Wall Street Breakfast: Must-Know News

• Approval for TARP repayment expected. The Treasury is expected to announce today the banks that have been approved to repay TARP, and sources say there are nine or ten names on that list. Approved banks likely include JPMorgan Chase (JPM), Goldman Sachs (GS), American Express (AXP), Bank of New York Mellon (BK), Capital One Financial (COF) and State Street Corp. (STT). Even after paying back the preferred shares, banks will still have to retire warrants given to the government.
• Fed okays capital-raising plans. The ten stress-tested banks that were told to raise more capital "have all submitted capital plans that, if implemented, would provide sufficient capital to meet the required buffer under the assessment's more-adverse scenario," the Federal Reserve said yesterday. The banks, including Citigroup (C), Bank of America (BAC) and Morgan Stanley (MS), have until November 9 to follow through on their capital-raising plans.
• Chrysler creditors win Supreme Court stay. The sale of Chrysler's best assets to Fiat was temporarily blocked late yesterday afternoon by Supreme Court Justice Ruth Bader Ginsburg, and will remain blocked 'pending further order' from Ginsburg or the Court. The decision will give the top court more time to weigh its response, as Chrysler and the White House warn a long delay could kill the deal and force Chrysler into liquidation.
• Obama scales down financial reforms. The White House is reportedly backing away from plans to seek a major reduction in the number of agencies overseeing financial markets. Instead, the administration will likely call for most existing agencies to have broader powers to limit risk-taking by financial firms.
• Panel calls for more stress tests. The Congressional Oversight Panel issued a report calling for regulators to continue running stress tests on banks for as long as they keep large amounts of illiquid mortgage securities on their books, and suggested running new stress tests if unemployment rises beyond the level assumed by regulators. The report also recommended that the Federal Reserve release more information about the exams, including non-public results and more details about the methodology used. Separately, the Obama administration wants Europe to puts its banks through more rigorous public stress tests, an issue Geithner will likely raise later this week at a meeting of G-8 finance ministers.
• Suppliers want new federal aid. Auto-parts suppliers plan to ask Obama's auto task force for $8-10B in loan guarantees to help lessen risk and increase lending. The industry already negotiated federal loans earlier this year.
• Banks pay to settle claims. In separate agreements on Monday, Wells Fargo (WFC) and Bank of America (BAC) reached settlements over claims that employees misled investors about the value and safety of certain securities. Wells Fargo's mutual fund Evergreen Investment Management will pay $40M to end civil state and federal securities-fraud allegations. Bank of America agreed to 'facilitate' the return of more than $3B to California clients who purchased auction rate securities.
• Globe cuts pay after union rejection. The Boston Globe's (NYT) largest union narrowly rejected a deal that would have substantially cut wages and benefits. The Globe will instead unilaterally cut union pay by 23% to get the savings it needs, saying it has been left with 'no financially viable alternative.' Union leaders plan to challenge the move before the National Labor Relations Board, while parent company New York Times Co. has threatened to close the paper if it can't get $10M in savings from the union.
• Pepsi Bottling extends buying spree. Pepsi Bottling Group (PBG) plans to buy Ab-Tex Beverage, its fifth acquisition since the beginning of 2008. Pepsi Bottling has signaled it wants to grow on its own terms, and that the $4B takeover offer from PepsiCo (PEP) undervalues the bottling company.
• Quest for bidders halted. Qwest (Q) called off the auction for its nationwide long-haul data and telephone network, saying the network is more valuable to the company than the amount of money a sale would generate. Though Qwest didn't specify the size of the bids it received, media reports put some of the bids below $1B, a far cry from the $2-3B Qwest wanted.
• BoA loses more directors. Two more Bank of America (BAC) directors resigned from the board, bringing the tally to five who have left since late April. The departures could increase scrutiny of CEO Ken Lewis amid a broader plan to overhaul the board.
• Cheaper iPhone, no Steve. Apple (AAPL) rolled out a next-generation iPhone and a $99 entry-level model at its annual conference for software developers. Company executives said the $99 price could boost iPhone demand by as much as 50%, allowing the company to 'enhance its first-mover advantage.' Apple also announced several new lower-priced notebook computers. Fans were disappointed, however, when a rumored surprise appearance by Steve Jobs didn't materialize.

Earnings: Monday After Close

• Pall (PLL): FQ3 EPS of $0.42 in-line. Revenue of $556M (-16%) vs. $564M. (PR)
• Quiksilver (ZQK): FQ2 EPS of $0.05 beats by $0.01. Revenue of $494M (-17.1%) vs. $502M. (PR)

Today's Markets

Asian markets closed mixed, while European markets and U.S. futures are slightly in the red.

• In Asia, Nikkei -0.8% to 9,787. Hang Seng -1.1% to 18,058. Shanghai +0.7% to 2,788. BSE +3.1% to 15,127.
• In Europe at midday, London -0.3%. Paris +0.1%. Frankfurt -0.2%.
• U.S. futures: Dow -0.2%. S&P -0.2%. Nasdaq -0.1%. Crude +1.3% to $68.97. Gold -0.2% to $950.80.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  10:00 Wholesale Inventories
  10:30 Geithner testifies before a Senate subcommittee
  5:00 PM ABC Consumer Confidence Index
• Notable earnings after Tuesday's close: NCS, SINA

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[spald_fr:]

The sale of Chrysler's best assets to Fiat was temporarily blocked late yesterday afternoon by Supreme Court Justice Ruth Bader Ginsburg, and will remain blocked 'pending further order' from Ginsburg or the Court.

What, Ginsberg worry? Check for snowballs in Hell.

Supreme grandstanding at it's finest.

Jun 09 08:50 AM

[robert.b.fe...:]

I was pleasantly surprised that Justice Ginsburg did any thing at all. As I posted yesterday I fully expected her to support team Obama by letting the sale go forward. Perhaps the globama is wearing off and even folks in his own camp are begining to understand how dangerous nullifying bankruptcy/contract law would be. Or spald_fr may be right by labeling this supreme grand standing. Let's hope that the court will actualy look at this and uphold the concept of senior debt.

Jun 09 09:18 AM

[bobbobwhite:]

Obama cutting back on financial regulators and oversight is just another example of why politics is different than any other job in this universe and why it is universally damned: you can say you will do this or that great thing in order to get elected, then you do nothing at all or just the opposite when you get into office, and still keep your job! What a system.

Where other area of employment can one do that? That's why so many undesireables go into politics, and not because they want to do anything good for America. It's all about themselves.

Jun 09 09:45 AM

[David White:]

The Wholesale Inventories were worse than expected this morning (-1.4% vs. an expected -1.2%). This likely means another very bad GDP number for Q2. This is bad news for the US economy. If the markets were already thinking about retracing, this is the kind of news that would push them in that direction. The Trade Balance, the Treasury Budget, the Fed Beige Book and Petroleum Inventories are all on tap for tomorrow. If we don't see a down movement start today. It may well start tomorrow, unless there is unexpectedly good news.

With all of the markets in the overbought stage, the possibility of a downturn is huge. The broader market was in clear decline yesterday by a ratio of 5/3 to 1. The volume was also negative by a lesser margin. I expect more of the same today (unless we see a big downturn).

With the above situation in place, I expect the many investors who have stored oil offshore in tankers will have delivered more of it last week. They will have wanted to take advantage of the high prices. They will have wanted to cut their storage costs, which have risen 28% since May 28 (Boomberg). They will have wanted to make sure they didn't miss out on higher prices by waiting too long. Many people think oil is due to retreat to the $55 to $60 range. For all of these reasons, I expect there to be a build recorded from last week. This should negatively impact oil prices. They in turn may bring down the market as the S&P500 is very oil heavy.

Jun 09 10:21 AM

[David White:]

No one in the western world should overlook the fact that Gordon Brown's government, after a shake up of his cabinet, was reaffirmed yesterday. That likely was the cause of the late afternoon spike up. The market hates uncertainty. It would have hated to be told that Britain had no government. It would have hated to be told that Britain believed that had been doing things seriously wrong lately. Instead the world was told that there is still confidence in the British government. Everything may not be perfect, but the government is making progress in a difficult time. This is what the world wanted to hear. This has pushed all of the European currencies up against the US Dollar. Even the Japanese currency is up against the US Dollar. We will find out tomorrow and Thursday if this is a blip or a longer term trend.

I am expecting the oil inventories in the US to rise tomorrow. This ought to pressure oil to the downside. It may also pressure the European currencies to the downside.

Jun 09 12:24 PM

[PainfullyAware:]

I doubt the "Market" will go down with any gusto until the "Banks" finish their capital raise.

Shadow Banking, Dark Pools, and The Presidents Working Group On Financial Markets Still Exist. These entities have no interest in a negative market - at this time. Fill The Money Hole Is The Agenda. Once this objective is complete and solvency assured the populous will receive the news of "We Must Endure The Hard Times; But Hey We Are Saved.".

Tax Revenues Still Tanking, Unemployment Still Rising, Bankruptcy and Default Accelerating - Don't Look At The Man Behind The Curtain.

Safety Is A Function Of Awareness.

The Complexity Of Corruption Is Vast.

Jun 09 01:18 PM

[David White:]

Data from the May 2009 International Petroleum Monthly (IPM) indicate that the US demand for oil in Jan. and Feb. of 2009 was approx. 1M barrels of oil per day less than in the same period of 2008. The OECD (Organization for Economic Cooperation and Development) demand for oil in Jan. and Feb. of 2009 was approx. 2.5M to 3.0M barrels of oil per day less than in the same period of 2008.

This is a significant drop in utilization of oil. Unfortunately the report does not include figures for China (or overall World demand) for this time period. China demand may have risen. Still the overall demand is assured of being down significantly over last year.

The OECD countries are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, South Korea, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.

Jun 09 01:32 PM

[bbowen7:]

Who can believe that the financial regulatory structure does not need a significant overhaul - as called for by Hank Paulson about a year ago? The problem is all of the oxen who would need to be gored, not the least of which sit on congressional committees.

Jun 09 01:33 PM

[AndrewBaker:]

The financial system is getting its overhaul, on the quiet; but with concessions everywhere so the fat cats will stay ... well, fat. TARP funds will be paid back on the cheap (with overpriced new stock money), so-called on-going stress testing will make sure the stresses aren't too tested, getting rid of the worst executives who couldn't be made to look less bad than they really are, paying off investors who received bad sales advice (which should be done, I agree), and last but by no means least, directing our attention elsewhere by making a hu-ha about European banks and what they should do. But the economy is no better off, we're still losing jobs and homes, we've been mugged for our tax dollars to pay for it all, and our savings/pension dollars are hit twice, in their nominal value and by the effective devaluation of the dollar.

Jun 09 03:22 PM

[Joseph Sherman:]

Cheaper iPhone, no Steve. - Great move for the mass market, and Apple will need to create a higher line to keep the feeling of luxury. Steve Jobs shows just how critical the leader figure can be to a firm.

Jun 09 03:31 PM