- Truth still murky after Bernanke testimony. Testifying before Congress, Bernanke faced open hostility from lawmakers over his handling of the financial crisis and the Federal Reserve's role in pushing through Bank of America's (BAC) acquisition of Merrill Lynch. In particular, lawmakers grilled Bernanke on whether he threatened to force out Bank of America CEO Ken Lewis, accusing Bernanke of inconsistencies in his statement and of withholding information from other agencies. At the end of the hearing, lawmakers were still uncertain as to how much force was applied to Bank of America. (Read Bernanke's prepared testimony, or a live blog of the hearing)
- Fed starts to scale back. The Federal Reserve extended five of its liquidity programs (AMLF, CPFF, PDCF, TSLF, and currency swaps with other central banks) by three months to Feb. 1, 2010, but will let one of its emergency programs expire (MMIFF) and trimmed two programs (TAF, TSLF), marking the Fed's first steps in scaling back its unprecedented market interventions. The changes were not announced with the FOMC statement because the Fed needed to coordinate the swap line extension with other central banks. (Read the Fed's press release)
- Tallying TARP. Around $369B of TARP funds have been invested in companies, loans and other types of assistance. Around $329B remains for use, though part of that money has already been committed. Roughly $142B has yet to be allocated.
- UBS sells shares, faces quarterly loss. UBS (UBS) raised around 3.8B Swiss francs ($3.5B) in a share sale, and said it expects to face a Q2 loss. UBS said the capital increase was aimed at increasing confidence in the bank, and that the Q2 loss is mostly because of reorganization costs and charges on the company's own debt. The moves will raise UBS' Tier 1 capital ratio to over 11.9% at the end of the month from 10.5% in March, with another 50 basis points boost expected in Q3. Shares -3.6% premarket.
- Sanctions for Citi. Japan's Financial Services Agency will reportedly sanction Citigroup (C) today over lax money-laundering controls and demand that the bank suspend some of its retail business operations. The severity of the sanction is unknown, but will be detailed later today in a press conference and is connected to money laundering by a Japanese criminal syndicate.
- California gets cut. Fitch downgraded California's credit rating to A- from A on the expectation of continuing strained finances through fiscal year 2010 and beyond, regardless of the outcome of its current budget battle. Outstanding bonds are Rating Watch Negative because of short-term concerns over the state's liquidity crisis.
- GM racing through Ch. 11. In a speedy 15 minute hearing, General Motors received court approval for $33B in bankruptcy financing. GM filed for bankruptcy June 1 with the goal of emerging from Chapter 11 within 60-90 days. However, if the automaker's progress through bankruptcy proceedings continues apace, the new GM could surface by mid-July. In a separate development, the Treasury is in talks with over a dozen state attorneys to change two key features of GM's bankruptcy plan. If those efforts are successful, GM might have to take on product-liability claims and compensate dealers more than it planned, making the company less attractive to a private buyer when the government tries to sell its stake.
- Looming Lear bankruptcy. Auto parts supplier Lear (LEA) is preparing to file for bankruptcy as soon as next week. The world's largest maker of auto seats, Lear warned in March it may have to file for Chapter 11 protection and since then has been exploring alternatives to restructure its debt outside of bankruptcy. Shares fell 39% Thursday to $0.54 and are down another 19% premarket to $0.44.
- Brazil's IPO winner. VisaNet, the Brazilian affiliate of Visa (V) raised 8.4B reais ($4.27B) in its initial public offering, marking the world's biggest IPO this year. In comparison, the U.S. had just 10 IPOs totaling $2.03B in Q2, and it's likely that the U.S. will lose the top spot in world stock market offerings for the first time since 1995.
- Stanford pleads innocence. Accused financier Allen Stanford pleaded not guilty to charges of fraud and was approved to be released on bail before the trial. At the hearing, prosecutors alleged Stanford, who is facing charges of conspiracy, fraud, obstruction and money laundering, also bribed the firm auditing his bank using funds from a secret bank account located in Switzerland.
- Palm handily beats expectations. Though Palm (PALM) posted a wider quarterly loss as revenue dropped ahead of its Pre smartphone release, results still beat analysts' expectations (see numbers below). CEO Jon Rubinstein said Pre sales are "strong and growing... I couldn't be happier with our launch," and expects gross margins to eventually top 30%. Shares +13.8% premarket to $15.95.
- Boston Sci gets new chief. Boston Scientific (BSX) announced the unexpected resignation of CEO Jim Tobin, and said he will be replaced by former Zimmer CEO Ray Elliot. Analysts said the change is likely to be positive for the stock, given both Elliot's track record and Tobin's; Tobin helped orchestrate Boston Scientific's $27.5B purchase of Guidant in 2006, which Fortune dubbed the 'second-worst deal ever.' Shares gained 5.1% to $10 Thursday.
- Another lost order for Boeing. Qantas canceled half its 30-plane order for Boeing's (BA) 787 Dreamliner amid falling demand for air travel. Boeing has already lost orders for 58 Dreamliners this year. Earlier this week, Jet Airways deferred delivery of nine Boeing planes, while Virgin Atlantic turned to Airbus to keep its fleet growing while waiting for the long-delayed Dreamliners.
- Final GDP numbers. Final numbers for Q1 GDP came in at -5.5% vs. the consensus and preliminary estimate of -5.7%. The GDP price index rose 2.8%, in line with estimates. In Q4, GDP was -6.3%.
- Jobless claims rise. Initial Jobless Claims came in at 627K, vs. last week's 612K (revised) and consensus of 613K. Continuing claims rose by 29K to 6.74M.
Earnings: Thursday After Close
- Accenture (ACN): FQ3 EPS of $0.68 beats by $0.04. Revenue of $5.5B (-16%) vs. $5.2B. Sees Q4 revenue $5B-5.2B vs. $5.3B. Raises FY09 guidance to $2.67-2.70 vs. $2.64. (PR)
- Micron Technology (MU): FQ3 EPS of -$0.36 beats by $0.07. Revenue of $1B (-26%) in-line. (PR)
- Palm (PALM): FQ4 EPS of -$0.40 beats by $0.22. Revenue of $87M (-70%) vs. $81M. Q4 smartphone shipments down 62% to 351,000. (PR)
- Tibco Software (TIBX): FQ2 EPS of $0.11 beats by $0.02. Revenue of $143M (-5%) vs. $139M. (PR)
Asian and European markets moved higher Friday after Thursday's strong U.S. performance. Futures have traded in a tight range.
- Asia: Nikkei +0.83% to 9,877. Hang Seng +1.78% to 18,600. Shanghai +0.11% to 2,928. BSE +2.92% to 14,765.
- Europe at midday: London +0.3%. Paris +0.1%. Frankfurt +0.3%.
- Futures: Dow -0.2% to 8398. S&P -0.2% at 915. Nasdaq -0.2%.
Treasurys are flat. Crude +0.7% to $70.75. Gold +0.7% to $946.
Euro +0.8% vs. dollar. Yen +0.4%. Pound +0.7%.
Friday's Economic Calendar
- 8:30 Personal Income and Outlays
9:55 University of Michigan Consumer Sentiment
- Notable earnings before Friday's open: KBH
Seeking Alpha editor Eli Hoffmann contributed to this post.
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