- RIM earnings spark rally. Research In Motion (RIMM) beat Q3 profit forecasts on the back of record Blackberry shipments, trumping smartphone rival Palm (PALM), which reported a loss for its fiscal quarter. RIM said Q3 earnings surged 58% to $1.10/share vs a $1.04 forecast, and said Q4 will be better than market forecasts as well (earnings call transcript). Some have worried about RIM's ability to catch up to Apple's iPhone, which has continued to grab more market share in Q3, according to one research firm.
- BOJ keeps rates steady, warns on deflation. As expected, the Bank of Japan left its policy rate unchanged at 0.1%, but raised the tone of its rhetoric against deflation, saying it won't tolerate on-year falls in consumer prices. "The bank recognizes that it is a critical challenge for Japan's economy to overcome deflation and return to a sustainable growth path with price stability," it said, but didn't clarify what measures it might take if prices fall further.
- Oracle: recovery underway. Business software giant Oracle (ORCL) outshone even its own expectations, saying net income for FQ2 jumped 12% to $1.46B. "We're really seeing a recovery," president Safra Catz said on the earnings call (transcript). The results suggest that corporate IT spending may be on the mend following one of the sector's worst-ever slumps. Revenue rose 4% from the year-ago period, following two consecutive periods of revenue declines amid a greater slowdown in tech spending.
- Google courting Yelp. Sources say Google (GOOG) is in advanced talks to buy Yelp, a review site for local businesses, for $500M or more. Yelp, founded in 2004 by two PayPal veterans, dominates the market for local business listings and ads in big U.S. cities. For $300-1,000/month, business can have their ads appear at the top of search results and on profile pages of their rivals.
- TARP finger pointing. Citigroup (C) is irate with the U.S. Treasury for letting Wells Fargo (WFC) sell shares to back its TARP exit at the same time Citi planned to sell $17B in stock to pay for its own bailout exit, which it believes crimped demand for the sale, sources say. Citi struggled to sell the shares, which forced the Treasury to freeze a separate plan to reduce its 34% stake. Fed regulators are also unhappy with Treasury for pushing them to let banks leave TARP too quickly, sources say. Citi dropped 7.3% on Thursday, to $3.20, and is off 19% this week. Wells rose $0.23, or 0.9% to $26.07.
- U.K. urges banks to replenish while they can. In its twice-yearly Financial Stability Report, the Bank of England warned U.K. banks to shore up their balance sheets and raise money while the going's good, saying banks "remain exposed to any future deterioration in macroeconomic and market conditions, which could substantially raise the cost of funding and capital raising in the future." BOE noted that British banks need to refinance more than £1T ($1.62T) of wholesale debt over the next half decade.
- Recovery firms. The U.S. economic recovery will likely continue into the first half of 2010, as indicated by a better-than-expected rise in the Conference Board's index of leading indicators, which rose for the eighth consecutive month in November, posting a better than expected gain of 0.9% after rising 0.3% in October. Another report showed that in December, manufacturing in the Philadelphia region grew at the fastest pace in more than four years.
- Bernanke keeps his job. The Senate Banking Committee voted 16-7 to let Fed chairman Ben Bernanke keep his job for a second term, despite strong objections from members including the senior Republican of the group, Richard Shelby. The lawmaker said he "strongly" disapproved of the Fed's prior actions and lack of articulation about plans for the future.
- More headaches for banks? Wall Street is under the gun again as Finra rounds up information from Citigroup (C), JPMorgan (JPM), Morgan Stanley (MS) and other securities firms about how they disseminate stock ratings and research, sources say. The probe is an expansion of one already underway at Goldman Sachs (GS), in which Finra is looking at “trading huddles,” where Goldman’s biggest clients have allegedly benefited from trading tips that have differed from the firm's long-term research.
- Paymaster chastised BofA - again. Bank of America (BAC) may have cut its TARP strings, but it still vetted the salary of potential CEO candidate Robert Kelly with U.S. paymaster Kenneth Feinberg, sources say. The CEO of Bank of New York Mellon (BK) had sought some $35-40M, a sum that Kenneth Feinberg said might be regarded as excessive - a key reason the bank late Wednesday settled on internal candidate Brian Moynihan to replace departing CEO Ken Lewis.
- News Corp. to ignite fee war. News Corp. (NWS) will try to spook viewers in a marketing blitz starting Friday, suggesting they could lose out on favorite programs if Time Warner Cable (TWC) doesn't pay up. News Corp. wants TWC to pay cash fees for the rights to carry its broadcast TV when its contract to carry News Corp.'s Fox network and other cable channels ends this month. Time Warner Cable claims media companies are making unfairly high price demands that will lead to higher cable bills for consumers.
- Icahn targets Take-two. Carl Icahn disclosed that he had scooped up an 11.3% stake in Take-Two Interactive Software (TTWO) after the video game publisher said its fiscal Q4 loss widened. The company, which blamed results on a tough retail market and struggled to control costs, reported a loss of $22M, or $0.28 a share vs a year-earlier loss of $15M, or $0.20 a share. Shares rose 3% AH on news of Icahn's stake.
- Zale loses sparkle. Vowing to "pay our bills," Zale (ZLC) said in an SEC filing that sales at stores open at least a year plunged 18.6% in November. Zale, the second largest U.S. jewelry store, turned away tens of million of dollars of inventory at the end of November and is stretching payments, sources say. Shares dove 13% Thursday.
- JAL favors Delta. Delta Air Lines (DAL) has gained the upper hand to become Japan Airlines' overseas partner in a deal that would end American Airlines' (AMR) ties to JAL, sources say. Delta has said that it and other SkyTeam members are ready to offer a total aid package of some $1B and said it may team with a fund to sweeten its proposal.
- Treasury outlines TARP exit. A senior Treasury official said the TARP program has been successful but that Treasury remains a reluctant shareholder in GM and finance firms such as AIG (AIG) and Citigroup (C). Treasury expects AIG to exit its international life-insurance businesses by early 2011, and that it will sell some $26.5B of Citigroup common stock within six to 12 months, a similar timeframe for selling its auto investments. Treasury estimates its AIG and auto investments will result in $60B in losses.
- GM may soon trade again. General Motors could be relisted on the stock exchange by the second half of 2010, a top administration auto adviser said Thursday. GM has been rebuilding cash reserves and has generally recovered more quickly than the administration, which owns 60% of the company, had expected. Ron Bloom, the advisor, told the Treasury that "the industry remains challenged but is in slow recovery."
- Barclays gets Kraft advisor crown. Kraft (KFT) has dubbed Barclays Capital (BCS) as its fifth advisory bank in backing $9.2B of loans to finance the company's hostile bid for Cadbury (CBY). The role could help the investment banking arm of Barclays in its quest to become a top global full-service investment bank following its takeover of the bankrupt Lehman.
- Kindle sales catch fire. The battle for market share among e-book readers intensified after Amazon (AMZN) said Kindle sales for December to-date are its best ever, barely halfway through the month. Amazon also announced it would begin selling Kindle with free expedited shipping, while Barnes & Noble (BKS) struggles to get its new Nook e-book reader into customers' hands.
- Travelport nears $3.2B IPO. In another sign that the IPO market may be reviving, sources say Blackstone (BX) is planning a £2B ($3.2B) IPO of Travelport, the New York-based travel reservation group, on the London Stock Exchange as soon as February. LBO firms are seizing on the 62% rebound in the S&P 500 this year.
- FedEx feeling merrier. FedEx (FDX) said Monday's holiday shipping - its busiest day for mailing holiday goods - shot up 17% from the peak day last year, higher than expected. In a conference call Thursday (transcript), CEO Fred Smith called a turning point, saying "global economic conditions are improving" despite a 30% drop in profits as the company crawls out of the worst downturn in its history. Still, FedEx said it expects FQ3 profits to disappoint, falling between $0.50 and $0.70/share vs. expectations for $0.84. Shares fell more than 6% Thursday.
Earnings: Fri. Before Open
- Carmax (KMX): Q3 EPS of $0.24 beats by $0.08. Revenue of $1.73B (+18.5%) vs. $1.66B. Shares +4% premarket. (PR)
Earnings: Thur. After Close
- Accenture (ACN): Q1 EPS of $0.67 beats by $0.02. Revenue of $5.4B (-11%) in-line. Sees Q2 revenue of $5.1B-5.3B vs. $5.43B. Shares -2.8% AH. (PR)
- Darden Restaurants (DRI): FQ2 EPS of $0.43 beats by $0.01. Revenue of $1.64B (-2%) vs. $1.65B. Blended same-store sales down 4.7%; excluding Thanksgiving week (in fiscal Q3 last year) down 3.9%. Excluding that holiday shift, same-store sales -0.7% at Olive Garden; -7.6% at Red Lobster; -5% at LongHorn Steakhouse. Shares -2.9% AH. (PR)
- Nike (NKE): FQ2 EPS of $0.76 beats by $0.05. Revenue of $4.4B (-4%) in-line. Gross margins 44.5% vs. prior-year 44.7%. Worldwide futures orders of $7B up 4% from prior year; North American futures orders down 4%. Finished FQ2 having purchased $2.9B in shares under a $3B repurchase program; when it wraps, the company will start on a four-year $5B repurchase program authorized last year. Shares +2.1% AH. (PR)
- Oracle (ORCL): FQ2 EPS of $0.39 beats by $0.03. Revenue of $5.9B (+3%) vs. $5.7B. "Substantially better than we expected on both the top and bottom line, growing non-GAAP operating margins by 280 basis points to 49%, the highest Q2 non-GAAP operating margin in our history." Shares +3.2% AH. (PR)
- Palm (PALM): FQ2 EPS of -$0.37 misses by $0.05. Revenue of $302M vs. $266M. Shares -6.5% AH. (PR)
- Research In Motion (RIMM): Q3 EPS of $1.10 beats by $0.06. Revenue of $3.9B (+41%) vs. $3.8B. Shipped 10.1M devices in Q3. Gross margin was 42.7%, vs. prior-quarter 44.1%. Shares +11.5% AH. (PR)
- Take-Two Interactive Software (TTWO): FQ4 EPS of $0.09 in-line. Revenue of $343M (+6%) vs. $340M. Shares +7.3% AH. (PR)
Asia stocks were sharply lower Friday. Europe markets opened flat but have climbed higher, and U.S. futures are up modestly ahead of this year's final Friday session.
- Asia: Nikkei -0.2% to 10142. Hang Seng -0.8% to 21176. Shanghai -2% to 3114. BSE -1% to 16720.
- Europe at midday: FTSE +0.6% to 5250. CAC +0.1% to 3836. DAX +0.6% to 5877.
- Futures: Dow +0.3% to 10306. S&P +0.4% to 1098.50. Nasdaq +0.3%.
Feb. crude +1.6% to $75.30. Gold +0.3% to $1,111.
30-year Tsy +0.11% to 119-02. Euro +0.2% vs. dollar. Yen flat. Pound +0.3%.
Friday's Economic Calendar
- Quadruple Witching
12:05 BoJ Rate Decision
10:00 Regional and State Employment
- Notable pre-market earnings: CCL, KMX
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