Wall Street Breakfast: Must-Know News

• Intel says growth is back. Intel (INTC) CEO Paul Otellini sounded an optimistic note after a strong Q3 earnings report, telling analysts the firm's strength "remains primarily consumer driven with broad-based demand across all geographies." Speaking to concerns netbook sales are cannibalizing traditional PC and laptop sales, Otellini said sequential unit growth of notebook chip sales exceeded the growth rate of its Atom chips, "and we expect that to continue in the future." The strong report sent futures surging after hours, and shares of Intel are up almost 5% premarket. (read Intel's Q3 earnings call transcript)
• Bank crisis, what bank crisis? Major U.S. banks and securities firms will pay workers about $140B this year, topping the $130B record set at the peak in 2007 and up from $117B in 2008. According to an in-depth study by the WSJ, workers at 23 top Wall Street firms will earn an estimated $143,400 on average (Table: Projected Compensation). The same firms' total revenue are projected to reach $437B, smashing the record $345B set in 2007.
• China export decline slows. China’s exports declined 15.2% from a year ago to $115.9B, the smallest drop in almost a year, and substantially less than consensus estimates of 21%. A recovery in exports "is one more piece of evidence that the global economy is getting stronger," strategist Brian Jackson said, adding that recent gains in imports show "China is playing a greater role in driving recovery." Shanghai closed up 1.2%, and yuan forwards hit a 13-month high as traders bet the jump in exports will prompt the central bank to let the yuan climb against the dollar; some say the dollar peg will break as soon as Q1 2010.
• BoJ stays put, delays exit plan. Bank of Japan kept its overnight call loan rate unchanged at 0.1% (.pdf), and contrary to expectations, made no mention of whether it will end measures to supply funds to the market by buying bank-owned corporate debt, suggesting it's still concerned that its termination could choke off an economic recovery. BoJ revised its economic assessment upward for the second straight month, saying Japan's economy "has started to pick up," after saying last month the economy is "showing signs of recovery." (read BoJ's statement)
• Geithner aides making the rounds on Wall St. Members of Tim Geithner's behind-the-scenes kitchen cabinet are earnings millions of dollars a year in payments from top Wall Street firms, on top of their $163K government salaries. As members of Geithner's advisory, aides like Gene Sperling and Lee Sachs wield significant influence within the Treasury, but aren't subject to public confirmation or congressional scrutiny.
• BofA board was troubled by Merrill deal. Bank of America (BAC) has begun opening the tap on its promised disclosure of emails and documents relating to its purchase of Merrill Lynch. In an email exchange during a Jan. 15 call in which CEO Ken Lewis revealed to the board that Merrill's losses were far worse than the bank's previous estimates, board member Charles Gifford wrote, "Unfortunately it's screw the shareholders!!" to another director, who replied, "No trail," apparently reminding him to delete the thread. The bank says it believes that the record, taken in context, will demonstrate "that we acted in good faith and with appropriate disclosure in the Merrill Lynch acquisition." Gifford was reportedly the only director to oppose the merger, urging Lewis to wait a day or two to try and spin a better deal for shareholders; Lewis argued waiting could squander a golden opportunity to make the I-bank the crown jewel of his empire.
• Pay czar urges pay cuts at AIG. Treasury pay czar Kenneth Feinberg is urging AIG (AIG) to reduce a portion of the $198M in incentives it claims it needed to keep crucial staffers. Feinberg's report implies the Treasury should have been more attentive to AIG's pay practices, saying it "invested $40B of taxpayer funds in AIG, designed AIG's contractual executive compensation restrictions and helped manage the government's majority stake in AIG for several months, all without having any detailed information about the scope of AIG's very substantial, and very controversial, executive compensation obligations."
• Healthcare bill has miles to go. The Senate Finance Committee approved a proposed $829B healthcare overhaul, much to the chagrin of the health insurance industry, saddling Senate Majority Leader Harry Reid with the arduous task of melding it with the version passed by the Senate in July. A group of 27 unions including the UAW are coming out with a newspaper ad today saying they'll oppose the legislation unless in includes a public option. Another fault line is whether the bill should force employers to cover workers. Insurers are rankled by weakened penalties for those who fail to buy insurance.
• Bloomberg buys BusinessWeek. McGraw-Hill agreed to sell 80-year-old BusinessWeek to Bloomberg for an undisclosed price. Sources say less than $5M in cash will change hands, but Bloomberg will also assume another $10M in liabilities, including severance for BusinessWeek staffers who might lose their jobs. Bloomberg executives say the firm hasn't made any decision about job cuts or staffing, but insist it bought the magazine and web property to build them, not gut them. "Our intention is to take a venerable brand and turn it into the best global business newsweekly," Bloomberg president Daniel Doctoroff said in an interview.
• Cisco snaps up Starent. Cisco (CSCO) agreed to buy Starent Networks (STAR), a supplier of mobile internet solutions, for $2.9B, or $35/share in cash, a 42% premium over the 30-days prior close. The move comes just a week after the networking giant agreed to hand over $3B for Norwegian videoconferencing vendor Tandberg, an indication CEO John Chambers is quite serious about following through with recent promises to make the coming two year's Cisco's "most aggressive ever." The acquisition should increase Cisco's ability to help carriers manage the data moving across wireless networks, which analysts say is the single biggest growth opportunity for networking vendors.
• Mortgage rates creep higher; apps drop. Mortgage applications fell 1.8% from a week ago as mortgage rates skipped back above 5%, the Mortgage Bankers Association said this morning. The drop follows a 16.4% gain last week. 30-year fixed mortgages averaged 5.02%, up from 4.89% the previous week.

Earnings: Wed. Before Open

• JPMorgan (JPM): Q3 EPS of $0.82 beats by $0.30. Revenue of $26.62B (+3.9%) vs. $24.96B. Says credit costs remain high and adds $2B to consumer credit reserves, but says it's seeing initial signs of consumer-credit stability. Firmwide loan-loss coverage ratio of 5.3%. Shares +2.1% premarket. (PR)
• Host Hotels (HST): Q3 FFO of $0.11 beats by $0.03. Revenue of $912M (-19.9%) vs. $892M. (PR)

Earnings: Tue. After Close

• Altera (ALTR): Q3 EPS of $0.19 in-line. Revenue of $287M (+2.7%) in-line. Sees Q4 revenue of $303-314M vs. $291M. Shares +2% AH. (PR)
• Intel (INTC): FQ3 EPS of $0.33 beats by $0.05. Revenue of $9.4B (-8%) vs. $9B. Gross margin at 57.6%, above expectations. Sees Q4 revenue of $9.7B-10.5B vs. $9.5B. Shares +4.9% premarket. (PR)
• Linear Technology (LLTC): FQ1 EPS of $0.27 beats by $0.03. Revenue of $236M (-24%) vs. $216M. Sees Q2 revenue of $241M-248M vs. $223M. Shares +0.5% AH. (PR)

Today's Markets

Overseas markets posted impressive gains on Wednesday, and futures are up more than 1% after bellwether Intel (INTC) posted better than expected Q3 earnings.

• Asia: Nikkei -0.16% to 10,060. Hang Seng +1.95% to 21,886. Shanghai +1.17% to 2,971. BSE Sensex +1.2% to 17,231.
• Europe at midday: London +1.7%. Paris +1.7%. Frankfurt +2%.
• Futures: Dow +1.1% to 9918. S&P +1.3% at 1083. Nasdaq +1.3%. Crude +1.1% to $74.96. Gold +0.15% to $1,066. 30-year bonds -0.59%. 10-year -0.28%. 5-year -0.17%. Euro +0.5% vs. dollar. Yen +0.6%. Pound +0.6%.

Wednesday's Economic Calendar

• 12:00 AM BoJ Rate Decision
  7:00 MBA Mortgage Applications
  8:30 Sept. Retail Sales
  8:30 Sept. Import/Export Prices
  10:00 Aug. Business Inventories
  10:00 API's Monthly Report
  10:00 Hearing: OTC Derivatives, Consumer Financial Protection
  10:00 TARP's Barofsky on AIG bonuses
  2:00 PM FOMC minutes
  2:00 PM Hearing: High Speed Railroads
  2:30 PM Hearing: State of the Banking Industry
• Notable pre-market earnings: ABT, ASML, HST, JPM, LPL
• Notable post-market earnings: CCK, XLNX

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Comments

[doubleguns:]

Little Timmy's aides making millions.

Does anyone else see the conflict of interest or corruption in this?!!!

Washington never changes.

Oct 14 08:29 AM

[ScroogeMcduck:]

After work Timmy goes home puts his $ gold chain and pimp hat on. Slaps a couple hoes around and rolls in money till he falls asleep.

Oct 14 08:46 AM

[robert.b.fe...:]

I'm with you doubleguns. I wonder if they pay taxes on any of that shake down money. It almost seems like they are mobsters running around collecting protection money like they are doing in Mexico now.

Oct 14 08:56 AM

[doubleguns:]

As banking gangsters these guys need more appropriate middle names, like Gene "The Machine Gun" Sperling and Lee "Goldman" Sachs.

Anyone else got some ides for names?


On Oct 14 08:56 AM robert.b.ferguson wrote:

> I'm with you doubleguns. I wonder if they pay taxes on any of that
> shake down money. It almost seems like they are mobsters running
> around collecting protection money like they are doing in Mexico
> now.

Oct 14 09:15 AM

[Mayascribe:]

The big five banks have America hostaged.

DG: Go into Loundsbury's Instas. He has a link to an article last night, when this web site was a ghost town, which both pissed me off about the big five banks, yet also guiltily made me happy to own shares in two of the five. GREAT ARTICLE.

Yet, I need anger management. DC and Wall Street are raping Main Street.

Oct 14 09:29 AM

[Sovestor:]

We believe Dow 30 will likely hit 10,000 anytime soon. The bull has taken ownership of the markets. sovestor.com/content/d...

Oct 14 09:41 AM

[gmwright:]

Banks are posting record profits? And paying record wages amidst 9.5+% unemployment? I assume this profit is almost entirely due to the surge in the markets, which is interesting because the market surges when the banks post big profits and those surges further fuel bank profits. Chicken or the egg? When market levels and bank profits slide down how will the market react?

Oct 14 10:07 AM

[bottoms-up:]

Here's the link from Bloomberg on the Tim Geithner and his "Merry Men" that steal from the middle class and give to the rich and famous.

www.bloomberg.com/apps...

What a corrupt Third World country the United States is becoming... Dead bodies stacking up in morgues because the government and families can't afford to bury them, corrupt government officials in bed with the banking industry.

Sorry for the slogan: Change you can believe in? I believe it all right!

Oct 14 10:10 AM

[bottoms-up:]

PS: The Bloomber story should have read:

Geithner Aides RAPED millions...

Oct 14 10:13 AM

[RadicalCapi...:]

Read End the Fed by Ron Paul if you really want to get pissed...

Oct 14 10:28 AM

[notsosmart:]

BoA hires law firm. they will argue every paper & document & the periods & commas,etc on them before they make them public.this will end with the next sunday in the middle of the week. what a cheating ponzi scheme this whole thing has become."mission accomplished" put this whole crowd in office.for 6 years the republicans controlled this gov & wasted a golden opportunity to show some good leadership.so we had bad& worse.this market is as phony as all that AAA rated paper still hidden all over.the insiders will be out just before the next crash.the world loves this downhill slide of the once mighty USA. obama got the peace prize so he doesnt have to meet with the dalai lama

Oct 14 10:39 AM

[AndrewBaker:]

The "them and us" is becoming more obvious by the day. Markets are rising on hot air and statements from politicians and business leaders that are very economical with the truth, to say the least and best. Those actually investing in stocks in these markets now, which will not be those same politicians and business leaders - who are selling their stakes, as we know - will lose heavily when real values finally assert themselves, whilst our great leaders are pocketing the cash now and feathering their own nests. Perhaps they are also the ones investing in other countries' stocks and also buying commodities, because they know that the cash will be no good once they've destroyed the dollar and caused rampant inflation, which after a short period of deflation, will rise like the Zimbabwean dollar from the ashes to make the rest of us poor, having made wealthy our masters who will claim to have done so well. Third world no longer describes it properly: fourth world corruption is here and now radiating out from Washington.

Oct 14 12:01 PM

[bbowen7:]

So, while we have all been watching health care, the magicians on Wall Street (and in Treasury) continue to rape the economy. Where is Financial Reform? What was the public's priority when this administration came into power?

Oct 14 02:58 PM

[Old Trader:]

I wonder if Bloomberg's acquisition of Business Week will have any effect on the "magazine cover contrairian indicator" .

Oct 14 05:00 PM

[ebworthen:]

The real horror of this malfeasance will come when the inner city and poorer suburban populations can no longer be placated with fast food, beer, lottery tickets, and sports teams.

Enough of the average person sleeping two to three generations or families to a house and a lot of the young men out of work will lead to trouble fast in the streets.

I thought that would happen this Summer, but I didn't calculate that two trillion would be used to prop up the banks and a cotton candy stock market; nor that there would be a media blitz of near propogandistic proportions ignoring the problems and trumpeting hopium. But, I never saw Obama getting the Nobel either ;-)

If I were one of the Wall Street Pimps (i.e. - Timothy and his friends) I'd have an escape plan ready to get out of Dodge ahead of the mobs or the furious individual citizen seeking retribution.

Oct 14 05:59 PM