Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
PG&E fears penalties will take it close to bankruptcy. PG&E (NYSE:PCG) believes it may be pushed to the edge of bankruptcy if Californian regulators impose a proposed $2.25B penalty for the deadly 2010 San Bruno pipeline explosion. The fine represents more than four times the utility's 2012 net income and 15 years' worth of earnings at the gas business. The fine would push the total price tag of the disaster to over $4B.

J&J mulls $3B+ settlement over hip device. Johnson & Johnson (NYSE:JNJ) has reportedly discussed paying more than $3B to settle up to 11,500 U.S. lawsuits over its recalled ASR hip implants. J&J has already spent $993M on medical costs, and on telling patients and surgeons about the recall. The company has also suffered an $8.3M verdict against it in one trial but won another one. The chromium and cobalt implants have been blamed for pain, metal debris and replacement surgeries. Shares were -0.2% premarket.

Markets await FOMC minutes. U.S. stock futures and European shares were lower at the time of writing, while Asian shares traded mixed, as markets awaited today's publication of the minutes of the latest FOMC meeting. Ten-year Treasury yields were slightly up at 2.83%. "The minutes should continue to reinforce this theme of tapering at the September meeting as long as the labor market holds up," says RBS's Michelle Girard. "They should also repeat another tune dear to FOMC hearts, 'tapering is not tightening.'"

Top Stock News
H-P earnings seen falling again. H-P's (NYSE:HPQ) FQ3 earnings are due out after the bell, with analysts expecting that EPS dropped to $0.86 from $1 a year earlier, while revenues slipped 8% to $27.29B. H-P is "still plagued by a weak enterprise demand and a slowing PC market," says SA contributor Trefis, "and we expect that these factors will continue to affect HP's revenues across its business divisions." Trefis is also looking out for updates on H-P's restructuring, which was announced in May 2012.

Apple's iPad losing market share in China. The iPad's market share in China tumbled to 28% of the computer-tablet market in Q2 from 49% last year, IDC estimates, affected by the growth of cheaper devices running Google's (NASDAQ:GOOG) Android. Shipments of the Apple (NASDAQ:AAPL) product rose to 1.48M units from 1.15M. Samsung's (OTC:SSNLF) share increased to 11% from 6% as deliveries surged to 571,000, from 133,000. Third-placed Lenovo (OTCPK:LNVGF) experienced a drop in share to 8% from 9% even as shipments more than doubled to 413,000, from 204,000.

Apple could launch iTunes Radio in September. Apple (AAPL) will reportedly debut iTunes Radio next month, having secured McDonald's (NYSE:MCD), Procter & Gamble (NYSE:PG), Pepsi (NYSE:PEP) and other major advertisers. The ETA coincides with the expected launch dates for the iPhone 5S/5C and iOS 7. While Apple's service could threaten Pandora (NYSE:P), the latter has 71M active users who have spent time creating custom stations, which could limit the impact.

Court approves Kodak restructuring. Bankruptcy judge Allan Gropper has signed off on a restructuring that will allow Eastman Kodak (EKDKQ.PK) to emerge from Chapter 11 as a smaller company focused on commercial printing and imaging, as well as touch sensors. Creditors with secured claims will be paid in full, while those with unsecured claims will only receive 4-5 cents on the dollar. Shareholders will get nothing. Kodak, which has shed 47,000 employees since 2003, will exit bankruptcy protection with 8,500 workers.

Facebook leads project to connect the whole world. Facebook (NASDAQ:FB) has got together with Samsung (OTC:SSNLF), Qualcomm (NASDAQ:QCOM), Nokia (NYSE:NOK) and other technology companies to launch a project called Internet.org that aims to make Internet access available to the two-thirds of the earth's population who are not yet connected. Around 5B people don't yet have such access, which is a mighty number of potential Facebook users.

Google meets with NFL about Sunday Ticket deal. Google CEO Larry Page (GOOG) and YouTube content chief Robert Kyncl have reportedly met with an NFL delegation that included commissioner Roger Goodell to discuss the rights to the NFL's Sunday Ticket subscription package. DirecTV (DTV) pays $1B a year for the license but its deal is set to expire at the end of 2014. NFL is due to meet other tech companies as well as part of a jaunt through Silicon Valley.

Banks' hiring of well-connected relatives in China widespread. While the SEC is only now investigating JPMorgan (NYSE:JPM) for possibly hiring the children of influential officials in China to win business, the recruitment by major banks of well-connected relatives has been going on for over a decade in the country. Goldman Sachs (NYSE:GS) once employed the grandson of former President Jiang Zemin and Credit Suisse (NYSE:CS) the daughter of ex-Prime Minister Wen Jiabao. Still, regulators might find it difficult to prove a direct connection between an appointment and the obtaining of a contract.

Office Depot, Starboard reach deal over board slate. Just hours ahead of its shareholders meeting today, Office Depot (NYSE:ODP) has averted a proxy battle with Starboard Value, its biggest shareholder, by agreeing to support the nomination of three of the latter's candidates for the company's board. Starboard, which owns a 14.6% holding, had originally wanted six directors. One of Starboard's candidates will sit on the committee searching for a CEO for Office Depot and OfficeMax (NYSE:OMX) for when their merger is completed.

Goldman's erroneous trades could prove expensive. Goldman Sachs' (GS) losses from erroneous trades that disrupted options exchanges yesterday could amount to $100M if they weren't canceled, the FT reports, citing market participants. The trades occurred on the NYSE Euronext, CBOE and Nasdaq, which are reviewing the transactions. The NYSE expects to void most of the trades.

Top Economic & Other News
Moody's upgrades outlook on U.S. states. Moody's has lifted its collective outlook on U.S. states to stable from negative, citing increasing revenues following improvement in the labor and housing sectors, consumer confidence and the stock market. Credit quality is strong, with 30 states holding the two highest ratings, AAA or Aa1. Due to its massive pension gap, Illinois has the lowest grade among states, A3, while the local government outlook remains negative.

RBI moves to restore liquidity but rupee continues free-fall. The Reserve Bank of India has said it will buy government bonds on Friday and take other action to inject liquidity into the banking system. The move comes after a series of tightening measures unsuccessfully attempted to stem the free-fall in the rupee and instead caused a cash crunch. Yields on 10-year government bonds were -57 bps at 8.35% at the time of writing, but Indian shares were -1.9% and the USD-INR was +2% at 64.391.

Alpha-Rich Stock Movers and Great Calls
1) Last Monday, Suneet Chandvani argued that Digital Generation's (NASDAQ:DGIT) shares still had 70% upside even after a big move. The stock is +15.7% to date. Read article »
2) On June 3, Valuable Insights said Rubicon (NASDAQ:RBCN) was on the cusp of a growth transition, with 50% upside as a result. The stock is +21.9% since. Read article »

Alpha-Rich Stocks To Watch
1) Ingredion (NYSE:INGR) is switching to higher-margin specialty ingredients that could lead to 25% upside in the long run. Read article »
2) Bassett Furniture (NASDAQ:BSET) can benefit from economic expansion, increased U.S. home sales, and a continuing turnaround. Shaun Currie sees 20% intermediate-term upside, with more to come in the long-term. Read article »

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Today's Markets:
In Asia, Japan +0.2% to 13424. Hong Kong -0.7% to 21818. China flat at 2073. India -1.9% to 17906.
In Europe, at midday, London -0.7%. Paris flat. Frankfurt -0.3%.
Futures at 6:20: Dow -0.3%. S&P -0.3%. Nasdaq -0.3%. Crude -0.3% to $104.83. Gold -0.9% to $1360.80.

Today's economic calendar:
7:00 MBA Mortgage Applications
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
2:00 PM FOMC minutes

Notable earnings before today's open: AEO, EV, EXXI, LOW, MSG, PETM, SJM, SPLS,TGT, TOL

Notable earnings after today's close: AFCE, HAIN, HPQ, LTD, SB, SNPS, VVTV

See full real-time earnings coverage »

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