- Insurers get TARP nod. After waiting a half-year, six insurers were cleared to receive up to $22B in TARP funds late Thursday. Hartford Financial (HIG) was approved for $3.4B; Lincoln National (LNC) said it may receive $2.5B; also approved were Allstate (ALL), Prudential Financial (PRU), Principal Financial Group (PFG), and Ameriprise Financial (AMP). One analyst called the decision "a deal with the devil," but said the move may have been unavoidable, because the collapse of any one could ignite another round of panic. It's not clear that all six will avail themselves of TARP money.
- Barclays explores $10B sale of BGI. Barclays (BCS) is reportedly in talks to sell its entire asset-management unit, Barclays Global Investors, for as much as $10B. That's more than double the $4.4B Barclays would get for BGI's iShares ETF business from buyer CVC Capital Partners, which gave Barclays until June 18 to seek better offers. Potential buyers include BlackRock (BLK) and Bank of New York Mellon (BK). Unlike its peers (LYG and RBS), Barclays has shunned government money, but it needs cash to bring its capital ratio in line. A sale would leave Barclays in a solid position, but with a less-diversified business. Murray Coleman explores the ramifications of a sale for the ETF industry.
- Euro area GDP shrinks at record clip. Euro region GDP fell 2.5% in Q1 from last quarter, the fastest contraction on record, Eurostat said Friday morning. From a year ago, the euro-area economy shrank 4.6%, also the biggest drop on record. Inflation held steady at 0.6% in April. On May 7, the ECB lowered its benchmark rate to 1%, a level economists expect will be maintained, or even trimmed further. (see Eurostat's GDP and inflation data (.pdf))
- Feds 'urge' changes at BofA. Regulators are pushing for major changes in Bank of America's (BAC) board of directors, which is intriguing considering many of the bank's woes stem from its shotgun merger with Merrill Lynch after heavy pressure from the feds. A spokesman wouldn't comment on regulators' requests, but said all of the 19 banks that recently underwent government stress tests have been "directed" to review their managements. The meddling is remarkable, considering the government does not own a stake in most of the banks, including BofA.
- Temasek dumps BofA, looks to emerging markets. Temasek Holdings sold its 3.8% stake in Bank of America (BAC) for about $1.3B, at a loss of about $4.6B. The Singapore state-owned fund, which earlier this week boosted its stake in China Construction Bank, and whose investments shrank 31% over the past eight months, said it will continue to reduce its exposure to developed economies. "The belief now is that the world is not so American-centric anymore," a Singapore economist said.
- Rio Tinto says Chinalco deal is still on table. Rio Tinto (RTP) said Friday it remains committed to a $19.5B deal with Chinalco (ACH), and said the plan has now received U.S. regulatory approval, pouring cold water on speculation it might be backing away from the tie-up in favor of a public rights offering. Shares +1.6% premarket.
- Economists foresee protracted U.S. recovery. WSJ's latest economist survey predicts the recession will be over by August. Recovery, on the other hand, will be subdued and protracted. In the words of one economist: The Fed's "big guns" have "effectively averted a depression, or a much more severe recession." Q2 GDP is seen at -1.4%, a huge improvement from Q1's 6.1% drop.
- GM nears deal with UAW. Sources say GM (GM), under the direction of the Treasury, is near a deal with the UAW that would cut hourly labor costs by more than $1B/year, and halve its remaining commitment to cover healthcare costs to $10B. In exchange, the UAW would receive a 39% stake in a reorganized GM. With UAW backing in sight, Treasury insiders are increasingly confident they can push through a GM reorganization, despite the protests of bondholders who say they're getting the short end of the stick. Meanwhile, in Canada GM is seeking massive cuts in workers' pensions in a deal with the CAW.
- Jobless claims jump. Initial claims for the week came in at a higher-than-expected 637,000 (consensus 610K), the Labor Department said Thursday, and were up 32K from last week's 605K (revised). Continuing claims, which measure the total number of unemployed claiming benefits, rose 202K to 6.56M. The sharp rise may indicate new jobless claims haven't peaked as many hoped, but regardless, overall unemployment is nowhere near its top.
- Wholesale prices up slightly. Producer Prices rose 0.3% in April from March, a drop more than the 0.2% gain economists predicted. Prices are down 3.7% vs. a year ago. Core PPI gained 0.1%, and is up 3.4% vs. last year.
- 30-year fixed mortgage rates climbed 0.02 points to 4.86%, Freddie Mac said Thursday in its weekly report. Rates remain near their record low of 4.78%, but rates have yet to make a run at the 4% some anticipated following the government's aggressive support of mortgage markets.
Earnings: Friday Before Open
- Abercrombie & Fitch (ANF): Q1 EPS of -$0.31 misses by $0.17. Revenue of $612M (-23.5%) vs. $616M. (PR)
- AngloGold Ashanti (AU): Q1 EPS of $0.42 misses by $0.12. Q1 production of 1.1M oz., down 13%. (PR)
Earnings: Thursday After Close
- Blockbuster (BBI): Q1 EPS of $0.12 misses by $0.03. Revenue of $1.12B (-19.5%) vs. $1.3B. Shares -22.8% AH. (PR)
- Compuware (CPWR): FQ4 EPS of $0.20 beats by $0.01. Revenue of $253M (-25.2%) vs. $268M. Shares -1.6% AH. (PR)
- Darling International (DAR): Q1 EPS of $0.06 in-line. Revenue of $133M (-34.1%) vs. $147.7M. Shares +1.5% AH. (PR)
- Nordstrom (JWN): Q1 EPS of $0.31 beats by $0.05. Revenue of $1.71B in-line. Raises full-year EPS guidance to $1.25-1.50 vs. $1.27 consensus. Same-store sales fell 13.2%. Shares +1.8% AH. (PR)
Strong gains in Asia Friday, but Europe is flat and futures have turned negative.
- Asia: Nikkei +1.88% to 9,265. Hang Seng +1.51% to 16,791. Shanghai +0.2% to 2,645. BSE Sensex +2.53% to 12,173.
- Europe at midday: London flat. Paris flat%. Frankfurt -0.2%.
- Futures at 7:00: Dow -0.2% to 8267. S&P -0.4% to 886. Nasdaq -0.4%.
Crude -1.2% to $57.94. Gold -0.4% to $924.80.
30-year Tsy +0.3%. 10-year +0.12%.
Euro -0.6% vs. dollar. Yen +0.9%. Pound -0.35%.
Friday's Economic Calendar
- 8:30 Consumer Price Index
8:30 Empire State Mfg Survey
9:00 Treasury International Capital
9:15 Industrial Production
9:15 Fed's Fisher speaks
9:55 University of Michigan Consumer Sentiment
11:00 Cleveland Fed Median CPI
- Notable pre-open earnings: ANF, AU, JCP, TK, TNK
Seeking Alpha editor Rachael Granby contributed to this post.
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