- Underwater homeowners get a rescue. The White House launched its $75B foreclosure relief plan yesterday as new data showed 20% of homeowners with mortgages are "under water," or owe more than their house is worth. The program, which could help as many as 1 in 9 homeowners, offers cash incentives to loan servicers to cut monthly payments, will modify mortgages on single-unit homes up to $729,750 (with a higher limit for multiple-unit properties) and will apply only to loans originated before January 1. In the past, being under water ruled out the possibility of refinancing, but the new plan will allow homeowners with negative home equity to modify their loans. Still, as with any broad effort, the foreclosure relief plan creates distinct winners and losers among homeowners. Obama is also pushing for legislation to allow bankruptcy judges to alter loan terms; the House of Representatives is expected to pass a bill today allowing these mortgage "cramdowns."
- UBS stays mum. UBS (NYSE:UBS) has refused to provide the U.S. government with the details of 52,000 clients as part of a tax evasion probe, arguing that doing so would violate Swiss law. Last month, UBS agreed to pay $780M and disclose around 300 client names as part of a separate tax evasion settlement. Testifying in the Senate yesterday, UBS exec Mark Branson said bank officials "believe that UBS has now complied with the summons to the fullest extent possible without subjecting its employees to criminal prosecution in Switzerland," as the Swiss government recognizes only tax fraud, not tax evasion, as a crime. UBS therefore suggested the dispute should be resolved through diplomacy, not a legal suit. However, a top Justice Department official warned the agency may prosecute senior UBS executives.
- Fed okays CDS clearinghouse. The Federal Reserve approved a credit-default swap clearinghouse plan presented by IntercontinentalExchange (NYSE:ICE), leaving SEC approval as the final hurdle for the futures clearinghouse. Intercontinental has been competing with three rivals, including CME Group (NASDAQ:CME), to back the $27T CDS market; the winner stands to gain up to $400M annually in revenue. An SEC spokesman said Intercontinental's proposal is 'under active consideration' but he didn't know when the agency would make a decision.
- Beige book sees long recession. The Fed's Beige Book noted consumer spending remained sluggish on the whole, although many districts saw some improvement in January/February after a dismal holiday season. Travel and tourism fell noticeably, and manufacturing declines were pronounced. A near-term recovery looks unlikely, "with a significant pickup not expected before late 2009 or early 2010." (Read the Fed's summary or full report)
- Subpoenas for Merrill's merry millionaires. New York Attorney General Andrew Cuomo has issued subpoenas to seven top Merrill Lynch executives who received over $10M in cash and stock last year. Among the execs are top investment banker Andrea Orcel, global sales and trading chief Thomas Montag and former head of strategy Peter Kraus, each of whom made more than $25M apiece in 2008. Cuomo is investigating whether the bonus payments violated securities laws, and will ask the execs about their individual bonuses, their communications with John Thain and the timing of the bonuses. Bank of America (NYSE:BAC) has filed a petition in New York state court to keep the pay data confidential.
- Ford's new debt plan. Ford (NYSE:F) launched a major debt restructuring and plans to cut up to $10.4B, or around 40% of its debt, by offering cash and new shares to creditors. The automaker will make up to $2.2B in cash available for the restructuring, and is paying between $0.30-$0.55 on the dollar as an incentive to convert debt. Following the announcement, S&P cut Ford's credit rating to CC from CCC+, calling the move a distressed debt exchange but noting the downgrade does not reflect an increase in Ford's risk of bankruptcy. Fitch left its rating unchanged at CCC.
- Hartford may sell life unit to Sun Life. Sources say Hartford Financial Services (NYSE:HIG) is in talks to sell most of its unprofitable life insurance unit to Canada's Sun Life Financial (NYSE:SLF). Hartford has suffered from three credit-rating downgrades, and has watched its share price plunge 72%. As recently as this week, S&P cut the company's rating to BBB, saying losses at the life division, which has $247.9B of assets, are threatening the other half of the company. Hartford had previously held talks with MetLife (NYSE:MET) but no agreement was reached.
- MGM loan talks collapse. MGM Mirage (NYSE:MGM) and Dubai World failed to reach an agreement with Deutsche Bank (NYSE:DB), according to people close to the situation, and talks on a $1.2B loan to complete the Las Vegas CityCenter project have collapsed. Deutsche had been seeking equity and debt stakes in the $11.2B Las Vegas development. MGM Mirage and Dubai World are now said to be holding talks with other parties. Yesterday, MGM Mirage also warned it may breach its debt covenants this year if economic conditions worsen.
- Wyeth loses key drug case. Wyeth (WYE) lost a key court case, as the Supreme Court ruled drugmakers can be sued in state court over alleged drug defects, even if the FDA has already approved a medicine's use and the attached warning label. The decision eases the way for liability lawsuits, and could have significant implications for industries beyond pharmaceuticals. Justice John Paul Stevens wrote on behalf of the court that with 11,000 drugs on the U.S. market, the FDA's own advisory panels have said they lack the resources to protect the public.
- YouTube said to be in talks on music website. YouTube (NASDAQ:GOOG) is said to be in talks with Vivendi's Universal Music Group to create an online music website with the working title "Vevo." Universal approached YouTube at the end of last year and proposed a site that would include videos from all the major music labels, with YouTube providing the technology to sell ads accompanying the videos. Discussions are in an advanced stage but could still fall apart.
- China holds back from new stimulus. The Shanghai Composite Index gained over 6% yesterday on expectations that new Chinese stimulus measures would be announced today, but investors were left disappointed when no such announcement came. In his annual speech to China's parliament, Premier Wen Jiabao said an 8% growth target is within reach this year, signalling the government sees an additional stimulus as unnecessary. The IMF forecasts just 6.7% growth for the country, the slowest rate in nearly 20 years.
- Germany provides corporate credit. Germany created a €100B ($126B) fund to help corporations struggling with tight credit conditions. The fund will offer €75 billion in liquidity guarantees and €25 billion in direct loans. GM's (NYSE:GM) German unit Opel could be one of the first companies to tap the fund, after GM Europe warned it needs €3.3 billion in aid.
- Job cuts. Challenger reported that firing announcements fell 23% in February vs. the month before, to 186,350, but were up 158% Y/Y. "The decline in job cuts last month offers some hope that January was the peak and we will now see layoffs begin to fall or at least stabilize." However, ADP reported (.pdf) that the private sector shed 697,000 jobs in February, worse than the -630,000 economists expected and a big drop from January's -614,000 (revised from -522,000). Monster's online employment index edged up 4 points in February to 122, but is down 26% Y/Y. "The gain in the February Index is the first since October of 2008.... suggests that traditional annual hiring cycles remain somewhat intact."
- BoE rate cut. As expected, the Bank of England cut its key rate by half a percentage point this morning to 0.5%. BoE said lowering its key rate probably won't suffice, and resolved to take further actions to boost money supply, including buying up £75B of public- and private-sector debt - mainly the former - over the next three months.
- More non-mfg contraction. Economic activity in the non-manufacturing sector contracted in February, registering 41.6% on the ISM Index vs. January's 42.9%. This is the fifth month in a row of sector contraction.
Earnings: Thursday Before Open
- Canadian Natural Resource (NYSE:CNQ): Q4 EPS of $1.29 beats by $0.53. Revenue of $2.5B (-21.5%) vs. $2.1B. (PR)
- Ciena (NYSE:CIEN): FQ1 EPS of -$0.09 misses by $0.02. Revenue of $167M (-26.4%) vs. $172M. (PR)
- Talisman Energy (NYSE:TLM): Q4 EPS of $0.53 beats by $0.16. Revenue of $2.20B (-8.1%) vs. $2.25B. (PR)
- Urban Outfitters (NASDAQ:URBN): Q4 EPS of $0.24 misses by $0.04. Revenue of $508M (+9.2%) vs. $515M. (PR)
Earnings: Wednesday After Close
- Adobe (NASDAQ:ADBE): Sees FQ1 EPS of $0.44-0.45 vs $0.42 consensus and revenue of $783-786M vs. $792M. Sees FQ2 revenue of $675-725M vs. $776M consensus. Shares +8.8% premarket. (PR)
- Foot Locker (NYSE:FL): Q4 EPS of $0.24 beats by $0.08. Revenue of $1.32B vs. $1.37B. Shares -3.7% AH. (PR)
- Gymboree (NASDAQ:GYMB): Q4 EPS of $1.00 beats by $0.02. Revenue of $289M in-line. Sees Q1 EPS of $0.18-0.25 vs. consensus of $0.76, and negative comps in the range of 20-25%. Shares -32.1% AH. (PR)
- Jackson Hewitt (JTX): FQ3 EPS of $0.74 beats by $0.02. Revenue of $97.8M vs. $104.7M. Sees 2009 EPS of $1.00-1.10 vs. $1.48 consensus and revenue of $250-255M vs. $295M. Shares -3% AH. (PR)
- PetSmart (NASDAQ:PETM): Q4 EPS of $0.62 beats by $0.03. Revenue of $1.36B in-line. Sees 2009 EPS of $1.40-1.50 vs. $1.49 consensus and revenue growth in mid-to-high single digits. Shares -4.4% AH. (PR)
- Sigma Designs (NASDAQ:SIGM): Q4 EPS of $0.38 beats by $0.20. Revenue of $1M (-38%) vs. $47.3M. "The IPTV market is showing resiliency to the current economic turmoil and we are confident that it will continue to demonstrate strength throughout this year." Shares +9.7% AH. (PR)
- Weight Watchers International (NYSE:WTW): Q4 EPS of $0.56 beats by $0.04. Revenue of $338M (-1.6%) vs. $356M. 2009 guidance in-line with Street. Shares +6.6% AH. (PR)
- Asia markets were mixed Thursday after China Premier Wen reaffirmed the country's 8% growth goal for 2009, but was silent on the much-rumored extra stimulus money that sent Shanghai soaring Wednesday. Nikkei +1.95% to 7,433. Hang Seng -0.97% to 12,211. Shanghai +1.04% to 2,221. BSE -2.94% to 8,198.
- In Europe, markets are sagging at midday. London -2.5%. Paris -2.2%. Frankfurt -2.6%.
- U.S. stock futures failed to carry Wednesday's strength into the overnight session. Dow -1.3% to 6740. S&P -1.7% at 697. Nasdaq -0.8%. Crude -2.7% to $44.15. Gold +1.1% to $917. 30-year Tsys +1.01%.
Thursday's Economic Calendar
6:00 Chain Store Sales
6:00 Monster Employment Index
7:00 BoE Announcement
7:45 ECB Announcement
8:30 Jobless Claims
8:30 Productivity and Costs
9:00 RBC CASH Index
10:00 Factory Orders
10:00 Fed's Kohn testifies on AIG
10:30 EIA Natural Gas Report
4:30 PM Money Supply
- Notable earnings before Thursday's open: CIEN, CNQ, TLM, URBN
- Notable earnings after Thursday's close: IPI, MRVL
Seeking Alpha editor Eli Hoffmann contributed to this post.
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