Wall Street Breakfast: Must-Know News

• Cuomo continues BoA battle. New York Attorney General Andrew Cuomo moved closer to filing securities-fraud charges against Bank of America (BAC) executives, citing at least four failures to disclose key details about the Merrill Lynch takeover. Cuomo also said the bank, which 'sought guidance' before a December 2008 shareholder vote to see if it was possible to back out of the deal, can't continue to claim attorney-client privilege without revealing the substance of its lawyers' advice. Cuomo set a Sept. 14 deadline to receive the requested information before he may proceed with charging individual executives. (Read Cuomo's letter to BoA (.pdf))
• First Solar plans China venture. First Solar (FSLR) announced a memorandum of understanding with the Chinese government to build the world's largest solar plant in China. The 2-gigawatt power plant, which will generate enough energy to power around 3M Chinese households, is the first major entry of a U.S. company into Asia's rapidly growing alternative energy sector. Shares +1.2% premarket (7:00 ET), after gaining 10.6% yesterday. (Read First Solar's press release)
• NYSE sells Amex stakes to brokerages. NYSE Euronext (NYX) is selling a major stake in the options exchange NYSE Amex it purchased last year as part of an effort to revive the division. NYSE Euronext will remain the largest shareholder but will sell stakes to seven large brokerages, including Bank of America (BAC), Barclays (BCS), Goldman Sachs (GS) and UBS (UBS). NYSE Amex was once the country's second-largest options exchange but it has lost market share for eight years in a row, dropping to 5.8% from 28.6%. (Read NYSE Euronext's press release)
• U.S., U.K. AAA ratings safe. Moody's said the triple-A sovereign debt ratings of the U.K. and the U.S. aren't at risk in the 'near future.' The ratings agency said only a sustained increase in government debt over several years would warrant a downgrade, but that it doesn't anticipate such an event. The comments could help lift the battered British pound.
• So long, auto bailout funds. When it comes to the government's investment in General Motors and Chrysler, "Congress and ultimately the American taxpayer have been left in the dark," according to a new report by the Congressional Oversight Panel. The auto task force "failed to disclose to the public both the factors and criteria it used in its viability assessments, the scope of outside involvement in its evaluations, and its basis and reasoning for selecting particular benchmarks," and taxpayers are unlikely to recover their $81B investment. (Read the panel's report)
• Mass. reaches Madoff settlement. Massachusetts reached an $8M settlement with Madoff feeder fund Fairfield Greenwich Group, the first state to reach such an agreement. Fairfield will fully repay Massachusetts investors, including interest payments, but didn't admit or deny wrongdoing.
• Price cuts and Pixis at Palm. In an effort to gain market share, Palm (PALM) cut the price of its Pre smartphone by $50 and announced plans to start selling Pixi, a cheaper, thinner touchscreen phone that will go on sale later this year. The Pixi announcement may get overshadowed by Apple (AAPL), which is updating its iPod line today, and Motorola (MOT), which is announcing new phones tomorrow.
• Barrick bets on rising gold. Barrick Gold (ABX) will issue $3B in stock, taking a $5.6B charge to Q3 earnings, to exit all of its fixed-price gold contracts and some of its floating hedges. Barrick's bet is that gold prices will continue to rise and the deal will therefore remove the hedging which has been a major drag on its shares.
• CNPC gets funding more oil takeovers. State-run China National Petroleum Corp. [CNPC], the parent company of PetroChina (PTR), received a $30B loan to fund overseas expansion. The five-year loan will be provided at a discount and underscores China's increasing efforts to secure long-term energy sources for the country. Separately, CNPC dropped its $460M buyout offer for oil producer Verenex Energy after the Libyan government refused to approve the takeover.
• Geely mulls Volvo bid. China's Geely Automobile Holdings said its parent company, Geely Holding Group, is interested in bidding for Ford's (F) Volvo unit, making it the latest in a string of Chinese carmakers to pursue a foreign brand during an industry overhaul. Though some analysts doubt Geely's ability to manage an international brand, the move would boost Geely's profile while giving it access to Volvo technology it needs to upgrade its cars.
• CIC eyes U.S. real estate. China's $300B sovereign wealth fund is reportedly considering major investments in distressed U.S. real estate. In addition to potential purchases of commercial mortgage-backed securities, China Investment Corp. is also considering ownership stakes in buildings and an investment via the Treasury's Public-Private Investment Program.
• Bankrupt publisher finds buyer. Sun-Times Media Group, the bankrupt owner of the Chicago Sun-Times and dozens of local newspapers, reached a deal to sell most of its assets to a group led by local businessman James C. Tyree. The deal is subject to competitive bidding by other parties and needs court approval.
• MBA apps rise. Mortgage applications rose 17% from the previous week, MBA reported. The average interest rate on 30-year fixed-rate mortgages fell to 5.02% from 5.15%.
• Employment trends. The Conference Board's Employment Trends Index inched down 0.1% in August from the previous month and was down 18.5% from the previous year. "The fact that the index cannot get off the ground is another sign of a weak recovery, perhaps a jobless one," said Gad Levanon, Senior Economist at The Conference Board. According to Manpower, hiring plans for Q4 are at the lowest level in the history of its Employment Outlook Survey (.pdf). However, while the outlook was bleak for job seekers, it looks good for those with jobs, with a strong 69% of employers saying they plan to keep things stable.
• Record plunge in consumer credit. Consumer credit was down $21.5B in July to $2.47T, marking the biggest decline on record and a 10.5% annual rate. Economists had expected it to decline by $4.5B. July was the sixth month in a row, and the ninth of the past ten months, that consumers reduced their debt. Credit-card debt fell for a record 11th straight month, by $6.1B or an annualized 8.5%.
• Consumer confidence slips. ABC's Consumer Confidence Poll registered at -48, down from -45 and breaking a streak of four weeks without a slip. The index was led down by personal-finance ratings, with only 45% of Americans feeling positive about their own finances, down from 49% two weeks ago. Only 25% felt it's a good time to buy things, while just 8% rated the national economy positively.

Earnings: Tuesday After Close

• FuelCell Energy (FCEL): FQ3 EPS of -$0.21 beats by $0.03. Revenue of $23M (-18%) vs. $28M. (PR)
• Pep Boys (PBY): Q2 EPS of $0.15 beats by $0.01. Revenue of $489M (-2%) vs. $503M. (PR)

Today's Markets

• In Asia, Nikkei -0.8% to 10,312. Hang Seng -1% to 20,851. Shanghai +0.5% to 2,946. BSE +0.4% to 16,184.
• In Europe at midday, London +0.5%. Paris +0.3%. Frankfurt +0.5%.
• Futures: Dow -0.2%. S&P -0.1%. Nasdaq -0.2%. Crude -0.3% to $70.87. Gold -0.3% to $996.50.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  7:45 ICSC Retail Store Sales
  8:00 Fed's Evans speaks on inflation
  8:55 Redbook
  10:00 Quarterly Services Survey
  1:55 PM Fed's Fisher speaks on the economy
  2:00 PM Fed's Beige Book
• Notable earnings after Wednesday's close: NAV, NCS, SWHC

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

I for one will never buy a GM or Chrysler EVER if they fail to pay me back and if they don't pay us back I hope they fail again and no one bails them out next time.

Sep 09 08:24 AM

[robert.b.fe...:]

Let's see here: Uncle Sugar pushes deals on banks to buy up financials to prevent them from failing. Then the NY AG prosecutes the executives for doing what they were told to do, as in keep this hush hush. I hope that all the gory details from all of those transactions come out and that those execs start singing like canaries. Then th NY AG can start prosecuting Federal officials for these shenanigans. Meanwhile we seem intent to sell the entire country to China. Better brush up on your Mandrin.

Sep 09 08:56 AM

[Aaaa:]

I kind of agree not buying Gm if they don't pay us back, but I sure would like to buy that hot new Cammaro. Last time Chrysler did pay us back, plus interest.

Sep 09 09:11 AM

[JCCIII:]

It took Detroit and the UAW 40 years to do it, but they have finally convinced me that they cannot build a competitive world-class car. Congratulations.

Sep 09 10:29 AM

[Econ 101:]

I agree with you 100%, but it will never happen because there is too much at stake. The feds will find a way to discredit Cumo and stop the light from shining on their treason.


On Sep 09 08:56 AM robert.b.ferguson wrote:

> Let's see here: Uncle Sugar pushes deals on banks to buy up financials
> to prevent them from failing. Then the NY AG prosecutes the executives
> for doing what they were told to do, as in keep this hush hush. I
> hope that all the gory details from all of those transactions come
> out and that those execs start singing like canaries. Then th NY
> AG can start prosecuting Federal officials for these shenanigans.
> Meanwhile we seem intent to sell the entire country to China. Better
> brush up on your Mandrin.

Sep 09 11:00 AM

[ThetaTrade:]

The Volvo sale would be for market share in Russia and China. There just aren't many people willing to buy Volvos here in the US.

Sep 09 11:20 AM

[JS Partners:]

After a streaming line of pessimism about FSLR from analysts about the crashing price of solar modules, First Solar has answered all of Wall Street with why they are a top class firm run by professional managers and still withholding fantastic growth potential!

Sep 09 12:47 PM

[AndrewBaker:]

Employment down, consumer credit down (and not just because no-one wants to spend, they just can't borrow because the banks are saving themselves first and consumers are well down the list), and, not surprisingly, consumer confidence is down. Yet the banks especially and the markets generally keep on going up.

Until the manipulation of stock prices by whatever means, stops; we will not get a true recovery. All that is being achieved is a growing potential bigger drop in stock prices that will hit people already suffering due to the losses of the past two years. Letting the patient think he's getting better then knocking him back down again is not the way to instill confidence nor to get him wanting to get back up again anytime soon.

Apparently, Warren Buffet is buying less stocks and more bonds now. He's not stupid: take note and take appropriate action. When the Sage shuns stocks for bonds, he's not doing it to help the government. Sell stocks now whilst prices are as attractive as they are, or weep later when it's too late and the falling knife cuts you.

Sep 09 02:34 PM

[armny:]

The labor unions own Obama, so there is no way he will ever allow GM, at least, to fail.

Sep 09 03:06 PM

[tbado:]

True, Chrysler ponied up last time, but sold off General Dynamics (tanks, planes, missiles, etc) while the Cold War was going full bore. Frank - ly they no longer own any scrap $ilver bullet$ that they can sell by the Pound.
As for Government Motors, I am waiting for the German government to have some of Opel's suppliers force them into bankruptcy to make the move they want. The easy solution would be for Gm to trade the stock and cash for the patents, but Uncle Obama is not likely to crack the piggy bank again. Another interesting question, if the government health care option passes, and a company can save money by letting its' employee go into the public option, How is the US Gov't. stewards of our tax dollars going to vote OUR shares when it comes to putting the UAW in the public plan?


On Sep 09 09:11 AM Aaaa wrote:

> I kind of agree not buying Gm if they don't pay us back, but I sure
> would like to buy that hot new Cammaro. Last time Chrysler did pay
> us back, plus interest.

Sep 09 11:06 PM

[Buckoux:]

Appropriate sentiment, perhaps. But, in the long run, nobody, not GM, not Congress, not other taxpayers, and not the Feds really care.


On Sep 09 08:24 AM doubleguns wrote:

> I for one will never buy a GM or Chrysler EVER if they fail to pay
> me back and if they don't pay us back I hope they fail again and
> no one bails them out next time.

Sep 10 11:50 AM

[Buckoux:]

Permit me to add some other villains to your list. Product liability attorneys and federal government agencies such as the National Highway Transportation Safety Board, the EPA and, most of all, the US Congress.


On Sep 09 10:29 AM JCCIII wrote:

> It took Detroit and the UAW 40 years to do it, but they have finally
> convinced me that they cannot build a competitive world-class car.
> Congratulations.

Sep 10 11:56 AM

[Buckoux:]

Volvo is like a blond Swedish hooker, a few will "do" her, but nobody will take her home to meet the folks. Same with Saab, but she's an ugly chic dressed in Tie-Dye. Saab's have an expensive drug habit (parts) and you will need lots of penicillin (low re-sale) when the party's over.


On Sep 09 11:20 AM ThetaTrade wrote:

> The Volvo sale would be for market share in Russia and China. There
> just aren't many people willing to buy Volvos here in the US.

Sep 10 12:03 PM