): Q4 EPS of $0.23 beats by $0.02. Revenue of $209M (+40.1%) vs. $222M. (PR)
• R.R. Donnelley & Sons Company (RRD): Q4 EPS of $0.63 beats by $0.07. Revenue of $2.8B (-9.5%) vs. $2.7B. (PR)
• Saks (SKS): Q4 EPS of -$0.60 misses by $0.30. Revenue of $835M (-14.9%) vs. $859M. Comps fell 15.3%. "It remains impossible to predict future sales and gross margin performance with any degree of certainty." (PR)
• SPX (SPW): Q4 EPS of $2.06 beats by $0.19. Revenue of $1.5B (+17.1%) in-line. (PR)
• TJX Companies (TJX): Q4 EPS of $0.55 beats by $0.04. Revenue of $5.4B (-0.2%) in-line. (PR)
• Zale (ZLC): FQ2 EPS of $0.16 misses by $0.32. Revenue of $679M (-18%) vs. $693M. (PR)

Earnings: Tuesday After Close

• Chicago Bridge & Iron (CBI): Q4 EPS of $0.72 beats by $0.06. Revenue of $1.51B (++14.4%) vs. $1.55B. Sees 2009 EPS of $1.30-2.00 vs. $2.15 and revenue of $4.4-4.8B vs. $5.91B. Shares +9% AH. (PR)
• Crown Castle International (CCI): Q4 EPS of -$0.24 misses by $0.20. Revenue of $392M (+4.5%) vs. $385M. Shares -6.3% AH. (PR)
• Dreamworks Animation SKG (DWA): Q4 EPS of $0.58 misses by $0.02. Revenue of $200M (-31.2%) vs. $232M. Shares -5.8% AH. (PR, earnings call transcript)
• Exco Resources (XCO): Q4 EPS of $0.13 misses by $0.05. Revenue of $272M (+0.8%) vs. $304M. Shares -12.5% AH. (PR)
• First Solar (FSLR): Q4 EPS of $1.61 beats by $0.31. Revenue of $434M (+116%) vs. $410M. Shares -13.4% AH. (PR, earnings call transcript)
• Health Care REIT (HCN): Q4 EPS of $0.83 in-line. Revenue of $147M (+17.4%) in-line. Sees 2009 EPS of $3.20-3.30 vs. $3.42. Shares -2.5% AH. (PR)
• Helix Energy Solutions (HLX): Q4 EPS of $0.02 misses by $0.34. Revenue of $541M (+8.1%) vs. $565M. Shares -10.5% AH. (PR)
• Nabors Industries (NBR): Q4 EPS of $0.83 beats by $0.01. Revenue of $1.48B (+11.9%) in-line. "Q4 was not as bad as it could have been and the future is probably going to be better than the price of our stock seems to indicate." Shares +1.2% AH. (PR)
• Range Resources (RRC): Q4 EPS of $0.33 beats by $0.11. Revenue of $345M (+54.4%) vs. $263M. Targeting 10% production growth in 2009. Shares flat AH. (PR)
• Wynn Resorts (WYNN): Q4 EPS of $0.07 misses by $0.37. Revenue of $614M (-13.6%) vs. $703M. "Starting in October, we experienced a dramatic deceleration in business from the casino and non-gaming departments." Shares -15.1% AH. (PR, earnings call transcript)

Today's Markets

• Asia markets got a lift from Tuesday's strong U.S. session. Nikkei +2.65% to 7,461. Hang Seng +1.61% to 13,005. Shanghai +0.27% to 2,207. BSE +0.91% to 8,903.
• Europe stocks opened higher and spent the morning trading in a tight range. At midday: London +1.2%. Paris +1.1%. Frankfurt +1.2%.
• U.S. stock futures drifted lower overnight. Dow -0.6% to 7261. S&P -0.7% to 763.50. Nasdaq -0.5%. Crude +1% to $40.35. Gold -1% to $961. Treasurys are essentially flat.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  10:00 Existing Home Sales
  10:00 Bernanke speaks to the House Committee on Financial Services
  10:30 EIA Petroleum Status
• Notable earnings before Wednesday's open: ABK, CMS, CNP, DISCA, DLM, DLTR, DNR, FTR, HK, KBR, KWK, LXP, PEI, RRD, SJM, SKS, SPW, TJX, ZLC
• Notable earnings after Wednesday's close: AGO, CLF, CRM, ESRX, FLR, FLS, GDP, GNK, KEG, LTD, MEDX, MRX, PDGI, PXP, SCI, SVNT, TS, USU

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[Big-P:]

Let's get real people. The "market" doesn't trade off nonsense spewed by government "leaders" it trades up or down based on money flow from people like me.

-Big-P

Feb 25 08:50 AM

[know nothing:]

The stock market investors, always claiming this is the bottom, get in before the market takes off. Reminds me of battered women, Battered women never leave a bad realationship because of fear, fear of being abused some more, fear of missing something good that might come out of the relationship, or fear of being alone

Haven't you guys been hurt enough? Don't invest based on fear!.

Feb 25 09:46 AM

[Richard Col...:]

Let's be logical, how can large companies lose 75 to 90% on their stock price since Oct. 1977 and still be in the black.
These companies show no signs of going bankrupt and one day will explode to the upside unless our once great country goes under.
Don't let the Moody's, the Cramers and the bankrupt banks yell sell, sell, sell.
Remember the smart money like Buffett is buying low and selling high.

Daniel Kowkabany

Feb 25 10:20 AM

[Jgirl:]

I am a woman with MS that has been in the Fampridine trial for over five years now. It states above that Biogen will be in competition to compete with other Pharmas because they will have the first "pill for MS". This Pill is NOT to manage the relapses, remissions and progession of the disease as the other Pharmas injectable drugs do, but rather to help the symptoms of the disease. Fampridine has improved walking speed, lessened fatigue and other symptoms for myself any many others with MS .
I just wanted to make that clear for anyone who's interested.

Feb 25 10:37 AM

[Gravity404:]

Your joking, right? Psychology is too much of the market. Just look at the spike when Bernanke spoke earlier this week and compare that to when Dodd and Obama used words like catastophy.

Bubbles inflate prices on the upside just as much as over selling to the down side.


On Feb 25 08:50 AM Big-P wrote:

> Let's get real people. The "market" doesn't trade off nonsense spewed
> by government "leaders" it trades up or down based on money flow
> from people like me.
>
> -Big-P

Feb 25 10:40 AM

[axelrod608:]

>> ..."companies show no signs of going bankrupt and one day will explode to the upside unless our once great country goes under." >>

Look at any bull market and you'll find P/E ratios doubling, tripling or more. The driving force is EARNINGS. Increases in earnings drive stock prices up.

If you believe the claptrap coming out of DC that is working on the theory that the market can be made whole by re-capitalizing insolvent financial institutions, then it would logically follow that current federal policy will work. If it does, it will be the first time in history.

To quote Jerry Maguire, "Show me the money". Where exactly are the earnings going to come from to drive stock prices up ?

Our failed economy is driven 70% by consumer spending. Consumers are out of work, hours for those who work cut, no home equity.left to extract, savings and retirement funds savaged. Exactly where is the increase in consuner spending going to come from ?

Half of the remaining 30% of our failed economy is generated by the "financial sector". How are they doing ? DC is going to reduce mortgage rates which will shrink their earnings and cramdown losses on underwater mortgages. Just exactly where will these imaginary earnings increases come from ?

The programs coming from DC have the same probability of working as the probability of snow here in Florida.

Earnings drive markets. Lack of earnings gut them.

"Show me the money"

Feb 25 11:03 AM

[Richard Col...:]

axelrod608,

Go ahead and think like that. All other losers in the market do the same thing __ wait until the price of the stock has increased about 40% and the (so called ) analyst are telling you to buy, then you finally get in, then you get the crumbs.

Can you hear Cramer yelling "buy, buy, buy"? He will do it, once the stock has gone up about 90%.

Know the history of the company in which you want to invest. If their product or service is relevant to the times, you will make money.

Everyone on Wall Street wants to "show you the money" __ very few can put it into your bank account.

Feb 25 12:28 PM

[axelrod608:]

Mr Collins - it is helpful when criticizing someone to have one or two facts. You haven't a clue what my investing philosophy is based on a largely political opinion.

For the record, I bought over 3000 shares of stock this week. I have buy orders holding for another 2500 shares. if the prices get down to my level.

I understand clearly that the stock market is not the economy or vice versa. There is money to be made in EVERY market condition. Even when the politicians are doing everything possible to keep this mess screwed up. Believe in the bailouts if you want. Believe the market has bottomed if you want.

I believe I will buy up a bunch of resouce stocks that have been decimated and make big bucks when they rebound. You have a nice day.

Feb 25 01:45 PM

[Richard Col...:]

axelrod608,

I could have ONLY commented on what you originally said, "show me the money". For me that's after the fact.

I invest on potential.

You have a nice day too.

Feb 25 02:12 PM

[bbowen7:]

A comment on the San Francisco Chronicle.
- They are subject to the forces facing all newspapers. I read the NYT, the Drudge Report, and Seeking Alpha on line. I've kept the WSJ.
- I've dropped the Chron, and then reinstituted it for local sports, theater, and music coverage. The political slant is so infuriating that I don't have the energy to fight through it. My sense is that the editorial policy has seen it as a good business strategy to cater to the far left - but they have lost most of the moderates, and any credibility.
- San Francisco has a number of free dailies - the Examiner for the more conservative; the Bay Guardian for the more liberal.
- It is a shame if the Chronicle just folds. Maybe Nancy Pelosi will get an earmark in the next round of the TARP. There hasn't been a critical article about her in 10 years.

Feb 25 03:10 PM

[Joseph Sherman:]

"SF Chronicle joins the endangered list." This points to a broader concern for paper based news services worldwide. The world is changing, the newspapers must adapt or they will become extinct. People want to be part of the news; to connect to each other and create the news.

Feb 25 05:48 PM

[Mad Hedge F...:]

In five years there will probably be only two mass circulation papers left, The New York Times and the Wall Street Journal, with the Washington Post as an outlyer. Thousands of small, local, niche publications will take up the slack. As a long time print journalist dating back to the typewriter days myself, I am sad to see newspapers go. But you can’t exactly sit like Denmark’s old King Canute and order the tide to stop rising. Journalism is degrading into an army of guys banging away at the computers at 3:00 AM in their boxer shorts. Trust, accuracy, objectivity, style, and taste will be the victims.

Feb 26 06:58 AM

[Achangel:]

1.- Spanding drives you into bankruptcy'
2.- Saving and Investing can make you rich.
3.- Savings is proper if it takes in account currency devaluation and/or cost of living increases.
4.- Investing is proper in businesses that produce marketable goods.
5.- Taxation is the way we pay for civilization (Oliver Wendel Holmes), but confiscatory or unfair taxation drives investment away and promotes all sorts of avoidance methods, available mostly to the rich.
6.- FICA, or any other similar tax, is an anormous burden on the poor, middle class and employers; however, the earnings cap saves the ones most able to pay for it.
7.- Unreasonable retiremt income and other perks of Congress members are not only unreasonable, create a separate cast society and is a slap in the face of US taxpayers, made second class citizens by this self serving legislation, in adition to being a prohibitive cost.
8.- Medicare and Medicaid, as they are presently legislated, have been the primary cause for out of contol health costs and a gigantic burden to the Treasury. However, the VA model has worked very well, without depriving the beneficiaries while maintaining costs under control.
9.- Before attempting to "salvage" non payers of mortgages from their woes, the incredibly stupid legislation that forced banks into granting them has to be struck down.
10.- The so called Stimulus Packsge has done little to address any of the above stated.

Feb 26 10:38 AM

[billy32:]

Every time obama speaks, the market goes down. Asian is struggling too, which could be bad, see here crashmarketstocks.com

Feb 26 11:46 PM