Wall Street Breakfast: Must-Know News

• Chrysler goes bankrupt. It's official - Chrysler has filed for Chapter 11 bankruptcy protection, and announced a deal with Fiat giving the Italian carmaker an initial 20% stake. Obama thanked everyone from unions to executives for fighting to keep the automaker alive, and blamed 'a small group of speculators' for making bankruptcy inevitable. The plan now is for Chrysler to leave bankruptcy protection in a month or two with a lighter balance sheet, new management, fewer dealers, lower labor costs, a Fiat alliance and possibly even a new name.
• Cramdowns get voted down. The Senate rejected an amendment that would have given bankruptcy judges the ability to ease a homeowner's monthly payments and stave off foreclosure. Cramdown fans said the amendment would have helped keep millions of Americans in their homes, but critics argued the plan's arbitrary rules would scare off investors and prolong the housing slump. The defeat of the cramdown bill in the Senate came as the House voted to cap the fees credit card companies can charge.
• Citi's Nikko sale. Citigroup reached a deal to sell Nikko Cordial Securities to Sumitomo Mitsui Financial (SMFJY.PK) for around ¥774.5B ($7.9B), ending Citi's ambitions to create a full-service bank in Japan. The deal will turn Sumitomo Mitsui into a major player in Japan's securities industry. The deal will create an accounting loss for Citigroup, but will raise its tangible common equity, an important move in light of the capital shortfall identified by stress tests.
• Cuomo pension probe widens. New York Attorney General Andrew Cuomo is expanding his probe of pension-fund kickbacks, saying the probe has exposed "a national network of actors" whose schemes are ongoing, and has charged a money manager with making illegal payments to a political consultant in exchange for investment business. The charge is at least the fifth since Cuomo's investigation began.
• BoA board wants Lewis to stay. Bank of America (BAC) directors showed continued support of CEO Ken Lewis despite outside pressure to accelerate a search for his replacement. The subject of succession didn't come up during a board meeting Wednesday, or during recent conversations with regulators. However, the board's continued public support for Lewis will likely raise tensions with angry shareholders who already voted Lewis out of the chairman position. Separately, lawmakers will likely call for hearings on the involvement of the Treasury and Federal Reserve in Bank of America's acquisition of Merrill Lynch.
• Stress test results delayed. The Federal Reserve postponed the release of banks' stress test results while bank executives argue with regulators over the tests' preliminary findings. Originally scheduled for publication May 4, the results likely won't be published until the end of next week.
• UBS demurs on tax case disclosures. Responding to the U.S. lawsuit on tax evasion, UBS said revealing the names of 52,000 U.S. customers would violate Swiss criminal law prohibiting such disclosures and trample on Swiss sovereignty. According to UBS' filing, the disclosure request also violates tax treaties between the U.S. and Switzerland, and is "fundamentally an issue for diplomats, not litigators."
• Fed eyes TALF terms. The Federal Reserve is reportedly preparing to announce new terms for TALF to help revive the commercial real estate market. The Fed will likely roll out new loans with five-year terms to better match the need of investors in commercial mortgage-backed securities, up from the current three-year loan terms.
• AmEx cut to junk. S&P downgraded American Express' (AXP) credit rating amid concerns about the company's long term liquidity. Its counterparty credit rating was cut by two notches to BBB+, while its preferred stock rating was cut to junk territory with a three-notch drop to BB. Further downgrades are possible.
• Disney does the Hulu. Disney (DIS) joined up with video site Hulu (GE, NWS) and will distribute films from Walt Disney Studios and programs from ABC and the Disney Channel through the site. The deal marks a shift in strategy for Disney, which will cede some control over the distribution of its programming in exchange for an equity stake, and brings together three of the biggest broadcast and cable network owners under the same banner. GE's NBC Universal, News. Corp and Disney will each hold roughly a 27.5% stake in the venture.
• Hasbro, Discovery build kids' network. Hasbro (HAS) and Discovery Communications (DISCA) have teamed up to launch a children's entertainment network in 2010. The new network will replace the Discovery Kids network in around 60M homes, and will help Hasbro transform itself into an entertainment company as toys face increased competition from videogames, the internet, movies and TV.
• Personal income falls. U.S. consumer spending fell in April together with incomes. Personal Income fell 0.3% ($34.4B) in March, while disposable income decreased less than 0.1% ($1.8B). Personal consumption expenditures (PCE) declined 0.2% ($24.2B).
• Employment costs rise. Employment costs rose a record low 0.3% in Q1, in-line with consensus. Over the past year, employment costs have risen a record low 2.1%.
• Jobless claims better than consensus. Initial jobless claims were 631K, down from last week's 645K (revised) and better than consensus of 640K. Continuing claims rose 133K to 6.27M.
• Business conditions improve (.pdf). Business conditions in the Chicago area surged to their best reading in seven months, according to the NAPM Chicago Business Barometer. Varied "general comments" included "Record setting Federal debt will harm economic recovery," and "Small business lending is picking up..."

Earnings: Friday Before Open

• American Axle & Manufacturing (AXL): Q1 EPS of -$0.37 beats by $0.18. Revenue of $402M (-31.5%) vs. $427M. (PR)
• Aon (AOC): Q1 EPS of $0.76 misses by $0.12. Revenue of $1.85B (-2.7%) vs. $2.08B. (PR)
• Apartment Investment and Management Company (AIV): Q1 FFO of $0.42 beats by $0.08. Revenue of $349M (+0.4%) vs. $311M. Sees Q2 FFO of $0.37-0.43 vs. $0.44, and full-year FFO of $1.65-1.95 vs. $1.65. (PR)
• Brookfield Properties (BPO): Q1 EPS of $0.32 misses by $0.03. Revenue of $592M (-9.1%) vs. $533M. (PR)
• Chevron (CVX): Q1 EPS of $0.92 beats by $0.11. Revenue of $36.13M vs. $21.14M. Shares +0.4% premarket. (PR)
• Clorox (CLX): FQ3 EPS of $1.17 beats by $0.27. Revenue of $1.35B (-0.2%) in-line. Sees full-year EPS of $4.00-4.15 vs. $4.21, and sales growth of 3-4% vs. a previous 3-5%. Shares +1.6% premarket. (PR)
• Cott (COT): Q1 EPS of $0.28 vs. consensus of -$0.07. Revenue of $367M vs. $377M. (PR)
• Dean Foods (DF): Q1 EPS of $0.52 beats by $0.10. Revenue of $2.7B (-12.2%) vs. $2.9B. "We have significant momentum in our business with an exceptionally strong first quarter behind us and indications of a solid start to the second quarter." (PR)
• Domtar (UFS): Q1 EPS of -$0.07 misses by $0.03. Revenue of $1.39B (+1.3%) vs. $1.39B. "The rapid decline of paper volumes in recent months has been abating." (PR)
• DryShips (DRYS): Q1 EPS of $0.36 beats by $0.17. Revenue of $197M (-15.3%) in-line. Shares +15.3% premarket. (PR)
• FLIR Systems (FLIR): Q1 EPS of $0.35 beats by $0.05. Revenue of $272M (+14.8%) vs. $277M. Full-year guidance in-line. (PR)
• Fortune Brands (FO): Q1 EPS of $0.30 beats by $0.08. Revenue of $1.44B (-20.3%) in-line. (PR)
• James River Coal (JRCC): Q1 EPS of $1.03 beats by $0.22. Revenue of $192M (+39%) vs. $193M. (PR)
• MasterCard (MA): Q1 EPS of $2.80 beats by $0.19. Revenue of $1.16B (-2.2%) vs. $1.21B. Gross dollar volume and purchase volume up 0.3%. Transactions up 5.8%. Shares +1.9% premarket. (PR)
• NiSource (NI): Q1 EPS of $0.62 in-line. Revenue of $2.72B (-17.2%) vs. $2.66B. (PR)
• PPL Corp. (PPL): Q1 EPS of $0.60 beats by $0.14. Revenue of $2.36B (+54.6%) vs. $1.69B. (PR)
• Simon Property Group (SPG): Q1 FFO of $1.61 beats by $0.13. Revenue of $918.5M (+2.6%) vs. $886M. Says it raised $1.6B in Q1. Shares -0.2% AH. (PR)
• TECO Energy (TE): Q1 EPS of $0.16 beats by $0.01. Revenue of $824M vs. $764M. Shares (PR)

Earnings: Thursday After Close

• Ariba (ARBA): FQ2 EPS of $0.15 beats by $0.01. Revenue of $84.7M (+5.2%) vs. $85M. Shares +5.1% AH. (PR)
• Chiquita (CQB): Q1 EPS of $0.49 beats by $0.21. Revenue of $842M (-9.9%) vs. $910M. "While Q1 results were better than expected... the company's full-year expectations remain the same." Shares +14.4% AH. (PR)
• Curtiss-Wright (CW): Q1 EPS of $0.35 beats by $0.01. Revenue of $424M (-2.2%) vs. $420M. Reaffirms full-year guidance. (PR)
• DENTSPLY International (XRAY): Q1 EPS of $0.43 in-line. Revenue of $507M (-9.6%) vs. $524M. (PR)
• Evergreen Solar (ESLR): Q1 EPS of -$0.40 vs. consensus of -$0.08. Revenue of $55.8M (+26.2%) vs. $49.2M. Shares -14% AH. (PR)
• Hartford Financial (HIG): Q1 EPS of -$3.77 misses by $0.72. Sees full-year EPS of $0.05-0.45 vs. $0.98 consensus. Book value per share down 57% to $24.15. Net unrealized investment losses $6.9B, up from $6.8B in Q4. Shares -12.6% AH. (PR)
• Ingram Micro (IM): Q1 EPS of $0.23 beats by $0.10. Revenue of $6.75B (-21.4%) in-line. "With the recession now affecting all regions, we do not expect a pick-up in sales for several more months, perhaps for the remainder of the year. However, we don't feel the market getting worse at this stage..." Shares +3.3% AH. (PR)
• Manitowoc (MTW): Q1 EPS of $0.18 beats by $0.05. Revenue of $1.03B (+4%) in-line. Shares -2.5% AH. (PR)
• McAfee (MFE): Q1 EPS of $0.54 beats by $0.06. Revenue of $448M (+21.1%) in-line. Q2 guidance in-line. Shares +3.9% AH. (PR)
• MetLife (MET): Q1 EPS of $0.20 misses by $0.14. Revenue of $10.22B (-12.%) vs. $11.93B. Net realized investment losses of $618M. Shares -3.8% AH. (PR)
• Monster Worldwide (MWW): Q1 EPS of $0.00 beats by $0.11. Revenue of $254M (-30.6%) in-line. Shares -4% AH. (PR)
• PerkinElmer (PKI): Q1 EPS of $0.26 beats by $0.06. Revenue of $432M (-5.9%) vs. $411M. Shares flat AH. (PR)
• Republic Services (RSG): Q1 EPS of $0.35 beats by $0.05. Revenue of $2.06B (+164.4%) in-line. (PR)
• QLogic (QLGC): FQ4 EPS of $0.20 misses by $0.01. Revenue of $130.5M (-18.3%) vs. $135M. Shares -3.2% AH. (PR)

Today's Markets

Japan moved higher Friday. London was lower. Elsewhere markets were closed. Volume in overnight futures is unusually low.

• Asia: Nikkei +1.69% to 8,977.
• Europe: London -0.6%.
• Futures: Dow +0.5% to 8163. S&P +0.5% to 874. Nasdaq +0.5%. Crude -0.2% to $51.04. Gold -0.8% to $884.30. 30-year Tsy -0.14%. Euro +0.7% vs. dollar. Yen -0.7%. Pound +0.8%.

Friday's Economic Calendar

• Motor Vehicle Sales
  8:00 Geithner speaks at U.S.-China conference
  9:45 Fed's Bullard speaks on the financial system
  9:55 University of Michigan Consumer Sentiment
  10:00 ISM Manufacturing Index
  10:00 Factory Orders
• Notable earnings before Friday's open: AEE, AGN, AIV, AOC, AXL, BPO, CLX, CVX, DF, ED, FLIR, FO, JRCC, LPNT, MA, NI, PPL, SPG, TE

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

There is potential coruption in money. Lots of money= lots of potential.

It will be interesting to see how many of our illustrious politicians hands get caught in the cookie jar by Cumo. Hopefully the politicians dont do him in before he is finished investigating.

May 01 08:00 AM

[Speedspirit:]

Stress Test results delayed what a surprise. How about they will never be disclosed, how about altered.

May 01 08:16 AM

[Nedko:]

Glad cramdowns did not pass. Not acting on foreclosures does not solve the problem, yet it scares investors. I've experienced that in Europe where the bank is at the owner's mercy to get the property back.

May 01 08:34 AM

[Winston Smi...:]

They are consulting with some Freddie Mac CFOs on how to improve the results before they release the stress test results.

May 01 08:36 AM

[Bill38119:]

I've only been reading "Breakfast: must knows" for a few months and I can't imagine how I've managed without it. Rachael Granby is terrific.

May 01 09:05 AM

[yolosetodo:]

Stress test results delayed just long enough so the Big Banks have time to build up more funny money to buy the little guys. Just like they did in the 80'S. 2 many small banks taking market share away from the 2 big 2 fail Pigs. Just another engineered banking consolidation following the Golden Rule.

"The ones with the Gold, make all the Rules"

May 01 09:41 AM

[David White:]

For those following Financials (Marketwatch): Mitsubishi UFJ cut its full year outlook. It now projects a loss of -$2.6B in 2009. As late as Feb. 6, it had forecast a gain of +$0.5B.


"These decreases were mainly due to an increase in net losses on equity securities caused by further decline in market share prices, and a recording of valuation allowance against deferred tax assets as a result of re-assessing collectability of its deferred tax assets," MUFG said in the Friday statement.
The revision, the third time the bank has cut its outlook for fiscal 2008, was released after the close of Tokyo stock trading Friday. Markets in Japan will remain shuttered for an extended holiday break and reopen Thursday. "

This is another instance of banks tending to sour recently. Ken Lewis has made very clear negative comments about the likely souring of the credit card business throughout this year. At some point one has to believe all of these negatives will start to negatively effect banks stock prices.

Certainly the capital many banks are supposed to be required by the government to raise should lead to further dilutory effects on the banking stocks. This should tend to push prices of those stocks downward. The souring of the credit card business is just yet another reason for this. The banks have been resistant to downward movement as the overall markets have climbed. Now the overall markets are overbought. A downturn seems imminent. Are financials going to lead the way down again???

A number seem to have definite downside potential. For example AXP's credit ratings were lowered substantially today by S&P. Its counterparty credit rating was cut by two notches to BBB+, while its preferred stock rating was cut to junk territory with a three-notch drop to BB.

May 01 10:17 AM

[David White:]

March factory orders were down more than expected -.9% vs an expected -.5%. Adding to this negative news, the Feb. factory orders were revised downward from +1.8% to +0.7%. The April ISM Manufacturing PMI came in at 40.1 vs. and expected 38.3. This is probably good news, but it is still contraction. Overall you would have to say this news was negative for the markets.

May 01 10:30 AM

[axelrod608:]

Since March, while the market prices have been going up, the volume has been declining and its rate of decline has accelerated lately. You don't have to be a professional chartist to know that signals a likely downturn in the not so distant future. The rally is losing momentum.

The truth is that the Fed's ZIRP policy is having dangerous effects on the markets. When you can't even get an interest rate return large enough to offset inflation - let alone taxes - people and investors will move to higher risk alternatives for the perceived increase in yield. Cheap money screws up the markets.

Add to that the common misperception that an economy declining at a slower pace is "good" news, and you have all the ingredients for another big selloff. Less bad is not good. The economy is still swirling in the bowl and having a few megabanks with enough capital is irrelevant to the economy as a whole.

This year, "sell in May and stay away" is better advice than in most years.

May 01 11:01 AM

[doubleguns:]

Better hope for some plunge protection team assistance with that. 11:00 and not looking so good but they usually show up after a late lunch and a few drinks(possibly more now adays) Hic, Duh time to get to work. Buy, buy, buy.

On May 01 09:04 AM Cetin Hakimoglu wrote:

> The markets will probably end today up 2% at least. The nasdaq will
> close higher for an 8th consecutive week.

May 01 11:03 AM

[carey_jim:]

Someday contrary stock market and real estate effects, such as the ones we are witnessing in the present, will be called 'CETIN phenomena', after Cetin Hakimoglu, Seeking Alpha's eternal optimist.

You can't have 25 years of rocket stock and real estate markets without creating a generation of people who think stock markets and real estate markets only make temporary dips before heading for the stratosphere again.

Funds based on the CETIN phenomenon will be called Cetin Titanic Deck Chair Funds or CTDCF's for short.

CTDCF is harder to say than ETF but sexier.

May 01 11:19 AM

[bbowen7:]

I do appreciate Axelrod's insights - not as much as Rachel's summaries, but very good none-the-less. This is clearly the place to start one's investing day. As for the folks with opinions without facts, some are amusing, but easily ignored.

May 01 12:40 PM

[PainfullyAware:]

"Cuomo pension probe widens. New York Attorney General Andrew Cuomo is expanding his probe of pension-fund kickbacks, saying the probe has exposed "a national network of actors" whose schemes are ongoing, and has charged a money manager with making illegal payments to a political consultant in exchange for investment business. The charge is at least the fifth since Cuomo's investigation began."



I Hope Others Rally To Protect Andrew Cuomo - It is a "Dangerous Game" when chasing those with the means to "Pay" to stay in power. This is one of the better developments in that it is at least an attempt to Prosecute Wrong Doing. Complexity Favors The Sinister. The Complexity Of Corruption Is Vast. K-Street in DC may finally Be Exposed for its Nefarious Practices.



"Cramdowns get voted down." - Thank Goodness That Contract Law Dodged A Bullet. When Contracts Become "Negotiable In Retrospect At The Whim Of Judges" The "Free Market" Will Cease To Function With Any Vitality.


"Stress test results delayed." - This is buying more time to "Massage The Numbers". By the time these "Results" are released we may have reached, or passed, the values used for "Worst Case" in these tests. Lets hope that no one else "Commits Suicide" while arguing with regulators about what "Stats" to release. I guess that most of the "Original Captains" are in place still, so maybe there will be less dissension.



I Think It Is Great That We Are Not Going Over The Cliff - AS FAST.

Live While You Live.

May 01 01:53 PM

[buff butler:]

"Rachael Granby is terrific"

So true!

May 01 02:44 PM

[BerkeleyBob:]

I fail to see how the notion of a mortgage "cramdown" is bad policy in an individual BK, but has been part of corporate BK proceedings for years. Contracts are "impaired" in either scenario, no? Might not a BK judge be a pricing mechanism for defaulted loans?

May 01 03:25 PM

[PainfullyAware:]

If you are correct, then the subjugation of America Is Complete and the ails of the populous matter not.


On May 01 02:44 PM Cetin Hakimoglu wrote:

> The crisis is 'fixed' By printing 2 trillion dollars the banking
> system has been saved, and confidence is returning. The only direction
> for the foreseeable future for the stock market is up. If you're
> waiting for more shoes to drop you will be very disappointed. No
> more shoe dropping.

May 01 03:25 PM

[PainfullyAware:]

Yes, In Bankruptcy Cramdown is a valid remedy. However, the policy as discussed has nothing to do with Bankruptcy.


On May 01 03:25 PM BerkeleyBob wrote:

> I fail to see how the notion of a mortgage "cramdown" is bad policy
> in an individual BK, but has been part of corporate BK proceedings
> for years. Contracts are "impaired" in either scenario, no? Might
> not a BK judge be a pricing mechanism for defaulted loans?

May 01 03:28 PM

[AndrewBaker:]

Well, we all expected the Chrysler deal, but delaying the bank stress tests? They wouldn't do that without some bad stuff being there that they don't want to come out. My SEF for holding, and my SKF and FAZ for short term trading will really show profits in the next week or two and probably longer. The government still won't tell the truth and neither will the banks: until we know the full extent of the financial problems, all of us will lose, and investors who buy this bull market rubbish will lose even more when the next fall occurs, and it won't be long in coming.

May 01 04:07 PM

[Delojozafado:]

OK .. I'll bite ? AOC missed it's numbers by a wide margin and the stock tanked by ~15%. So what is the story on the DKK knocking off only 0.7%?

May 03 02:35 PM

[Joseph Sherman:]

Hasbro goes to TV- they realize that world is changing and choose to evolve - Great way to create a new situation.

May 03 05:48 PM