JPMorgan admits material misrepresentations in $13B settlement. As expected, JPMorgan (JPM) has reached a $13B deal that settles civil charges with the Department of Justice, and a handful of states and government agencies. The agreement holds The Bank of Dimon accountable for fraud in the mortgage-bond market, with the firm admitting to making material misrepresentations, although it didn't explicitly admit wrongdoing. The deal doesn't cover the criminal investigations into JPMorgan's conduct, nor private lawsuits.
Bernanke: Tapering depends on further improvement in jobs data. The Fed's scaling back of its bond-buying program still depends on the jobs market improving further and a rise in inflation towards the central bank's goal of 2%, Ben Bernanke said in a speech last night. Bernanke also said that the Fed is likely to keep interest rates near zero until "perhaps well after" unemployment drops below 6.5%, the bank's threshold for increasing rates, as policy makers want to be assured of the strength of the job market.
Top Stock News
J&J confirms $2.47B settlement over hip implants. Johnson & Johnson (JNJ) will pay at least $2.47B in total to around 8,000 patients who said they were injured by some of the company’s artificial hips. However, the deal doesn't stop patients whose devices fail in the future from seeking compensation, which could significantly increase the final bill. There are also some U.S. lawsuits that will remain even if the settlement receives the necessary 94% approval from eligible claimants.
Lowe's net profit surges 26%. Lowe's (LOW) FQ3 net profit jumped 26% to $499M, although EPS of $0.47 missed consensus by $0.01 despite revenues climbing 7.3% to $13B and topping forecasts by $280M. Lowe's attributed its performance to a "strengthening home improvement market," which is set for more growth in Q4 and "further acceleration in 2014."
Yahoo boosts buyback by $5B. Yahoo (YHOO) has added $5B to its share buyback program, having repurchased $5.3B of stock since January 2012. The Internet portal is also offering a private placement of $1B in convertible senior notes, due in 2018. Shares were +3.15% premarket.
Apollo to sell CKE Restaurants. Apollo Global (APO) has agreed to sell CKE Restaurants to fellow private-equity firm Roark Capital in a deal that reportedly values CKE at $1.65-1.75B. The company, which is the parent of the Hardees and Carl's Jr. fast-food chains, has 3,400-owned or franchised locations across 42 U.S. states and 25 countries.
Top Economic & Other News
Inflation seen easing. U.S. inflation data for October is scheduled to be released this morning, with economists expecting that CPI was flat on month after rising 0.2% in September. On year, inflation is seen slowing to 1% from 1.2%. The data will be followed later in the day by the minutes of the latest FOMC meeting, which will no doubt be scrutinized for any hints as to when the Fed might finally start scaling back QE. Given Ben Bernanke's comments yesterday, the taper might be a few months away yet.
Japanese export growth accelerates. Japanese exports rose at their fastest pace in three years in October, jumping 18.6% on year vs 11.5% in September and beating consensus. Exports also grew 4.4% in volume terms, suggesting that Japan is not just relying on the weak yen to boost trade. Imports jumped 26.1% - again driven higher by soaring fuel costs - helping the trade deficit rise to ¥1.09T ($11B) from ¥932.1B a month earlier.
BOE again united in keeping policy on hold. As expected, the Bank of England's Monetary Policy Committee voted unanimously to keep interest rates at 0.5% and against more quantitative easing at a meeting earlier this month. "There were uncertainties over the durability of the recovery," the MPC said. Given that inflation is under control, "there could be a case for not raising the bank rate immediately when the 7% unemployment threshold is reached."
Bankrupt Jefferson County raises $1.8B in debt. Jefferson County in Alabama has become the first municipality to successfully tap the bond markets while still in bankruptcy protection, selling $1.8B in sewer warrants. However, Jefferson will reportedly have to pay up to 6.85% in interest on the debt, which has a maturity as long as 40 years. The county is due to go to court today to seek authorization to exit Chapter 9 by the year-end.
Experts recommend closing Obamacare site due to security fears. The HealthCare.gov Web site should be shut down as it is full of security flaws that could expose the user data of millions of people, IT experts warned a Congressional hearing yesterday. The experts also said the site should be completely rebuilt so that it would run better, as well as making it easier to protect.
World powers, Iran meeting again over nuclear program. Iran and the P5+1 world powers are due to meet again from today until Friday in an attempt to thrash out a deal in which the Persian nation would scale back its nuclear program in return for an easing of international sanctions. While an interim deal was close last time the sides met earlier this month, President Obama has lowered expectations about the chances of an agreement this week.
Alpha-Rich Stock Movers and Great Calls
1) On Thursday, Yuanxi Zhang noted that shares of MTR Gaming (MNTG) were only pricing in the lowest of three competing buyout offers. On Tuesday, Eldorado Gaming raised its offer; shares are +8.2% in the five days since Zhang's call. Read article »
2) On June 21, Volte-Face Investments argued that Coastal Energy Company (OTCPK:CENJF) was trading at a steep discount to intrinsic value and net asset value. On Tuesday, Coastal agreed to be acquired by Spain's Cepsa; shares are +41.3% to date. Read article »
Alpha-Rich Stocks To Watch
1) The GeoTeam says the involvement of activist investor Baker Street Capital in the takeover drama surrounding USA Truck should lead to a sale - at a higher price. Read article »
2) Points International's (PCOM) stock price belies its impressive cash flow and growth, leaving shares 40% undervalued, according to Bishop Research and Analytics. Read article »
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In Asia, Japan -0.3% to 15076. Hong Kong +0.2% to 23701. China +0.6% to 2207. India -1.2% to 20635.
In Europe, at midday, London -0.5%. Paris -0.3%. Frankfurt -0.3%.
Futures at 6:20: Dow -0.1%. S&P -0.15%. Nasdaq -0.1%. Crude +0.1% to $93.45. Gold -0.2% to $1270.80.
Ten-year Treasury Yield +2 bps to 2.73%.
Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
8:30 Retail Sales
10:00 Business Inventories
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
12:10 PM Fed's Bullard: U.S. Economic and Monetary Policy
2:00 PM FOMC minutes
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