- No rescue for CIT. CIT Group (NYSE:CIT) said 'there is no appreciable likelihood' of government support, after officials determined CIT's problems were too severe to be solved by any of the plans being considered and decided not to inject additional taxpayer funds because the company doesn't seem to have a viable business plan. This marks the first time since Lehman Brothers' collapse that the government has chosen not to help a major financial company in distress. It also marks the first loss for TARP, as Treasury officials have essentially written off the entire $2.3B investment made in CIT last year. CIT is trying to line up at least $2B in rescue financing from existing debtholders (though stress tests indicate it may need as much as $4B) and indicated it will likely have to file for bankruptcy without it, possibly as soon as tomorrow.
- Rock solid Q2 for JPMorgan. Like its peer Goldman Sachs (NYSE:GS) on Tuesday, JPMorgan (NYSE:JPM) exceeded consensus with Q2 earnings of $2.7B ($0.53/share) compared to Street estimates of just $0.06 (see numbers below). Record investment-banking revenue from trading and stock/bond underwriting helped offset losses from defaults on consumer loans. JPMorgan's Tier 1 capital ratio was 9.7% vs. 11.4% last quarter. Credit-loss provisions fell 3.6% from Q1 to $9.7B.
- BoA's secret regulatory agreement. Bank of America (NYSE:BAC) is reportedly operating under a secret regulatory agreement requiring it to overhaul its board and address certain risk and liquidity problems. Federal regulators imposed the memorandum of understanding in May, giving the bank a chance to work out its problems in private, but also surprising some bank executives who hadn't expected such a formal rebuke. Sources say Bank of America is coming up against some July and August deadlines, but may get an extension on certain tasks, such as replacing the majority of its board with new directors.
- Citi in secret talks too. Sources say Citigroup (NYSE:C) is in talks with the FDIC to enter into a memorandum of understanding, and that the memo will reinforce Citi's existing strategy of shedding assets and improving governance, among other things. Citi has been working with a similar memorandum of understanding with the Office of the Comptroller of the Currency since last year.
- Possible SEC charges for Regions Financial. Regions Financial (NYSE:RF) says its investment bank may face charges related to 'certain mutual funds' that sustained heavy mortgage-related losses after receiving a Wells notice from the SEC on July 9. Regions didn't disclose which mutual funds are being investigated, and said only that they're part of regional brokerage firm Morgan Keenan.
- AIG tries to speed deals. AIG (NYSE:AIG) reportedly asked the buyout firms bidding for its Taiwan life insurance unit to partner with select local companies in the next round of bidding to help secure regulatory approval for the potential $2B deal. Taiwanese regulators have expressed concern over selling the island's second-largest life insurer to private-equity firms, and had suggested they team with companies that have experience in the field. Separately, AIG said it will speed its efforts to take Alico public and get it listed on the stock market in New York.
- Porsche, VW close to deal. Multiple German newspapers reported Porsche had agreed to merge with Volkswagen (OTCPK:VLKAY), but a Porsche spokesman downplayed the news, saying the company is not aware of any such agreement by the Porsche and Piech families. However, Volkswagen signaled a deal is imminent, if not already agreed upon, and called an extraordinary meeting of its supervisory board for next week.
- Germany throws support to Magna. Germany threatened it may withdraw its aid offer to General Motors if GM sells its Opel unit to anyone other than Magna International (NYSE:MGA). The ultimatum could substantially help Magna, which has seen renewed bid competition from RHJ International as Magna's talks have stalled.
- FOMC sees both growth and unemployment. The Federal Open Market Committee released minutes yesterday from its April meeting, suggesting that the pace of contraction is slowing but economic activity will remain weak 'for a time.' The FOMC expects exceptionally low levels of federal funds rate for an extended period of time and is wary of buying more Treasurys. Higher unemployment is forecast in conjunction with more robust economic growth than previously expected. (Read the FOMC press release and minutes)
- Panel chosen for crisis probe. Congress appointed a ten-member panel to investigate the financial crisis. The panel has broad authorities, including the ability to issue subpoenas and investigate individual financial firms, and includes several well-known business and consumer advocates.
- Foreclosures reach new high. Foreclosures reached a new record in the first half of the year, climbing to 1.9M filings on 1.5M properties, or one in every 84 households with loans. That's a 9% jump from H2 2008 and nearly a 15% jump from H1 2008. "Despite everybody's best efforts to date we're not really making any headway against the problem," said Rick Sharga, senior vice president at RealtyTrac.
- Consumer prices rise. June's Consumer Price Index rose 0.7% M/M and fell 1.4% Y/Y, vs. consensus of +0.6% and -1.5%. Core CPI was +0.2% M/M and +1.7% Y/Y. The year-over-year drop was led by a 25.5% decline in energy prices. The housing index was unchanged, after falling in each of the three previous months.
- NY mfg gains. The New York Fed's Empire State Manufacturing Index gained 9 points to -0.6, vs. consensus of -4.5. The new orders index rose above zero for the first time in several months. Inventories slipped to a record low of -36.5. Future indexes were slightly less optimistic than in June.
- Industrial production dips. Industrial Production fell 0.4% in June, vs. -0.7% consensus and May's -1.2% (revised). Capacity utilization was 68% vs. last month's 68.3%.
Earnings: Thursday Before Open
- Amphenol (NYSE:APH): Q2 EPS of $0.43 beats by $0.01. Revenue of $685M (-19.1%) vs. $673M. (PR)
- Baxter International (NYSE:BAX): Q2 EPS of $0.96 beats by $0.02. Revenue of $3.1B (-2.1%) in-line. (PR)
- Biogen Idec (NASDAQ:BIIB): Q2 EPS of $0.75 beats by $0.07. Revenue of $1.1B (+10%) in-line. (PR)
- Cypress Semiconductor (NASDAQ:CY): Q2 EPS of -$0.03 beats by $0.06. Revenue of $156M (-25.7%) vs. $152M. (PR)
- Fairchild Semiconductor Intl. (NYSE:FCS): Q2 EPS of -$0.03 beats by $0.08. Revenue of $278M (-33.6%) vs. $265M. Shares +0.7% premarket (7:45 ET). (PR)
- Harley-Davidson (NYSE:HOG): Q2 EPS of $0.08 misses by $0.16. Revenue of $1.2B (-26.6%) in-line. (PR)
- JPMorgan (JPM): Q2 EPS of $0.28 beats by $0.24. Revenue of $27.7B (+2.9%) vs. $25.9B. After repaying $25B of TARP funds, Tier 1 Capital ratio of 9.7%. Extended ~$150B in new credit. Shares +2% premarket (6:50 ET). (PR)
- Marriott International (NYSE:MAR): Q2 EPS of $0.23 beats by $0.02. Revenue of $2.6B (-19.2%) vs. $2.5B. Issues downside guidance: Q3 EPS of $0.09-0.14 vs. $0.20 consensus, FY '09 EPS of $0.76-0.86 vs. $0.91 consensus. (PR)
- McMoRan Exploration Company (NYSE:MMR): Q2 EPS of -$1.36 misses by $0.62. Revenue of $97M (-74.3%) vs. $101M. Shares +1.8% premarket (8:10 ET). (PR)
- MGIC Investment (NYSE:MTG): Q2 EPS of -$2.74 misses by $1.54. Revenue of $454.5M (+7.1%) vs. $432.9M. (PR)
- Nexen (NXY): Q2 EPS of $0.04 misses by $0.26. Revenue of $1.3B (-35.7%). (PR)
- Nokia (NYSE:NOK): Q2 net income of €380M ($0.10/share) vs. consensus of €361M. Revenue of €9.9B (-25%) vs. €10.1B. Sees flat market-share growth, after previously forecasting an increase. Sees margins steady at ~11% vs. a previous forecast of 'in the teens.' Shares -7.8% premarket (6:50 ET). (Bloomberg)
- Novartis (NYSE:NVS): Q2 EPS of $0.90 beats by $0.05. Revenue of $10.5B (-1.7%) vs. $10.2B. (Novartis financial report (.pdf))
- PPG Industries (NYSE:PPG): Q2 EPS of $0.91 beats by $0.16. Revenue of $3.1B (-30.4%) vs. $3.3B. Shares +0.9% premarket (8:00 ET). (PR)
- Sony Ericsson Mobile Communications (SNE, ERIC): Q2 loss of €213M on sales of €1.68B (-40%). Handsets shipped fell to 13.8M from 24.4M a year ago. Says market share fell to 5% from 6%. Gross margin down to 12% from 23% a year ago. (MW)
Earnings: Wednesday After Close
- Cintas (NASDAQ:CTAS): FQ4 EPS of $0.38 beats by $0.01. Earnings exclude $54 million after-tax charge. Revenue of $879M (-13%) vs. $876M. (PR)
- Crown Holdings (NYSE:CCK): FQ2 EPS of $0.65 beats by $0.01. Revenue of $2B (-6%) in-line. (PR)
- Polycom (NASDAQ:PLCM): FQ2 EPS of $0.29 beats by $0.01. Revenue of $231M (-15%) vs. $223M. (PR)
- Xilinx (NASDAQ:XLNX): Q1 EPS of $0.14 misses by $0.05. Revenue of $376M (-23%) vs. $381M. Sees Q2 revenue up 2%-6% sequentially. (PR)
Asian markets were mixed, European markets are trending higher and U.S. futures are unsure what direction to take.
- In Asia, Nikkei +0.8% to 9,344. Hang Seng +0.6% to 18,362. Shanghai -0.15% to 3,184. BSE -0.02% to 14,250.
- In Europe at midday, London +0.4%. Paris +1.2%. Frankfurt +1.1%.
- Futures: Dow +0.2%. S&P +0.1%. Nasdaq -0.1%. Crude -1% to $60.97. Gold -0.1% to $938.40.
Thursday's Economic Calendar
8:30 Jobless Claims
9:00 Treasury International Capital
9:00 RBC CASH Index
10:00 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
1:00 PM NAHB Housing Market Index
4:30 PM Fed Balance Sheet
4:30 PM Money Supply
- Notable earnings before Thursday's open: APH, BAX, BIIB, CY, FCS, GPC, HOG, JPM, MAR, MMR, MTG, NOK, NXY, PPG
- Notable earnings after Thursday's close: GOOG, IBM, PBCT, TPX
Seeking Alpha editor Eli Hoffmann contributed to this post.
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