Wall Street Breakfast: Must-Know News

Broader pay curbs for banks. The Federal Reserve is considering a far-reaching plan to regulate pay for tens of thousands of bankers nationwide. Compensation policies at thousands of bank holding companies would be subject to approval from the Fed, which would be able to reject any policies that encourage employees (regardless of seniority) to take too much risk. Details could still be revised but a final proposal will reportedly be ready in a few weeks, and the measure would require a vote by the Fed's board but no congressional approval.
New SEC rules on ratings agencies. The SEC voted unanimously to impose new rules on credit rating agencies in an effort to eliminate the practice of ratings shopping and to protect investors through stronger regulation. Among the new measures, ratings agencies will be required to disclose their data and processes for determining a particular credit rating, and will have to reveal more information about past ratings. As expected, the SEC also proposed a ban on flash trading.
American Air flies high on financing. American Airlines (AMR) announced yesterday that it had secured $2.9B in financing, raising $1B through the advance sale of frequent flier miles to credit-card partner Citigroup (C) and arranging $1.9B in financing from GE Capital Aviation Services (GE). The news, which sent shares up nearly 20%, should ease investors' concerns about liquidity and also paves the way for a potential tie-up with Japan Airlines (see below).
Everyone wants a piece of JAL. American Airlines (AMR), which has reportedly been in 'intense negotiations' with Japan Airlines for over a month, may join with Oneworld alliance partners British Airways (BAIRY.PK) and Qantas to deepen their ties with JAL. Sources said the proposal would include a capital injection from American Airlines but not necessarily from British Airways or Qantas, in a move meant to thwart Delta (DAL) and its rival alliance from luring away Oneworld's only Japanese carrier.
UBS under investigation, again. UBS (UBS) is the subject of a probe by Switzerland's stock exchange for possible breaches of rules regarding publication of price-sensitive information and information on its board. SIX Exchange Regulation said the potential violations occurred from 2007 to the end of 2008, but declined to provide additional details.
Google edges into display ads. Google (GOOG) announced a major overhaul of its DoubleClick ad exchange as part of its push into the graphical display ads market, what CEO Eric Schmidt called "the next billion dollar business" at Google. To compete with market leaders Yahoo (YHOO) and AOL (TWX), Google will combine DoubleClick exchange with its own advertising system and technology, and will feature tools that allow advertisers to more precisely target their audiences and monitor results. Google is also moving into print publishing for the first time with an arrangement with a printing company to offer 2M out-of-copyright books.
Lloyds may limit gov't asset protection. Lloyds (LYG) is in talks to scale back its participation in a U.K. program meant to insure it against credit losses. Encouraged by "improving economic conditions," Lloyds said it may reduce the number of toxic assets it chooses to place in the U.K.'s asset protection scheme and that it is discussing all "possible alternatives" with financial regulators.
Citi looks to slip out of oil trading. Citigroup (C) is looking to spin off its controversial energy trading unit, Phibro. CEO Vikram Pandit told a New York audience Thursday he wanted to reduce Citi's ownership in the unit, and get it to manage money from outside investors, transforming it from a proprietary trading unit to an asset manager. Pandit also admitted that head trader Andrew Hall's much-discussed $100M pay package was too much for an employee to earn given the bank's circumstances.
Palm beats with strong Pre sales. Palm (PALM) reported a smaller-than-expected quarterly loss yesterday (see details below), but shares traded down nearly 3% in after hours trading on a weak FQ2 sales forecast and plans to sell 16M of common stock. Palm shipped 823,000 smartphones in FQ1 vs. Wall Street estimates in the range of 700,000-800,000. (Read Palm's earnings call transcript)
Money market withdrawals increase. A federal guarantee to safeguard money market assets is set to expire today, prompting investors to increase their withdrawals. On Tuesday and Wednesday, investors withdrew a much larger than usual total of $55B from money market funds. For the most part, however, industry participants think "folks who wanted out of money funds have already taken their cash and put it elsewhere," so while outflows will likely continue, they won't be panicked.
Housing starts tick up (.pdf). Housing Starts came in at 598,000 in August, up 1.5% from July, and in line with consensus. Permits came in at 579,000, up 2.7% from July, vs. consensus of 583,000. Starts were down 29.6% from a year ago, while permits were down 32.4%.
Jobless claims decline. Initial Jobless Claims were 545K, down 12K from a week ago (revised) and better than the 575K consensus. Continuing claims rose 129K to 6.23M.
Philly Fed looks up (.pdf). The Philadelphia Fed's Business Outlook Survey registered a strong +14.1 in September vs. +4.2 in August and consensus of +8. This is the highest reading since June 2007. New orders, shipments and general activity posted gains for the second month in a row.

Earnings: Thursday After Close

IHS (IHS): FQ3 EPS of $0.66 beats by $0.06. Revenue of $239M (+15%) vs. $235M. Sees full-year revenue growth of 14-15% Y/Y. (PR)
Palm (PALM): FQ1 EPS of -$0.10 beats by $0.14. Revenue of $361M (-2%), excluding deferred sales of Pre smartphone, vs. $298M. Sees Q2 revenue of $240M-270M vs. $344M, and full-year revenue of $1.6B-1.8B vs. $1.57B. (PR)

Today's Markets

Asia markets finished the week with modest losses, except for China which fell more than 3%, but Europe has inched back into positive ground, as have futures.

Asia: Nikkei -0.7% to 10,371. Hang Seng -0.67% to 21,623. Shanghai -3.19% to 2,963. BSE +0.18% to 16,741.
Europe at midday: London +0.1%. Paris +0.1%. Frankfurt +0.1%.
Futures at 7:00: Dow +0.1% to 9745. S&P +0.1% at 1064. Nasdaq +0.1%.
Crude -1.1% to $72.17. Gold +0.2% at 1,015.50.
30-year Tsy -0.05%. Euro -0.2% vs. dollar. Yen flat. Pound -0.4%.