Wall Street Breakfast: Must-Know News 19 comments
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- Cash for mortgage mods. The Treasury has earmarked nearly $10B in federal subsidies for mortgage modification programs at six major U.S. banks. If the modifications have long-term success, the mortgage specialty arms of Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) could each earn over $2B. The other three mortgage servicers participating in the program are GMAC Mortgage Inc., Saxon Mortgage Services Inc. and Select Portfolio Servicing. Payments to servicers won't kick in until a modified loan has survived a 90-day trial period. The White House believes the program could help as many as 3-4M homeowners.
- General growth goes bankrupt. Mall giant General Growth Properties (GGP) filed for bankruptcy protection early this morning, marking one of the largest-ever real estate failures in U.S. history. Analysts say General Growth will likely survive the long-anticipated Chapter 11 filing intact, but could emerge as a smaller company after selling some properties. The filing marked the end of a months-long effort to restructure a heavy $27B debt load, and could mark the end of the stock, which is down more than 97% from its 2007 high and -52.4% premarket to $0.50 (7:00 ET).
- Geithner goes easy on Chinese currency. After accusing China of currency manipulation in January, Treasury's Geithner backtracked in his first semi-annual report on foreign currency exchanges. In the document, Geithner wrote that the yuan remains 'undervalued' but no country 'met the standards' of illegal currency manipulation in the second half of 2008. The shift could anger U.S. lawmakers, companies and trade unions who have tried to punish nations with undervalued exchange rates. The report cited efforts by China to rebalance its economy, including allowing the yuan to rise and announcing a two-year, $590B stimulus package.
- Beige book: slowdown starts to moderate. The Federal Reserve's Beige Book reported overall economic activity either contracted or remained weak. However, "five of the twelve Districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level." The overall takeaway is that the economy is getting worse, but more slowly.
- Pension probe charges by NY AG. In what New York Attorney General Andrew Cuomo said will be the first charges of many yet to come, former hedge fund manager Barrett Wissman was criminally charged for his role in a New York State pension kickback scheme. Wissman pleaded guilty to the felony, will serve as a witness in the continuing investigation and will pay $12M in forfeiture and penalties. The former leader of New York's Liberal Party, Raymond Harding, was criminally charged with getting over $800,000 in illegal fees on a pension investment. Cuomo told reporters the scheme had turned the New York State Common Retirement Fund into a 'piggybank' to raise campaign funds, enrich individuals and reward favors.
- eBay makes Gmarket offer. eBay (EBAY) offered to buy South Korean rival Gmarket (GMKT) for $1.2B in cash, outstripping media reports from earlier in the week that eBay would offer $413M for a 34% stake. eBay will buy 67% of Gmarket from investors and make a general offer of $24/share, a 20% premium on Gmarket's closing price yesterday. The acquisition would more than double eBay's South Korean sales and serve as a platform for expansion in Asia. eBay plans to complete the purchase during the second quarter and then de-list Gmarket from the Nasdaq.
- GM speeds up timetable. General Motors (GM) is accelerating its timetable for closing around 1,700 dealerships, said sources familiar with the matter, as it tries to meet a June 1 restructuring deadline. Around 200 dealerships were already closed in the first quarter. Sources also said GM has found several potential investors for its troubled Hummer brand and expect to receive an offer to keep the brand running. A GM spokesman confirmed that several groups are interested in Saturn, another of GM's money-losing brands.
- Chrysler-Fiat talks heat up. Talks have intensified between Chrysler and Fiat, with Fiat CEO Sergio Marchionne saying he saw no reason why Fiat and Chrysler could not complete a proposed alliance by the end of April. However, Marchionne also told reporters a partnership deal has only a 50-50 chance of succeeding because of lack of progress in talks between Chrysler and union leaders. If a partnership is finalized, Marchionne is likely to seek broad management authority over Chrysler, possibly as CEO.
- SEC takes aim at ratings firms. SEC's Mary Schapiro said the agency has 'more to do' in regulating credit-rating firms and that the performance of rating firms in connection to mortgage-backed securities has 'shaken investor confidence to its core.' The SEC held a roundtable on the topic yesterday, focusing on ways to minimize potential conflicts of interest. Suggestions included switching ratings firms to an investor-paid model from an issuer-paid model, or for fees be paid out of the rated bonds' interest payments. Schapiro had previously suggested the possibility of creating an independent oversight body to set standards for the ratings firms.
- UBS downsizes again. UBS announced plans to cut 8,700 jobs, or 11% of its workforce, and to lower operating costs by 15%, an admission that the bank has yet to recover from the crises in its trading and wealth management units. CEO Oswald Grubel told investors "unfortunately, I am not able, as yet, to offer you any good news," and warned the bank expects to report a Q1 net loss of nearly 2B Swiss francs ($1.76B) next month, worse than market expectations.
- AIG may be near auto deal. AIG (AIG) is reportedly close to a deal to sell its U.S. auto business to Zurich Financial Services (ZFSVY.PK) for around $2B. Sources said an agreement to sell the unit could be reached as early as today, and that Zurich would pay for the acquisition mostly in cash. If the deal goes through, it will be AIG's largest divestiture since being bailed out by the government.
- Roche revenue growth. Roche Holding (RHHBY.PK) reported a 7% increase in Q1 revenue to 11.58B Swiss francs ($10.2B) thanks to strong sales of its portfolio of cancer drugs. The sales growth was largely in-line with analyst expectations of 11.56B francs. The company said it is confident in its ability to meet its full-year targets and will update its 2009 outlook in July to reflect the full takeover of Genentech.
- Quest settles diagnostic claims. Quest Diagnostics (DGX) and its Nichols Institute Diagnostics unit reached a settlement on criminal and civil allegations connected to diagnostic test kits manufactured and sold until 2006. Prosecutors alleged that Quest and NID manufactured diagnostic tests that provided inaccurate and unreliable results. The settlement will see Quest pay $262M plus interest as a fine. Quest will also pay a $40M fine after pleading guilty to felony misbranding over a laboratory test used to measure certain hormone levels.
- H-P steals top spot from Dell. According to two market trackers, Hewlett-Packard (HPQ) overtook Dell (DELL) in U.S. computer sales during the first three months of the year. During the same time frame, computer sales in the U.S. and worldwide were slightly better than expected, building hopes for an industry turnaround this year.
- Fed to disclose stress test methods. Ahead of the bank stress test results due in early May, sources say U.S. regulators are planning to disclose their testing methods to increase credibility in the process. A white paper with details of the stress testing process will likely be released within the next two weeks.
- Lending falls for TARP recipients. According to the Treasury, the 21 largest bank recipients of TARP funds are offering less credit to business and consumers. Lending fell by 2.2% across all commercial-lending and consumer-lending categories in February from the month before. Commercial real estate and general business lending continued to deteriorate, as did student and auto loans. The one bright spot was mortgage lending, which saw a 35% uptick in February vs. January.
- China's slowing growth. China's GDP grew at the slowest pace in almost two decades, expanding just 6.1% in Q1 from the year before. By comparison, Q4 2008 saw 6.8% growth and China reached 13% growth for the full year of 2007. However, some indicators continued to improve in March, suggesting the worst of the downturn may have already passed.
- Mortgage apps fall. Mortgage applications fell 11% from a week ago, MBA reported, on a seasonally adjusted basis. However, the group noted that the weekly figures were not adjusted for the Easter/Passover weekend, which may have contributed to the drop in application volume. The average interest rate on 30-year fixed-rate mortgages dipped to 4.70% from 4.73%.
- CPI inches down. The Consumer Price Index decreased 0.1% in March after rising 0.4% in February, on a seasonally adjusted basis. Consensus had been for a 0.2% increase. Core CPI was up 0.2% on a month-by-month basis, in-line with estimates, and rose 1.8% vs. the previous year.
- Industrial production drops. Industrial production fell 1.5% in March, marking the fifth consecutive month of contraction. Output is now at its lowest level since December 1998. Capacity utilization fell to 69.3%, a record low for the series, which began in 1967.
Earnings: Thursday Before Open
- Baxter International (BAX): Q1 EPS of $0.83 beats by $0.02. Revenue of $2.82B (-1.8%) vs. $2.87B. (PR)
- Harley-Davidson (HOG): Q1 EPS of $0.50 misses by $0.01. Revenue of $1.29B (-1.5%) vs. $1.28B. (PR)
- JPMorgan (JPM): Q1 EPS of $0.40 beats by $0.08. Revenue of $25B (+48.2%) vs. $23B. Shares +2.3% premarket (7:00 ET). (PR)
- Nokia (NOK): Q1 EPS of €0.10 beats by €0.01. Revenue of €9.28B (-26.7%) vs. consensus of €9.77B. Device sales of 93.2M units were down 19% from a year ago and 18% sequentially. Net income of €122M was the lowest since Q2 1996. Shares +8.2% premarket (7:00 ET). (PR)
Earnings: Wednesday After Close
- Crown Holdings (CCK): Q1 EPS of $0.28 beats by $0.06. Revenue of $1.68B (-9.6%) vs. $1.91B. (PR)
- Heartland Express (HTLD): Q1 EPS of $0.15 beats by $0.03. Revenue of $115M (-22.9%) vs. $130M. (PR)
- Polycom (PLCM): Q1 EPS of $0.27 beats by $0.01. Revenue of $225M (-12.9%) vs. $234M. (PR)
Today's Markets
Asia markets were mostly lower Thursday, Europe is up, while futures are trending lower.
- Asia: Nikkei +0.14% to 8,755. Hang Seng -0.55% to 15,583. Shanghai -0.08% to 2,534. BSE -2.99% to 10,947.
- Europe at midday: London +1.1%. Paris +0.8%. Frankfurt +1.2%.
- Futures at 7:00: Dow -0.5% to 7935. S&P -0.7% to 843. Nasdaq -0.3%. Crude +0.2% to $49.33. Gold +3.7% to $927.
Thursday's Economic Calendar
- 8:30 Housing Starts
8:30 Jobless Claims
10:00 Philadelphia Fed Survey
10:30 EIA Natural Gas Report
12:15 PM Fed's Lockhart speaks on the financial crisis
4:30 PM Money Supply
7:30 PM Fed's Yellen speaks on lessons for central bankers - Notable earnings before Thursday's open: APH, BAX, CY, FCS, GCI, GPC, HOG, ITW, JPM, LUV, NOK, PH, SHW
- Notable earnings after Thursday's close: AMLN, BIIB, GOOG, ISRG, PBCT, TPX, VRTX, WERN
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 19 comments:
Building Permits were down -9.0%.
Neither of these statistics was particularly surprising news. There was unseasonably warm weather in February. This led to some projects starting ahead of time. Feb.'s numbers were too high. March's numbers are likely too low, as the higher starts in Feb. likely subtracted from the planned March starts. Next month's number may be more meaningful. It is unlikely to be skewed by earlier starts the previous month subtracting from it. We will have to wait to see what that number turns out to be.
While public bailouts of both parties to mortgage contracts cannot be endorsed, the asymetry is instructive. Trillions for banks--billions for homeowners.
Kudlow and friends laugh and have a gay old time , they've declared the WORST is over . Bill and the Big Blonde are having lunch at the Four Seasons , whens the last time You had a $200 lunch ?? Thats per person mind You ! There meeting two banking "friends" that came out just fine in the financial mess , I just call them "crooks ." And so it goes just another day in NY . Good Day Dylan Radigan were ever You are . He was The Only HONEST and Geniune person at CNBC
Hopefully the SEC will figure out a way to fix the rating agencies. Including a small fee in the bond issuances seems the most logical way to get their incentives back in line.
On Apr 16 01:24 PM WAKEUP wrote:
> Same - Oh. The recession is real, deep, long-lasting, and has changed
> forever the American financial landscape.Oh, well, let's go to Starbucks,
> for coffee. Oops, forgot, Starbucks closed that store. Got any instant
> coffee?
~~~~~~~~~~~~~~~~~~~~~~...
I actually MUCH prefer the coffee, atmosphere, music, the overall ambience -- being adult and all -- to McDonalds!
There is something about kids running around screaming and such and pelting about to and fro the playground, that in the afternoon, evenings, and especially weekends, simply cannot compare to a Starbucks. And yes, I love children. I raised three and Mickey D's was the favorite haunt.
Starbucks is more than just a great cup of coffee.
An expansion on this: China has 2 Bn people ( at a guess by their own reckoning) .
Another not so fresh fact. Australia has just blown 20 Bn of it own cash surplus on a Cash Splash.
They have borrowed 48 Bn from the Chinese to further finance a another Cash splash starting this month because the first one failed .
They are going to have a further cash splash later this year.
That is 68Bn so far with an unknown amount to be borrowed.
Australia's tax payers number 9 Million.
From the above facts you may draw your own conclusions but I can see something called manipulation and lies happening in the world money markets when a small nation like Australia has a government which says it needs to borrow so much money thus going from a 20 Bn surplus to a 48 bn debt in 12 weeks.
I think I need a good cup of rain forest coffee...( what ever the hell that means)
On Apr 16 03:55 PM slipperyrazor wrote:
> absolutely not one word about yesterdays TEA PARTYS. what direction
> are we going in? i could give a sh...t about coffee. please give
> me some fresh facts.
Quest Diagnostics Settles DOJ Charges Over Faulty Tests: www.newsinferno.com/ar...
On Apr 16 02:21 PM Cetin Hakimoglu wrote:
> McDonalds now sells coffee
On Apr 16 12:19 PM Cetin Hakimoglu wrote:
> Another awesome day for me. I love being right and making money.
On Apr 16 12:19 PM Cetin Hakimoglu wrote:
> Another awesome day for me. I love being right and making money.
On Apr 16 04:19 PM I am not a number.. wrote:
> Fresh Fact: China is going to spend 580 Bn on a Cash splash.
> An expansion on this: China has 2 Bn people ( at a guess by their
> own reckoning) .
> Another not so fresh fact. Australia has just blown 20 Bn of it own
> cash surplus on a Cash Splash.
> They have borrowed 48 Bn from the Chinese to further finance a another
> Cash splash starting this month because the first one failed .<br/>They
> are going to have a further cash splash later this year.
> That is 68Bn so far with an unknown amount to be borrowed.
> Australia's tax payers number 9 Million.
> From the above facts you may draw your own conclusions but I can
> see something called manipulation and lies happening in the world
> money markets when a small nation like Australia has a government
> which says it needs to borrow so much money thus going from a 20
> Bn surplus to a 48 bn debt in 12 weeks.
> I think I need a good cup of rain forest coffee...( what ever the
> hell that means)
>
>
>