Wall Street Breakfast: Must-Know News

• In search of bidders for Guaranty. Regulators reportedly asked prospective bidders to submit bids for Guaranty Financial Group (GFG) by today, and are hoping that Toronto Dominion (TD), JPMorgan Chase (JPM) and BBVA, all of which bid for Colonial Bank, will step up and bid for Guaranty as well. A private equity consortium, including Carlyle, Blackstone Group (BX) and TPG, are also considering a bid, but as of late Friday hadn't been given access to Guaranty's confidential financial information. Guaranty is the second-largest publicly traded bank in Texas and has around $14B in assets.
• Schwab to face ARS lawsuit. New York Attorney General Andrew Cuomo is expected to file suit against Charles Schwab (SCHW) as soon as today, alleging the firm engaged in civil fraud in the marketing and sale of auction-rate securities. Schwab continues to deny any wrongdoing and said Cuomo's "approach is inconsistent with the law, basic fairness, and common sense."
• UBS nears settlement as probe expands. The tax evasion probe of UBS (UBS) is widening, and now includes allegations that the Swiss bank helped Americans avoid tax payments by setting up enterprises in Hong Kong. The new Asian angle of the case was detailed in court documents filed last week. Meanwhile, details of a civil case settlement between UBS and the U.S. government are expected this week. Swiss media reports said the identities of 4,500-5,000 UBS clients will be revealed, while a UBS lawyer expects the number to be 5,000-10,000. Shares -5% premarket (7:20 ET).
• Japan jettisons its recession. Japan left behind its deepest recession since WWII, buoyed by a rebound in exports and consumer spending. GDP grew at an annualized 3.7% in Q2, the first growth in five quarters but slightly shy of +3.9% consensus. Despite the positive economic news, Japanese stocks fell the most in four months on concerns the stimulus-led recovery won't last. Nikkei -3.1% to 10,269.
• Pay czar shows his claws. Pay czar Ken Feinberg said he has broad and 'binding' authority over executive compensation, including the ability to claw back money already paid, and is now weighing how and where to apply his powers. In regards to the potential $100M payday energy trader Andrew Hall could receive from Citigroup (C), Feinberg said only that he hadn't looked at Hall's contract yet and that a decision will be forthcoming in the next few weeks.
• China eyes U.S. mortgages. Sovereign wealth fund China Investment Corp. may soon buy up to $2B in U.S. mortgages under the Treasury's Public-Private Investment Plan [PPIP]. Sources explained that "the Chinese government is always trying to seek a more ideal way to invest in U.S. assets rather than purely buying U.S. government bonds all the time."
• BB&T colonizes Colonial. Late Friday evening, BB&T Corp. (BBT) took over the branches and deposits of Colonial BancGroup (CNB) in a government-assisted deal that could cost the FDIC billions of dollars. The takeover agreement marks the largest bank failure of 2009 and could be the most costly since IndyMac failed last year. (Read the FDIC's press release)
• China pushes for iron ore concessions. The China Iron & Steel Association concluded talks with Fortescue Metal Group (FSUMF.PK), winning a 35% reduction in iron ore prices. China plans to ask Vale (VALE), Rio Tinto (RTP) and BHP Billiton (BHP) for similar concessions, backing down from earlier demands for a 45% price cut.
• Next-gen chips mimic genes. IBM (IBM) is working to build its next generation of microchips using 'DNA origami,' or artificial DNA nanostructures. As companies compete to develop increasingly small chips at increasingly low cost, DNA origami could allow manufacturers to trade hundreds of millions of dollars in complex tools for less than a million dollars of polymers, DNA solutions, and heating implements. However, application of the new technique is at least ten years away.
• Bank failures stack up. Five more banks failed on Friday, bringing this year's total to 77. The FDIC's insurance fund has already fallen to $13B, and there are over 300 banks and thrifts still on the FDIC's list of problem institutions. (Read the FDIC's press releases I, II, III, IV, V)

Earnings: Monday Before Open

• Lowe's Companies (LOW): Q2 EPS of $0.51 misses by $0.03. Revenue of $13.8B (-5%) vs. $14.3B. Issues downside Q3 EPS guidance of $0.21-0.25 vs. $0.27 consensus. Issues downside FY '10 EPS guidance of $1.13-1.21 vs. $1.23 consensus. (PR)

Today's Markets

Japan pulled out of its recession, but stocks fell on concerns the recovery won't last. Heavy losses in Asia are dragging down European markets and U.S. futures:

• In Asia, Nikkei -3.1% to 10,269. Hang Seng -3.6% to 20,137. Shanghai -5.8% to 2,871. BSE -4.1% to 14,785.
• In Europe at midday, London -1.8%. Paris -2.3%. Frankfurt -2.1%.
• Futures: Dow -1.8%. S&P -2%. Nasdaq -1.7%. Crude -2.6% to $65.73. Gold -1.2% to $936.90.

Monday's Economic Calendar

• 8:30 Empire State Mfg Survey
  9:00 Treasury International Capital
  1:00 PM NAHB Housing Market Index
• Notable earnings before Monday's open: LOW
• Notable earnings after Monday's close: A, CHINA, TSL

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.

After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.

Comments

[doubleguns:]

It would appear that the correction is starting this morning. Europe and Asia got smacked and the index futures dont look so good today.

China wants in on PPIP to the tune of 2 billion. I wonder if they are paying with presently held treasuries?

Schwab to be sued. Probably will amount to another 2 inch penalty by the time that it is over.

UBS to give up only about 10% of the names of the US citizens with off shore accounts in its bank. Must be giving up the children's names that don't owe or owe very little taxes and cant be tried as adults anyway. It is obvious that something is crooked here. The elite, connected and politicos will not let their names get exposed. We can all trust in that.

Aug 17 08:24 AM

[AndrewBaker:]

Signs that the rally is over are all around. My short foray into long holdings is nearly over, and I hope everyone else holding other than for the long term, are able to get out before the real drop comes. And if you are a long term holder, why not take a profit now, and buy back in later at a lower price?

Aug 17 08:53 AM

[Old Trader:]

It'll be interesting to see how the oil/energy sector does, over the upcoming week. On the one hand, poor fundamentals...on the other, it appears the hurricane season has gotten off to a somewhat belated start; setting up an interesting tug of war.

Aug 17 09:01 AM

[spald_fr:]

["Schwab to face ARS lawsuit . . . Schwab continues to deny any wrongdoing and said Cuomo's 'approach is inconsistent with the law, basic fairness, and common sense.'"]

Citizens all over the USA are stating the same observation on a variety of issues.

Aug 17 09:17 AM

[User 433379:]

PPIP...great, so not only is our government being bought out by China, but now the People will be indebted to it as well. The idea bothers me a lot. I can't help but think we'll look back in our history someday and regret selling off massive amounts of assets and burying ourselves in debt to foreign countries.

Aug 17 11:48 AM

[gimmenews:]

Every Monday I read this to prepare myself for some trading and water cooler talk for the office....while a lot of stuff is out there, i appreciate the weekly roundup...i wish there was more commentary though...however its a good start. I also read marketwatch and a little known site called stockoodle.com..small but interesting info. Thanks for keeping me up and prepared for the week....

Aug 17 03:26 PM

[100 mortgage:]

Its like we are all living hand to mouth at the moment taking every moment as it comes, the markets fluctuate crazily, its very volatile time right now.

Aug 17 05:08 PM

[gmwright:]

It has been a couple of rough days but I think it is a bit premature to declare the rally at an end or the start of a significant correction. The next few days will be very telling and it will be interesting to see what happens once the FDIC runs out of money...well, maybe interesting is not the right word....

Aug 18 05:35 AM