- CIT to get much smaller. CIT Group (CIT) reportedly turned down offers from Berkshire Hathaway (BRK.A) and Leucadia National Corp. (LUK) last spring to buy parts of the lender because the offer prices were too low. CIT is now being forced to evaluate a similarly structured breakup as it faces potential bankruptcy, with its aviation-finance and rail-finance operations units the most likely to be sold. CIT will likely keep its vendor-financing department, but could shed its vendor-financing business.
- White House wants to fold OTS. The White House submitted a proposal to Congress to fold the Office of Thrift Supervision into the larger Office of the Comptroller of the Currency, which oversees commercial banks, and to empower the SEC to administer the resolution of large financial firms that operate brokerages. The plan, which is part of a broader effort to create a process for unwinding systemically important institutions that are failing, would try to end the practice of escaping regulation by acquiring a thrift and organizing as a unitary thrift holding company. (Read the Treasury's fact sheet)
- Stock indices head up and away. Better-than-expected quarterly earnings reports have helped stock indices surge forward. The Dow Jones Industrial Average closed at 9,069.29, its first time above 9,000 since January, for a 38.5% gain in less than five months. The S&P 500 has erased half its losses since September, and the Nasdaq is on its longest streak of gains since 1992. Skeptics warn the sharp gains are just a set-up for a sharp pullback.
- Fed seeks consumer protection overhaul. The Federal Reserve submitted its own proposal to Congress yesterday, detailing sweeping new consumer protections for mortgages. Among the proposals were a ban on side payments to mortgage brokers for pushing clients to higher-cost loans and plans to overhaul the content and timing of disclosures to consumers. (Read the Fed's press release)
- SEC sues over fake takeover reports. SEC officials filed a civil lawsuit against Hazem Khalid Al-Braikan, a respected Kuwaiti financier, alleging he made millions in suspicious profits after 'fraudulent' takeover reports sent shares of U.S. companies Harman International (HAR) and Textron (TXT) soaring. The SEC said the case represents 'pretty brazen misconduct,' with Al-Braikan aggressively buying Harman stock and call options in the four days before the fake tender offer, followed by a liquidation of the entire position.
- Qualcomm fined for abusing market power. South Korea’s fair trade regulator is fining Qualcomm (QCOM) a record $208M, accusing the U.S. chipmaker of abusing its market dominance. Qualcomm promised to fight the ruling, which it called 'overly excessive and unwarranted.' South Korean regulators have been investigating Qualcomm since 2006.
- Beijing Auto's Opel bid fails. Xu Heyi, chairman of Beijing Automotive, said the company's bid for General Motors' Opel unit failed because of a disagreement over the intellectual property rights to care designs and technology. Analysts speculate that Beijing Automotive's growing success may have been a factor as well, as "GM has no interest in strengthening a rival in China."
- Tough times for Microsoft. Microsoft (MSFT) reported quarterly earnings after the market closed (see details below), with a $0.02/share miss that dampened hopes of a tech recovery. The company posted its first ever annual decline in sales of its Windows operating system, and saw weak sales across all of its units, but struck a bullish tone, noting "there is some sense we have hit bottom."
- Amazon fails to amaze. Amazon (AMZN) met expectations when it reported quarterly earnings yesterday (see details below), but took a profit hit on a legal settlement and weak sales in high-margin products like videogames. Sales of media, including books and music, were flat in North America. On a more positive note, Amazon's third-party marketplace continued to grow, contributing 30% of unit sales.
- U.K. economy shrinks. The U.K. economy shrank far more than expected in Q2, contracting 0.8% from the previous quarter and 5.6% annually, the largest decline since quarterly records began in 1955. This was the fifth consecutive quarter of GDP contraction in the U.K.
- Jobless claims rise. Initial jobless claims came in at 554K, up 30K from a week ago (revised) and better than the 560K consensus. Continuing claims fell 88K to 6.225M.
- Fewer mass layoffs. Mass layoffs (of at least 50 people) fell 6% in June to 2,763, resulting in 279K job losses, down from record highs in May. Over the year, mass layoffs increased by 1,046 and associated initial claims increased by 104K.
- Home sales increase. Existing home sales rose 3.6% in June to 4.89M/year, vs. consensus of 4.77M. Sales are 0.2% lower than a year ago. NAR chief economist Lawrence Yun said he expects the gradual uptrend to continue, but noted again that new appraisal standards are resulting in lost sales.
Earnings: Friday Before Open
- Arch Coal (ACI): Q2 EPS of -$0.11 misses by $0.05. Revenue of $555M (-29.4%) vs. $634M. Full-year guidance in line. Believes the trough of the current coal market cycle has been reached, and anticipates better industry supply and demand balance in H2. Shares -2.8% premarket. (PR)
- Ashland (ASH): FQ3 EPS of $1.01 beats by $0.09. Revenue of $2.04B (-7.5%) in-line. (PR)
- Black & Decker (BDK): Q2 EPS of $0.63 beats by $0.26. Revenue of $1.19B (-27.4%) in-line. Sees Q3 EPS of $0.35-0.45 vs. $0.52 consensus and full-year EPS of $1.65-2.00 vs. $1.60. (PR)
- Dover (DOV): Q2 EPS of $0.54 beats by $0.08. Revenue of $1.4B (-30%) in-line. "Though quarterly order rates stabilized across most of our businesses, we still do not anticipate a meaningful second half recovery." (PR)
- Ericsson (ERIC): Q2 EPS of 0.26 kroner misses by 0.58 kroner. Revenue of 52.1B kroner vs. consensus of 50.58B. Gross margin 36.3% vs. 37% a year ago. Notes continued growth in mobile subscriptions, although the growth rate has slowed. Shares -6.6% in Stockholm. (PR)
- Exelon (EXC): Q2 EPS of $1.03 beats by $0.06. Revenue of $4.17B (-11.1%) vs. $4.93B. Sees Q3 EPS of $0.90-1.00 vs. $1.05 consensus. Shares -0.5%. (PR)
- Fortune Brands (FO): Q2 EPS of $0.70 beats by $0.06. Revenue of $1.74B (-16.9%) in-line. Sees full-year EPS in line with consensus. (PR)
- Ingersoll-Rand (IR): Q2 EPS of $0.50 beats by $0.11. Revenue of $3.47B (+12.8%) in-line. Sees Q3 EPS of $0.55-0.70 vs. consensus of $0.52 and full-year EPS of $1.39-1.69 vs. $1.32. "Based on our recent order pattern and a review of customer and channel activity, we expect to continue to see reduced activity levels year over year for most of our major end markets for the second half of 2009." (PR)
- Pinnacle Entertainment (PNK): Q2 EPS of $0.08 beats by $0.05. Revenue of $266M (flat). (PR)
- Schlumberger (SLB): Q2 EPS of $0.68 beats by $0.05. Revenue of $5.53B (-18.1%) in-line. Says "the overall sequential rate of revenue decline slowed as a further precipitous drop in North America was offset by slowing rates of decline and some recovery in other parts of the world." (PR)
- Sepracor (SEPR): Q2 EPS of $0.72 beats by $0.33. Revenue of $326M (+10.9%) vs. $280M. Sees full-year EPS of $2.55-2.90 vs. $2.54. (PR)
- T. Rowe Price Group (TROW): Q2 EPS of $0.38 beats by $0.04. Revenue of $442M (-24.6%) vs. $424M. "The second half of 2009 will likely continue to be challenging for both consumers and companies around the world; nevertheless, investors should be encouraged about the prospects for a gradual return to longer-term financial stability and global growth." (PR)
- Wabtec (WAB): Q2 EPS of $0.64 beats by $0.02. Revenue of $334M (-14.4%) vs. $380M. (PR)
Earnings: Thursday After Close
- Amazon.com (AMZN): Q2 EPS of $0.32 in-line. Revenue of $4.65B (+14%) vs. $4.69B. Sees Q3 revenue of $4.75B-5.25B vs. $4.92B. Sees operating income of $120M-210M. (PR)
- American Express (AXP): Q2 EPS ex-items of $0.27 beats by $0.01. Revenue of $6.1B (-18%) vs. $6.3B. Q2 provisions for losses $1.6B vs. year-ago $1.8B. Tier one risk-based capital ratio 9.6% at Q2 end. (PR)
- Ameriprise Financial (AMP): Q2 EPS of $0.58 in-line. Revenue of $1.9B (-5%) vs. $1.8B. (PR)
- Baidu.com (BIDU): Q2 adjusted EPS of $1.71 beats by $0.27. Revenue of $161M (+37%) vs. $158M. (PR)
- Broadcom (BRCM): Q2 EPS of $0.03 misses by $0.21. Revenue of $1B (-13%) in-line. (PR)
- Burlington Northern Santa Fe (BNI): Q2 EPS of $1.18 beats by $0.17. Revenue of $3.3B (-26%) vs. $3.4B. (PR)
- Bucyrus International (BUCY): Q2 EPS of $1.08 beats by $0.25. Revenue of $724M (+17%) vs. $625M. (PR)
- CA Inc. (CA): Q1 EPS of $0.42 beats by $0.04. Revenue of $1.05B (-3%) vs. $1.03B. Sees FY10 EPS of $1.60-1.70 vs. $1.57. Sees FY10 revenue growth high end of 2-4%. (PR)
- Cabot Oil & Gas (COG): Q2 EPS of $0.38 beats by $0.04. Revenue of $205M (-18%) vs. $206M. (PR)
- Capital One (COF): Q2 EPS of -$0.65 beats by $0.08. Revenue of $4.1B (+1%) vs. $3.9B. (PR)
- Century Aluminum Company (CENX): Q2 EPS of -$0.32 beats by $0.50. Revenue of $189M (-65%) vs. $188M. (PR)
- Cheesecake Factory (CAKE): Q2 EPS of $0.32 beats by $0.06. Revenue of $408M (flat) vs. $403M. Q2 same-store sales down 3.2%. (PR)
- Chubb (CB): Q3 EPS of $1.49 beats by $0.18. Net written premiums of $2.8B (-7%) vs. $3B. Sees FY09 EPS of $5.20-5.50 vs. $5.15. (PR)
- Compuware (CPWR): Q1 EPS of $0.22 beats by $0.09. Revenue of $214M (-28%) vs. $218M. (PR)
- Con-Way (CNW): Q2 EPS of $0.64 beats by $0.51. Revenue of $1.1B (-21%) in-line. (PR)
- Developers Diversified Realty (DDR): Q2 FFO of $0.51 beats by $0.01. Revenue of $204M (-8%) vs. $202M. (PR)
- Eastman Chemical Company (EMN): Q2 adjusted EPS of $0.86 beats by $0.15. Revenue of $1.3B (-32%) vs. $1.4B. Sees Q3 EPS of $1.10 vs. $0.82. Sees FY09 EPS high end of $2.00-$3.00 vs. $2.48. (PR)
- Federated Investors (FII): Q2 EPS of $0.52 beats by $0.02. Revenue of $307M (-1%) vs. $314M. Total managed assets $402B. (PR)
- Immucor (BLUD): Q4 EPS of $0.29 beats by $0.20. Revenue of $79M (+15%) vs. $75M. Sees FY10 EPS of $1.10-1.17 vs. $1.11. Sees FY10 revenue of $332M vs. $297M. (PR)
- Informatica (INFA): Q2 EPS of $0.13 misses by $0.06. Revenue of $117M (+3%) vs. $118M. (PR)
- IPC Holdings (IPCR): Q2 EPS of $1.72 beats by $0.36. Revenue of $195M (+240%) vs. $120M. (PR)
- Juniper Networks (JNPR): Q2 EPS of $0.19 beats by $0.01. Revenue of $786M (-11%) vs. $767M. (PR)
- KLA-Tencor (KLAC): Q4 EPS of -$0.15 in-line. Revenue of $282M (-52%) vs. $298M. (PR)
- Leggett & Platt (LEG): Q2 EPS of $0.16 beats by $0.02. Revenue of $757M (-29%) vs. $781M. Sees FY09 adjusted EPS of $0.55-0.70 vs. $0.64. Sees FY09 revenue of $3B vs. $3.1B. (PR)
- MEMC Electronic Materials (WFR): Q2 EPS of $0.03 beats by $0.03. Revenue of $283M (-47%) vs. $231M. (PR)
- Microsoft (MSFT): Q4 EPS of $0.34 misses by $0.02. Revenue of $13.1B (-17%) vs. $14.4B. (PR)
- Netflix (NFLX): Q2 EPS of $0.58 beats by $0.08. Revenue of $409M (+21%) vs. $410M. Sees Q3 EPS of $0.39-0.47 vs. $0.45. Sees Q3 revenue $416M-422M vs. $418M. Raises FY09 EPS guidance to $1.65-1.82 (from $1.56-1.72) vs. $1.72. Raises FY09 revenue view to $1.65B-1.67B (from $1.63B-1.67B) vs. $1.66B. (PR)
- PMC - Sierra (PMCS): Q2 EPS of $0.13 beats by $0.03. Revenue of $123M (-12%) vs. $120M. (PR)
- Rambus (RMBS): Q2 EPS of -$0.23 misses by $0.02. Revenue of $27M (-24%) in-line. (PR)
- RF Micro Devices (RFMD): Q1 EPS of $0.07 beats by $0.07. Revenue of $213M (-12%) vs. $187M. (PR)
- Riverbed Technology (RVBD): Q2 EPS of $0.14 in-line. Revenue of $91M (+12%) vs. $94M. (PR)
- Starent Networks (STAR-OLD): Q2 EPS of $0.20 beats by $0.03. Revenue of $78M (+28%) vs. $76M. (PR)
- SunPower (SPWRA): Q2 EPS of $0.24 beats by $0.10. Revenue of $298M (-22%) vs. $263M. Sees FY09 EPS of $1.15-$1.60 vs. $0.96. Sees FY09 revenue $1.35B-1.7B vs. $1.32B. Sees FY09 CapEx $250M-300M. (PR)
- Synovus Financial (SNV): Q2 EPS of -$1.82 misses by $1.28. Pretax income of $145M. (PR)
- Taubman Centers (TCO): Q2 FFO of $0.65 beats by $0.04. Revenue of $159M (flat) vs. $148M. (PR)
- Washington Real Estate Investment Trust (WRE): Q2 FFO of $0.53 beats by $0.03. Revenue of $77M (+12%) vs. $78M. (PR)
Overseas markets posted modest to strong gains Friday. Futures are moderately higher in overnight trading.
- Asia: Nikkei +1.55% to 9,945. Hang Seng +0.83% to 19,983. Shanghai +1.33% to 3,373. BSE +0.97% to 15,379.
- Europe at midday: London +0.5%. Paris +0.4%. Frankfurt +0.4%.
- Futures at 7:00: Dow +0.3% to 9019. S&P +0.2% to 971. Nasdaq +0.1%.
Crude +0.2% at $66.46. Gold -0.3% to $952.30.
30-year Tsy bond +0.32% to 116-00. 10-year +0.18%. 5-year +0.1%. 2-year +0.04%.
Euro +0.2% vs. dollar. Yen +0.3%. Pound -0.35%.
Friday's Economic Calendar
- 9:55 University of Michigan Consumer Sentiment
10:30 Bernanke, Geithner, Bair testify on regulatory reform
- Notable earnings before Friday's open: ACI, ASH, BDK, DOV, ERIC, EXC, FO, IR, PNK, SEPR, SLB, TROW, WL
Seeking Alpha editor Eli Hoffmann contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.