- Hershey and Ferrero mull rival Cadbury bid. Hershey (NYSE:HSY) is in talks with Italian confectionary giant Ferrero about a rival bid to Kraft's (KFT) $16.7B offer for Cadbury (CBY). Cadbury rejected Kraft's hostile bid last week, calling it "derisory." The American and the Italian candy makers have reportedly not been able to decide how to slice up Cadbury's businesses, which are worth $9B billion in annual sales - in particular deciding which one should get Cadbury's higher-margin gum and candy units. Analysts said that neither Hershey nor Ferrero could fund a Cadbury takeover on their own.
- Morgan Stanley, MUFG to split up brokerage. Morgan Stanley (NYSE:MS) and Mitsubishi UFJ Financial Group (NYSE:MTU) changed their plans about merging their brokerage operations in Japan, originally announced in March after MUFG made Morgan Stanley a $9B loan during the financial crisis. Current plans, which will delay the merger for two months, will create a two-company JV, one of which will be called Mitsubishi UFJ Morgan Stanley Securities, 60%-owned by MUFG, and will include Morgan Stanley's investment-banking business; the other will be controlled by Morgan and will include its equity and bond trading businesses.
- Fed officials disagree on recovery. Top Fed officials gave different points-of-view on Tuesday about the pace of recovery. Inflation hawk Jeffrey Lacker, president of the Richmond Fed, said that recovery is solidly under way, and he expects the economy to grow at a reasonable pace next year, though there could be "patches of lingering weakness." Cleveland Fed President Sandra Pianalto and San Francisco Fed chief Janet Yellen disagreed, saying that the economic recovery will be sluggish. Yellen warned that the Fed could not maintain its loose money stance for too long, regardless of the pace of recovery. "It is a core responsibility of the Federal Reserve to preserve price stability," she said.
- SkyTeam seeks to lure JAL. Troubled Japan Airlines has been offered a $1B package if it will join Delta Airlines (NYSE:DAL) and its SkyTeam alliance. SkyTeam airlines would buy $500M of JAL or convertible securities, and Delta, by itself, would pay $200M in asset-backed financing and as much as $300M in guarantees to cover any losses caused by leaving the Oneworld alliance led by American Airlines (AMR). Delta said that joining SkyTeam's larger network would boost JAL’s sales by $400M a year. JAL has $15B in debt and has applied for mediated debt restructuring as part of a government bailout plan - the third such bailout the company has had to seek since 2000.
- Hedge-fund assets increase for sixth straight month. Hedge-fund assets rose $7.8B in October, the sixth straight month assets under management have improved, researcher Eurekahedge said on Tuesday. Net inflows totaled $10.2B, while performance-based losses were $2.4B for the month. Eurekahedge's Hedge Fund Index was up 16% this year, its best performance since 2003. Europe attracted the most capital, with four out of the five regions in the report reporting positive net flows for the month.
- Friction between Obama and Hu on yuan. Despite repeated urging by President Obama of Chinese President Jintao to liberalize the yuan-dollar peg, the joint statement issued by the two leaders after today's meeting made no mention of foreign exchange. Hu used the meeting to complain about recent U.S. trade measures that placed tariffs on Chinese exports of pipes and tyres. In its third-quarter report last week, China alluded to freeing up the yuan, but since then the bank has been chiding the U.S. about letting its loose money policies incite speculation against the greenback.
- Buffett and Blankfein aid small business. Goldman Sachs (NYSE:GS) is teaming up with Warren Buffett (NYSE:BRK.A) to set up a $500M program to aid small business, a move widely seen as image repair for the investment bank which has been taking a beating over executive bonuses. CEO Lloyd Blankfein issued a public apology on Tuesday for the bank's role in the financial crisis. The program, called "10,000 Small Businesses," is aimed at helping small businesses grow and create jobs, and will dedicate $300M to helping small businesses raise capital and grow; the remaining $200M will be given to universities and schools to expand education opportunities for these companies.
- Who should pay for 'too-big-to-fail?' The House Financial Services Committee agreed to include in the proposed banking reform bill a provision to require banks and funds to make payments in advance to provide for companies deemed 'too-big-to-fail,' aimed at insuring taxpayers don't wind up footing the bill when banks go bust. "Wall Street companies and executives should have to pay for their own mistakes," said Rep. Paul Hodes, D-N.H., the provision's author. But the amount to be collected from the industry is to be capped at $200B. A similar bill making its way through Senate would permit bank regulators to use taxpayer funds to dismantle a failed institution, and later recoup those costs from the industry.
- GM's Opel could set off bidding war. With cash reserves of $2.5B, General Motors' Opel unit has enough cash to survive into the first quarter, acting CEO Nick Reilly said on Tuesday. Opel announced Tuesday plans to cut 10,000 jobs and about 25% of its output, which will mean closing plants in at least one country in Europe. Opel will need government aid, Reilly said, adding that he didn't want to start a bidding war among governments in countries where Opel has plants. "But if a country refuses to participate, it could influence the plan somewhat," he added. For now, Germany has refused to provide aid, still angry about GM's backpedaling on a state-financed sale of Opel to Magna International (NYSE:MGA) and Sberbank. But the U.K. has already promised financing, and Spain is mulling doing the same.
- Three Dems threaten to block Senate healthcare reform. Three Democratic senators could vote against the healthcare reform bill in the Senate, which would scuttle the bill. Debate is due to start this week, but Sen. Ben Nelson,(D.-Neb.), Mary L. Landrieu (D.-La.), and Blanche Lincoln (D.-Ark.) have all declared that they may not support the bill; it would require just one of them voting against for the bill not to pass. All Republican senators have already stated that they will not vote for the bill. Senate Majority Leader Harry Reid (D.-Nev.) is working hard to negotiate with the three holdouts. The bill would spend $1T over ten years, creating a government-run insurance plan and making health insurance obligatory for all individuals.
- Retailers show signs of life. Target (NYSE:TGT), TJX (NYSE:TJX), and Saks (NYSE:SKS) all posted solid Q3 results Tuesday, a sign consumers have begun spending. TJMaxx parent TJX had the strongest results, with quarterly profit up 32% year-on-year. Target's profits rose 18%, and Saks surpised analysts by earning a small profit after more than a year of straight losses. Meanwhile, credit card researchers Synovate Mail Monitor and Credit Karma said average credit-card balances increased during October. The average consumer carried $7,573 of credit-card debt, a 14% increase from $6,641 a month earlier. The numbers indicate the holiday spend may not be as disappointing as was originally expected.
- Merrill deal a 'mistake,' BofA director says. Bank of America director Chad Gifford called the decision to acquire Merrill Lynch last year a "mistake," in an email sent to his children in January. The email emerged in the House investigation of the Merrill deal, which pushed BofA's quarterly dividend down to a penny, and which the government had to finance with a $20B cash injection. Gifford told the House committee that, despite the losses at Merrill, he'd supported the deal because it was good for shareholders. Retail bank head Brian Moynihan also testified at these hearings, but failed to explain why he was chosen to replace Tim Mayopoulos as General Counsel shortly before the Merrill deal was completed. Some Congressmen speculated that Mayopoulos was fired because he warned the board that it could not make use of a clause in the merger agreement that allowed BofA to back out of the deal. Moynihan argued, immediately after Mayopoulos was fired, that the clause could be invoked, and it was used as leverage to obtain the $20B from the Treasury.
- Boeing gets its contract back. A federal appeals court ruled on Tuesday that Boeing's (NYSE:BA) $1B 10-year contract to maintain the KC-135 Tanker Jet for the Air Force was valid. Rival Alabama Aircraft Industries (AAll) had contested the contract, alleging that the bidding process had been unfair. The appeals court had overruled the judgment of a lower court in favor of the Alabama company. Alabama Aircraft Industries said it may appeal the decision.
- IRS divulges deal with Switzerland. The Internal Revenue Service on Tuesday released the terms of its banking secrecy deal with Switzerland. The banks must reveal the names of U.S. depositors who do not file a W-9 form for three years. But the deal only applies to depositors who had more than CHF1M ($992,802) in their accounts at any time from 2001 through 2008, and which generated average annual revenue of more than CHF100,000 ($98,892) over three years. The deal dates from the time UBS (NYSE:UBS) agreed to pay the U.S. government $780M to avoid prosection on tax evasion charges. The deal was the result of protracted negotiations between the two countries.
- Wall Street sees record profits. Profit at Wall Street firms is now back to the levels seen before the financial crisis, according to a report released on Tuesday by New York State Comptroller Thomas P. DiNapoli. Goldman Sachs (GS), Merrill Lynch (NYSE:BAC), Morgan Stanley (MS) and the investment banking arm of JPMorgan Chase (NYSE:JPM) earned $22.5B in the first nine months of this year. Net revenue at the four firms reached a high of $57.7B in the second quarter. Securities trading with low-interest rate capital and declining interest payments were behind the profits, the report said.
- Apollo plans NYSE listing. Private-equity giant Apollo, with $38.3B assets under management, is planning a New York Stock Exchange listing in coming weeks, sources say. Apollo will list shares that now trade on platforms run by banks, including GSTrUE, which was set up by Goldman Sachs in 2007 for institutional investors, and where the company is valued at $1.55B, although that figure may not reveal the firm's entire value. Apollo plans to take advantage of the current stock market rally, the sources said.
Earnings: Wed. Before Open
- BJ's Wholesale Club (NYSE:BJ): Q3 EPS of $0.45 in-line. Revenue of $2.51B (+2%) in-line. (PR)
- Chico's FAS (NYSE:CHS): Q3 EPS of $0.13 beats by $0.06. Revenue of $447M (+123.4%) vs. $415M. SSS +12.8% vs. +3.1% consensus. Shares +11.3% premarket. (PR)
- Navios Maritime (NYSE:NM): Q3 EPS of $0.20 beats by $0.01. Revenue of $161M (-55.8%) vs. $132M. (PR)
- Perry Ellis International (NASDAQ:PERY): Q3 EPS of $0.31 beats by $0.10. Revenue of $178M (-19.9%) vs. $185M. (PR)
- Solarfun Power Holdings (SOLF): Q3 EPS of $0.37 beats by $0.22. Revenue of $145M (-23%) in-line. "We expect to see a healthy demand environment in 2010. The preliminary shipment target for 2010 is 500 MW. We expect strong demand from Germany as project development is accelerated in response to expected feed-in-tariff reductions, from new markets like China and the United States, and as the general availability of funding for solar projects improves." (PR)
Earnings: Tue. After Close
- Autodesk (NASDAQ:ADSK): FQ3 EPS of $0.27 beats by $0.04. Revenue of $417M (-31%) vs. $415M. Sees Q4 EPS of $0.19-0.24 vs. $0.25. Shares -9.4% AH. (PR)
- La-Z-Boy (NYSE:LZB): FQ2 EPS of $0.12 in-line. Revenue of $301M (-9%) vs. $285M. Shares +1.7% AH. (PR)
- Salesforce.com (NYSE:CRM): Q3 EPS of $0.16 in-line. Revenue of $331M (+20%) vs. $324M. Sees Q4 revenues of $340M-342M vs. $335M. Sees fiscal 2011 growth of 15-16%. Shares -4% AH. (PR)
Asia stocks were mixed Wednesday, but Europe markets are strong at midday and futures are a drop higher in overnight trading.
- Asia: Nikkei -0.55% to 9,677. Hang Seng -0.32% to 22,840. Shanghai +0.62% to 3,303. BSE -0.3% to 16,998.
- Europe at midday: London +0.4%. Paris +0.7%. Frankfurt +0.7%.
- Futures at 7:00: Dow +0.2% to 10422. S&P +0.2% to 1110. Nasdaq +0.1%. Dec. crude +1.2% to $80.07. Gold +0.7% to $1,147.40. 30-year Tsy -0.13% to 120-29. 10-year -0.14%. 5-year -0.1%. Euro +0.6% vs. dollar. Yen flat. Pound flat.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
8:30 Consumer Price Index
8:30 Housing Starts
9:00 Small Business Financing Forum
9:15 Fed's Bullard: U.S. Economy and Monetary Policy
10:00 E-Commerce Retail Sales
10:00 AIA Architecture Billings Index
10:00 Markup: Investor Protection Act
10:30 EIA Petroleum Inventories
11:45 PM Fed's Plosser: Monetary Policy
- Notable premarket earnings: BJ, CHS, NM, SOLF
- Notable postmarket earnings: GYMB, HOTT, JACK, LTD, NTAP, NTES, PETM, PVH
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