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
Senate, House to convene after talks stall. The Senate and the House are due to hold sessions today despite the Columbus Day federal holiday as Washington continues to struggle to forge a deal over the government budget and the debt ceiling. Weekend talks between President Obama and House Republicans broke down, although Senate Majority Leader Harry Reid and Republican leader Mitch McConnell held discussions that Reid described as substantive. U.S. stock futures were lower at the time of writing.

China's exports surprisingly fall, CPI rises. China's exports slipped 0.3% on year to $185.6B in September and badly missed consensus for growth of 6%. Although the drop has raised concerns about global demand and the staying power of China's recent economic recovery, analysts pointed out that the over-invoicing of exports may have inflated the numbers in September 2012. Meanwhile, CPI rose to a seven-month high of 3.2% on year, which was more than expected but within the government's annual target of 3.5%.

Top Stock News
TD Bank eyes RBS's £8B U.S. retail business. TD Bank (NYSE:TD) has reportedly long coveted RBS's (NYSE:RBS) Citizens Bank, which is worth an estimated £8B, but the interest has grown since the summer. RBS, in which the U.K. government owns 82%, has played it cool over its desire for a quick sale of the U.S. retail operations. However, British politicians are pressing the bank and new CEO Ross McEwan to focus on domestic lending and building capital.

Netflix in negotiations to provide service via cable operators. Netflix (NASDAQ:NFLX) has reportedly held talks with Comcast (NASDAQ:CMCSA), Time Warner Cable (TWC) and other U.S. cable TV providers to make its service available to their customers via an app on their set-top boxes. However, one snag is that Netflix wants its potential partners to use its technology. The negotiations indicate how telecom / cable TV providers could use Netflix as a way to draw in and keep subscribers rather than just viewing the company as a threat.

Alibaba to invest billions as it aims for $500B market place. Alibaba intends to pour $16B over the next several years into building out its logistics and support systems as part of a strategy to penetrate deep into China's massive interior and reach hundreds of millions of consumers. The Internet giant, which could raise $12-15B in a possible U.S. IPO, expects to triple the amount of transactions on its market places to 3T yuan ($490B) by 2016. That would enable Alibaba to pass Wal-Mart (NYSE:WMT) as the world's largest retail network.

GM to open $200M plant as it looks to slash logistics costs. General Motors (NYSE:GM) is today due to open a $200M metal-stamping facility in Texas that is adjacent to the car maker's Arlington factory. GM expects the new plant to save it $40M in annual shipping costs, with the facility part of its strategy of improving profitability by slashing logistics expenses. GM says that one of the factors that has facilitated the new plant is labor contracts that allow it to pay new workers lower wages.

Roche to invest $880M in biologic manufacturing network. Roche (OTCQX:RHHBY) intends to spend 800M Swiss francs ($880M) on its production facilities over the next five years and create 500 jobs. The plan is part of Roche's strategy to prepare for increasing demand for its biologic drugs, which are proteins or cells derived from living organisms. The investment is in contrast to major peers, such as Teva (NASDAQ:TEVA) and Merck (NYSE:MRK), that are slashing jobs and expenses.

Germany's Merck to seek deals with P-E for drug development. Merck KGaA (OTCPK:MKGAF) is reportedly looking to partner with private-equity groups and other investors to share the costs of developing new drugs. The unorthodox approach comes as the industry tries to juggle what appear to be competing goals: 1) boosting productivity and 2) cutting research expenditures and returning cash to shareholders.

Boeing may furlough defense, space, and security workers. Boeing (NYSE:BA) could reportedly furlough staff this week should the government shutdown persist. Stop-work orders from customers, "limited access to federal installations", and a "shortage of government inspectors" are all cited as possible triggers for workforce reductions in the company's defense, space, and security businesses.

Top Economic & Other News
Four main Gulf states produce record amounts of oil. Saudi Arabia, Kuwait, the United Arab Emirates and Qatar extracted record aggregate volumes of oil in each of the last three months as they offset problems with supplies from Iran, Libya and Nigeria. In total, the Gulf states produced 16.4M barrels a day in Q3. "Despite the (U.S.) shale revolution, the Middle East is and will remain the heart of the global oil industry for some time to come," said Fatih Birol, the International Energy Agency's chief economist.

Crumbling infrastructure seen adding huge sums to business costs. With one in nine U.S. bridges structurally deficient and 42% of major urban highways congested, the American Society of Civil Engineers forecasts that the poor infrastructure could cost companies an extra $430B in operating expenses by 2020 and cause $1.7T in lost sales opportunities. One affected firm is Armstrong World Industries (NYSE:AWI), a provider of floor and ceiling tiles. Armstrong's fully loaded trucks have to take a 25-mile detour due to a bridge that is unsafe for such vehicles, which could add $200,000-300,000 in costs.

Indian WPI surprisingly rises. India's wholesale price index, one of the country's main inflation gauges, rose to +6.5% on year in September from +6.1% in August and came in above expectations for +6%. The increase comes amid stuttering economic growth, the weak rupee, which makes imports more expensive, and high food prices. With CPI inflation at 9.5%, the Reserve Bank of India raised interest rates to 7.5% last month.

Ireland to exit bailout in mid-December. Ireland is set to become the first eurozone country to exit a bailout program, with Prime Minister Enda Kenny saying that the nation will leave its €85B scheme on December 15. Ireland may exit without the insurance policy of a precautionary credit line, which would stop the country from obtaining funds from the ECB's Outright Monetary Transactions program, but would also reduce the conditions involved and the close monitoring of Troika officials.

Alpha-Rich Stock Movers and Great Calls
1) On October 3, DAG1996 said CECO Environmental's (NASDAQ:CECE) recent acquisition hadn't yet been factored in, leaving at least 30% upside on the table. The stock is +8.6% since. Read article »
2) On June 18th, Money Investor said Jos. A Bank's (NASDAQ:JOSB) cash pile and entry into the tuxedo rental business left the stock looking good. After news last week, the stock is +23.9% since the article came out. Read article »

Alpha-Rich Stocks To Watch
1) Tableau's (NYSE:DATA) valuation compared to peers does not compute for buysider Akram's Razor. With a lock-up expiration looming and momentum dropping, he sees up to 50% downside. Read article »
2) Performant Financial's (NASDAQ:PFMT) secular growth opportunities and attractive valuation have been obscured by noise related to a myriad of mostly government-related issues, leaving 60% upside. Read article »

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Today's Markets:
In Asia, Japan, Hong Kong closed. China +1.7% to 2228. India +0.5% to 20624.
In Europe, at midday, London +0.1%. Paris flat. Frankfurt -0.2%.
Futures at 6:20: Dow -0.7%. S&P -0.7%. Nasdaq -0.5%. Crude -0.6% to $101.42. Gold +0.6% to $1276.
U.S. bond markets closed for Columbus Day.

Today's economic calendar:
8:00 PM Bernanke Press Conference

Notable earnings after today's close: PKG

See full real-time earnings coverage »

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