- Toyota halts U.S. sales. In an unprecedented move, Toyota (TM) has halted U.S. production and sales of eight models, including its top-selling Camry and Corolla models, on mounting concerns that defects might cause the cars to accelerate unintentionally. The eight models represented 57% of Toyota's 2009 sales. A Toyota spokesman didn't specify how long the sales suspension will last, but the move will no doubt be costly both in terms of lost revenue and damage to a once-strong reputation for safety.
- Geithner defends position on AIG. Geithner testifies today before a congressional oversight panel investigating AIG's (AIG) counterparty payments. In prepared testimony, Geithner denied any role in disclosures about the payments. He also defended the decision to pay full price on AIG's credit default swaps, saying protracted demands for concessions could have triggered devastating credit downgrades, causing an AIG collapse with 'catastrophic' consequences for the economy.
- Burgeoning budget. The deficit will come in at $1.35T in 2010, according to a report by the Congressional Budget Office, a slight drop from the $1.4T deficit in 2009 but still high enough to make the budget outlook 'bleak.' Economic growth will remain 'muted' for several years and unemployment won't return to 5% until the middle of the decade. The aggregate deficit projection for the next decade is $6T, but the CBO is likely underestimating the deficit problem because of its assumption that annual spending won't outpace inflation.
- FOMC to decide on mortgage-debt purchases. The FOMC will release its statement today at 2:15 PM, and will likely acknowledge that while growth accelerated last quarter, tight credit and elevated unemployment still pose risks to the country's economic recovery. Officials are expected to keep interest rates low for "an extended period." One issue to keep an eye on is whether the Federal Reserve will stick to its plan of ending its $1.25T mortgage-debt purchase program in March; regional Fed presidents have expressed varying opinions as to whether the housing market can rebound without this extra federal support.
- Spyker saves Saab. General Motors sold its Saab unit to Spyker Cars for $400M in cash and stock, ending months of uncertainty about the Swedish brand's fate. The Swedish government will guarantee loans from the European Investment Bank which are crucial for completion of the deal.
- Berkshire joins S&P 500. Berkshire Hathaway (BRK.A, BRK.B) will be added to the S&P 500 index, replacing Burlington Northern (BNI), the railroad operator it's acquiring. In after hours trading yesterday, BRK.A +8.8% and BRK.B +7.4%. Separately, Munich Re disclosed that Berkshire's holding in the reinsurance giant had reached 3.045%, a stake valued at around $1B.
- Liberty Media wants bigger Live Nation stake. Following merger approval for Live Nation (LYV) and Ticketmaster (TKTM), Liberty Media (LCAPA) offered to buy up to 34.5M shares in the new Live Nation Entertainment at a 14% premium. If the tender offer is fully subscribed, Liberty will end up with a 34.9% stake in the company. The offer sent Live Nation up 15.6% in after hours trading.
- Nestle-Hershey tie-up? Now that the Cadbury (CBY) - Kraft (KFT) deal is moving forward, all eyes turn to Nestle (OTCPK:NSRGY), the world's largest food group which will drop to No. 3 in the chocolate market behind Mars-Wrigley and Kraft-Cadbury. Many analysts expect Nestle to set a long-term goal to buy Hershey (HSY), which would put Nestle back in the No. 1 spot. It would also benefit Hershey, which is facing increased U.S. competition and exposure to commodity price fluctuations.
- China tries to quell fears. China said it would not try to curb Google's (GOOG) Android platform in the Chinese market, despite the ongoing showdown between Google and China over internet censorship and cyber-attacks. China also played up a comment by Bill Gates (MSFT) who called the country's internet censorship 'very limited.' The moves are meant to calm the fears of many U.S. firms concerned over 'alarming' measures against foreign high-tech firms in China.
- Greece puts hopes on China. Debt-laden Greece has turned to China to buy up to €25B ($35B) of bonds, reported the Financial Times, and has rejected the suggestion that a Chinese bank acquire a strategic stake in National Bank of Greece, the country's flagship commercial lender. Greek officials deny the report.
- Clawback clauses get new claws. Amid the bonus backlash, many banks are tightening their clawback rules. Previously, the rules were applied only to top executives or in cases of fraud. However, last week JPMorgan (JPM) expanded the provision to cover any employee who receives stock as compensation, and to cases not just of fraud but of excessive risk-taking, or even failure to report excessive risk-taking. Bank of America (BAC) will now claw back pay if profit projections fall short, and Goldman Sachs (GS) will do so in cases of excessive risk. Compensation experts say this is a step in the right direction, but worry the rules will be less effective than the banks make them seem.
- Oracle sees a new future. With its acquisition of Sun Microsystems nearly complete, Oracle (ORCL) is preparing for a significant mission shift. CEO Larry Ellison said he plans to turn Oracle into a company that's as serious about server systems as it is about business software. To that end, Oracle will hire 2,000 new sales and engineering employees, and will work on developing a line of high-end computer systems.
- Yahoo turns to profit. Yahoo (YHOO) posted better-than-expected earnings yesterday, swinging to a Q4 profit of $153M from a loss of $303M the year before. There were further signs of stabilization in advertising, and CFO Timothy Morse said product enhancements like better ad-matching technologies were helping to grow revenue. (Read Yahoo's earnings call transcript)
- Quad's colorful deal. As expected, privately held Quad/Graphics Inc. announced its plans to acquire World Color Press in an almost all-stock deal. The companies said they had not yet placed an exact value on the deal, though sources estimate it's worth $1.3-1.4B.
- Mortgage apps fall. Mortgage applications fell 10.9% vs. +9.1% last week, reported the Mortgage Bankers Association this morning. Thirty-year fixed mortgage rate rose to 5.02% from 5%.
- Seasonal sway for retail sales. ICSC retail store sales were down 2.5% from the previous week, vs. +2% prior. Sales were up 1.9% from the previous year, vs. 2.6% prior. The decline was attributed to seasonal fluctuations which magnified the effects of weather and inventory. Redbook reported a 1% Y/Y rise in chain store sales, vs. +0.9% last week. Redbook stressed that sales this time of year are thin, which accounted for the relatively soft reading.
- Mixed messages on home prices. The S&P Case-Shiller Home Price Index was down 0.2% M/M in November vs. 0% prior. On a yearly basis, prices were down 5.3%, in-line with consensus and vs. -7.3% prior. November's index marked approximately ten months of improvement in the annual data, although many markets experienced price declines that month. According to the FHFA Housing Price Index (.pdf), prices rose 0.7% M/M in November, vs. +0.6% in October. Year-on-year, prices rose 0.5%.
- Mild improvement in confidence levels. Several confidence indicators were released yesterday. The Conference Board's Consumer Confidence Index registered a small gain in January, coming in at 55.9 vs. 54 expected and 53.6 in December. Although "consumers were less dire about their income prospects than in December, the number of pessimists continues to outnumber the optimists." According to ABC's Consumer Comfort Index, confidence held steady for the third week in a row at -48, hovering a bit above an all-time low of -54. State Street's Investor Confidence Index showed a slight improvement, coming in at 104.5 in January vs. 104.3 the month before. North America was more confident than Europe, reflecting ongoing concerns about fiscal difficulties in some European countries.
Earnings: Wednesday Before Open
- Praxair (PX): Q4 EPS of $1.09 in-line. Revenue of $2.4B (+0.2%) in-line. (PR)
- Rockwell Automation (ROK): FQ1 EPS of $0.54 beats by $0.18. Revenue of $1.1B (-10%) vs. $1B. (PR)
- SAP AG (SAP): Q4 EPS of $0.67 beats by $0.01. Revenue of $3.1B (-9%) in-line. Shares +0.8% premarket (7:00 ET). (PR)
- Smith International (SII): Q4 EPS of $0.09 in-line. Revenue of $2B (-35%) vs. $1.9B. (PR)
- Tyco Electronics (TEL): FQ1 EPS of $0.47 beats by $0.08. Revenue of $2.9B (+7%) vs. $2.8B. (PR)
- WellPoint Health Networks (WLP): Q4 EPS of $1.16 beats by $0.14. Revenue of $15.1B (-2%) in-line. (PR)
Earnings: Tuesday After Close
- Altera (ALTR): Q4 EPS of $0.34 beats by $0.05. Revenue of $365M (+16%) vs. $335M. Sees Q1 revenue up 5-10% from Q4. Expects Q1 gross margins of 67.5-68.5%. (PR)
- Boston Properties (BXP): Q4 FFO of $1.04 misses by $0.02. Revenue of $378M (-3%) vs. $359M. Sees fiscal 2010 FFO of $4.10-4.25 vs. $4.10. (PR)
- Callaway Golf Company (ELY): Q4 EPS of -$0.27 beats by $0.01. Revenue of $186M (+9%) vs. $171.5M. Sees fiscal 2010 revenue of $990M-1.05B vs. $980M. (PR)
- Canadian National Railway Company (CNI): Q4 EPS of C$1.23 beats by C$0.30. Revenue of C$1.9B (-14%) in-line. (PR)
- Gilead Sciences (GILD): Q4 EPS of $0.93 beats by $0.08. Revenue of $2B (+42%) vs. $1.9B. (PR)
- Integrated Device Technology (IDTI): FQ3 EPS of $0.10 beats by $0.01. Revenue of $142.5M (-15%) vs. $140.5M. (PR)
- McKesson (MCK): FQ3 EPS of $1.19 in-line. Revenue of $28.3B (+4%) vs. $27.7B. Sees full-year EPS of $4.55-4.70 vs. $4.55. (PR)
- Molex (MOLX): FQ2 EPS of $0.24 beats by $0.02. Revenue of $730M (+9%) vs. $709M. Sees Q3 revenues of $715M-735M vs. $691M. (PR)
- Pactiv (PTV): Q4 EPS of $0.53 beats by $0.03. Revenue of $854M (-3%) vs. $849M. Sees Q1 EPS of $0.38-0.42 vs. $0.51. Expects fiscal 2010 sales growth of 7-9%. (PR)
- QLogic (QLGC): FQ3 EPS of $0.31 beats by $0.02. Revenue of $149M (-9%) vs. $147M. (PR)
- RF Micro Devices (RFMD): FQ3 EPS of $0.14 beats by $0.02. Revenue of $250M (+24%) vs. $252M. Sees full-year non-GAAP margins approaching 15%. (PR)
- STMicroelectronics (STM): Q4 EPS of $0.04 beats by $0.02. Revenue of $2.6B (+14%) in-line. Sees Q1 revenue down 7-13% from Q4, but up 35-45% Y/Y. (PR)
- Stryker (SYK): Q4 EPS of $0.82 in-line. Revenue of $1.8B (+7%) in-line. Sees fiscal 2010 revenues up 1.5-2%. (PR)
- The South Financial Group (TSFG): Q4 EPS of -$0.90 misses by $0.43. Net interest income of $81M (-12%). (PR)
- Yahoo (YHOO): Q4 EPS of $0.15 beats by $0.04. Revenue of $1.7B (-4%) vs. $1.2B. Revenue ex-traffic acquisition costs: $1.26B vs. $1.23B. Sees Q1 sales of $1.58B-1.68B vs. $1.16B. Sees Q1 income from operations of $90M-110M. Owned & operated display ad revenue up 26%; O&O search ad revenue up 4%. Free cash flow $220M (flat Y/Y). CEO Bartz: "We're pleased that the midpoint of our Q1 revenue outlook marks the first quarter of year-over-year growth in six quarters." (PR)
- In Asia, Nikkei -0.7% to 10,252. Hang Seng -0.4% to 20,033. Shanghai -1.1% to 2,987. BSE -2.9% to 16,290.
- In Europe at midday, London -0.5%. Paris -0.6%. Frankfurt -0.1%.
- Futures: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude flat at $74.69. Gold -0.6% to $1,091.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
10:00 New Home Sales
10:00 Hearing: AIG Counterparty Payments
10:30 EIA Petroleum Inventories
1:00 PM 5-Yr Note Auction
2:15 PM FOMC Announcement
9:00 PM Obama: State of the Union
- Notable earnings before Wednesday's open: ABT, AAI, ATI, BA, CAT, COP, GD, HES, ITW, MNI, MWV, NYB, PX, ROK, SAP, SEIC, SII, SO, STJ, SWK, TEL, UAUA, UTX, VLO, WLP
- Notable earnings after Wednesday's close: ACF, AF, AMLN, BMC, CCI, CTXS, DRE, ETFC, EWBC, FLEX, FTNT, GMCR, ISIL, JAVA, LRCX, LSI, MUR, NE, NFLX, NSC, OI, QCOM, RYL, SYMC, TER
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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