Wall Street Breakfast: Must-Know News 15 comments
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- BoA settlement "at war with common sense." The SEC and Bank of America (BAC), still waiting for court approval of a $33M settlement over Merrill Lynch bonus payments, will have to wait a little longer. Jed Rakoff, the federal judge presiding over the case, slammed the SEC yesterday, saying the decision to let individual executives off the hook is "at war with common sense." The SEC said it will provide additional information requested by Rakoff by the new submission deadline of September 9.
- Dueling deficit projections. Both the White House and the Congressional Budget Office updated their deficit projections yesterday. The White House expects the ten-year budget deficit to reach $9T, up from $7.1T, and said it will work to bring down the "higher than desirable" figure (though some note the ten-year projections are far less relevant, and less worrying, than the one-year projections). It expects a $1.58T deficit for the current fiscal year. The CBO forecasts a 2009 deficit of $1.6T and a ten-year deficit of $7.14T, arriving at the lower figure mostly by assuming tax cuts set to expire in 2011 will end as planned, despite the fact that they will likely be extended. (Read the CBO's budget report (.pdf) or the White House report (.pdf))
- Sony strikes back at Kindle. Gearing up for the holiday shopping season, Sony (SNE) unveiled a new e-book reader with wireless capabilities that could present the strongest competition to date for Amazon's (AMZN) Kindle. At $399, the reader is $100 more than the entry-level Kindle but has a touch screen and, critically, allows readers to access books from a much broader range of sources, including temporary loans from libraries. The device will reach stores in December.
- Confidence jumps. Conference Board's Consumer Confidence Index jumped to 54.1 in August, markedly better than the consensus of 48 and higher than the 47.4 registered in July. Confidence "appears to be back on the mend," Conference Board said of the rebound, though "spending is likely to remain constrained." Investor confidence improved as well, with the State Street Index rising 3.5 points to 122.9 in August, the fifth straight monthly increase.
- ING seeks final bank bids. ING Group (ING) is reportedly seeking final bids for its private banking operations, and hopes to get around $1.8B. ING received a €10B ($14.3B) bailout in October from the Netherlands, and is trying to raise up to €8B through asset sales to increase its capital cushion. Shares +3.3% premarket (7:00 ET).
- Soaring stocks on no news. Fannie Mae (FNM) and Freddie Mac (FRE) continued to trade on extraordinary volume, making Fannie the top-traded stock yesterday and marking a 220% gain for Fannie in the last month. There was no news from either company, and analysts speculated the elevated volume was due to day-traders looking to make a profit. Vonage (VG) rocketed 165% in yesterday's trading on volume of 33.2M shares compared to a daily average of 2.21M shares. The company announced last week that it plans to enter the mobile applications market, but once again, there were no recent news releases to warrant yesterday's jump. FNM +5.4%, FRE +1.9%, VG +41.5% premarket (7:00 ET).
- Toyota trims output. Toyota (TM) plans to halt at least one production line and cut capacity as part of a push to return to profitability amid an extended industry slump. Total cuts could reach 700,000 cars, or 7% of Toyota's global capacity.
- Chevron gas project get the go-ahead. Chevron (CVX) won Australian approval for a planned A$50B ($42B) liquefied natural gas project. The approval was one of the last steps needed to clear the way for the joint venture between Chevron, Royal Dutch Shell (RDS.A) and Exxon Mobil (XOM).
- FAA investigates Southwest. Southwest Airlines (LUV) is under investigation by the Federal Aviation Administration for installing unauthorized parts on at least 42 of its jets and for failing to flag the problem. Though the parts don't pose an "immediate safety issue," some of the planes were temporarily grounded. The parts will be replaced in less than two weeks, but Southwest could still face civil penalties.
- Snail-mail decline prompts USPS buyouts. The U.S. Postal Service, the nation's second-largest employer, is offering buyouts to up to 30,000 employees in light of falling mail volume and a push for automation. The Postal Service hopes to cut costs by $6B in the current fiscal year.
- Colonial goes bankrupt. As expected, Colonial BancGroup filed for bankruptcy protection yesterday, eleven days after regulators seized its banking operations and sold most of its assets to BB&T Corp. (BBT). The bankruptcy papers listed $45M in assets and $380M in debt.
- Home prices continue to improve(.pdf). The S&P/Case-Shiller 20-City Home Price Index registered -15.44% in June vs. last year, better than the -16.4% consensus and last month's 17.1% drop. This marks the fifth monthly improvement for the index, and the first quarter-over-quarter improvement in three years. The FHFA House Price Index (.pdf) rose 0.5% vs. +0.4% consensus, after rising 0.9% in May (revised). Nationwide, prices are down 5% from a year earlier and down 0.7% in Q2 from Q1.
- Mortgage apps rise. Mortgage applications rose 7.5% from last week, MBA said. The average interest rate on 30-year fixed-rate mortgages rose to 5.24% from 5.15%.
- Retail sales fall. Chain store sales fell 0.7% in the first three weeks of August, Redbook said, slightly worse than the -0.6% expected. According to ICSC, weekly sales fell 0.2% Y/Y but rose 0.6% from the previous week.
- Richmond mfg holds steady. The Richmond Federal Reserve's Manufacturing Index was unchanged, holding steady at July's 14. Activity in the Central Atlantic region expanded for the fourth straight month, with shipments growing, new orders growing at a slightly slower rate, and employment steadying. Manufacturers softened their outlook for the next six months.
Earnings: Wednesday Before Open
- Williams-Sonoma (WSM): Q2 EPS of $0.05 beats by $0.14. Revenue of $672M (-18%) vs. $658M. Issues upside guidance: sees Q3 EPS of $0.01-0.05 vs. -$0.06 consensus, FY '10 EPS of $0.19-0.31 vs. $0.04 consensus. (PR)
Earnings: Tuesday After Close
Today's Markets
Asian markets posted gains, but European markets are slipping. U.S. futures are down very slightly.
- In Asia, Nikkei +1.4% to 10,640. Hang Seng +0.1% to 20,456. Shanghai +1.8% to 2,968. BSE +0.5% to 15,770.
- In Europe at midday, London -0.4%. Paris -0.4%. Frankfurt -0.6%.
- Futures: Dow -0.1%. S&P -0.2%. Nasdaq flat. Crude +0.3% to $72.30. Gold +0.4% to $949.40.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
8:30 Durable Goods Orders
10:00 New Home Sales
10:30 EIA Petroleum Status
11:30 Fed's Lockhart speaks on economy - Notable earnings before Wednesday's open: DLTR, WSM
- Notable earnings after Wednesday's close: CWTR, GES, TIVO
Seeking Alpha editor Eli Hoffmann contributed to this post.
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These monthly surveys are showing dated data, and a 4-week trend of this type is probably more reliable--and consistent with the 4-week trend for initial jobless claims. I happen to think the consumer reacts massively to the headline employment numbers. Watch out when the monthly rate trends up toward 9.9, as Fed bank economists' surveys have predicted for Q4 '09. Beware media buzz and spin. Notice how CNBC doesn't hype the ABC number today. I guess it doesn't fit their agenda.
Judge Jed doesn't appear to be letting these banksters off the hook so easily. Its about time someone put a stop to these 2 inch penalties.
ABC had three week old data that Google somehow aggregated and posted as current yesterday. The correct poll was slightly positive, except "[t]wenty-five percent say it's an excellent or good time to buy things; it was 26 percent last week. The best was 57 percent on Jan. 16, 2000. The worst was 18 percent, last reached Oct. 19, 2008." So the confidence back story is that consumer buying attitudes declined one percent week over week. abcnews.go.com/Polling...
On Aug 26 07:42 AM markfl wrote:
> "Conference Board's Consumer Confidence Index jumped to 54.1 in August,
> markedly better than the consensus of 48 and higher than the 47.4
> registered in July." ABC released its index abcnews.go.com/Polling...;page=1
> after hours (I really have no idea why they do this), which showed
> that "[t]he ABC News Consumer Comfort Index stands at -49 on its
> scale of +100 to -100, showing no signs of improvement after three
> weeks of progress."
>
> These monthly surveys are showing dated data, and a 4-week trend
> of this type is probably more reliable--and consistent with the 4-week
> trend for initial jobless claims. I happen to think the consumer
> reacts massively to the headline employment numbers. Watch out when
> the monthly rate trends up toward 9.9, as Fed bank economists' surveys
> have predicted for Q4 '09. Beware media buzz and spin. Notice how
> CNBC doesn't hype the ABC number today. I guess it doesn't fit their
> agenda.
"1. an unexpected 4.3 million-barrel build in U.S. crude stocks last week, confounding analysts' expectations for a 1.1-million-barrel fall, and coming after the 8.4-million-barrel drop the week before.
2. Gasoline stocks fell 1.8 million barrels, more than the 1-million-barrel drop predicted in the Reuters poll.
3. Distillates declined 146,000 barrels, versus forecasts for a 300,000-barrel rise."
All told this amounts to approx. a 2.4M barrel build. It is also a rise of over 4.1M barrels above expectations, which were for an overall decrease. This seems very likely to make oil go down, if EIA roughly confirms these numbers this morning.
And again, the government has gotten it wrong; rewarding those who wanted a huge suv for no apparent reason, and punishing those of us who had the foresight to see oil prices rising into the future, or those of us who care about energy conservation and pollution. In the end, it bears a striking similarity to give the banks giant bail outs for getting us in this mess in the first place, and is archetypal of what is wrong with the system.
Those deficit projections are going to be worse than either the White House or OMB can imagine once the FDIC has to go to the well to refill its insurance fund.
Consumer confidence jumped once delinquent homeowners stopped paying their mortgages. Why throw money down a hole when you can buy a plasma screen TV and enjoy your last few months of pre-foreclosure freeloading? It's the new American Way.
>>> There is so little of note happening that it's pretty safe to go away for a while. <<<
Been in Brazil for the past week on business. Have not checked SA in the interim. Miss AndrewBaker, doubleguns and Rachel.
spald_fr
On Aug 26 06:47 PM spald_fr wrote:
> On Aug 26 01:43 PM AndrewBaker wrote:
While I'm certainly no fan of C4C, where did you come with "rewarding those who wanted a huge suv for no apparent reason"? First, SUVs and pickups, etc, didn't qualify (unless you're counting stuff like Ford's Escape Hybrid). Secondly, I keep hearing quite a few dealers ran out of stock on cars like the Ford Focus, and other fuel efficient cars. In fact, the program was modified to allow participants to qualify on an "ordered" car. Orginally, the program only applied to cars on dealers' inventories, which is why Ford and GM ramped production back up (at least, for now).
On Aug 26 10:05 AM Bill L. wrote:
> Unfortunately, the manufacturing number seems to be highly influenced
> by automotive orders, again just a bump from a short term stimulative
> measure.
>
> And again, the government has gotten it wrong; rewarding those who
> wanted a huge suv for no apparent reason, and punishing those of
> us who had the foresight to see oil prices rising into the future,
> or those of us who care about energy conservation and pollution.
> In the end, it bears a striking similarity to give the banks giant
> bail outs for getting us in this mess in the first place, and is
> archetypal of what is wrong with the system.