Wall Street Breakfast: Must-Know News

• Fed shrugs off risks. The Fed admitted its near-zero-interest-rate policy could fuel "excessive" speculation in financial markets and thwart expectations for low inflation. Still, policy-makers indicated in minutes from their FOMC Nov. 3-4 meeting, released Tuesday, that rates will likely remain near zero "for an extended period." Fed officials agreed to remain vigilant, but such risks have not escaped Japan and China, where last week finance chiefs accused the Fed of being reckless and potentially endangering the global economy.
• Exports help rebound in Japan. Exports helped Japan's economy expand at the fastest pace in more than two years in Q3, even as prices of goods fell and the yen gained. In October, Japan's exports fell at the slowest pace in a year as government-backed spending around the world boosted demand and economic recovery. Overseas shipments slid 23.2% from a year earlier, compared with a 30.6% decline in September. Strong Asia demand may help the economic rebound extend into this quarter. Imports slid 35.6% from a year ago.
• U.S. lending in the dumps. The FDIC said in its Q3 report for U.S. banks that bank lending fell by the largest amount since the government began tracking such data, suggesting that banks are still anxious, and that the recovery could suffer as a result. Total loan balances fell by $210.4B, or 3%, the biggest decline since data collection began in 1984. The FDIC also said that a wave of bank failures pushed its fund to backstop deposits into the red (-$8.2B) for just the second time in its history. In anticipation of this, the agency recently approved plans calling for banks to prepay annual assessments through 2012, which will add $45B to the FDIC's coffers.
• GDP, house prices, consumer confidence rise. A wider U.S. trade gap and other factors helped clip the government's Q3 GDP forecast, with Tuesday's report showing growth at 2.8% vs. the 3.5% the Commerce Department had originally forecast. Still, it was the fastest pace since Q3 2007 as the economy emerges from the worst recession since the Great Depression. The upturn, following a 0.7% contraction in Q2, reflected hefty government spending. Also Tuesday, house prices gained month-on-month, and Conference Board's measure of consumer confidence rose to 49.5 from an upwardly revised 48.7 in October.
• ECB discusses adjustable rate loans. Sources say ECB officials are mulling issuing December's 12-month loans based on an adjustable interest rate, a move that could be interpreted as a signal they will tighten monetary policy in 2010. The ECB is offering banks unlimited funds for 12 months as part of its strategy to get them lending again; December will be the final tender. Nothing's final yet, but sources say the 22-member council is for now leaning toward sticking with a fixed rate of 1%.
• More publishers gang up on Google. As the print-ad market continues to founder, two more publishers said they may yank stories off Google's (GOOG) news site, perhaps following the lead of Rupert Murdoch who is in talks to remove News Corp.'s (NWS) sites from Google's search engine and hand them exclusively to Microsoft's (MSFT) Bing. MediaNews Group Inc., publisher of the Denver Post, plans to block Google News when it starts charging readers for online content next year, and Morning News owner A.H. Belo (AHC) says it may start charging online subscription fees and block Google. Google says fewer than 1% of newspapers have opted out of its service so far.
• GM Saab sale slams into reverse. Scandinavian carmaker Koenigsegg Group AB said it won't buy General Motors' Saab unit after all, throwing a wrench into the U.S. automaker's ambitions to rapidly downside its global operations. The collapsed plan with Koenigsegg included hundreds of millions of dollars in financial backing from the Swedish government. The Swedish company was planning to hook up with China's Beijing Automotive Industry Holdings to revitalize the brand. GM, which has been running Saab for the past two decades but failed to make any money on the unit, will reassess its options over the coming days.
• Facebook moves closer to IPO. The global social networking website sensation Facebook may be laying the groundwork to go public, after it said yesterday it will establish a dual-class stock structure that would increase the voting power of the company's CEO and other existing shareholders, should they keep their shares during an IPO. The move is similar to one Google (GOOG) made before taking its shares public. For its part, Facebook said it has "no plans" to do an IPO "at this time" and was only taking this step because shareholders "wanted to maintain control over voting on certain issues" and "focus on the long-term."
• Citi scolds peers on mortgage relief. Citigroup (C) urged banks to step up principal forgiveness on mortgages for homeowners bowed by unemployment, and not just focus on restructured loans. Citi, the only big bank disclosing quarterly reports on how it's helping borrowers avoid foreclosure, said it helped 130K homeowners with $20B in mortgages outstanding avoid potential foreclosure in Q3 - up 20% from Q2. Foreclosures initiated in Q3 rose 10% from Q2, but fell 11% from a year earlier. Completed foreclosures fell less than 1% from Q2 and 48% from a year earlier.
• Merck in $3B share buyback. Merck (MRK), which issued $45B in stock to buy Schering-Plough and has a market valuation around $110B, will buy back $3B of that stock as it looks to put cash to work. Earlier this month, CEO Richard Clark said the company is "actively looking" to buy biotechnology companies worth less than $10B, but ruled out any more purchases of Schering's scale.
• In arm-twist, AIG chief wins pay deal. AIG's (AIG) CEO secured a pay package of $7M after threatening to quit over frustration about government meddling in executive pay and other matters. CEO Robert Benmosche will get his already-agreed annual salary of $3M in cash and $4M in fully-vested AIG stock, to be held for at least five years, the company said. As one of the largest recipients of U.S. aid, AIG has to comply with pay regulations imposed on the top 100 executives at companies that have received the biggest loans under TARP.
• Investor confidence declines. Investor sentiment dropped in November, with State Street's index falling 7.6 points to 100.8, just barely above the 100-level, which is neutral. "Across all regions, institutional investors are largely treading water; neither increasing nor reducing their aggregate holdings of risky assets," the asset manager said. "Overall, investors are displaying some caution about the current level of equity valuations, and a desire to see more evidence of real economic activity and aggregate demand, particularly in the US, before adding to equity exposures."
• Microsoft CFO quits. Chris Liddell, the Microsoft (MSFT) CFO who won respect on Wall Street for helping guide the company through a challenging transition period, said he's leaving to look for opportunities in private equity and other areas. He will be replaced by Peter Klein, the 47-year-old chief financial officer of Microsoft's business division. Under his watch, Microsoft says it returned $86B to shareholders through $68.8B in stock buybacks and $17.2B in dividends.
• Rentals reel as kids flock back home. The nation's apartment operators are feeling the bite of unemployment as more adults forsake independence for free rent with their families. The Pew Research Center said in a report released Tuesday that job loss, education and other factors had sent 1 in 10 adults from age 18-35 - prime renters - back to the family nest. The news weighed on the multifamily real estate investment trust sector Tuesday. The apartment vacancy rate is at its highest level in 23 years, with price cuts needed to fill them.
• Starbucks sets sights on China. Starbucks (SBUX) is looking to China as its next big market after the U.S. in the near future, the firm's China chairman said on Wednesday. "This has really become our second home market," Wang Jinlong said, noting profit contributions from the Chinese market more than doubled in 2009. The firm already has almost 700 cafes in China and has said it sees the potential for thousands more.
• LyondellBasell bid competition heats up. Just days after Reliance Industries made a $10-12B bid for bankrupt Dutch-based U.S. petrochemical giant LyondellBasell Industries AF, sources tell Bloomberg News China's biggest oil refiner and U.S. buyout firm TPG are sizing up a possible bid. It was unclear whether Sinopec (SNP) and TPG will go ahead with an offer, and the sale process remains fluid. Analysts say a buyer would gain U.S. chemical assets that use natural gas as a raw material, which is cheaper than the oil-based ingredients mainly used in Europe and Asia. However, in a Reuters article, sources said it was "completely incorrect" that the two companies are contemplating such a move.
• Mortgage applications decline. MBA's weekly measure of mortgage loan application volume decreased 4.5%, led by a 9.5% drop in refinancing. 30-year fixed mortgage rates inched down to 4.82% from 4.83% last week.

Earnings: Before Open

• Deere (DE): FQ4 EPS of $0.23 beats by $0.20. Revenue of $4.73B (-29.8%) vs. $4.44B. Sees sales down 1% in F2010. (PR)
• Tiffany (TIF): Q3 EPS of $0.33 beats by $0.09. Revenue of $598M (-2.9%) vs. $575M. Sees 2010 EPS of $1.88-1.98 vs. $1.77 consensus. (PR)

Earnings: Tue. After Close

• Coldwater Creek (CWTR): FQ3 EPS of -$0.04 misses by $0.01. Revenue of $267M (+17%) vs. $232M. Shares -7.5% AH. (PR)
• J Crew Group (JCG): Q3 EPS of $0.67 beats by $0.09. Revenue of $414M (+14%) vs. $405M. Same-store sales up 8%. Shares +7.5% AH. (PR)
• TiVo (TIVO): Q3 EPS of -$0.06 in-line. Service and technology revenue of $47M (-12%) vs. $50M. Sees Q4 revenue of $43M-45M vs. $46.2M. Shares -0.3% AH. (PR)

Today's Markets

Asia's and Europe's stock markets posted modest gains Wednesday. U.S. futures are higher in light overnight trading.

• Asia: Nikkei +0.4% to 9442. Hang Seng +0.8% to 22612. Shanghai +2.1% to 3290. BSE +0.4% to 17199.
• Europe at midday: FTSE +0.6% to 5355. CAC +0.6% to 3808. DAX +0.5% to 5797.
• Futures: Dow +0.4%. S&P +0.5%. Nasdaq +0.5%. Treasurys are flat. The dollar is sharply lower: Euro +0.8%. Yen 0.8%. Pound +0.9%. Jan. crude +0.4% at $76.30. Dec. gold +1.3% to $1,181.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  8:30 Initial Jobless Claims
  8:30 Durable Goods
  8:30 Personal Income and Outlays
  9:55 Reuters/UofM Consumer Sentiment
  10:00 New Home Sales
  10:30 EIA Petroleum Inventories
  10:30 EIA Natural Gas Inventory
  11:00 KC Fed Manufacturing
  1:00 PM Results of $32B, 7-Year Note Auction
• Notable premarket earnings: DE, TIF

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.

Comments

[jrainspe]

Note to Rupert Murdoch:

Go ahead and take them off, but it won't do you any good as far as I am concerned. I don't read your trash propaganda anyway.

2009 Nov 25 07:50 AM

[sieraromero]

I agree with jrainspe. Everything you publish,Mr. Murdoch is just biased regurgitated trash. You sir, take journalism to a new low!

2009 Nov 25 08:07 AM

[Dr. O]

Odd that the day before Thanksgiving that the US dollar crashes through support overnight. Especially notable are Euro >1.5000 and Yen <88. Gold, as overbought as it is, is screaming over $1180.

The thing that intrigues me is that the amount of gold in the world is really quite small relative to the amount of money or other assets. If gold continues to come back into favor as a store of value, the price could increase many fold from here.

2009 Nov 25 08:22 AM

[bottoms-up]

"U.S. lending in the dumps. The FDIC said in its Q3 report for U.S. banks that bank lending fell by the largest amount since the government began tracking such data,.."

Buuuuut wait! Wasn't this the reason that they pushed TARP through? To help "Main Street" by greasing the wheels of the fat bankers on Wall Street?

Wow! U.S. Taxpayers got a lot of bang for the buck on this one!

Still no transparency of where exactly $$$trillions of dollars went. Maybe at tax time all small businesses should start using this method of "accountability."

2009 Nov 25 08:28 AM

[robert.b.ferguson]

Greetings all and a happy thanks giving to every one. Just more voodoo economics on display. "Beats." on negative numbers. Misses on positive ones. Unemployed consumers are more optimistic while fully employed investors are less so. Employees are in no position to take on more debt and employers are too cautious about more leveraging in a hostile environment. Small businesses won't borrow either because they may be crushed financially by pending legislation. Add the toxic waste hidden by the TBTF banks and the less than savory CRE loans at the regionals and no one is lending even to those who would borrow. Looks like a bleak holiday season to me.

2009 Nov 25 08:48 AM

[Old Trader]

"The FDIC said in its Q3 report for U.S. banks that bank lending fell by the largest amount since the government began tracking such data, suggesting that banks are still anxious"

Why should they take chances, when they can get "free" money and just park it at the Fed, and make the spread? Wasn't a part of the whole bailout thingy to increase bank lending?

2009 Nov 25 08:50 AM

[bottoms-up]

Petrovka: It could break 11,000 very easily since the US$ fell below the Euro 1.5 overnight. It could even do it before the end of the year.

Problem is, you are working with relative value here and very low volumes. Volume has been so low on the upside and high on the downside, that CNBC (hypemasters) no longer report volume - at least on my Blackberry. People are now hip to it...

Then we have:

"...as the economic recovery encourages companies to fire fewer workers."

There've been some models that put the time frame, with strong job creation, to put all those unemployed and coming into the labor market back to work by 2030. No kidding!

2009 Nov 25 09:39 AM

[Old Trader]

spald....completely ot, but were you a Warthog driver?


On Nov 25 09:32 AM spald_fr wrote:

> On Nov 25 08:20 AM xiaomaidion wrote:

2009 Nov 25 10:01 AM

[Dave M.]

WRT the first two posts here. I thank God every day for Fox News because they are the only ones who are reporting on all the sleaze coming out of the Obama administration.

2009 Nov 25 12:16 PM

[bbowen7]

Reporting should probably be divided into Wall Street and Main Street sections. Clearly the administration is cowed by Goldman and friends, and doesn't have a clue about small companies, community banks, and those other folks who tend to be Republicans.

2009 Nov 25 02:19 PM

[spald_fr]

Roger that, OT.

I see my original post responding back to the pulled spam article has also been pulled. Too bad, for I thought the comment regarding outsourcing bank oversight to China had merit.

Signing out for the Thanksgiving Holiday. I'll see you in a few days unless the family drives me to the net (what chance of that happening???).

A very Happy Thanksgiving to you and yours.

2009 Nov 25 06:57 PM

[Old Trader]

LIkewise, spald...*s*.


On Nov 25 06:57 PM spald_fr wrote:

> Roger that, OT.
>
> I see my original post responding back to the pulled spam article
> has also been pulled. Too bad, for I thought the comment regarding
> outsourcing bank oversight to China had merit.
>
> Signing out for the Thanksgiving Holiday. I'll see you in a few days
> unless the family drives me to the net (what chance of that happening???).
>
>
> A very Happy Thanksgiving to you and yours.

2009 Nov 25 07:22 PM