Wall Street Breakfast: Must-Know News 9 comments
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- Clunkers grinds to a halt. The White House will end its cash-for-clunkers program sooner than expected, setting a deadline for 8PM on Monday so as not to exceed the program's $3B budget. As of yesterday, the program had generated over 457,000 auto sales, though the Transportation Department had only handled 37% of those dealer requests.
- AIG in no rush to sell. Shares of AIG (AIG) rallied over 21% yesterday, lifted by positive comments from CEO Robert Benmosche who said he plans to repay the government and still turn a profit for shareholders. In a townhall employee meeting earlier this month that came to light yesterday, Benmosche also said he won't rush to sell AIG's assets at unfavorable prices because, "I don’t liquidate things, I build them." Benmosche will continue to evaluate the company over the next several weeks and decide which units to offload and on what timetable.
- Dollar General to go public. Discount retailer Dollar General filed for a $750M initial public offering. Private-equity firm Kohlberg Kravis Roberts took the company private in 2007 but is hoping to take advantage of a rebound in equity markets and is serving as one of the main underwriters, along with Citigroup (C), Goldman Sachs (GS) and six other banks. Dollar General plans to pay KKR and other shareholders a $200M special dividend with proceeds from the sale.
- FDIC eases up on failed bank bidders. The FDIC is expected to loosen restrictions on private-equity firms that want to buy failed banks, as its dwindling budget forces it to look for more bank buyers. The FDIC's original proposal required buyout firms bidding on failed institutions to maintain a larger capital base than banks must, a decision private-equity firms said was too stringent and would be a deterrent. With 77 bank failures so far this year, the FDIC will likely soften its stance as soon as next week.
- AT&T, Verizon face FCC probe. The Federal Communications Commission intends to investigate whether AT&T (T) and Verizon Wireless (VZ) are unfairly hurting competitors by denying them connections and making it hard for subscribers to switch providers. A probe into the wireless policies of the two companies, which share a combined 60% of the U.S. market, could signal the start of a broader government push for antitrust scrutiny.
- GM to decide Opel fate. General Motors' board will convene today to discuss the bids received for the firm's Opel unit and will reportedly weigh the two bids against the option of insolvency. Magna International (MGA) is the frontrunner of the two bidders, primarily because its bid is favored by Germany, but GM has been concerned that Magna may exploit GM's intellectual property in Russia.
- Tech biggies team up against Google. Microsoft (MSFT), Yahoo (YHOO) and Amazon (AMZN) have joined a coalition taking aim at Google's (GOOG) book publishing settlement. Google settled a class-action lawsuit last October by agreeing to share revenue from scanned books with authors and publishers. However, a growing group of authors, publishers, privacy advocates and now technology giants argue the settlement gives Google an unfair copyright immunity in digital books that other companies will find difficult to match.
- More mortgage woes. Delinquent mortgages hit 13.16% in Q2, MBA said Thursday, the highest percentage on record. Mortgages in the foreclosure process are now 4.3% of all mortgages, up from 3.85% in Q1, but new loans entering the foreclosure process were down one point to 1.36%. While the increase in delinquencies from Q1 was marginal, the mix changed dramatically, with a significant drop in foreclosures on subprime loans offset by increases in prime loans and other fare. Prime loans now account for one in three foreclosure starts, up from one in five a year ago.
- Firms scoop up own debt. Recent regulatory filings reveal that companies are quietly buying back their own bonds on the cheap. Bankers say the trend may signal executives believe the worst of the credit crisis is over, but it also reflects the need for companies to delever as quickly as possible and not risk coming up against debt they're unable to refinance.
- Tribune ownership shake-up. Tribune Co. said its ownership is likely to change as it emerges from bankruptcy protection, with sources saying the company will likely end up in the hands of its lenders in a move that would reduce its primary debt by over 90%. A small amount of equity would be reserved for management, employees and unsecured debtholders. Samuel Zell, who led the 2007 buyout of Tribune, will likely see his $500M warrant wiped out and his future role in a post-bankruptcy company is unclear.
- Euro zone on brink of growth. The decline in the euro-zone services sector almost reversed itself in August, while future expectations soared to their highest level in more than two years, according to Markit's PMI survey released this morning. Markit's Services Index climbed to 49.5, the highest since last May, from 45.7 in July and well ahead of the 46.5 consensus (below 50 indicates contraction). Expectations leapt to 66.5 from 61.4.
- China jitters spark outflow. Fears over China set off a huge outflow from emerging market funds, with $946M going out the door - the lion's share of that ($810M) from Asia ex-Japan - the worst week since early 2008. "Doubts about the quality of the loans doled out at breakneck speed by Chinese banks during H1 prompted investors to book profits," fund tracker EPFR Global says.
- Securities sinking banks. With the imminent failure of Guaranty Financial Group (GFG), the banking crisis is poised to enter a new phase: banks failing not due to the bad loans they made, but those they bought. Thousands of banks invested in securities backed by subprime mortgages over the past decade, and analysts say the boomerang effect that killed Guaranty could cripple many small and regional banks.
- News Corp. shutters free paper. News Corp. (NWS.A) is closing The London Paper, a money-losing free tabloid that was aimed at young commuters. The paper was started three years ago but "has fallen short of expectations" and posted a recent pre-tax loss of $21M for the year.
- Jobless claims increase. Initial jobless claims came in at 576K, up 15K from a week ago (revised) and worse than the 550K consensus. Continuing claims rose 2K to 6.241M.
- Leading indicators rise. Conference Board's Leading Indicators index rose 0.6% in July vs. +0.7% consensus, the fourth increase in as many months. Unemployment claims, the interest rate and average workweek made large positive contributions to the index. Consumer expectations, real money supply, and building permits made negative contributions.
- Philly business outlook improves. The Philadelphia Federal Reserve Business Outlook Survey rose 4.2 points in August vs. -7.5 in July and consensus of -2, marking the highest reading since November 2007. Of the firms that shrank inventories, 15% expect to begin rebuilding in Q3, 27% said next year, and 19% said the reductions are permanent.
Earnings: Friday Before Open
- J.M. Smucker Company (SJM): FQ1 EPS of $0.92 beats by $0.12. Revenue of $1.05B (+58.4%) in-line. Affirms full-year guidance. (PR)
Earnings: Thursday After Close
- Aeropostale (ARO): Q2 EPS of $0.57 beats by $0.01. Revenue of $453M (+20%) vs. $452M. (PR)
- Brocade Communications Systems (BRCD): FQ3 EPS of $0.12 beats by $0.01. Revenue of $493M (+35%) vs. $504M. (PR)
- Foot Locker (FL): Q2 EPS of $0.00 misses by $0.07. Revenue of $1.1B (-16%) vs. $1.2B. (PR)
- Gap (GPS): Q2 EPS of $0.33 beats by $0.01. Revenue of $3.25B (-7%) in-line. Same-store sales declined 8%. (PR)
- Harris Stratex (HSTX): FQ4 EPS of $0.09 beats by $0.06. Revenue of $135M (-28%) vs. $142M. Sees Q1 revenue of $120M-140M vs. $153M. (PR)
- Intuit (INTU): FQ4 EPS of -$0.10 beats by $0.02. Revenue of $476M (+0%) vs. $470M. Sees full-year EPS of $1.89-1.96 vs. $2.00. (PR)
- Pacific Sunwear of California (PSUN): Q2 EPS of -$0.22 beats by $0.01. Revenue of $243M (-22%) vs. $240M. Sees Q3 EPS of -$0.16 to -$0.23 vs. -$0.09. Expects Q3 same-store sales percentage decline in high teens to low 20s. (PR)
- Salesforce.com (CRM): Q2 EPS of $0.17 beats by $0.02. Revenue of $316M (+20%) vs. $313M. (PR)
- Wet Seal (WTSLA): Q2 EPS of $0.03 in-line. Revenue of $136M (-9%) in-line. Same-store sales down 10.6%. Sees Q3 EPS of $0.02-0.05 vs. $0.06 and sales of $142M-147M vs. $141M. (PR)
Today's Markets
Asia markets were mixed Friday, but Shanghai - in focus for much of the week - ended things off with a vote of confidence. Europe has resolved strongly to the upside, and futures are trading near overnight highs.
- Asia: Nikkei -1.4% to 10,238. Hang Seng -0.64% to 20,199. Shanghai +1.69% to 2,961. BSE +1.52% to 15,241.
- Europe at midday: London +0.9%. Paris +1.6%. Frankfurt +1.5%.
- Futures: Dow +0.4% to 9358. S&P +0.5% to 1010. Nasdaq +0.4%.
Crude +0.9% to $73.60. Gold +0.4% to $945.50. 30-year Tsy -0.06%.
Euro +0.5% vs. dollar. Yen +0.2%. Pound +0.4%.
Friday's Economic Calendar
- 10:00 Existing Home Sales
10:00 Mass Layoffs
10:00 Bernanke speaks at Kansas City Fed annual conference - Notable earnings before Friday's open: ANN, SJM
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 9 comments:
Securities failing at banks? I thought the change in mark to market fixed this. Yea right.
Mortgages failing rapidly. Cramer was wrong!!!
Jobs still going, going, gone.
China looking like a bad investment.
Other than that green shoots every where.
Might be the eye of the storm. We aren't out yet.
Let face it congress will not stop spending as long as the Democrats are in charge, it's what they do. This spending will cause inflation by weakening the dollar. Under this scenario wall street will cheer because stocks, oil and gold will skyrocket. But consumers will suffer. To pay for government out of control spending, taxes will have to rise on "the rich" and others as well. And from there the economy as well as those who are employed and unemployed will see changes in our economy that are so drastic that most citizens will be shell shocked. Many more jobs will be lost and unemployment could rise to the highest levels since the Great Depression.
From there prices will drop for all goods due to the lack of demand for goods due the lack funds to pay for them. Deflation is bad for the stock market too.
It's too bad that congress is in control of our destiny, considering that they are clueless when it comes down to the understanding the basics of economics. We need to replace many members in congress, starting with Dodd. Peter Schiff is interested in running for his seat in CT and I'm confident that he will work for the people.
To remedy this economic situation, first the Fed needs to raise interest rates to combat future inflation before the bond market pushes rates up, stop buying Treasuries and support a stronger dollar. Next Congress needs to take back the Stimulus money that hasn't been spent. This plan is not solving the problem of job creation, which is what it was supposed to target.
Folks, we should learn from big business. Never work again. Sell your own debt and buy it back on the cheap: now that's progress.
On Aug 21 12:02 PM Old Trader wrote:
> Perhaps SA might consider a "centerfold"?
On Aug 21 02:17 PM doubleguns wrote:
> Down boy, down boy. Be nice a swimsuit edition is good enough.<br/>