- Couldn't even wait until Friday: In the biggest bank collapse of 2009, regulators seized Florida thrift BankUnited yesterday afternoon, a failure which could cost the FDIC $4.9B. For the current crisis, only IndyMac's failure ($11B) has been bigger. The bust brings into focus recent rumblings that extending government stress test results to smaller banks could result in another $24B or even $100-200B in losses. (table: banks gone bust)
- Geithner pledges to shave deficit. Treasury chief Geithner said Thursday he's committed to trimming the bulging budget deficit and maintaining the U.S.'s pristine AAA sovereign rating: "It's very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term." Treasurys and stocks came under heavy selling yesterday, which influential bond trader Bill Gross said was due to concerns over America's AAA rating, after S&P downgraded the U.K.'s outlook to Negative.
- So long fat profits. Taxpayers could be left to absorb a $10B loss on stock warrants being sold back to banks who are repaying their TARP loans. So far, 17 financial institutions have repaid TARP funds, but only one - Old National Bancorp (ONB) - has come to terms with the Treasury. ONB gave the Treasury $1.2M for warrants that may have been worth $5.81M. If other banks can finagle similar terms, they could walk away with 80% of the profits taxpayers were hoping for.
- Next sucker? AIG (AIG) Chairman and CEO Edward Liddy says he'll step down as soon as a replacement is found, noting the company has reached an 'inflection point' and needs a CEO who's ready to commit long term. Sources say a search could take 3-6 months, which seems optimistic considering the job description includes coming out of a comfortable retirement to put up with congressional buffoonery on an almost weekly basis for a $1 pre-tax salary. AIG also said it will split the two jobs, and proposed a 20:1 reverse stock split, which would bring shares back on to the radar screens of institutional investors. AIG -1.7% premarket to $1.77.
- Card companies brace for big losses. Analysts say companies that pitch credit cards to riskier customers and those that issue cards for retailers will be hardest hit by new legislation being signed into law today. Major players include Bank of America (BAC), Citigroup (C), Capital One (COF), HSBC (HBC), GE (GE), and Target (TGT). Some analysts estimate the new laws - which restrict fees, limit rate increases, and require more transparency - will lop $10B in revenue off the industry's top line.
- GM, union strike deal. UAW reached a tentative deal with GM (GM) and the Treasury to modify its labor agreement, including enabling GM to contribute shares instead of cash to a new, union-managed healthcare plan. On Tuesday, GM said it didn't envision reaching a deal with the UAW before May 26, when an offer to bondholders to exchange $27B in debt for a 10% stake expires. The deal, which must still be ratified by workers, will not necessarily allow GM to avoid bankruptcy. A story in the WaPo says the Obama administration is steering GM to file for bankruptcy protection as early as the end of next week, but Reuters sources say otherwise.
- Citi looks to slice IT costs. Citigroup (C) is ramping up efforts to slash IT costs, and sources say it believes it can save more than $1B 2009 through a massive systems integration.
- Opel draws another vulture. A Chinese automaker expressed interest in GM's (GM) Opel and Vauxhall operations in Europe, bringing potential bidders to four: unnamed Chinese firm, Fiat, Magna International (MGA) and RHJ International, a buyout firm with automotive assets.
- Leading indicators show signs of growth. The Conference Board's Leading Indicators rose 1% in April, in-line with consensus. It was the first increase in seven months, and indicates the recession will be less intense - at least in the near-term - and give hope for growth in H2. "The question is how long before declines in activity give way to small increases. If the indicators continue on the current track, that point might be reached in the second half of the year," Conference Board's Ken Goldstein said. (Conference Board's release)
- Factory sector still struggling. The Philly Fed's Business Outlook Survey edged up to -22.6 in May from -24.4 in April. The increase was substantially less than consensus estimates of -15. Although clearly indicating continued overall decline, the reading was the highest since last September. New orders remained negative, but shipments and the future activity index improved notably. "The survey does suggest that the rebound from the post-Lehman shock is not yet morphing into a sustained recovery story," Ian Shepherdson of High Frequency Economics says. (Philly Fed's release)
- U.S. still bleeding jobs. Initial Jobless Claims fell 12,000 from last week to 631,000 - just worse than the consensus of 625K. Continuing claims rose by 75,000 to 6,662,000. The report failed to satisfy bulls or bears, offering neither proof that job losses have topped, nor clarity that they're headed higher.
Earnings: Thursday After Close
- Aeropostale (ARO): Q1 EPS of $0.49 beats by $0.01. Revenue of $408M (+21.3%) vs. $405M. Issues upside EPS guidance for Q2 of $0.46-0.48. Same store sales for Q1 increased 11% vs. 10% a year ago. (PR)
- Alkermes (ALKS): FQ4 EPS of -$0.14 misses by $0.02. Revenue of $44M (-29.7%) vs. $45M. Issues downside guidance for FY '10, sees revenue $182-197M vs. $205.84M consensus. (PR)
- Aruba Networks (ARUN): FQ3 EPS of $0.01 beats by $0.02. Revenue of $46M (+7.5%) vs. $43M. (PR)
- Autodesk (ADSK): Q1 EPS of $0.18 beats by $0.10. Revenue of $426M (-28.9%) vs. $419M. (PR)
- Dress Barn (DBRN): FQ3 EPS of $0.39 beats by $0.08. Revenue of $376M (+6.6%) vs. $362M. Issues upside EPS guidance for FY '09 of $1.00-1.05 vs. $0.88 consensus. (PR)
- Excel Maritime Carriers (EXM): Q1 EPS of $2.42 beats by $1.73. Revenue of $222M (+218.2%) vs. $109M. (PR)
- Foot Locker (FL): Q1 EPS of $0.20 beats by $0.07. Revenue of $1.2B (-7.1%) in-line. (PR)
- Gap (GPS): Q1 EPS of $0.31 beats by $0.01. Revenue of $3.1B (-7.6%) in-line. (PR)
- LDK Solar (LDK): Q1 EPS of -$0.21 misses by $0.13. Revenue of $283M (-33.6%) vs. $240M. (PR)
- Pacific Sunwear of California (PSUN): Q1 EPS of -$0.13 beats by $0.16. Revenue of $223.5M (-16.3%) vs. $214.5M. (PR)
- Salesforce.com (CRM): Q1 EPS of $0.15 beats by $0.04. Revenue of $305M (+23.1%) in-line. (PR)
- Zumiez (ZUMZ): Q1 EPS of -$0.06 misses by $0.02. Revenue of $77M (-2.4%) vs. $76.5M. (PR)
Asia was mostly lower following a difficult session in the U.S. Thursday, but Europe stocks have moved up from early lows. Futures are up.
- Asia: Nikkei -0.41% to 9,226. Hang Seng -0.8% to 17,063. Shanghai -0.5% to 2,598. BSE +1.1% to 13,887.
- Europe at midday: London +0.8%. Paris +1.1%. Frankfurt +1%.
- Futures at 7:00: Dow +0.7% to 8350. S&P +0.7% to 895. Nasdaq +0.8%. July crude +0.8% to $61.57. Gold +0.5% to $955.70. Treasurys flat. Euro +0.5% vs. dollar. Yen +0.3%. $Cdn +1%.
Friday's Economic Calendar
- Thur. 11:30 PM BoJ Rate Decision
10:00 Mass Layoffs
10:00 Regional and State Employment and Unemployment
10:30 ERCI Leading Index
10:30 FDIC meeting on assessment fees
2:00 PM Bernanke speaks
- Notable earnings before Friday's open: BAIRY.PK, CPB, YGE
- Notable earnings after Friday's close: GA
Seeking Alpha editor Rachael Granby contributed to this post.
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