Wall Street Breakfast: Must-Know News

• Bernanke defends Fed. In a PBS Town Hall forum that taped on Sunday and will be aired this week, Bernanke defended the Federal Reserve's actions of the past year, telling participants "I was not going to be the Federal Reserve chairman who presided over the second Great Depression." Bernanke said he was 'disgusted' by the circumstances leading up to the rescue of some large firms and called for new legislation to allow non-bank financial firms to fail without going into bankruptcy.
• U.S. gears up for China summit. Ahead of a U.S.-China Strategic and Economic Dialogue, Geithner and Secretary of State Clinton called for a 'new framework' for the relationship between the two countries. In a jointly-written op-ed in the Wall Street Journal, Geithner and Clinton stressed the need to keep trade and investment open and for China to continue to reform its financial sector reform and shift away from an over-reliance on exports.
• Pay Czar gets down to business. Kenneth Feinberg, the U.S. 'pay czar' in charge of overseeing pay at bailed out firms, is pushing to renegotiate contracts and reduce overall outlays. Seven firms are subject to Feinberg's authority (Citigroup (C), Bank of America (BAC), AIG (AIG), General Motors, Chrysler, Chrysler Financial and GMAC) and have been meeting with him regularly to reach a compensation structure the government feels is appropriate. The firms must submit their proposals by August 13.
• Ericsson wins Nortel auction. Ericsson (ERIC) will acquire the wireless assets of bankrupt Nortel Networks for $1.13B in cash after winning Friday night's auction. The assets include Nortel's division in the CDMA wireless technology used in North America and the division for emerging LTE high-speed wireless technology, which is expected to see significant future growth.
• Aetna shops its PBM unit. Aetna (AET) is reportedly looking to sell its pharmacy benefits management business. Potential buyers include CVS Caremark (CVS) and Medco Health Solutions (MHS). A deal could net Aetna as much as $2B.
• High-speed trading could be gone in a flash. Senator Charles Schumer is pushing the SEC to ban so-called flash orders, a move that presents the biggest threat yet to high-speed trading in the U.S. stock market. With flash orders, some exchanges hold orders to buy and sell for a fraction of a second before publishing them on competing platforms. Flash trades make up less than 4% of U.S. stock volume, but potentially give hedge funds and Wall Street firms an unfair advantage over other investors.
• Gov't eyes UBS client visits. Pushing forward in the investigation of UBS (UBS), U.S. officials are focusing on client visits by UBS bankers to help identify U.S. citizens with accounts who may have evaded taxes. The trial against UBS was postponed until August 3 to allow time for a settlement, but talks between Switzerland and the U.S. could extend beyond the deadline.
• eBay revamps its marketplace. eBay (EBAY) is set to announce a series of changes to its core marketplaces to help large merchants sell new goods in greater quantities. To help volume sellers, eBay plans to limit the direct communication between buyers and sellers. The company will also update its search algorithm to favor new products, and introduce categories to describe an item's condition.
• Apple, record labels seek album sales. Apple (AAPL) is teaming up with record labels EMI, Sony Music (SNE), Warner Music (WMG) and Universal Music Group to help boost sales of digital music albums by including an interactive booklet, sleeve notes and other features with music downloads. Consumers purchase large quantities of music online, but tend to buy individual songs rather than the higher-margin albums.
• Friday's failures. Another slew of bank failures on Friday, including Waterford Village Bank of Clarence, NY (the first New York state failure since 2004) and the six subsidiaries of Security Bank of Macon, GA. The closures bring the 2009 total to 64, and the seven failures will cost the FDIC over $812M.

Earnings: Monday Before Open

• Aetna (AET): Q2 EPS of $0.68 misses by $0.10. Revenue of $8.7B (+10.3%) vs. $8.6B. Issues downside EPS guidance for FY '09 of $2.75-2.90 vs. $3.53 consensus. Shares -5.4% premarket (6:50 ET). (PR)
• Alpha Natural Resources (ANR): Q2 EPS of $0.22 misses by $0.16. Revenue of $386M (-45%) vs. $446M. Shares -2% premarket (8:00 ET). (PR)
• Corning (GLW): Q2 EPS of $0.39 beats by $0.07. Revenue of $1.4B (-17.6%) in-line. (PR)
• Enterprise Products Partners (EPD): Q2 EPS of $0.43 beats by $0.02. Revenue of $3.5B (-44.7%) vs. $4.5B. (PR)
• Foundation Coal (FCL): Q2 EPS of $0.67 misses by $0.04. Revenue of $405M (-1.7%) vs. $445M. (PR)
• Honeywell International (HON): Q2 EPS of $0.60 in-line. Revenue of $7.6B (+22%) vs. $7.7B. "Economic conditions, however, remain challenging and we are not planning for any recovery in 2009." (PR)
• International Coal Group (ICO): Q2 EPS of $0.07 beats by $0.05. Revenue of $278M (0%) vs. $307M. (PR)
• Lorillard (LO): Q2 EPS of $1.71 beats by $0.28. Revenue of $1B (+16.6%) vs. $969M. (PR)
• RadioShack (RSH): Q2 EPS of $0.39 beats by $0.11. Revenue of $966M (-2.9%) vs. $978M. (PR)
• Sohu.com (SOHU): Q2 EPS of $0.79 beats by $0.03. Revenue of $127M (+24.6%) vs. $123M. (PR)
• Tellabs (TLAB): Q2 EPS of $0.07 beats by $0.01. Revenue of $385M (-11%) vs. $381M. (PR)
• Verizon (VZ): Q2 EPS of $0.63 in-line. Revenue of $26.9B (+11.3%) in-line. Shares -1.2% premarket (8:00 ET). (PR)

Today's Markets

Asian markets closed mostly up. European markets and U.S. futures are feeling similarly optimistic.

• In Asia, Nikkei +1.45% to 10,089. Hang Seng +1.35% to 20,252. Shanghai +1.9% to 3,435. BSE -0.03% to 15,375.
• In Europe at midday, London +0.3%. Paris +1.1%. Frankfurt +1.2%.
• Futures: Dow +0.5%. S&P +0.4%. Nasdaq +0.6%. Crude +0.85% to $68.63. Gold +0.5% to $957.90.

Monday's Economic Calendar

• 10:00 New Home Sales
  10:30 Texas Manufacturing Outlook Survey
  12:00 PM Chicago Fed's Manufacturing Index
• Notable earnings before Monday's open: AET, ANR, EPD, FCL, GLW, HON, ICO, LO, RSH, SOHU, TLAB, VZ
• Notable earnings after Monday's close: ACE, AMGN, CF, FNF, HMA, HXL, KRC, MAS, MTW, OLN, PCL, SLG, TMK, WRB

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

I cant stand to listen the Schumer's nasal whining so if anyone can get this done he can. They will simply give in after one or two meetings with him just so they do not have to listen to him pontificate in that voice any more.

"Mercy, mercy I give up, you can have the flash trading scam. Just please shut up."

Jul 27 07:58 AM

[Dr. O:]

The dollar is weakening this morning, following strong stock sessions in Asia overnight. Looks like emerging markets, commodity stocks and markets (Brazil, Australia, Canada), should be strong today. Remember: weaker dollar, stronger stocks, stronger commodities.

Jul 27 08:12 AM

[absinop:]

Earnings season continues to be a great opportunity to earn some money. I'm moving today (7/27/09) into the following stocks. Their earnings announcements are scheduled at the market period indicated. But please remember: Sell the Losers, Keep the Winners.

7/28 before Mrkt open: UA DIN EVVV PTC QLTI
7/28 after Mrkt open: RCII PEET
7/28 after Mrkt closes: CBI ISSC MEOH SKT

Jul 27 08:34 AM

[robert.b.fe...:]

The banks are doing wonderfull profiting handsomly except the ones that keep failing. Pesky banks. Rediculuosly low expectations still making crappy earnings from cost cutting look like everything is peachy. Bucky is likely to trend down as Da Boyz take money off the table this week. Hopefully it will sustain support at 77-78. Could be a good week to buy into some sectors (Tec anyone?) if the expected dip occurs. Happy Monday and good luck to all.

Jul 27 08:54 AM

[AndrewBaker:]

Even greatly adjusted down earnings are only just being beat and lots missing as well, and smaller banks keep failing, so maybe it will get home to people soon that it is not getting better: the government, Fed and their pals are just getting better at misrepresenting the truth to us. I've given up caling when the markets will drop again because of this, but drop they will and the higher they get before they do, the more pain when it happens.

Jul 27 09:29 AM

[spald_fr:]

From the linked WSJ article co-authored by Clinton and Geithner: " In the run-up to the international climate change conference in Copenhagen in December, it is clear that any agreement must include meaningful participation by large economies like China."

Chicoms to Hillary and Tim: "Rotsa Ruck."

Jul 27 10:13 AM

[notsosmart:]

how about all those resets for folks who bought in 2006?

Jul 27 10:51 AM

[ebworthen:]

Exactly - like the Chinese are going to protect the environment when they wipe out entire villages to build a factory to make plastic Happy Meal toys for our latest cultural escapade. Look for plastic gerbils with guns and dead gerbils this winter from all the hype.

Can you imagine what an enslaved Chinese farmer thinks as they mold a plastic Homer Simpson?

"Rotsa Ruck" is right; these clowns in the Whitehouse are going to be played like a violin by the Asians.

Global warming...please...you may as well join the Flat Earth Society.


On Jul 27 10:13 AM spald_fr wrote:

> From the linked WSJ article co-authored by Clinton and Geithner:
> " In the run-up to the international climate change conference in
> Copenhagen in December, it is clear that any agreement must include
> meaningful participation by large economies like China."
>
> Chicoms to Hillary and Tim: "Rotsa Ruck."

Jul 27 01:23 PM