Wall Street Breakfast: Must-Know News

• CIT confirms rescue details. CIT Group (CIT) confirmed its $3B rescue by bondholders, of which $2B is available immediately and the rest is expected to be available within ten days. The loan has a 2.5-year maturity. CIT also announced a tender for debt due August 17 where it would pay creditors $0.825 on the dollar as part of a "comprehensive restructuring of its liabilities," and canceled its Thursday earnings release. The real question now is whether the loan is anything more than a stop-gap measure and if CIT can survive without a complete overhaul.
• California closes budget gap. California lawmakers reached an agreement over how to close a $26B budget deficit, pulling the state back from the brink of bankruptcy. The deal, which needs to be approved by the state's full Senate and Assembly, will cut spending for schools, public works, welfare programs and municipalities, will force companies and individuals to pay income taxes sooner and will make it more difficult to receive state aid. In the time it took lawmakers to close the budget gap, California issued 153,711 IOUs worth $682M.
• TARP update. A leaked report from TARP Special Inspector General Neil Barofsky shows the country's bailouts and backstop plans total $23.7T. Of the $700B slated for TARP, $441B has been distributed. Barofsky will present a quarterly report on TARP to a congressional panel at 10:00 ET, and will criticize the Treasury for not being transparent enough about how it's spending taxpayer money. (Read Barofsky's report (.doc))
• Deutsche's spying probe. Insiders say Deutsche Bank (DB) has fired two top executives following an internal investigation into whether the company spied on a board member and others. Meanwhile, German prosecutors have opened a preliminary probe into whether Deutsche Bank and its senior officials broke civil and criminal laws protecting individual privacy.
• Yahoo's new homepage. Yahoo is launching a new homepage months earlier than planned, rolling out a test version in some markets today. The first homepage re-design since 2006, Yahoo is hoping to attract more users and advertisers by making its site the "center of their lives online," and will make it easier for users to access content from across the web, including from social networking sites.
• Ameritrade reaches ARS settlement. TD Ameritrade (AMTD) reached a settlement with New York Attorney General Andrew Cuomo and will buy back $456M of auction-rate securities from around 4,000 clients. Clients with accounts under $250,000 should get their money back within 75 days, while the company aims to return the rest of the funds by March 2010.
• Swiss banks retreat from U.S. clients. As the Justice Department's case against UBS (UBS) drags on, Swiss banks are reevaluating their U.S. business connections. Some Swiss banks are cutting off business with American clients for fear of U.S. authorities, while others are no longer accepting deposits from U.S.-based customers or allowing them to open accounts.
• Final Opel bids. General Motors confirmed it received three binding takeover offers for its Opel unit and will consider the deals in conjunction with the European countries that will be affected. The consortium of Magna International (MGA) and Russia's Sberbank made an unexpected last-minute change to their bid to appease critics, agreeing to evenly split a 55% majority stake in Opel instead of giving 80% of the stake to Sberbank. The other two bidders are RHJ International and Beijing Automotive.
• Wyeth okays Pfizer deal. As expected, Wyeth (WYE) shareholders approved a takeover by Pfizer (PFE), with 98% of votes cast in favor of the deal. The transaction still needs to be cleared by U.S. antitrust regulators.
• Barnes & Noble's e-book strategy. Barnes & Noble (BKS) announced plans to launch an electronic bookstore and will debut a physical e-book reader early next year, a direct attack on Amazon (AMZN) and its Kindle. Titles bought through the eBookstore can also be read over devices like the iPhone (AAPL) and BlackBerry (RIMM) and on computers.
• Leading indicators improve. Conference Board's Leading Indicators index rose +0.7% in June, vs. +0.5% consensus, the third increase in as many months with most components contributing positively. The index is up 2% in H1 2009 vs. -3.1% in H2 2008.

Earnings: Tuesday Before Open

• Ameritrade (AMTD): FQ3 EPS of $0.33 beats by $0.04. Revenue of $614M (-1.6%) vs. $580.5M. (PR)
• Autoliv (ALV): Q2 EPS of -$0.24 beats by $0.18. Revenue of $1.19B (-37%) vs. $1.15B. (PR)
• BJ Services (BJS): FQ3 EPS of -$0.11 misses by $0.11. Revenue of $787M (-40.8%) vs. $868M. (PR)
• BlackRock (BLK): Q2 EPS of $1.75 beats by $0.17. Revenue of $1.03B in-line. Assets under management $1.373T. Shares +1.6% premarket (8:20 ET). (PR)
• Caterpillar (CAT): Q2 EPS of $0.72 beats by $0.50. Revenue of $8.0B (-41.5%) vs. $8.9B. Shares +9.3% premarket (7:50 ET). (PR)
• Coca-Cola (KO): Q2 EPS of $0.92 beats by $0.03. Revenue of $8.3B (-8.6%) vs. $8.7B. Shares -1% premarket (7:50 ET). (PR)
• Comerica (CMA): Q2 EPS of -$0.10 beats by $0.35. Tier 1 capital ratio of 11.57%. Net credit-related charge-offs of $248M, or 2.08% of average total loans. (PR)
• Continental Airlines (CAL): Q2 EPS of -$1.36 misses by $0.01. Revenue of $3.1B (-22.7%) in-line. (PR)
• EI DuPont de Nemours (DD): Q2 EPS of $0.61 beats by $0.08. Revenue of $6.9B (-22.4%) vs. $7.15B. Shares +1% premarket (6:40 ET). (PR)
• Elan (ELN): Q2 EPS of -$0.14 beats by $0.01. Revenue of $281M (+14.4%) vs. $262M. (PR)
• Forest Laboratories (FRX): FQ1 EPS of $0.87 beats by $0.05. Revenue of $1B (+4.3%) in-line. (PR)
• Freeport-McMoRan Copper & Gold (FCX): Q2 EPS of $1.38 beats by $0.69. Revenue of $3.7B (-32.3%) vs. $3.4B. Shares +3.1% premarket (8:10 ET). (PR)
• Hudson City Bancorp (HCBK): Q2 EPS of $0.26 beats by $0.01. Loan loss provisions of $32.5M in Q2 vs. $3M in Q2 2008. Net charge-offs of $9.6M. (PR)
• Jefferies Group (JEF): Q2 EPS of $0.30 beats by $0.04. Revenue of $590M (+50.5%) vs. $510M. Shares +5.1% premarket. (PR)
• Lexmark International (LXK): Q2 EPS of $0.55 misses by $0.05. Revenue of $905M (-20.6%) vs. $916M. (PR)
• Lockheed Martin (LMT): Q2 EPS of $1.88 beats by $0.07. Revenue of $11.24B (+1.8%) in-line. Reaffirms full-year guidance. Shares -0.4% premarket. (PR)
• Merck & (MRK): Q2 EPS of $0.83 beats by $0.06. Revenue of $5.9B (-2.5%) vs. $5.8B. (PR)
• Peabody Energy (BTU): Q2 EPS of $0.49 in-line. Revenue of $1.3B (-12.2%) vs. $1.4B. Shares -2.4% premarket (8:10 ET). (PR)
• Precision Castparts (PCP): FQ1 EPS of $1.70 misses by $0.05. Revenue of $1.4B (-23.8%) vs. $1.6B. (PR)
• Quest Diagnostics (DGX): Q2 EPS of $1.00 beats by $0.05. Revenue of $1.9B (+3.5%) in-line. (PR)
• Regions Financial (RF): Q2 EPS of -$0.28 misses by $0.06. Loan origination volume of $3.1B vs. $2.8B in Q1. Net loan charge-offs increased to $491M, or an annualized 2.06% of average loans. (PR)
• Schering-Plough (SGP): Q2 EPS of $0.46 beats by $0.01. Revenue of $4.6B (-5.6%) in-line. (PR)
• Southwest Airlines (LUV): Q2 EPS of $0.08 beats by $0.01. Revenue of $2.6B (-8.8%) in-line. Shares +0.7% premarket (7:50 ET). (PR)
• State Street (STT): Q2 EPS of $1.04 beats by $0.07. Revenue of $2.15B (-20.3%) vs. $2.16B. Shares -1.6% premarket (8:00 ET). (PR)
• United Technologies (UTX): Q2 EPS of $1.21 beats by $0.17. Revenue of $13.2B (-17.2%) vs. $13.9B. (PR)
• Unitedhealth Group (UNH): Q2 EPS of $0.73 beats by $0.03. Revenue of $22B (+6.8%) in-line. (PR)
• Western Union (WU): Q2 EPS of $0.32 beats by $0.02. Revenue of $1.25B (-6.9%) in-line. (PR)

Earnings: Monday After Close

• Allscripts-Misys Healthcare Solutions (MDRX): Q4 EPS of $0.16 beats by $0.01. Revenue of $166M (+71%) vs. $160M. (PR)

• Boston Scientific (BSX): Q2 adjusted EPS of $0.20 beats by $0.07. Revenue of $2.1B (-2.4%) vs. $2B. Sees Q3 EPS of $0.17-0.21 vs. $0.15 and Q3 revenue of $2B-2.1B vs. $2B. Sees FY09 EPS of $0.82-0.86 vs. $0.57 and FY09 revenue of $8.1B-8.4B vs. $8.2B. (PR)

• Canadian National Railway Company (CNI): Q2 EPS of C$0.82 beats by C$0.14. Revenue of C$1.8B (-15%) vs. C$1.7B. (PR)

• Legg Mason (LM): Q1 EPS of $0.35 beats by $0.13. Revenue of $613M (-42%) in-line. (PR)

• Lincare (LNCR): Q2 EPS of $0.49 beats by $0.02. Revenue of $380M (-11%) vs. $389M. (PR)

• Packaging Corp. of America (PKG): Q2 EPS of $0.28 beats by $0.12. Revenue of $549M (-11%) vs. $535M. (PR)

• Texas Instruments (TXN): Q2 EPS of $0.20 beats by $0.02. Revenue of $2.5B (-27%) vs. $2.4B. Sees Q3 EPS of $0.29-0.39 vs. $0.27 and Q3 revenue of $2.5B-2.8B vs. $2.5B. (PR)

• Werner (WERN): Q2 EPS of $0.18 in-line. Revenue of $403M (-30%) vs. $435M. (PR)

• Zions Bancorp (ZION): Q2 EPS of -$0.35 beats by $0.67. Taxable-equivalent revenue of $1.1B (+93%). (PR)

Today's Markets

Asian markets closed mixed, European markets are moderately higher and U.S. futures show little movement.

• In Asia, Nikkei +2.7% to 9,652. Hang Seng flat. Shanghai -1.6% to 3,213. BSE -0.85% to 15,062.
• In Europe at midday, London +0.6%. Paris +0.8%. Frankfurt +0.8%.
• Futures: Dow +0.1%. S&P +0.1%. Nasdaq flat. Crude +0.4% to $64.27. Gold -0.1% to $947.90.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:30 Chicago Fed National Activity Index
  8:55 Redbook
  9:00 Bank of Canada Announcement
  10:00 Bernanke delivers semi-annual monetary policy testimony
  10:00 TARP chief Neil Barofsky presents quarterly report to Congress
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday's open: AKS, ALV, AMTD, BJS, BTU, CAL, CAT, CMA, DD, DGX, ELN, FCX, FRX, HCBK, JEF, KO, LMT, LUV, LXK, MRK, PCP, RF, SGP, SHW, STT, UAUA, UNH, UTX, WU
• Notable earnings after Tuesday's close: AAPL, AMD, AMLN, ATHR, BXP, CHRW, FULT, GILD, ILMN, LLTC, NBR, PPDI, PTV, QLGC, RHI, SBUX, SLM, STX, SYK, VFC, YHOO

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

CIT has kicked the can all the way down to the end of the road. Next kick will put it in the ditch and it will be time to go home.

UBS wants no more of the US elites money. They probably have most of it anyway. I wonder how much of our illustrious leaders have accounts there. One reason that the IRS will probably never get that information and nothing will ever come of it. wink, wink, nod, nod.

California intends to pay back the cuts once the market recovers, with interest. I guess they expect a quick V shaped recovery. This is not true spending cuts this is simply kicking the can down the road. Wonder what the outcome will be when they too run out of road.

More pressure on future budgets!!!

I hope they understand that there is nothing but a ditch at the end of the road.

Jul 21 07:41 AM

[ScroogeMcduck:]

$441 billion?

A billion seconds ago it was 1959.

A billion minutes ago Jesus was alive.

A billion hours ago our ancestors were living in the Stone Age.

A billion dollars ago was only 8 hours and 20 minutes, at the rate Washington spends it.

The tax payer will never know where all that money went. I dont care how much transparency Barofsky gets.

Jul 21 08:05 AM

[robert.b.fe...:]

Wow everyone seems to be doing better than expected. Gentlemen start your spinning wheels.

Jul 21 08:44 AM

[JCCIII:]

Looks like neither the Obama-Pelosi cap-and-trade (tax) and health care reforms (more taxes) are going to pass in their present forms. Those are two real green-shoots.

Jul 21 09:12 AM

[ebworthen:]

"Happy days are here again..."

And the band played on.

Does anyone really and truly believe we are "turning a corner"?

Or are we just ginning the market up so the banks and traders can make some more cash before we hit 12% nationwide unemployment?

More "irrational exuberance" more accurate?

Things are down -66% but that is "less bad" than the 69% predicted so everything is better now?

I feel like I'm at the Mad Hatter's tea party...

Jul 21 09:58 AM

[absinop:]

Earnings season is a great way to make profits. Do some homework and get in at best price. But remember PRIDE doesn't make you money - SELL the Losers and KEEP the Winners.
I'm moving into the following before their EA announcements this Thursday (7/23):
7/23 BMO: ALK TNH
7/23 AMC: INSU MCRL SGEN

Jul 21 10:26 AM

[Monty23:]

I didn't read Barofsky's report because that figure knocked me off my chair. $23.7 TRILLION. That has to be a misprint. I can't believe congress authorized that much of our money.

Jul 21 10:31 AM

[Billy Ford:]

ebworthen,

you couldnt have said it any better. I also firmly believe this is all a big ball of Sh!t. Goldman and the govt are pulling the strings on this thing. They are trying to force positive feelings on people so that they will go out and buy crap...that may work for a few, but not for the 10% that dont have jobs. Doesnt work for the people like me who are skeptical of this whole charade. I have spoken to many small business owners and they all say about the same thing in that they feel this is just getting started and that they ripple effect is just starting to impact them in a major way. I feel sorry for you if you buy into all this...quit reading the biased articles and watching CNBC...that is precisely the vehicle for which they are trying to build consumer sentiment..it is a joke.

Jul 21 10:43 AM

[AndrewBaker:]

It is unbelievable that $23.7 trillion has been earmarked one way or another to supposedly get us out of this financial crisis. And much of this money is being handed out to favorites to play with in such a way as they can take a chunk for themselves, use a chunk of the rest to falsely bid up the markets and their own stocks, and pass the rest around like a pass-the-parcel game so their cronies get some too.

In the same report, investigations into fraud, insider trading and corruption are highlighted: yet many of the people and organizations charged with handling and dealing with the rescue funds are surely just as worthy for such investigations. Only they are the favoured ones, and above such enquiries and examinations.

Meanwhile the markets continue to be manipulated such that the men at the top can make some money, whilst those poorer folk at the bottom of the food chain get their money in just in time for the big drop that robs them even more of any savings that they may have had or thought they were going to make from this lacklustre and fabricated but well publicized and advertized recovery.

I agree with futurestrader except that I can't see it as a joke: it is far too serious for that.

Jul 21 12:04 PM

[doubleguns:]

Sick joke.

Jul 21 01:19 PM