Wall Street Breakfast: Must-Know News

• Ken Lewis, RIP. Ken Lewis lost his battle to stay in control of Bank of America (BAC), leaving the board and its new chairman Walter Massey three months to find a replacement with no heir apparent. The fact that BofA isn't announcing a successor now is indicative of the chaos within the bank, and suggests Lewis's departure isn't entirely voluntary. BAC +1% premarket.
• So long, Saturn. Late yesterday, Penske (PAG) canned what was thought to be a done deal to buy Saturn, citing concerns about the future supply of vehicles beyond the supply period it had negotiated with GM. Another (unknown) carmaker was supposed to take over manufacturing of Saturn-branded cars after two years, and its board nixed the deal, according to Penske. Afterwards GM said it's pulling the plug on Saturn, putting 357 U.S. dealerships and 13,000 jobs at risk. PAG -7.6% AH.
• One step closer to domination. Cisco Systems (CSCO) agreed to buy Tandberg, a Norwegian manufacturer of videoconferencing systems, for about $3B in cash - an 11% premium to Wednesday's close and 25.2% higher than its three-month average price. The move indicates how serious Cisco is about video conferencing; Tandberg's smaller conferencing units will give Cisco a cheaper option to its expensive, room-sized TelePresence systems. In an interview last week, Cisco CEO John Chambers boasted the company has managed to move into 30 new markets through acquisitions and internal product development. "We are involved in things that may shock you." Keep an eye on Polycom (PLCM), Tandberg's key rival.
• IMF: recovery faster than expected. In its twice-yearly World Economic Outlook this morning, IMF boosted its 2010 world growth outlook to 3.1% from a previous 2.5%, and adjusted 2009's expected contraction to 1.1% from 1.4%. But it warned against premature withdrawal of stimulus efforts and said uncertain growth in developed countries could leave governments with the uncomfortable choice of extending stimulus programs at the risk of inflation, or cutting them short and risking a double dip.
• CIT raises stakes in bondholder discussion. CIT Group (CIT) upped the ante with its creditors by drawing up a prepackaged bankruptcy plan Wednesday, sources say. The move pressures CIT's bondholders to buy into a proposed debt restructuring, or take their chances in bankruptcy court. CIT will ask shareholders to vote on both options when it unveils the proposed debt exchange, which is thought to give bondholders control of the company in exchange for wiping out 30-40% of its debt and extending the rest.
• CNOOC pursues Uganda oil stake. Sources say Chinese state-owned oil company CNOOC (CEO) has entered talks with Uganda over a $5B Tullow Oil-led project. Earlier this week, the Nigerian government confirmed reports CNOOC was looking to enter Nigerian oil blocks underused by major international oil companies.
• Euro-zone joblessness hits decade high. Euro-zone unemployment rose to 9.6% in August from 9.5%, the highest rate in over 10 years and in line with consensus. Spain was worst off at 18.9%, while Netherlands' 3.5% and Austria's 4.7% were the least severe.
• Global deflation abates. Consumer prices in developed economies fell 0.3% in the 12 months to August after falling 0.6% in the 12 months to July, OECD said. June marked the first Y/Y episode of deflation since the OECD began compiling data in 1971; as recently as July 2008, the rate stood at an 11-year high of 4.8%.
• Creeping toward growth. BEA's final reading of Q2 GDP came in at -0.7%, substantially better than the -1.2% economists expected and a preliminary reading of -1%. The much smaller decrease than in Q1 (-5.5%) reflects improvements in nonresidential fixed investment and in exports, an upturn in federal government spending, an upturn in state and local government spending, and a smaller decrease in residential fixed investment, BEA said.
• Job losses narrow. ADP reported 254,000 job losses in September, far worse than the 200K forecasted, while revising August to -277,000 from -298,000. September’s losses were the least severe since July 2008, as job cuts have diminished significantly over the last two quarters. "Nevertheless, employment, which usually trails overall economic activity, is likely to decline for at least several more months, with losses continuing to diminish," ADP said.
• Chicago ISM disappoints. Business activity in the U.S. Midwest failed to return to growth in September, with ISM's business barometer dropping unexpectedly to 46.1 vs. consensus of 52 after an even 50 (above 50 indicates growth) in August. New orders dipped to 46.3 from 52.5.

Earnings: After Close

• Diamond Foods (DMND): FQ4 EPS of $0.25 beats by $0.07. Revenue of $114M (+1%) in-line. Shares -0.5% AH. (PR)
• Lawson Software (LWSN): FQ1 EPS of $0.09 beats by $0.04. Revenue of $169M (-11%) vs. $162M. Shares +9% AH. (PR)
• Xyratex (XRTX): FQ3 EPS of $0.36 beats by $0.22. Revenue of $246M (-12%) vs. $239M. Shares +7.5% AH. (PR)

Today's Markets

Asia stocks were mixed Thursday, while Europe has turned lower taking U.S. futures along.

• Asia: Nikkei -1.53% to 9,979. BSE +0.05% to 17,135. Hong Kong and Shanghai were closed.
• Europe at midday: London -0.6%. Paris -0.7%. Frankfurt -0.5%.
• Futures at 7:00: Dow -0.4% at 9611. S&P -0.6% to 1047. Nasdaq -0.6%. Crude -0.9% at $70. Gold -0.4% to $1,005. Treasurys are flat. Euro -0.6% vs. dollar. Yen -0.45%.

Thursday's Economic Calendar

• 4:00 Monster Employment Index
  7:30 Challenger Job-Cut Report
  8:30 Jobless Claims
  8:30 Personal Income and Outlays
  9:00 Bernanke testifies on regulatory reform
  9:30 225-day progress report on Recovery Act
  10:00 Construction Spending
  10:00 ISM Manufacturing Index
  10:00 Pending Home Sales
  10:30 EIA Natural Gas Inventory
  12:00- PM Sep. Auto Sales
  4:45 PM Geithner speaks
  5:30 PM Fed's Pianalto speaks on current economic issues
  5:30 PM Fed's Lockhart speaks on the economy
• Notable earnings before Thursday's open: MXB, STZ
• Notable earnings after Thursday's close: ACN, BLUD, CREL, GPN

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Comments

[BullnBear:]

I believe that the CNOOC story is big and hasn’t been covered as much as it should or could, thanks for the post.

Oct 01 08:35 AM

[conceptwizard:]

The wild Card:

The Fed Board presented evidence to the district court regarding significant harms that could befall not only private companies, but the economy as a whole, if the withheld information is disclosed. The public interest is coexistive with the Board's interest in that the harms the Board is seeking to prevent inure to the benefit to the U.S. economy." - Federal Reserve

Now I wonder what wild animal is living in this cave.

Oct 01 08:51 AM

[Old Trader:]

China's efforts to secure oil/energy sources all over the world should be a moment's pause to those who say "There's PLENTY of oil available".

Oct 01 08:56 AM

[oldjoewhite:]

Alpha Pro Tech is booming due to swine flu and rain is coming so roofing will boom too. APT went up over 19% yesterday.

Oct 01 09:12 AM

[Joseph L. S...:]

"CNOOC pursues Uganda oil stake. " And just as with Nigeria, China is welcome to it. Dealing with tin-horn dictators around the world, subjecting themselves to arbitrary cutoffs, expropriations, and resentment / sabotage from the local populace is the seeds that grow into very ugly plants for China's economic future.

Now if the US will just pursue its own massive natural gas reserves and join with our Canadian neighbors to increase production from the oil sands and frontier areas, we could watch from the sidelines as China reaps what it has sown...

Oct 01 10:31 AM

[Shaggieman:]

China's rushing to unload dollars for oil while they still have a little value left. Perhaps there's a message here for all of US.

Oct 01 10:45 AM

[Joseph L. S...:]

"The fact that BofA isn't announcing a successor now is indicative of the chaos within the bank, and suggests Lewis's departure isn't entirely voluntary."

In an overcrowded field, Ken Lewis may just win the award for worst CEO to rise 7 levels above his Peter Principle potential.

He overpaid for LaSalle Bank, bought MBNA at the top just as it was rolling over, thought Countrywide was a steal (it’s now worth 10 cents on the dollar that BAC’s shareholders paid for Ken’s Folly) and bought Mother Merrill for ego, not for the shareholders – then whined that mean old Hank and Timmy bullied him into buying it.

In the new world of failing upward, I suppose the administration will now hire him to run AIG “for the benefit of the taxpayers.”

Oct 01 11:08 AM

[AndrewBaker:]

China has long had interest in Africa: not just oil but agriculture and mining too. The problem is that they are much like the old Portuguese colonialists: they take from the country they enter, but give nothing back, and when they leave, they leave it in a worse state than it was when they got there.

Today that will also mean that other countries will suffer too because with China's influence, the African countries affected will be less easy to deal with than they are now, and less inclined to deal also. So important raw materials will get re-directed to China, with possible shortages for anyone else, and the host country will not get any of the benefits they may have been promised or thought would come their way.

If Africa didn't like European colonialism, they will like de-facto Chinese colonialism even less.

Oct 01 11:49 AM

[Anthony Alfidi:]

Good riddance to Ken Lewis. He was the architect of all the BofA acquisitions in the '90s that made it too big to fail.

The IMF is fooling itself. All it did was give political cover to finance ministers and central bankers who know that stimulus policies are the only force keeping the world economy out of a double-dip recession.

CIT is toast. They probably won't survive the end of 2009.

Oct 01 11:50 AM

[TBill:]

Couple of days ago the rumor was CIT was being merged, stock leaps skyward. Then talk of bankruptcy. Hmm, does this look like clasic manipulation to you? Wonder how many insiders were able to get top $ for their shares on the runup...?

Oct 01 01:11 PM

[bbowen7:]

A Greek playright could do a good job with Ken Lewis. He built a great empire. In the last act, Paulson (with Bernanke standing in the shadow) told him that he had to ignore his stockholders - and perhaps the law - and take one for the country. They all recognized that once the hurricane was over, the pundits and lawyers would descend and they would pay a price. Down comes the curtain.

Oct 01 02:52 PM