Wall Street Breakfast: Must-Know News 16 comments
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- FDIC changes toxic asset plan. The FDIC is changing its approach to the Legacy Loans Program since banks have been reluctant to participate and have been able to raise capital without selling off bad loans. Instead of buying toxic assets from banks to improve their balance sheets, the FDIC will use debt guarantees as an incentive for buyers of assets from failed banks. A June pilot sale of toxic bank loans has been delayed, and bids that are part of the LLP's new approach will be solicited in July.
- Chinalco may restructure deal. Chinalco (ACH) may revise its $19.5B investment deal with Rio Tinto (RTP) ahead of a June 14 deadline in order to secure Australian government approval without further delays. The deal has been a controversial one; shareholders are concerned it gives Chinalco preferential treatment and the Australian government is worried the deal could give China undue influence over the pricing of key commodities.
- Financial overhaul en route. The Obama administration is reportedly planning to unveil its plans for a sweeping overhaul of financial regulation on June 17. Officials say they are aiming to have broad legislation approved by the end of the year. Expected changes include a merger of the Office of Thrift Supervision and the Office of the Comptroller of the Currency, as well as a shake-up in the responsibilities of the Federal Reserve and FDIC.
- Bernanke attacks growing deficit. Bernanke testified before Congress yesterday, telling lawmakers they need to start reining in soaring budget deficits. He noted that 'concerns about large federal deficits' have contributed to an unwanted rise in long-term Treasury yields despite efforts by the Federal Reserve to keep those yields down. Without a "strong commitment to fiscal sustainability in the longer run, we will have neither financial stability nor healthy economic growth." (Read Bernanke's testimony)
- Financial firms try to delay accounting rule. After teaming up earlier this year to push for changes in mark-to-market accounting rules, several industry associations in the financial sector are trying to delay an accounting rule that would force banks to raise additional capital. The accounting measure would require banks to bring hundreds of billions in assets back onto their books from off-balance-sheet vehicles, effective as of the beginning of 2010.
- GM, Chrysler defend dealer cuts. Top executives from General Motors (GM) and Chrysler were grilled in Congress yesterday about their plans to cut thousands of car dealerships, but defended the move as vital to the firms' future survival. GM CEO Fritz Henderson explained it was "our last chance to get it right, to fix permanently those parts of the business that have diverted us from consistently building winning cars and trucks." Wednesday's hearing was the latest signal that Congress wants to play a larger role in Obama's auto industry rescue, even as Obama said he doesn't want the government running GM and Chrysler while it holds a significant stake in each.
- TiVo still stuck in court saga. TiVo (TIVO) won an additional $103M in federal court as part of a major ruling in a long-running legal dispute with EchoStar Communications, now part of Dish Network (DISH). Dish subsequently won a temporary stay of the ruling, surprising some analysts who thought another stay was unlikely and that Dish would have to strike a licensing pact with TiVo in order to use its technology to pause, fast-forward and rewind live television.
- NetApp, EMC in bidding war. NetApp (NTAP) raised its offer for Data Domain (DDUP) to $30/share, from $25/share, after EMC Corp. (EMC) threw its hat in the ring with an unsolicited bid. NetApp's new offer is now worth around $1.9B vs. EMC's $1.8B.
- UBS faces civil complaint. New Hampshire securities regulators filed a civil complaint against a unit of UBS (UBS) for failing to pass along a warning to clients about the safety of certain financial products underwritten by Lehman Brothers. The filing accuses the UBS unit of unfair sales practices and inadequate employee supervision. UBS denies the allegations.
- NY AG ends ARS probe. New York Attorney General Andrew Cuomo closed his criminal investigation into auction-rate bond sales practices at six investment banks. Cuomo said the banks, which included Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS) and Bank of America (BAC), abided by agreements to buy back the securities from individuals.
- United plans major jet order. In the latest example of recession-induced bargain-hunting, United Airlines (UAUA) has asked Boeing (BA) and Airbus to submit competing bids for up to 150 new airplanes. The deal could be worth over $10B to the winning bidder, a prospect United hopes will land it better terms than otherwise possible.
- MSFT may move jobs offshore. Microsoft (MSFT) CEO Steve Ballmer plans to move some employees offshore if Congress enacts legislation to impose higher taxes on the foreign profits of U.S. firms. Since the legislation would make U.S. jobs more expensive, Ballmer said the company is "better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S."
- Firing announcements fall. According to the Challenger job-cut report, firing announcements fell 16% in May M/M to 111,182, marking the fourth month in a row of job cuts declines, but were up 7.4% Y/Y. However, the job cuts decline could be short-lived, as Q2 typically marks the slowest quarter for layoffs.
- Employment declines. Private sector employment fell by 532K in May vs. 545K in April (revised from 491K) - slightly worse than the 525K decline economists expected. ADP's survey showed notable improvements over the first three months of the year, but employment "is likely to decline for at least several more months."
- Monster dips down (.pdf). Monster.com's online employment index dipped down two points in May to 118, erasing April's gains. However, year-over-year growth held steady, suggesting stabilization in employer demand for workers.
- Factory orders rise. April's factory orders +0.7% vs. +1.1% consensus, the second increase in three months. Ex-transportation, orders +0.1%.
- Non-mfg contracts. Economic activity in the non-manufacturing sector contracted in May, registering 44% on the ISM Index vs. April's 43.7%. This marks the eighth month in a row of contraction.
- BoE holds steady. Bank of England kept its benchmark rate unchanged at 0.5%, and offered no further adjustment to its planned £125B ($205B) purchase of government bonds and other assets.
Earnings: Thursday Before Open
Earnings: Wednesday After Close
- ADC Telecommunications (ADCT): FQ2 EPS of $0.05 beats by $0.04. Revenue of $275M (-30%) vs. $266M. (PR)
- Collective Brands (PSS): Q1 EPS of $0.59 beats by $0.12. Revenue of $863M (-7.5%) vs. $890M. (PR)
- SAIC (SAI): Q1 EPS of $0.29 beats by $0.02. Revenue of $2.65B (+11.9%) vs. $2.51B. Reaffirms full-year guidance. (PR)
Today's Markets
Overseas markets were mixed Thursday, with Asia mainly lower but modest gains in Europe. Futures are marginally higher overnight.
- Asia: Nikkei -0.75% to 9,669. Hang Seng -0.4% to 18,503. Shanghai -0.41% to 2,767. BSE +0.93% to 15,009.
- Europe at midday: London +0.1%. Paris +0.6%. Frankfurt +0.75%.
- Futures at 7:00: Dow +0.3% to 8698. S&P +0.4% to 935. Nasdaq +0.1%.
Crude +1.6% to $67.15. Gold +0.3% to $967.30.
30-year Tsy -0.29%. 10-year -0.11%. 5-year -0.07%. 2-year -0.03%.
Euro +0.1% vs. dollar. Yen -0.5%. Pound +0.4%.
Thursday's Economic Calendar
- Thursday's economic calendar:
6:00 Monster Employment Index
6:00 Chain Store Sales
7:00 BoE Announcement
7:45 ECB Announcement
7:50 Fed's Pianalto speaks on the economy
8:00 Fed's Dudley speaks on PPIP
8:30 Jobless Claims
8:30 Productivity and Costs
8:45 Bernanke gives opening remarks at Fed conference
10:30 EIA Natural Gas Report
4:30 PM Fed Balance Sheet
4:30 PM Money Supply - Notable earnings before Thursday's open: CIEN
- Notable earnings after Thursday's close: GES
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 16 comments:
Washington is going to ruin this country.
When will the "fools on the hill" (Congress) scrap corporate income taxes and replace them with a sales tax ?? The entire US tax code is nothing but tax breaks for those in favor and penalties for others. And it requires a HUGE bureaucracy to administer and enforce it.
And while I'm on the soapbox, when will Gates' Microsoft stop refusing to hire qualified Americans and instead fly in tens of thousands of Indians and Pakistanis at slave wages ? It's antiAmerican, treasonous behavoir. But it inflates MS bottom line and in this epoch, whatever generates profits is what corporations do.
Moral decline + ethical decline = economic decline. My daddy taught me what's cheap usually costs more in the long run. Sometimes even a dirt farmer is smarter than the talking heads in DC and Wall St.
Thanks again for the run down!
Bernanke says: Without a "strong commitment to fiscal sustainability in the longer run, we will have neither financial stability nor healthy economic growth."
So true: shame the government don't take their own advice.
When Clinton proposed his tax increases on the richest 1.2% of families in 1993, many predicted doom for America. Newt Gingrich said, “the tax increase will kill jobs and lead to a recession and actually increase the deficit.” Dick Armey opined that it would “grow the government and shrink the economy. It will mean fewer jobs for ordinary Americans.” Then Senator Phill Gramm claimed that “we are buying a one-way ticket to a recession.”
Following passage of the bill, the budget deficit continued to shrink until it finally turned into a surplus and we began paying the national debt down. Unemployment shrank and prosperity reigned.
If it's any consolation to the right wing readers of SA, the peace that the nation experienced under President Clinton had nothing to do with The Clinton-Gore 1993 Deficit Reduction Act.
Cheers to all.
On Jun 04 10:03 AM User 197681 wrote:
> We may need to study chaos theory to understand where BHO and the
> new left are taking us, because there's no way any rational, economically
> educated adult would propose the things they are and expect the successes
> we have accomplished in this system since it's creation and evolution......beware.
So soon? Great another bill they don't read.
"several industry associations in the financial sector are trying to delay an accounting rule that would force banks to raise additional capital. The accounting measure would require banks to bring hundreds of billions in assets back onto their books from off-balance-sheet vehicles"
There should never be off-balance-sheet vehicles in the first place. Lies of omission are lies too.
Using Tax Payer Monies To "Back Stop" Losses On This Crap Is Criminal. Bad Bets Need To Burn !!!
I fear that the "Regulation" that is coming will be authored by those subject to the regulation and handed to our "Purchased Representatives", not for review but for passage. "Shadow Banking" has turned out to be way too lucrative for meddlesome regulation.
Case In Point - Review the Savings And Loan Debacle and Enron. Their structure is the same as our current fiasco - only the names of the "Instruments" have changed.
On Jun 04 03:17 PM WAKEUP wrote:
> "Financial firms try to delay accounting rule." I have commented
> before, on the critical importance of accounting in determining the
> direction, and yes, even the future of this (and any other) country.
> It is difficult if not impossible to overstate the importance of
> accounting, because accounting, used the wrong way, allows criminals
> to commit crimes legally. And yet the people of this country stand
> by, ignoring accounting changes that an accounting-ignorant Congress
> allows to go into effect. (Maybe Congress is not ignorant, maybe
> they are complicit.)
How many jobs that we'll never read about aren't being created here in the first place because of US tax policy?
We are being intentionally driven into the ditch so the Progressives can reshape the rubble into the paradise they have always imagined.
God help us all.
and, ballmer can start a new nfl franchise with fanatic taliban fighters...nfl teams need fanaticism.
Thanks for helping push TIVO's stock price down so that those who know how the system works could make easy money. The degree of misinformation in the media is astounding. Court cases can be technical, so this is understandable to a degree. I just wanted to get the right information out there. Thanks for your blog.