Wall Street Breakfast: Must-Know News

• CIT posts heavy loss on bad loan reserves. CIT Group (CIT) reported Q2 results, posting its ninth straight quarterly loss as reserves for bad loans more than tripled. The net loss of $1.62B, or $4.30/share, narrowed from a $2.07B loss in Q2 2008, but was worse than the consensus of a $1.53/share loss. Loan loss provisions rose to $588.5M from $152.2M the year before. Net charge-offs rose to 2.81% from 2.41% the previous quarter. Losses pushed the ratio of total capital to risk-weighted assets to 'slightly below' the 13% required by regulators, which CIT said could potentially cause the Federal Reserve or FDIC to take enforcement actions, leading to a "material adverse effect on its business" and possible bankruptcy. (Read CIT's 10-Q quarterly report (.pdf))
• Exxon signs major LNG deal. Exxon Mobil (XOM) reached an agreement to sell liquefied natural gas from its share of the Gorgon LNG project to PetroChina (PTR). The deal is worth around A$50B ($41.3B) and will see PetroChina buy 2.25M tons of LNG annually for 20 years. PTR +6% premarket (7:00 ET).
• Amcor to buy Rio packaging unit. In its largest acquisition ever, Amcor (AMCRY.PK) will buy part of Rio Tinto's (RTP) Alcan packaging unit for $2.03B. The deal will net Amcor the global pharmaceuticals and tobacco packaging as well as the Asian and European food packaging units Rio acquired in its 2007 takeover of Alcan, making Amcor the largest supplier of drug packaging and hopefully ending two years of declining profits. Amcor will finance the offer through a A$1.6B ($1.3B) share sale and bank debt. RTP +3.2% premarket (7:00 ET). (Read Amcor's press release)
• GM's Saab story comes to an end. General Motors reached an agreement to sell its unprofitable Saab unit to Swedish sports car maker Koenigsegg Group. The move was announced early this morning, two months after the companies signed a letter of intent, but several financing hurdles still remain. Notably, the deal depends on the Swedish government providing guarantees for loans from the European Investment bank and Koenigsegg still needs to secure another $300M in financing. For GM, the sale brings it one step closer to completing its global restructuring plan.
• AIG's swaps probed before bailout. Newly released SEC documents show that regulators questioned AIG's (AIG) disclosure on derivatives months before the insurer's federal bailout. In particular, regulators were concerned about "apparent inconsistency" on AIG's statements about credit default swaps that had been sold to European banks.
• 3 charged in massive credit card breach. Three men were indicted for allegedly stealing 130M credit and debit card numbers between 2006 and 2008 in what could be the largest hacking and identity theft case ever brought to court. The data was stolen from credit-card processor Heartland Payment Systems (HPY) and from retail chains 7-Eleven and Hannaford Brothers. (Read the Justice Department's press release)
• Lilly loses patent ruling. A court invalidated Eli Lilly's (LLY) method-of-use patent for its cancer drug Gemzar in response to a lawsuit brought by generic drug maker Sun Pharmaceutical Industries. The patent was set to expire in 2013. Lilly said the decision has no bearing on its compound patent for Gemzar, which is set to expire in 2010. Gemzar had 2008 global sales of $1.7B.
• Ex-Credit Suisse broker guilty of fraud. Eric Butler, a former Credit Suisse (CS) broker, was convicted of securities fraud in connection to the sale of millions of dollars of subprime securities to corporate clients. Butler could face as much as 45 years in prison, though the judge said he's unlikely to impose such a strict term because Butler operated in a "culture of corruption.”
• Schwab sued over ARS. As expected, New York Attorney General Andrew Cuomo filed formal charges against Charles Schwab (SCHW) for falsely representing auction-rate securities as liquid, short-term investments without discussing the risks. Schwab said the lawsuit lacks merit and "casts blame for a bad situation in the wrong direction."
• NY mfg ticks up. The New York Federal Reserve's Empire State Manufacturing Index climbed +13 points to 12.1, its highest level since Nov. 2007, vs. consensus of 5. New orders and shipments also reached their highest levels in several months. Employment remained below zero but showed improvement.
• Treasury international capital. Net foreign purchases of long-term securities were $90.7B in June, with foreigners picking up $123.6B in long-term U.S. securities ($105B by private investors and $18B by official institutions). Although foreign purchases of U.S. Treasurys rose overall, China reduced its stake by 3.1% to $776B in June from $801.5B in May, the biggest percentage drop since October 2000. China sold $51.75B in short-term maturities, but spent some of that rotating into longer-end holdings. U.S. residents bought $32.9B in foreign debt.
• Housing sentiment shows some improvement. The NAHB Housing Market Index rose 1 point to 18, the highest level in homebuilder sentiment since June 2008, and up from a record low of 8 in January. Future expectations improved while current expectations were static. However, it still means that less than one in five builders think it's a good market.

Earnings: Tuesday Before Open

• Cardinal Health (CAH): FQ4 EPS of $0.87 beats by $0.01. Revenue of $25.2B (+10%) vs. $24.3B. Raises guidance for FY '10: sees EPS of $1.90-2.00 vs. $1.91 consensus, up from previous guidance of $1.87-1.91. (PR)
• Home Depot (HD): Q2 EPS of $0.64 beats by $0.05. Revenue of $19.1B (-9%) vs. $19.2B. Shares +3.6% premarket (6:30 ET). (PR)

Earnings: Monday After Close

• Agilent Technologies (A): FQ3 EPS of $0.15 beats by $0.04. Revenue of $1.1B (-27%) vs. $1B. Sees Q4 EPS of $0.20-0.25 vs. $0.20. (PR)
• AirMedia Group (AMCN): Q2 EPS of -$0.08 beats by $0.05. Revenue of $37M (+24%) vs. $36M. Sees Q3 revenue of $37M-40M vs. $44M. (PR)
• CDC (CHINA): Q2 EPS of $0.03 beats by $0.01. Revenue of $82M (-26%) vs. $84M. (PR)
• Dillard's (DDS): Q2 EPS of -$0.36 beats by $0.20. Revenue of $1.4B (-11%) in-line. (PR)
• First Marblehead (FMD): FQ4 EPS of -$0.36 misses by $0.11. Revenue of $11.6M vs. $12.4M. (PR)
• Trina Solar (TSL): Q2 EPS of $0.71 beats by $0.39. Revenue of $150M (-27%) vs. $149M. (PR)

Today's Markets

Asian markets managed to close higher after yesterday's heavy losses. European markets and U.S. futures are also showing gains.

• In Asia, Nikkei +0.2% to 10,285. Hang Seng +0.8% to 20,306. Shanghai +1.4% to 2,911. BSE +1.7% to 15,035.
• In Europe at midday, London +0.8%. Paris +0.6%. Frankfurt +0.6%.
• Futures: Dow +0.5%. S&P +0.6%. Nasdaq +0.7%. Crude +1.4% to $67.71. Gold +0.4% to $939.50.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:30 Housing Starts
  8:30 Producer Price Index
  8:55 Redbook
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday's open: HD, SKS, SOLF, TGT, TJX
• Notable earnings after Tuesday's close: ADI, HPQ, HSTX

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

"he's unlikely to impose such a strict term because Butler operated in a "culture of corruption.”

Liberal hog wash!!! It's not his fault!!! Yea right!!!!

I am glad this judge did not help in sentencing Bernie Madoff.

Our entire govt operates in a "culture of corruption". It appears that if any of them get caught in criminal activity they now have a defense. Maybe Bernie has grounds for an appeal now.

Aug 18 07:51 AM

[Truyen:]

The economic will not recover until there more good news from housing market. The optimistic sign of real estate all the past days is a good signal for our economy.

Aug 18 07:55 AM

[robert.b.fe...:]

Gentlemen: Start your spinning wheels. Almost all entities beat expectations, what a surprise. Financial execs operate in a "Culture of corruption.". ya think? FDIC could be in a tight spot and is having trouble unwinding Garaunty Bank. How bad can their toxic waste be? Unemployment numbers were unexpectedly high. Just who didn't expect that? Well I'm sure that the correction is over and the new bull market will start running today. You beleive that? I've got some exceptional bottom land in Florida for sale cheap. You can build condos on it. Any takers?

Aug 18 08:47 AM

[spald_fr:]

[CIT: "Losses pushed the ratio of total capital to risk-weighted assets to 'slightly below' the 13% required by regulators, which CIT said could potentially cause the Federal Reserve or FDIC to take enforcement actions, leading to a 'material adverse effect on its business' and possible bankruptcy."]

There's a shocker.

Aug 18 08:52 AM

[Old Trader:]

CIT DID manage to dodge a bullet yesterday, when they managed to buy back $1B in debt at a discount. Whether that will ultimately be enough is still in doubt, of course.

Regarding Saab: it'll be interesting to see what Koenigsegg will be able to do with it. For those who aren't "gear heads", they (Koenigsegg) are a manufacturer of very limited production, super high end supercars (think of Ferraris on steriods).

Aug 18 09:07 AM

[absinop:]

8/18/09A. Earnings season is a great opportunity to earn some money. I've taken a position in the following stocks. Their EA announcements are scheduled at the market period indicated. But please remember: Sell the Losers, Keep the Winners.

8/18 after Mrkt. closes: PLAB HSTX
8/19 after Mrkt. closes: JDSU FLO

Aug 18 09:13 AM

[Drew Horn:]

Yeah, "culture of corruption" my left foot! Judges who make sentencing decision's based on "culture" probably got their jobs as a result of a "culture of political corruption". This precedent probably means that Representative Jefferson who was caught with $90 K in cash in his freezer (you cant call that hot money :-) should be sentenced to two weeks in Disney Land.

Financial flim flam artists will continue to ply their trade until some are sentenced to their rightful occupations -- cleaning our sewers or redesigning / reform of bank regulations, both subject they are very familiar with.

Aug 18 09:32 AM

[spald_fr:]

[GM's Saab story comes to an end. ]

Krone's disease?

Aug 18 09:37 AM

[AndrewBaker:]

It's unlikely CIT will be allowed to fail now as it would do far too much damage to very fragile sentiment. We're getting more small bank closures, and hearing more about non-performing loans little by little. They're out there, they've not been accounted for yet, and we all know that until these bad debts have been fully factored in, we won't have a recovery; so perhaps the hope is that by slow disclosure the full effect won't be as big as otherwise, and that in the meantime other good news can keep sentiment up. That's what we have now: a market moved by sentiment as much as or even more than by hard fact and numbers.

Aug 18 10:18 AM

[ain't no fo...:]

There has been very little reason to put up with the immature cetin annoyances, but in and of itself it wasn't the end of the world, and so I have complained to management and then kept on posting.

Recently, however, I've been getting virus and spyware warning messages and actual screens popping up trying to hijack my PC and force it into doing virus scans. They appear randomly when I access different articles on this site. They've been happening off and on for a week or two, no rhyme or reason to when they occur. They do not occur on any other programs of the hundreds I access weekly.

I have no idea whether others are receiving similar stuff but I have no interest in subjecting my system and my records to crap like that.

Hence, I will not be contributing comments to this site anymore - its just not worth it.

I've enjoyed reading and participating in what have usually been serious subjects and discussions that have taken place here, and I've developed respect for a number of authors and commenters, like swashbuckler, john gordon and trader mark, etal.

I wish you all good fortune on your investing and personal lives... and as the sarge used to say in Hill Street Blues, "Be careful out there!" because we are far from home and there are many miles to go before we sleep.

Aug 18 11:55 AM

[BerkeleyBob:]

Yeah, I've been getting the phony virus alert on this site too. Don't respond, close the box and back up a page. Works so far for me. The quality of discourse on SA varies, and a few of the posters are obnoxious but all in all this is far better than the unmoderated Yahoo finance message boards, and the Street's Stockpickr has also had some problems.

Aug 18 01:51 PM

[przem23:]

I know exactly what you are talking about. Its a browser hi-jack originating from online-secure-scannerv... . What you people need to do is go to Tools, Internet Options, Security tab, select 'Restricted Sites' Icon, click 'Sites', add online-secure-scannerv...

On Aug 18 11:55 AM ain't no fortunate son wrote:

> There has been very little reason to put up with the immature cetin
> annoyances, but in and of itself it wasn't the end of the world,
> and so I have complained to management and then kept on posting.
>
>
> Recently, however, I've been getting virus and spyware warning messages
> and actual screens popping up trying to hijack my PC and force it
> into doing virus scans. They appear randomly when I access different
> articles on this site. They've been happening off and on for a week
> or two, no rhyme or reason to when they occur. They do not occur
> on any other programs of the hundreds I access weekly.
>
> I have no idea whether others are receiving similar stuff but I have
> no interest in subjecting my system and my records to crap like that.
>
>
> Hence, I will not be contributing comments to this site anymore -
> its just not worth it.
>
> I've enjoyed reading and participating in what have usually been
> serious subjects and discussions that have taken place here, and
> I've developed respect for a number of authors and commenters, like
> swashbuckler, john gordon and trader mark, etal.
>
> I wish you all good fortune on your investing and personal lives...
> and as the sarge used to say in Hill Street Blues, "Be careful out
> there!" because we are far from home and there are many miles to
> go before we sleep.

Aug 18 03:38 PM

[przem23:]

Comments won't let me paste the site to restrict. Here it is again

online-secure-scannerv...

Aug 18 03:39 PM

[przem23:]

the remainder is V2(DOT)COM

Aug 18 03:39 PM

[ReverendSlappy:]

WHy does this lady have so many followers, she just cuts and pastes?

Aug 18 05:42 PM

[I am not a ...:]

The Announcement by Australia about the LNG is great news if you are Chicom party member and have shares in Exxon. The people of Australia,unlike norway,will not benefit from this scheme. We are being taxed beyond belief because Kevin Rudd borrowed 380 billion from the chinese is a massive popularity buying spree earlier this year.
50 billion over 20 years means that the chinese have just got their gas for .2 cents per liter. Nice going,NOT>
Just the pre 1972 situation in the middle east,the suppliers of the commodity were being screwed by the main user but unlike the Arab states we have no one with a nationalistic bent who will fight in our favor to maintain a proper price curve . Instead we are being made wage slaves by a political party full of China sycophants who are both in thrall and in the pay of the Chinese.
Much to very detriment of the people who elected them.

Aug 18 06:00 PM

[robert.b.fe...:]

I to experienced that problem. Set up a ping bomb worked like a champ.


On Aug 18 11:55 AM ain't no fortunate son wrote:

> There has been very little reason to put up with the immature cetin
> annoyances, but in and of itself it wasn't the end of the world,
> and so I have complained to management and then kept on posting.
>
>
> Recently, however, I've been getting virus and spyware warning messages
> and actual screens popping up trying to hijack my PC and force it
> into doing virus scans. They appear randomly when I access different
> articles on this site. They've been happening off and on for a week
> or two, no rhyme or reason to when they occur. They do not occur
> on any other programs of the hundreds I access weekly.
>
> I have no idea whether others are receiving similar stuff but I have
> no interest in subjecting my system and my records to crap like that.
>
>
> Hence, I will not be contributing comments to this site anymore -
> its just not worth it.
>
> I've enjoyed reading and participating in what have usually been
> serious subjects and discussions that have taken place here, and
> I've developed respect for a number of authors and commenters, like
> swashbuckler, john gordon and trader mark, etal.
>
> I wish you all good fortune on your investing and personal lives...
> and as the sarge used to say in Hill Street Blues, "Be careful out
> there!" because we are far from home and there are many miles to
> go before we sleep.

Aug 18 06:49 PM