- Cuomo subpoenas BoA directors. New York Attorney General Andrew Cuomo subpoenaed five board members from Bank of America (BAC) in connection with the probe over Merrill Lynch bonuses. The five directors will likely be asked how much they knew about Merrill's losses, what role they played in disclosure decisions, whether there was pressure from government officials and whether the board sought outside counsel. Cuomo is also considering possible civil fraud charges against CEO Ken Lewis.
- eBay faces Skype lawsuit. The founders of Skype software have filed a copyright lawsuit against current owner eBay (EBAY) and the proposed buyers of a 65% stake in Skype, alleging breach of licensing terms and escalating eBay's ongoing legal drama over the unit. eBay denied the claims, but the suit could complicate the deal which is due to close in Q4 2009.
- Kodak takes a moment for financing. Eastman Kodak (EK) plans to raise up to $700M in debt to shore up its balance sheet. The financing, which is being led by Kohlberg Kravis Roberts, gives Kodak more financial breathing room and will help it pay off debt due next year. However, the deal is not without its costs and KKR could end up with as much as a 20% equity stake in Kodak through warrants issued as part of the deal. Shares -2.7% premarket (7:00 ET).
- FDIC repackages loans. The FDIC launched a new program yesterday to package loans from failed banks and subsidize their purchase by investors. To kick-off the long-awaited program, the FDIC announced a partnership with Residential Credit Solutions to take ownership of loans originally worth $1.3B. Officials said a second deal will follow soon, and others will be announced before the end of the year.
- Insurance regulators target ratings agencies. Regulators of some of the largest bond buyers in the world are considering cutting the role of ratings agencies in the market in response to the poor job the agencies did with complex mortgage securities. State insurance regulators are in the early stages of reassessing their reliance on firms like Moody's (MCO) and Standard & Poor's (MHP) and may opt instead for analysis from other financial firms with expertise in valuing the securities.
- California AG targets ratings agencies. In addition to being challenged by insurance regulators (see above) and facing heightened scrutiny from the SEC, ratings agencies will soon be under investigation by California Attorney General Jerry Brown for the role they played in the economic crisis through their evaluations of asset-backed securities. Ratings agencies "worked behind the scenes with the same Wall Street firms that created [the securities]," said Brown, earning "billions of dollars in revenue, at a rate double what they earned for rating other financial products." Brown didn't specify which companies will be investigated.
- Google focused on book deal. Google (GOOG) is reportedly in talks with the Department of Justice and a group of authors and publishers to modify its book-scanning settlement, with the hope of easing regulators' concerns that Google's ambitious project will discourage companies from competing for access to books online. Meanwhile, Google is buying reCaptcha, an online fraud prevention start-up, to use in its book-scanning project. Terms of the deal weren't disclosed.
- Oracle's sales cloud tech recovery hopes. Oracle (ORCL) reported quarterly earnings in-line with estimates (see details below), but its software sales were sharply lower than expected. New license sales were down 17% vs. the 4-14% decline Oracle had forecast, disappointing analysts hoping to see further signs of a tech sector rebound. Shares -2.1% premarket (7:00 ET). (Read Oracle's earnings call transcript)
- Toyota revs up for U.S. sales push. Toyota (TM) is planning a major marketing campaign to lift U.S. sales in Q4. The effort will cost $1B, which is 30-40% more than Toyota usually spends in a quarter, and will include subsidized leases and loans, customer incentives and financial support for dealer advertisements. The company also intends to expand its line of Prius hybrids.
- BoJ holds rates steady. As expected, the Bank of Japan left its key interest rate unchanged at 0.1%, but raised its economic forecast for the first time since July. The bank said "Japan's economic conditions are showing signs of recovery," a marked improvement from July's comment that the country's economy had "stopped worsening." (Read BoJ's statement (.pdf))
- Housing index ticks up. The NAHB Housing Market Index increased by 1 point to 19, its third straight gain and its highest point since May 2008. Current sales expectations and prospective buyer traffic ticked up, but expectations for the next six months declined slightly, likely as a result of the expected expiration of the homebuyer tax credit.
- Consumer prices rise. The Consumer Price Index rose 0.4% in August from the previous month and fell 1.5% Y/Y, vs. consensus of +0.3% and -1.7%. Core CPI rose 0.1% M/M and 1.4% Y/Y, both in-line with consensus.
- TIC: Foreign purchases fall. July Treasury International Capital data was released yesterday, with net foreign purchases of long-term securities registering at $15.3B, way down from June's $90.7B. Foreigners picked up $44B in long-term U.S. securities ($32.1B by private investors and $12B by official institutions), and U.S. residents bought $28.8B in foreign debt.
- Industrial production increases. Industrial Production rose 0.8% in August vs. consensus of +0.6%, the second straight monthly gain. July's increase was revised to +1% from +0.5%. Ex-auto, manufacturing was +0.4%. Capacity utilization rose to 69.6% from 69%, but is still 11.3 points below its historical average.
- Current account deficit. The Current Account Deficit was $98.8B in Q2 vs. consensus of $92B. The Q1 deficit was revised to $104.5B from $101.5B. The deficit on both goods and services moved lower.
Earnings: Thursday Before Open
- Pier 1 Imports (PIR): Q2 EPS of -$0.17 vs. consensus of -$0.22 (may not be comparable). Revenue of $287M (-11%) vs. $282M. Comparable store sales -7.6%. (PR)
Earnings: Wednesday After Close
- CKE Restaurants (CKR): Q2 EPS of $0.22 in-line. Revenue of $336M (-5%) vs. $341M. Same-store sales declined 2.3%. (PR)
- CLARCOR (CLC): FQ3 EPS of $0.42 misses by $0.01. Revenue of $230M (-17%) vs. $246M. (PR)
- Herman Miller (MLHR): FQ1 EPS of $0.22 beats by $0.03. Revenue of $324M (-32%) vs. $326M. (PR)
- Oracle (ORCL): FQ1 EPS of $0.30 in-line. Revenue of $5.1B (-5%) vs. $5.3B. Operating margin up 570bp to 46%; reduced value of foreign currencies hurt EPS by $0.02. (PR)
- The Dress Barn (DBRN): FQ4 EPS of $0.39 beats by $0.02. Revenue of $399M (+4%) vs. $401M. (PR)
Markets worldwide are showing gains.
- In Asia, Nikkei +1.7% to 10,444. Hang Seng +1.7% to 21,769. Shanghai +2% to 3,060. BSE +0.2% to 16,711.
- In Europe at midday, London +0.8%. Paris +0.5%. Frankfurt +0.6%.
- Futures: Dow +0.3%. S&P +0.2%. Nasdaq +0.2%. Crude flat. Gold flat.
Thursday's Economic Calendar
- 8:30 Housing Starts
8:30 Jobless Claims
10:00 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
4:30 PM Money Supply
- Notable earnings before Thursday's open: DFS, FDX, PIR
- Notable earnings after Thursday's close: PALM
Seeking Alpha editor Eli Hoffmann contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.