Wall Street Breakfast: Must-Know News 18 comments
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- Unemployment set to top 9%. Today's markets will be focused on the monthly U.S. nonfarm employment report, which often sets the tone for the coming month. Economists predict the workforce declined by 520,000 in May, the smallest decrease in seven months. But unemployment is expected to jump to 9.2%, the highest level in 26 years. While many think the worst may be over for the economy, it's unlikely firms will begin hiring aggressively until recovery goes from being a possibility to a well-rooted certainty. Earlier this week, Fed chief Bernanke warned "sizable" job losses may still occur. Peter Morici does a good job of summarizing expectations for and potential ramifications of this morning's report.
- Rio scraps Chinalco deal. Rio Tinto (RTP) scrapped a controversial $19.5B investment from Chinalco (ACH) and will instead raise $15.2B from a share sale and $5.8B from an iron ore venture with BHP Billiton (BHP). The new agreements will allow Rio to pay down some of its $38.9B in debt, and deal a blow to China's plans to secure access to raw materials crucial for its economic growth.
- FDIC gets tough on Citi. The FDIC is pushing for a management shake-up at Citigroup (C), and recently tried to lower the government's confidential ranking of Citi's health in a move that would give regulators greater control over the firm. Among FDIC concerns are the slow pace of change at Citigroup and the lack of senior executives with commercial banking experience. Officials have reportedly reached out to Jerry Grundhofer, former CEO of U.S. Bancorp (USB) and a recent addition to Citi's board, to see if he'd be interested in taking over CEO Vikram Pandit's position. Citigroup officials say the FDIC has overstepped its bounds, and several government regulators disagree with the FDIC's stance as well.
- Obama to create 'Pay Czar.' The White House plans to appoint a 'Special Master for Compensation' who will make sure companies receiving federal bailout funds abide by executive-pay guidelines. The administration is expected to name Kenneth Feinberg, who oversaw the government's compensation fund for 9/11 victims. Feinberg's appointment could be announced as soon as next week.
- Breezy times for Intel. Intel (INTC) agreed to buy Wind River Systems (WIND) for around $884M. The surprise move nets Intel a significant software business and makes it a direct competitor with Microsoft (MSFT) in certain areas. A Microsoft spokeswoman said the company is looking forward to continuing its long-term collaboration with Intel, but is also "working with Intel to evaluate what impact today's announcement has on our partnership."
- GM uses cash to fund Delphi buyout. General Motors, flush with $30B in bankruptcy financing from the government, is putting up over $2.5B to finance a private-equity firm's buyout of bankrupt auto-parts company Delphi Corp. Separately, GM is expected to announce today that it reached a preliminary deal to sell its Saturn division to mega auto dealer Roger Penske, who runs the Penske Automotive Group chain of dealers, for $100-200M. GM executives also said the company is considering a senior management shake-up but declined to provide details.
- AIG selling Transatlantic stake. AIG (AIG) may raise almost $1B by selling part of its stake in Transatlantic Holdings (TRH). According to a statement released yesterday, AIG offered 26M shares at $38 each. The sale will bring AIG's stake below 20% from 59%.
- Icahn wins Biogen board seat. Biogen Idec (BIIB) held its annual meeting this week and activist investor Carl Icahn claims he won two seats on the board. Biogen said Icahn won one seat, and the second is 'too close to call.' The showdown over the remaining board seat is the culmination of a months-long proxy fight. Icahn's victory, even if only partial, suggests shareholders are frustrated with Biogen's stagnant share price and the gap in its pipeline of new drugs.
- Countrywide CEO charged in subprime mess. The SEC charged Countrywide Financial's former CEO Angelo Mozilo with securities fraud and insider trading, winning Mozilo the distinction of most-prominent executive targeted to date in connection to the subprime crisis. Mozilo pocketed over $139 in profits in 2006-2007 while knowingly selling risky subprime loans and failing to disclose the deteriorating quality of the company's assets. Two other former Countrywide executives were also charged with fraud.
- Hartford to get TARP money, new CEO. Hartford Financial Services (HIG) CEO Ramani Ayer will step down from his post by the end of the year, following through on a departure originally planned for 2008. Ayer, who has been CEO for twelve years, was responsible for crafting the aggressive growth strategy that led to some of the insurer's current troubles. The company is expected to receive as much as $3.4B in TARP funds in the next few weeks.
- Jobs returning to Apple. Apple (AAPL) CEO Steve Jobs is on track to return to the company this month after a medical leave, possibly in a surprise appearance at Apple's annual software developers' conference next week. Some analysts thought Jobs' sudden departure six months ago and the limited disclosure of his illness would hurt the company, but the stock has risen 68% since Jobs announced his leave vs. a 24% increase in the Nasdaq. Even after Jobs returns, it's unclear whether he'll resume his full set of duties immediately.
- Jobless claims dip. Initial Jobless Claims came in at 621,000 vs. last week's 625,000 (revised) and consensus of 620,000. Continuing claims dipped by 15K to 6.74M.
- Productivity higher than expected. Q1 Nonfarm Productivity of 1.6% was better than the 1.2% economists expected, and sharply higher than initial estimates of 0.8%. Unit labor costs grew 3%, slightly above consensus (+2.9%), but lower than previous estimates of 3.3%. Manufacturing sector productivity fell 2.7%, its fourth consecutive decline.
Earnings: Thursday After Close
Today's Markets
Overseas markets edged higher Friday and futures are also up. All eyes will be on the nonfarm payroll report at 8:30.
- Asia: Nikkei +1.02% to 9,768. Hang Seng +0.96% to 18,680. Shanghai -0.48% to 2,754. BSE +0.63% to 15,104.
- Europe at midday: London +1.2%. Paris +0.9%. Frankfurt +0.3%.
- Futures at 7:00: Dow +0.4% at 8764. S&P +0.45% to 945. Nasdaq +0.25%.
Crude -0.1% to $68.74. Gold -0.5% to $976.50. Treasurys flat.
Euro -0.1% vs. dollar. Yen -0.2%. Pound -0.6%.
Friday's Economic Calendar
- 8:30 Non-farm payrolls
2:15 PM Fed's Kohn moderates panel at financial markets conference
3:00 PM Consumer Credit
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 18 comments:
They won't stop until they get to decide if you are allowed to change jobs and you have to file forms it triplicate to paint your bedroom a new color.
Da, comrades!
You mock, I exaggerate, but the government has made some real power grabs lately.
A bit toungue in cheek: the point is that human nature never changes. To rule is to tell other people what to do. To rule successfully is to make those other people think what you are doing was THEIR idea all along. Thus: never waste a crisis.
The sound of democracy dying is a thunderous applause.
like, the GOP was engaged in power grabs for 8 years and look where it got us !!
On Jun 05 11:28 AM sticktoitiveness wrote:
> comrade bobbobwhite
>
> You mock, I exaggerate, but the government has made some real power
> grabs lately.
I am more tea party than gop. I won't defend bush, have you seen the us patriot act? I never even voted for him.
The Great Oompa Loompa stood before the masses and spoke “Behold the Oompa Loompa Empire that I have built. Behold the sweet smell of success. Our stuff don’t stink!”
Then the Oompa Loompa turned to his inner council and said ” What is this crap? We’ve got seconds for 80/20’s with FICO’s under 600! I wouldn’t approve that kind of loan for my own MOTHER!, a Congressman maybe, but NOT my mother.”
Councilor Sambol replied “Sire, It is the ‘Milk’ of the Biz”
Oompa Loompa said “Milk my @%$. It’s poison! We gotta dump this stuff fast.”
Then Councilor Sieraki said ” We must match what is offered by others or the empire will shrink” and Councilor Sambol said ” Tis true”
The Oompa Loompa said ” Well be more careful, and by the way, those pick-pays stink too!”
As his councilors left the throne room, the Oompa Loompa did swear unto himself ” I will steadily sell my stake in this idiot empire and stand ready to move to the Caymans where my awesome tan will shield me from the harsh rays of the tropic sun.
Hmmm...now where did I put Ken’s number?"
Pick any one from three:
1) They feel they have helped out some very nice people.
2) They weren't invited to the "D" day celebrations.
3) They realise bank shares are in a bubble and are getting out at a profit whilst they still can.
No hints given; work it out for yourself. It can't be that difficult, can it?
On Jun 05 02:33 PM AndrewBaker wrote:
> Slowly slowly we are starting to hear admissions that things at financial
> companies, banks et al, are not so bright as they have recently been
> painted whilst the stock price ramp was in full swing (which enabled
> many to sell new shares at sky high prices). Do look around too to
> the UK, where Barclays recent Abu Dhabi IPEC saviour has now decided
> to offload stock they bought just seven months ago, and at a nice
> profit. These sovereign wealth and similar funds do not invest at
> the outset for a short term return, so what has caused them to get
> out so soon?
>
> Pick any one from three:
> 1) They feel they have helped out some very nice people.
> 2) They weren't invited to the "D" day celebrations.
> 3) They realise bank shares are in a bubble and are getting out at
> a profit whilst they still can.
>
> No hints given; work it out for yourself. It can't be that difficult,
> can it?
>> "Countrywide CEO charged in subprime mess" We'll see if a conviction is forthcoming. This country MUST send these criminals to prison for long terms, or we'll be right back where we are, ten years from now.<<
I'll believe you when Senator Chris Dodd of Conneticutt is in jail for taking a bribe from Angelo. There are people in government who are hugely responsible for this financial mess that began with the sub-prime problems.