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Wall Street Breakfast: Must-Know News 18 comments

by: SA Editor Eli Hoffmann May 20, 2009 | about: ADI / ANN / BAC / BJ / CTR / DIA / GLD / GOOG / HPQ / INTC / MSFT / NTES / NVS / QQQQ / RTH / SPY / TGT / TOL / TWB / USO    
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  • 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)

Today's Markets

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

Seeking Alpha editor Rachael Granby contributed to this post.

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This article has 18 comments:

  •  
    Credit card regulation passes Senate . . . Senator Chris Dodd called the measures "a victory for every American consumer who has ever suffered at the hands of a credit card company."

    Thank you, Senator Dodd. Now, how about a focus on Countrywide?
    May 20 07:51 AM | Link | Reply
  •  
    We wouldn't need this regulation if citizens could control their spending.

    Stop using your credit credit and spend only what you can afford. Use your debit card and cash to control your spending.

    Everyone wins when you pay with cash. Merchants won't have to pay 3% on your purchase and you won't have a credit card bill at the end of the month.
    May 20 08:35 AM | Link | Reply
  •  
    Credit cards are simply financial tools which when used wisely are a major convenience for a multitude of reasons.

    Once again, those who may have been irresponsible are being rewarded by government , while those who were responsible will likely see added costs:annual fees and a reduction in their rewards programs.

    Who is John Galt?
    May 20 08:45 AM | Link | Reply
  •  
    Financial watchdog, SEC strip search, congress passing credit card reform.

    Anyone else see a pattern of the govt getting deeper and deeper into running the financial markets.

    Chris Dodd touting anything scares the living hell out of me!!! A true snake in the grass.
    May 20 08:48 AM | Link | Reply
  •  
    Due to this passage of the new rules regarding credit card fees, citizens will be less likely to get that new credit card they have applied for recently. Credit card companies will be denying credit to those who are at risk of defaulting on their bills.
    May 20 08:50 AM | Link | Reply
  •  
    Now what? Credit card underwriters will stop lending to people with higher risk IE... lower income folks. Then we will have these clowns complaining about discriminitory credit policies. Go figure. Now let me get this straight: Mortgage apps were up over 2% but 73% of those were refies. New housing starts were the lowest ever but builder's confidence was up? My head is spinning about as much as the information I'm looking at.
    May 20 08:56 AM | Link | Reply
  •  
    I can see both sides of the credit card issue. Personally, my cc is on autopay for the balance every due day - haven't paid any interest ever. But I also worked in Consumer Credit Counseling Services for years and know precisely how ignorant many credit card users are. In a nation where less than half our youth graduate high school, and where basic functional daily living education is not required or even offered, crises in everyday living can be expected.

    If we REALLY want to improve education, we need to start teaching courses in basic life skills and functions - personal economics, insurance, law, etc.
    May 20 08:57 AM | Link | Reply
  •  
    And another think!!

    Remember he who has the purse strings has the power.

    The FED had the power over the banks but they never once said anything about this crisis coming. They did not see it either. If they had they would have been screaming. Their manipulation of the FED rate is part of the reason we are here.

    Giving them the power from the SEC is just giving them more absolute control over our government which means "we the people." and this ain't good.

    They really were slick when they called it the Federal Reserve since the sheeple think it is part of the govt and just follow along willy nilly.

    I don't like this smell.
    May 20 08:58 AM | Link | Reply
  •  
    >> "giving the Federal Reserve control over too-big-to-fail financial firms," >> Or, in plain English, giving the fox the keys to the henhouse.
    May 20 08:59 AM | Link | Reply
  •  
    Poor fox gets blamed for everything.

    More likely the "convicts the keys to the jail."

    We ARE dealing with crooks here.


    On May 20 08:59 AM axelrod608 wrote:

    > >> "giving the Federal Reserve control over too-big-to-fail financial
    > firms," >> Or, in plain English, giving the fox the keys to the
    > henhouse.
    May 20 09:14 AM | Link | Reply
  •  
    Yep, it's going that way. Slowly the State is taking over the financial markets. They have managed to engineer a stock rally on falsehood, error and omission, staredt moving the dollar down in value, which is dropping even though more foreign people want it than their own currency, and have yet to tell us how the banks bad assets are going to be dealt with without big losses and damaging the banks financial soundness. Watching all this happen doesn't make me feel good, and when an official annoucement is made, I'm left wondering what's been left out?
    May 20 09:34 AM | Link | Reply
  •  
    i said it for years.all ponzi/casino with ever changing rules.this credit card reform is a mess.punishing people who pay on time & control spending.this guy dodd is trying hard after his countrywide mess that he hasnt explained to this day.in all of ct he could not find a bank for his mortgage.a phony like his father.
    May 20 09:51 AM | Link | Reply
  •  
    Credit card companies will not reduce credit card because of new rules. They anyway get commission of at least 2% from whatever you purchase. You pay at least 2% higher price and in some case it goes up by 4%. That is how they make money silently or in simple words steal money from your pocket without you ever being suspicious on them. You think credit card companies your friend because they gave you loan, but actually they trapped you into high cost economy and possibly life long debt trap.
    May 20 10:22 AM | Link | Reply
  •  
    As others have said so well, the CC law is just another hit to responsible citizens by govt in order to reward irresponsibility by a few. When are people like the ones who pay in full each month and do without when they can't afford something going to be heard?

    Watch out for "free" healthcare next.
    May 20 10:48 AM | Link | Reply
  •  
    Axelrod,

    My thoughts exactly! And what is this BS being spouted by Chris Dodd, he's one of the biggest criminals in congress!

    Reading the tone of comments on this article, I'm wondering if soon the government will make short selling of anything completely illegal, subject to capital punishment ...


    On May 20 08:59 AM axelrod608 wrote:

    > >> "giving the Federal Reserve control over too-big-to-fail financial
    > firms," >> Or, in plain English, giving the fox the keys to the henhouse.
    May 20 11:13 AM | Link | Reply
  •  
    Let's see the general principles for the financial regulatory restructure. Some things seem reasonable - federal regulation of insurance companies, for example. But one big downside would be an expansion of the role of the Fed, which is supposed to be a politically separate guardian of the currency. One of the downsides of the past year is Bernanke's expanded, politicized role. He has done well, but the Fed needs to get back to the basics when this storm passes.
    May 20 02:06 PM | Link | Reply
  •  
    Microsoft readies revamped search engine. - Can Microsoft compete with Google? It will be exciting to watch.
    May 20 04:09 PM | Link | Reply
  •  
    I do see financials gaining more and more control of the US Government. But I might be backards.


    On May 20 08:48 AM doubleguns wrote:

    > Financial watchdog, SEC strip search, congress passing credit card
    > reform.
    >
    > Anyone else see a pattern of the govt getting deeper and deeper into
    > running the financial markets.
    >
    > Chris Dodd touting anything scares the living hell out of me!!! A
    > true snake in the grass.
    May 21 04:43 PM | Link | Reply
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