Wall Street Breakfast: Must-Know News

• PPIP managers to be named. The Treasury is expected to name as many as nine fund managers for its Public-Private Investment Program (PPIP) from the more than 100 applications it received. The list, which could be announced as soon as today, will likely include Pimco, BlackRock (BLK), billionaire investor Wilbur Ross and private investor Angelo Gordon & Co.
• Boeing in supply chain talks. Boeing (BA) is reportedly in negotiations to buy the operations of one of its main suppliers, a Vought Aircraft facility that makes some parts of the much-delayed 787 Dreamliner. This would be a major shake-up of its supply chain and likely the first step toward an anticipated second production site for the aircraft. Vought is owned by private-equity firm Carlyle Group, and terms of the possible deal are still unknown.
• China urges dollar stability. China reiterated its call for a stable dollar and for the need to diversify the international monetary system. The largest holder of foreign currency reserves, China has reportedly asked to debate proposals for a new global reserve currency at next week's G-8 summit, though some officials deny the claims.
• Auto sales fall. U.S. auto sales fell 28% in June. Though the decline, the narrowest in nine months, indicated increased stability, automakers said it's too soon to point to a turnaround. Here's the breakdown:
  -Ford (F): -10.9% to 148,153 units vs. consensus of -17%. Market share +3% from a year ago. June inventories totalled 343K, or 60-days supply. 'Tightly controlled' inventory level leaves it room to increase Q3 production to 485K vehicles.
  -General Motors: -33.6% to 176,571 units. Chevrolet sales -33.3% to 106,712 vehicles, and Cadillac -40.9% to 8,473.
  -Chrysler: -42% to 68,297 units. Market share up 1% vs. last year. Fleet sales down 95% from a year ago.
  -Honda (HMC): -29.5% to 100,420; company sees 'signs of strength' in light truck segments.
  -Toyota (TM): -34.6% to 131,654 units. Toyota division sales were down 36.3%; Lexus sales fell a milder 20%.
  -Nissan (NSANY): -23.1% to 58,298. Company saw "better traffic and an increase in the quality of customers during May and June."
  -Daimler (DAI) Mercedes-Benz: -26.5% to 16,271.
• Lear goes bankrupt. As expected, auto-seat maker Lear (LEA) filed for Chapter 11 bankruptcy, the eighth major auto-part supplier to do so since 2005. The company obtained $500M in bankruptcy financing, and its restructuring plan is supported by key lenders and bondholders.
• GMAC becomes a corporation. GMAC converted to a corporation from a limited liability company, a move that could allow it to sell shares to the public, though it wasn't clear when or if GMAC might choose to do so.
• SEC employee warned about Madoff in '04. A lawyer working for the SEC warned about irregularities at Madoff's financial management firm as early as 2004, sending emails to her supervisors that information provided during a review didn't add up and suggesting additional investigation. Several of the questions she raised turned out to be directly related to the fraud Madoff was running. At the time, however, the SEC was under pressure to investigate the mutual fund industry and told the lawyer to focus on a different probe.
• Strong Rio sale eases debt. Rio Tinto (RTP) saw strong demand for the U.K. part of its $15.2B rights offer, while results for its Australian offer are not yet available but are likely to be similar. Chinalco (ACH) took up its full entitlement and will remain Rio's largest shareholder. The sale will help ease Rio's heavy debt burden, but analysts say the company still needs to sell non-core assets to bring its debt down further.
• LogMeIn's IPO win. Software company LogMeIn (LOGM) marked another successful initial public offering for the tech sector, closing at $20.02 after initially pricing at $16. LogMeIn specializes in remote-access software, allowing users to log in and control any internet-connected device regardless of where it's located.
• Firing announcements fall... According to Challenger's job-cut report, firing announcements fell 33% in June to 74,393, the fifth month in a row of job cuts declines and the lowest level since March 2008. Announcements were down 9% Y/Y, the first year-on-year decline since Feb. 2008. Job cuts in Q2 were down 45% from Q1.
• ...and employment improves from Q1 (.pdf). ADP private sector employment fell -473K in June vs. -485K in May (revised from 532K). Employment improved notably over Q1, but will likely "decline for at least several more months, although perhaps not as rapidly as during the last six months."
• Manufacturing contracts. The ISM Manufacturing Index came in at 44.8 in June vs. 45 consensus, its 17th consecutive month of contraction. Petroleum & Coal Products and Printing & Related Support Activities reported growth. Apparel, Leather & Allied Products, and Furniture led the laggards.
• Construction spending drops (.pdf). Construction spending was down 0.9% in May M/M vs. -0.5% consensus and -11.6% from the year prior period. The decline followed two straight monthly increases. For the first five months of the year, construction spending was down 11.7% Y/Y.
• Home sales inch up. May's Pending Home Sales were +0.1% from April to 90.7. Prior sales were revised to +7.1% from +6.7%. It's the fourth straight monthly gain; the last time that happened was in 2004. The National Association of Realtors continues to push for relaxing appraisal rules.

Today's Markets

• In Asia, Nikkei -0.6% to 9,876. Hang Seng -1.1% to 18,178. Shanghai +1.7% to 3,060. BSE +0.1% to 14,658.
• In Europe at midday, London -0.85%. Paris -1.2%. Frankfurt -1.7%.
• U.S. futures: Dow -0.7%. S&P -0.7%. Nasdaq -0.6%. Crude -2.1% to $67.84. Gold -0.85% to $933.30.

Thursday's Economic Calendar

• 7:45 ECB Announcement
  8:30 Non-farm payrolls
  8:30 Jobless Claims
  10:00 Factory Orders
  10:30 EIA Natural Gas Inventory
  4:30 PM Fed Balance Sheet
  4:30 PM Money Supply

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[AndrewBaker]

The PPIP will give banks plenty of opportunity to sell bad assets amongst themselves, and I'm sure the accountants have already lined up ways to show a profit from the off. If one bank can sell a written-down asset at greater than the written down value, it can book a profit. The purchasing bank can show it on its balance sheet at the price it paid for it, so no loss at this stage for them. There can then be a mirror sale in the other direction, giving the other bank a profit to book. (In practice these buys and sales will be spread around and not so obvious to spot.)

Get ready for another big dollop of bank profit announcements in the near future. Gee, why did we ever doubt these guys?

2009 Jul 02 08:59 AM

[Buckoux]

"SEC employee warned about Madoff in '04."

Coincidently, this employee's supervisor at the SEC, Eric Swanson, later married Madoff's niece. In a similar metaphor to beauty, conflict of interest is in the eye of the beholder.

2009 Jul 02 09:59 AM

[pjl]

For those looking on additional analysis on the Boeing news, check out this write up at:

acrinv.blogspot.com/20...

2009 Jul 02 10:01 AM

[Zenfar]

Not to rain on the bad news parade but isn't Hyundai doing well?

Oh and I love my 2010 Ford Fusion Hybrid great car!

No positions in autos.

2009 Jul 02 01:48 PM

[Joseph Sherman]

Auto sales fall. - How is Ford able to increase market share of +3%?

2009 Jul 03 08:41 AM