- U.S. mulls financial watchdog. In an effort to address what's currently a blind-spot in regulation, Obama officials are considering creating a new agency to police mortgages, insurance and other consumer-geared financial products. A plan could be unveiled in the coming weeks.
- SEC stripdown? Officials may suggest stripping the SEC of some of its powers, including giving the Federal Reserve control over too-big-to-fail financial firms, sources say. Other SEC functions on the table include oversight of mutual funds, and its roll in consumer-finance products (see above). Sources say SEC chief Mary Schapiro feels largely left out of recent talks on a planned regulatory overhaul, and has pledged to fight any attempt to shrink the SEC's oversight.
- Credit card regulation passes Senate. The Senate passed (90-5) sweeping new restrictions on credit-card companies, including banning sudden surges in interest rates and extra fees for telephone payments, and forcing issuers to apply payments above the minimum due to balances carrying the highest rate. Other measures focus on bringing consumers clarity, such as telling them how long it will take to be debt-free if they pay only the minimum balance. Senator Chris Dodd called the measures "a victory for every American consumer who has ever suffered at the hands of a credit card company." The overhaul should pass the House in coming days, and be signed into law by the president next week.
- Share sale nets BofA $13.5B. Bank of America (BAC) said Tuesday it raised $13.5B in less than two weeks by selling 1.25B shares at an average price of $10.77. Recently-released stress-test results found BofA needed an additional $33.9B. Last week, it sold a stake in China Construction Bank for $7.3B, which means it's now more than half way.
- H-P issues sober outlook. Tech giant Hewlett-Packard (HPQ) posted FQ2 earnings in-line with analyst expectations, but threw cold water on suggestions industry sales were stabilizing after it announced another 6,400 layoffs. During its earnings call (full transcript) with analysts, CEO Mark Hurd gave a tepid forecast for sales through year-end, with revenue seen down 4-5% versus a previous 2-5%. "CEOs have been giving marching orders to be very particular about new projects," he said.
- Microsoft readies revamped search engine. Sources say Microsoft (MSFT) will unveil a new version of its search engine next week at WSJ's D: All Things Digital conference in a renewed effort to compete with Google (GOOG). Key improvements include better-organized results to help reduce not-useful clicks. On Tuesday Yahoo described plans to beef up its search by answering queries with real-world information rather than links.
- Intel's darkhorse OS. Intel (INTC) unveiled a new version of its Linux-varient OS, Moblin, which has emerged as an improbable competitor for Windows (MSFT) in the fast-growing netbook market. Moblin's "M-zone" interface is designed to make it easier for users play digital media, surf the internet, and social network. Designed to run on mobile devices, Moblin could be distruptive not only to Windows, but to Google's (GOOG) Android, and could emerge as an option in iPhone (AAPL) competitors.
- Novartis buys generic cancer unit for $1.2B. Novartis (NVS) will pay €925M to buy the injectable generic cancer drugs business of Austria's EBEWE Pharma, and says it may pursue other similar deals in its planned diversification away from brand-name treatments. Shares +0.7% in Zurich.
- Japan GDP shrinks at record clip. Japan's economy contracted by 4% in Q1, or 15.2% annualized, its fastest decline on record. Exports plunged by 26%, also a record, amid a stronger yen and a weak global economy. Some analysts think the worst is probably over, citing reduced inventories and the government's aggressive stimulus, but BoJ governor Masaaki Shirakawa said any rebound would be no more than restocking, and that he expects global consumption to remain weak.
- Morgage applications rose 2.3% last week after falling 8.6% a week earlier, while 30-year fixed rates declined 7 bps to 4.69%, just one point short of the record. Applications for refinance mortgages rose to 73.6% of all applications vs. 71.9% last week.
- Housing starts drop to record low. New home construction fell to its lowest pace on record in April, disappointing economists who had hoped for a modest increase. Housing starts fell 12.8% to an annual pace of 458,000, indicating the market remains oversupplied despite a recent upturn in homebuilder confidence. Single-family homes, the one bright spot, were up 2.8%, but apartments and multi-family units plunged 42.2%. (see Census Department's report)
- Chain store sales fell 0.2% in the first two weeks of May from the same period last month, according to Redbook. Analysts were expecting a 0.1% drop. Weekly sales were down 1.2% vs. last week, ICSC said separately, noting both traffic and sales "slowed dramatically." Retail HOLDRS ETF (RTH) was down 0.4% Tuesday.
Earnings: Before Open
- AnnTaylor (ANN): Q1 EPS of -$0.04 beats by $0.09. Revenue of $427M (-27.9%) vs. $455M. Comps fell 30.7%. Sees only modest improvement in Q2. Shares -2.8% premarket. (PR)
- BJ's Wholesale Club (BJ): Q1 EPS of $0.45 beats by $0.01. Revenue of $2.31B (+0.3%) in-line. Full-year EPS guidance of $2.44-2.54 in line. (PR)
- Cato (CTR): Q1 EPS of $0.64 beats by $0.02. Revenue of $238M (+5.4%) vs. $241M. Sees Q2 EPS of $0.48-0.54 vs. $0.34. (PR)
- Deere (DE): FQ2 EPS of $1.11 beats by $0.04. Revenue of $6.19B (-17.2%) vs. $6.6B. Sees full-year equipment sales down 19%. "The outlook for market conditions over the remainder of the year remains highly uncertain and the impact on the company's sales and earnings is difficult to assess." Shares -3% premarket. (PR)
- Netease.com (NTES): Q1 EPS of $0.47 beats by $0.01. Revenue of $114.4M (+19.9%) vs. $116M. (PR)
- Target (TGT): Q1 EPS of $0.69 beats by $0.10. Revenue of $14.36B (+0.4%) vs. $14.81B. Net writeoffs of $301M. Allowance for doubtful accounts was flat at $1B. Says both retail and credit-card segments seemed to stabilize. Shares +4.7% premarket. (PR)
- Toll Brothers (TOL): Q2 home-building revenue fell 51% to $388M. Units sold fell 47% to 648. Backlog down 55% to $994M. Net signed contracts down 40% to $298M. Cash position increased to $1.96B from 41.53B last quarter. Continued to reduce the number of lots it controls. Says it has "a few reasons for cautious optimism," mainly that deposits were higher for seven of nine weeks vs. the same weeks last year. Shares +2% premarket. (MW)
- Tween Brands (TWB): Q1 EPS of -$0.06 beats by $0.13. Revenue of $205M (-18.5%) vs. $221M. Comps -23%. Inventories -22.5% vs. a year ago. Shares +27.8% premarket. (PR)
Earnings: Tuesday After Close
- Analog Devices (ADI): FQ2 EPS of $0.21 beats by $0.12. Revenue of $475M vs. $427M. Issues upside guidance for Q3, sees EPS of $0.17-0.19 vs. $0.11 consensus, revenue of ~$475M vs. $442M consensus. Shares +8.1% AH. (PR)
- Hewlett-Packard (HPQ): FQ2 EPS of $0.86 in-line. Revenue of $27.35B (-5.0%) vs. $27.42B. Issues in-line EPS guidance for Q3 of $0.88-0.90, sees Q3 revenue flat to down 2%. Reaffirms guidance for FY '09, sees EPS of $3.76-3.88 and revenue down 4-5%. Shares -3.1% premarket. (PR)
Overseas markets were mixed Tuesday. Futures are moderately higher.
- Asia: Nikkei +0.59% to 9,345. Hang Seng -0.39% to 17,476. Shanghai -0.94% to 2,651. BSE -1.69% to 14,061.
- Europe at midday: London -0.3%. Paris +0.1%. Frankfurt +0.7%.
- Futures: Dow +0.2% to 8467. S&P +0.3% to 909. Nasdaq +0.05%. Crude +0.7% to $60.55. Gold +0.5% to $931.50. Treasurys are flat. The dollar is slightly lower vs. a basket of currencies.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
9:30 Geithner testifies on TARP before Senate Banking Committee
10:00 Commercial Real Estate Leading Indicator
10:30 EIA Petroleum Inventories
2:00 PM FOMC minutes from Apr. 28-29 meeting
- Notable earnings before Wednesday's open: ANN, BJ, CTR, DE, EV, MPEL, TGT, TWB
- Notable earnings after Wednesday's close: AAP, CSC, GYMB, HOTT, INTU, LTD, NTES, NTAP, PETM, SNPS
Seeking Alpha editor Rachael Granby contributed to this post.
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