- TARP watchdog to probe NY Fed over AIG. According to prepared testimony, TARP Special Inspector Neil Barofsky launched two new investigations into the New York Federal Reserve's actions during AIG's (NYSE:AIG) bailout. Barofsky will look at whether there was any misconduct related to the public disclosure of the $62.1B paid to counterparties, and will also investigate the NY Fed's level of cooperation with a previous audit of the counterparty payments. In a further development, Geithner, who was head of the NY Fed at the time of AIG's bailout, has said counterparties weren't a consideration in structuring AIG's rescue. However, emails have subsequently shown that counterparties were indeed discussed, and buying out banks' AIG contracts was deemed better "from a financial-stability perspective" than other AIG rescue options being considered.
- AIG holds onto ILFC unit. AIG (AIG) has decided not to sell its aircraft-leasing unit, International Lease Finance Corp., after concluding the potential profit wouldn't justify the sale of such a key asset. AIG will now have to continue funding the unit's large balance sheet either through cash or new debt-financing while it also works to repay billions of dollars in federal bailout funds. It's unclear whether AIG's decision is connected to reports that Steven Udvar-Hazy, a founder and CEO of ILFC, is planning on leaving the company this week.
- Merger approved for Live Nation, Ticketmaster. The Justice Department approved the merger of Live Nation (NYSE:LYV) and Ticketmaster (TKTM), on the condition that Ticketmaster sells its Paciolan unit to a unit of Comcast (NASDAQ:CMCSA), that the combined company licenses its primary ticketing software and that it doesn't retaliate against venues that use another provider. The new Live Nation Entertainment will own more than 140 concert venues across the world, and will sell roughly 140M tickets per year to 22,000 concerts. The news sent shares climbing yesterday, with LYV closing up 14.7% and TKTM +15.8%.
- U.K. exits recession. The U.K. emerged from recession, barely, reporting GDP growth (.pdf) of 0.1% in Q4 2009 vs. the previous quarter. However, the growth rate was far less than the +0.4% expected and has raised concerns that the economy could fall back into contraction.
- Japan outlook turns negative. Earlier this morning, S&P revised its outlook on Japan to "negative" from "stable," potentially putting at risk Japan's AA long-term rating. The ratings firm cited concerns over "the Japanese government's diminishing economic policy flexibility" and over growing "fiscal and deflationary pressures." Japan's government debt is already among the highest for rated sovereigns, and S&P thinks the debt burden will continue to rise, peaking at 115% of GDP over the next few years. Moody’s and Fitch Ratings kept their grades unchanged today, calling Japan's debt burden 'relatively moderate' and expressing confidence that "the market will finance this without putting big upward pressure on yields."
- Deal will create massive printer firm. Privately held Quad/Graphics Inc. is expected to buy Canadian rival World Color Press for $1.3-1.4B, creating the second-largest commercial printer in North America and posing a threat to industry giant R.R. Donnelley & Sons (NASDAQ:RRD). Sources said the firms hope to close the deal this summer, and estimate combined 2010 earnings would be around $875M.
- Fed mulls new benchmark rate. Federal Reserve officials begin a two-day FOMC meeting today, and one of the items on the agenda is whether to adopt a new benchmark interest rate to replace the one that's been used for the last two decades. Instead of the federal funds rate, officials may choose to use the interest paid on excess bank reserves.
- Porsche sued by VW short sellers. Porsche is being sued by short sellers of Volkswagen (OTCPK:VLKAY) stock. The group of short sellers claim that Porsche misled investors by denying it planned to acquire Volkswagen and by using manipulative trades to hide its stock positions, and then sent the stock rocketing as short sellers tried to cover their positions. The plaintiffs are seeking to recover more than $1B in damages.
- White House aims for stimulus, and reduced spending. Gearing up for the State of the Union address tomorrow, the White House released details on a series of initiatives meant to help middle-class families, including a set of tax credits and an automated-IRA system for workplaces. Obama also proposed a three-year freeze on domestic spending accounting for one-sixth of the federal budget. The freeze would save $250B by 2020. In addition, Democratic lawmakers are considering an $80B jobs-stimulus package that would provide tax credits to small and medium-sized businesses that hire workers.
- Apple's healthy earnings beat. Apple (NASDAQ:AAPL) posted better-than-expected quarterly results (see details below), buoyed by strong sales across most of its product lines. However, Apple's results were also helped by new accounting rules allowing the firm to recognize all the revenue for iPhone sales at the time the devices are sold, rather than having to defer that revenue over 24 months. (Read Apple's earnings call transcript)
- GM's Whitacre chooses himself for CEO. Edward Whitacre, chairman and interim CEO of General Motors, said he will assume the position of permanent chief executive. Whitacre said staying on as CEO hadn't been his original intention but that the firm needs stability and he felt increasingly comfortable in the job. Separately, GM acknowledged it held advanced talks with Spyker Cars, but said it's still moving forward with plans to wind down its Saab unit.
- China raises select reserve ratios. Asian markets traded heavily down (see details below) following reports that China moved forward today with a planned increase in required reserves for some of its banks. Some banks were also told to suspend new lending for the rest of the month. In another move that surprised markets, the central bank left yields unchanged in its closely watched one-year bill sale, though analysts think this is just a pause in tightening policy and not a reversal.
- More cyber-attacks. A Chinese human-rights group said it and four other advocacy and news organizations were targeted in cyber-attacks over the weekend. The group said that the hackers were "of unknown origin" but hinted the Chinese government might be to blame.
- Goldman caps U.K. pay. Goldman Sachs (NYSE:GS) is capping compensation at £1M ($1.6M) for the company's partners in London, in response to the one-time 50% bonus tax announced by U.K. Prime Minister Gordon Brown last month. Most other firms subject to the tax are spreading the penalty out across a wider swathe of employees, sometimes across their entire workforces.
- Home sales drop. Existing Home Sales fell 16.7% to 5.45M in December, vs. expectations of 5.78M. The supply of homes rose to 7.2 months. NAR chief economist Lawrence Yun said there were no surprises in the data, but noted that although "sales are on track to rise again in 2010," the labor market "remains a concern and could dampen the housing recovery – job creation is key to a continued recovery in the second half of the year.”
Earnings: Tuesday Before Open
- Baker Hughes (NYSE:BHI): Q4 EPS of $0.43 beats by $0.08. Revenue of $2.4B (-24%) vs. $2.3B. (PR)
- Corning (NYSE:GLW): Q4 EPS of $0.44 beats by $0.02. Revenue of $1.5B (+41%) vs. $1.4B. (PR)
- DuPont (NYSE:DD): Q4 EPS of $0.44 beats by $0.03. Revenue of $6.4B (+10%) vs. $6.1B. (PR)
- MGIC Investment (NYSE:MTG): Q4 EPS of -$2.25 beats by $1.1. Revenue of $406M (-2%) vs. $394M. (PR)
- Regions Financial (NYSE:RF): Q4 EPS of -$0.51 misses by $0.17. (PR)
- Tellabs (NASDAQ:TLAB): Q4 EPS of $0.09 beats by $0.02. Revenue of $389M (-5%) in-line. (PR)
- Travellers (NYSE:TRV): Q4 EPS of $2.12 beats by $0.63. Revenue of $6.4B (+11%) vs. $5.2B. (PR)
- Weatherford International (NYSE:WFT): Q4 EPS of $0.02 misses by $0.09. Revenue of $2.4B (-8%) vs. $2.3B. (PR)
Earnings: Monday After Close
- Amgen (NASDAQ:AMGN): Q4 EPS of $1.05 misses by $0.08. Revenue of $3.8B (+2%) vs. $3.85B. Expects fiscal 2010 capex of about $600M. (PR)
- Apple (AAPL): FQ1 EPS of $3.67 beats by $1.60. The company elected to adopt required accounting standards changes related to revenue recognition, retrospectively. Revenue of $15.7B (+32%) vs. $12B. Sees Q2 EPS of $2.06-2.18 vs. $1.77, on sales of $11B-11.4B vs. $10.4B. Gross margin of 40.9% vs. year-ago 37.9%. Sold 3.36M Macintosh computers, up 33% from year ago. Sold 8.7M iPhones, up 100% from year prior. Sold 21M iPods, an 8% decline. (10-Q, PR)
- Atheros Communications (NASDAQ:ATHR): Q4 EPS of $0.62 beats by $0.09. Revenue of $186M (+89%) vs. $175M. (PR)
- Olin (NYSE:OLN): Q4 EPS of $0.28 may not be comparable to estimates of -$0.05. Net income of $21.8M incorporates $37M of pretax recoveries of environmental costs expensed in prior periods and $1.2M pretax gain from sale of a manufacturing facility. Revenue of $351M (-19%) vs. $330M. (PR)
- Packaging Corp. of America (NYSE:PKG): Q4 EPS of $0.16 beats by $0.03. Revenue of $532M (-3%) vs. $510M. Sees Q1 EPS of $0.12 vs. $0.17. (PR)
- SL Green Realty (NYSE:SLG): Q4 FFO of $0.87 misses by $0.01. Revenue of $247M (-8%) vs. $239M. (PR)
- Texas Instruments (NYSE:TXN): Q4 EPS of $0.52 beats by $0.03. Revenue of $3B (+21%) in-line. Expects Q1 EPS of $0.44-0.52 vs. $0.43, on revenues of $2.95B-3.19B vs. $2.83B. (PR)
- VMware (NYSE:VMW): Q4 EPS of $0.31 beats by $0.05. Revenue of $608M (+18%) vs. $554M. Sees Q1 revenue of $580M-600M vs. $530M. (PR)
- Zions Bancorp (NASDAQ:ZION): Q4 EPS of -$1.26 beats by $0.38. Net interest income of $457M (-10%). Net loan charge-offs of $292.1M vs. $381.3M in Q3. (PR)
- In Asia, Nikkei -1.8% to 10,325. Hang Seng -2.4% to 20,109. Shanghai -2.4% to 3,019. BSE closed.
- In Europe at midday, London -0.5%. Paris -0.6%. Frankfurt -0.4%.
- Futures: Dow -0.4%. S&P -0.55%. Nasdaq -0.2%. Crude -1% to $74.49. Gold flat at $1,095.20.
Tuesday's Economic Calendar
FOMC Meeting, Day 1
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 FHFA Housing Price Index
10:00 State Street Investor Confidence Index
10:00 Richmond Fed Mfg.
5:00 PM ABC Consumer Confidence Index
- Notable earnings before Tuesday's open: ABC, BHI, CVG, CBE, GLW, DAL, DD, EMC, FPL, JNJ, MHP, MTG, NVS, NUE, BTU, RF, SHW, TLAB, TRV, X, VZ, WFT
- Notable earnings after Tuesday's close: ALTR, BXP, CNI, ELY, GILD, IDTI, MCK, MOLX, PTV, QLGC, RFMD, STLD, STM, SYK, TSFG, YHOO
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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