Wall Street Breakfast: Must-Know News

• BoA bites back against Cuomo. Bank of America (BAC) said it's 'surprised and disappointed' by accusations that's it's hiding behind attorney-client privilege, and called New York Attorney General Andrew Cuomo's allegations 'spurious' and 'simply wrong.' Meanwhile, Bank of America and the SEC are making their third attempt to convince Judge Jed Rakoff to approve a $33M settlement over disclosures of Merrill Lynch bonuses. The SEC called the settlement 'fair' and 'reasonable,' and Bank of America said it's prepared to litigate if the settlement isn't approved.
• Phasing out debt guarantees. The FDIC is considering a six-month, emergency-only extension to its debt guarantee program and is seeking public comment on the proposal, with FDIC's Sheila Bair noting "it has been a successful program but we would like to end it." The guarantee program had around $320B in outstanding debt guaranteed as of the end of July, and whether it expires Oct. 31 as planned or is extended by six months, the phase-out should provide an early indicator for how banks fare once emergency government support measures have been removed.
• U.S. levies duties on Chinese steel. In the largest countervailing duty case to date against Chinese-made products, the U.S. Commerce Department decided to impose preliminary duties of up to 31% on Chinese steel pipe because of unfair subsidies, bringing average duties on the $2.8B of annual imports to 21.3%. China 'strongly opposes' the ruling, which is only the latest in a series of events contributing to escalating trade tensions.
• Beige Book: Signs of slow improvement. In the Federal Reserve's latest Beige Book, most districts reported the economy was firming up overall and stability increasing, though many sectors still show weaknesses. In particular, despite some improvements in residential real estate, commercial real estate remains weak and non-residential construction activity is down. Credit remains tight, loan demand is down and retail sales are soft. (Read the Beige Book summary)
• OPEC holds steady. As expected, OPEC agreed to keep its oil production quotas unchanged, betting a recovery in the global economy will help keep prices near the current $72/barrel. The decision comes even as the Energy Information Administration's latest forecast calls for weaker oil demand and higher supply, which is projected to result in a daily world surplus of 70,000 barrels.
• Beijing Automotive steers for Saab. After a failed bid for Opel, Beijing Automotive is joining Koenigsegg Group's offer to buy General Motors' Saab. Beijing Automotive will become a minority shareholder in the bidding team, with the hope that a successful bid will allow it to spur model development and sales growth. (Read the memorandum of understanding)
• Apple's iPod refresh fails to dazzle. Investors were generally unimpressed at Apple's (AAPL) "Let's Rock" event yesterday, where Apple introduced a new version of iTunes, updated iPhone software and an iPod Nano with video camera and FM radio. Many had been hoping to see a camera on the iPod Touch and there was no sign of a much-talked-about tablet device. With no major product surprises, much of the attention was focused on CEO Steve Jobs, who made his first public appearance since returning from medical leave.
• Foreclosures remain elevated. U.S. foreclosure filings topped 300,000 for the sixth month in a row, coming in at 358,471 in August, according to RealtyTrac Inc. The number is just 0.5% below July's record all-time high, and is up 18% from August 2008. Nevada had the highest foreclosure rate, followed by Florida and California. With unemployment hovering at 9.7%, RealtyTrac expects foreclosures to rise for another year.
• Google preps for micropayments. Google (GOOG) plans to introduce a micropayments platform within the next year to help newspapers charge for their content. The move would create a direct competitor for Journalism Online, a site launched by media executives that aims to provide one-stop subscriptions for newspapers and magazines that want to charge for online content. (Read Google's micropayments plan (.pdf))
• Retail sales inch up. Chain store sales rose 0.2% in the first week of September, Redbook reported, better than the -0.3% expected. According to ICSC, weekly sales rose 0.6% from the previous week but dipped 0.1% vs. the previous year. Sales for September are expected to be down 2% vs. the previous year.

Earnings: Thursday Before Open

• Lululemon Athletica (LULU): Q2 EPS of $0.13 beats by $0.03. Revenue of $98M vs. $88M. (PR)

Earnings: Wednesday After Close

• Men's Wearhouse (MW): Q2 EPS of $0.75 beats by $0.14. Revenue of $526M (-4%) vs. $523M. Sees Q3 EPS of $0.27-0.30 vs. $0.32. (PR)
• Navistar International (NAV): FQ3 EPS of -$0.16 does not compare to consensus of $0.69. Revenue of $2.5B (-38%) vs. $2.7B. Lowers full-year EPS guidance, which includes effects of Ford (F) settlement, to $4.95-5.25 vs. $2.92. (10-Q)
• NCI Building Systems (NCS): FQ3 EPS of $0.25 beats by $0.14. Revenue of $238M (-50%) vs. $263M. (PR)
• Smith & Wesson (SWHC): FQ1 EPS of $0.21 beats by $0.11. Revenue of $102M (+30%) vs. $94M. (PR)

Today's Markets

Asia locked in some gains but European markets and U.S. futures are trading down.

• In Asia, Nikkei +1.95% to 10,514. Hang Seng +1.05% to 21,070. Shanghai -0.7% to 2,925. BSE +0.2% to 16,217.
• In Europe at midday, London -0.6%. Paris -0.5%. Frankfurt -0.1%.
• Futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.2%. Crude +0.7% to $71.80. Gold -0.95% to $987.60.

Thursday's Economic Calendar

• 7:00 BoE Announcement
  8:30 International Trade
  8:30 Jobless Claims
  9:00 RBC CASH Index
  9:00 Bank of Canada Announcement
  10:30 EIA Natural Gas Inventory
  11:00 EIA Petroleum Status
  12:30 PM Fed's Lockhart speaks on the global economy
  1:00 PM Geithner testifies on TARP
  4:15 PM Fed's Kohn speaks on unconventional monetary policy
  4:30 PM Fed Balance Sheet
  4:30 PM Money Supply
• Notable earnings before Thursday's open: LULU
• Notable earnings after Thursday's close: NSM

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[AndrewBaker:]

Weaker oil demand and continuing high foreclosures just don't add up for me as being part of any recovery, more like part of a continuing recession that's going to get worse.

And retail sales a little higher? Even in a recession, children go back to school and new kit is needed. That alone would account for the 0.5% "increase" that we're being told about.

When real trading gets going again, watch closely for the market's direction: and it won't be north.

Sep 10 07:34 AM

[axelrod608:]

The peak month for Alt A and other "prime" mortgage resets is this November. Anyone who expects foreclosure rates to drop had best prepare for disappointment.

Sep 10 09:06 AM

[Old Trader:]

Smith & Wesson beats handily....gold broke $1k/oz. the other day...things are looking up for the 3B portfolio (bullets, bullion, and beans).

Sep 10 09:15 AM

[MarvinMBA:]

In this world things are never that clear...except for money printing which seems to be the one proud thing the Fed and Treasury are in agreement. ......without real production and job creation and real exports we are in deep trouble.....things are going to be getting worst and the health care discussion is just a diversion from the real issues facing this country, not that HC reform is nessasary but Obama has failed to provide a new paradyne to get this country going except for money printing. I think PM's are going to be the real money of the future or at least paper money backed by gold/silver...MarvinMBA PS The EXPOLOSION of the money supply cannot continue without dislocation like Super Inflation.

Sep 10 09:58 AM

[Mike from NYC:]

How can sales be up when more and more people are charging less as was reported yesterday and barely mentioned. It was reported that consumers charged $$24 BILLION LESS last month, far, far greater than what so-called economists estimated.

BTW, it's about time the USA started putting tariffs on Chinese goods. Because of China's manipulation of the currency exchange the yuan is 40% below what it should be as compared to the dollar. Raising the value of the yuan is good for American consumer manufacturing, or what's left of it. Been to WalMart lately?

Sep 10 10:18 AM

[Joseph L. S...:]

"Bank of America (BAC) said it's 'surprised and disappointed' by accusations that's it's hiding behind attorney-client privilege."

Yes, and in 'Casablanca', Louie was "shocked...SHOCKED!" to discover there was gambling in Rick's bar ( and casino) as the croupier handed him his winnings...

Sep 10 10:28 AM

[bbowen7:]

It would be nice if the Commerce Department's levies on Chinese steel were a part of a broader re-industrialization strategy. Within the past week there have been major cross-currents on what is allowed - automotive subsidies, aircraft (airbus), and steel. Before we lose all of our manufacturing, we need a national strategy that includes tariffs, education, taxes, union rules, energy, healthcare, and everything needed to support competitive basic industries with good-paying jobs.

Sep 10 02:05 PM

[notsosmart:]

until every chinese family has a granite counter the global tug of war will continue.

Sep 10 03:55 PM