Wall Street Breakfast: Must-Know News

• DoJ probes telecoms. The Justice Department is investigating whether large U.S. telecommunications companies have abused their market power. The probe isn't a formal investigation of any specific company, but firms like AT&T (T) and Verizon (VZ) may have reason to worry nonetheless; the Obama administration is taking a tougher approach to antitrust enforcement, and the probe may focus in part on whether large wireless carriers are hurting competition through exclusivity agreements with handset makers.
• CFTC considers position limits. The Commodity Futures Trading Commission will hold hearings this summer to consider imposing position limits for "all commodities of finite supply," including oil, natural gas and possibly other commodities. The CFTC will also review whether or not swap dealers, index traders and ETF managers should be allowed to bypass those limits through special hedge exemptions. Any limits on energy and other commodities would mark a major change from the CFTC's relatively hands-off approach.
• Goldman's stolen codes. No damages were caused at Goldman Sachs (GS), a source said, after a computer programmer who quit the firm last month was arrested and charged with stealing proprietary trading codes. The programmer, Sergey Aleynikov, was arrested on Friday but the story didn't break right away, nor did the authorities or Goldman move on Aleynikov right away, even though they were aware of the breach weeks ago. Goldman could lose millions of dollars if the software ends up in the wrong hands, a distinct possibility since the codes were transferred to a computer server in Germany where others may have had access to them. Separately, the New York Stock Exchange said there was no connection between the security breach at Goldman and an error that dropped the investment bank from a trading report the exchange issued last week.
• EMC ups its DDUP offer. EMC (EMC) raised its offer for Data Domain (DDUP) by 11% to $2.2B, or $33.50/share, the fourth offer in a bidding war between EMC and NetApp (NTAP). EMC's previous all-cash offer, for $1.9B, was rejected by Data Domain, which cited its binding agreement with NetApp, and the uncertainty of an EMC acquisition. NetApp, whose current offer stands at $30/share in cash and stock, plans to review its options in light of the new bid.
• More chatter about stimulus II. Economists and lawmakers are starting to weigh in on calls for a second stimulus, after Vice President Joe Biden said earlier this week a second stimulus isn't out of the question. Obama adviser Laura Tyson called the $787B package approved in February 'a bit too small' and suggested lawmakers should consider drafting a second stimulus bill, though she stressed that she was speaking for herself and not the White House. However, some economists fear public impatience will "lead to the adoption of policies that will not only fail to reduce unemployment this year, but could stoke inflation in the not-too-distant future."
• California's rating cut, again. California was dealt another blow yesterday as Fitch Ratings further cut the state's rating on its long term bonds to BBB, just two notches above junk status. Fitch kept the debt on watch, suggesting California, which last week began paying some bills with IOU notes (creating the possibility of a secondary market for the notes, and push-back from banks), could see additional downgrades. S&P and Moody's may soon issue downgrades as well, a move that could potentially raise California's borrowing costs at a time when it's already facing a $26.3B budget shortfall.
• Telefonica wins Pre deal. Telefonica's (TEF) O2 and Movistar won exclusive rights to sell Palm's (PALM) Pre smartphone in Britain, Ireland, Germany and Spain. Palm said the Pre will be available in the specified European countries in time for the Christmas shopping season.
• Nokia looks to Android. Nokia (NOK) is reportedly developing a smartphone based on Google's (GOOG) Android operating platform. The decision to use Android's open source software is a reversal of Nokia's previous smartphone strategy, but the company has seen its market share slip over the last two years and is trying to create new growth. A Nokia spokesman disputed the report, but insiders say the new touchscreen phone will be unveiled in September.
• ISM service index inches up. The ISM Non-Manufacturing Survey rose 3% in June to 47% vs. consensus of 46%. The index remained below 50%, indicating contraction, but respondents said they're seeing signs of stabilization.

Today's Markets

Asia closed mostly down, but Europe gets off to a strong start and U.S. futures inch into positive territory.

• In Asia, Nikkei -0.3% to 9,648. Hang Seng -0.65% to 17,862. Shanghai -1.1% to 3,089. BSE +0.9% to 14,170.
• In Europe at midday, London +0.8%. Paris +0.7%. Frankfurt +1%.
• U.S. futures: Dow +0.1%. S&P +0.2%. Nasdaq +0.4%. Crude +1.1% to $64.74. Gold +0.2% to $926.50.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  5:00 PM ABC Consumer Confidence Index
• Notable earnings after Tuesday's close: RT

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[BlueOkie:]

Calif IOU's are a real neat trick. Some banks may or may not accept them. They pay a 3.75% APR if Calif can come up with the money. If people start to refuse them, then Calif must go to lender of last resort, the US Treasury. The federal gov't requires Calif to feed and care for illegals - Isn't that a unfunded mandate? Maybe the left coast might want to rethink some of its policies.

Jul 07 08:06 AM

[Allan Frain:]

Thr CFTC will have to continue to overlook concentrated short positions in PMs or cause some real problems for a couple of banks on the favoites list.

Jul 07 08:10 AM

[Novista:]

Stimulus II ... hahahahaha!!! (with Mogambo scorn) ... blame the public ... what they gonna say when they come for YOU with the pitchforks and torches?

Jul 07 08:34 AM

[Beefcake:]

Yeah it is a neat trick with those Calif IOU's. So whats the problem with them??? They are IOU's!!! Hello...there is nothing there to back it up. It is just like the good ol' days of school when your friend would take $.25 out of your desk and replace it with a little piece of paper from his note book that said "IOU". Yeah it was an IOU except you never received anything back.

This is the same thing brewing up here. If you like the IOU's you either have so much cash invested everywhere else that you are forced into making this investment, or you are just flat out insane.

California is a few short steps away from Junk, and I forsee it heading in that direction. It seems everyone there has their head stuck up between their legs and really can't come up with a solution. This is the best they could come up with??? Come on!!! Anyone can figure out something better than an IOU. My suggestion...stay away from California investments for a while. It's just not worth the risk.

Jul 07 08:40 AM

[robert.b.fe...:]

Well well: No damage done at GS and a silly computer glich dumped thier trading records boy I'm sure relieved that got squared away. Now the CFTC is considering limitting certain commodities (read that fossile fuels) to elevate prices. What will they think of next? And the damned public along with noninstitutional traders/investors keep screwing up this whole stimulus thing. Well if all els fails the U.S. can just issue I.O.U.s. Oh wait we already do we call them dollars.

Jul 07 08:46 AM

[vatexas645:]

How can anyone in their right mind think about adding to the stimulus plan when so little of the existing plan has been released? More debt will not help; it will give Congress and the White House more excuses to raise taxes even further than they currently project. And, as we know, taxed once - taxed forever.

Jul 07 08:49 AM

[spald_fr:]

[Obama adviser Laura Tyson called the $787B package approved in February 'a bit too small'. . . ]

The entire GDP of Portugal is $232B, Laura.

Jul 07 09:31 AM

[axelrod608:]

>> "DoJ probes telecoms. " >>

About time. The only bad credit report items I have EVER had - three total - have all been from telecoms. They REFUSE to follow the requirements of debtor/creditor law. When I dispute a charge, they make no attempt to resolve the issue, charge it off, send it to a collection agency and report it as a chargeoff. Damn scofflaws.

It is SOP in the telecom biz to bypass the required attempt to collect disputed amounts in court. They know the legal requirement and refuse to follow it. And until Uncle Sam makes them adhere to the law, they'll keep doing it.

Jul 07 10:16 AM

[axelrod608:]

PLEASE return to the old format listing SA articles.

Jul 07 10:21 AM

[AndrewBaker:]

Yep, another stimulus package. Trouble is they may run out of money having used up all the paper and ink already on quantititive easing, so they may have to borrow some of California's IOUs to complete the deal!

Jul 07 12:38 PM

[OldNavySailor:]

I second my fellow Alpha Mate's request. We used to receive one email with all the articles we were interested in reading/commenting. The new process is too cumbersome and unwieldy.


On Jul 07 10:21 AM axelrod608 wrote:

> PLEASE return to the old format listing SA articles.

Jul 07 01:51 PM

[jackooo:]

With Obama promising change I would have to say the promise has been kept. That's all I have in my pocket, change!!!
How do I get in the stimulus package like GM ceo?

Jul 07 01:59 PM

[bbowen7:]

Folks: We don't need another stimulus package because the last one was too small - there are some special interests that it missed.

Jul 07 02:43 PM

[Buckoux:]

Actually, California's 3.75% rate on their debts is about right for now. The Fed erroneously keeps their rate - and therefore the value of money - abysmally low at 0-.25% and this is the real brake on the US economy. Interest rates are too low and worse, no hope of rising. Lot's of money but with no time value. There is a lot of "real" cash on the side and this cash won't come out of its mattress for less than 3.5-4.0% The banks can get Fed funny-money at 0% and lend it to CA for 3.75%. Such a deal.

Jul 07 08:39 PM