- Toyota faces safety probe, penalties. U.S. safety officials are reviewing Toyota's (TM) electronic throttle systems as a possible cause of unintended vehicle acceleration, and are considering civil penalties against the company for the way it handled the recall of millions of cars. Toyota has already ruled out the electronics system, and its reputation would take a further hit if proved wrong. In Japan, officials have asked Toyota to investigate several complaints regarding problematic brakes on new Prius models. Unsurprisingly, the recalls and continued complaints have taken a toll on sales (see details below). Shares -2.1% premarket (7:00 ET).
- Moody's warns of U.S. ratings pressure. Moody's released a statement yesterday that unless the U.S. works to lower its budget deficit or the economy grows more than expected, the government's triple-A bond rating will eventually come under pressure. Moody's called the $3.8T budget proposal a small step in the right direction, but "the deficits projected in the budget do not stabilize debt levels in relation to GDP, and the portion of government expenditures going to pay interest on the debt shows a steady rise."
- Madoff suit dismissed, victims fight each other. A federal judge dismissed the SEC's civil fraud complaints against Cohmad Securities, a small brokerage firm the SEC claimed had "knowingly or recklessly" participated in Madoff's Ponzi scheme, as "speculative and flimsy." In a separate case, some victims of Madoff's scheme are contesting how trustee Irving Picard is calculating losses. Victims who withdrew all their initial investments before the scheme collapsed will receive no money unless the courts force Picard to redefine losses, and victims who only partially withdrew their funds are fighting to keep it that way so that they don't have to share the recovered money with as many individuals. In the U.K., regulators said they won't bring charges against Madoff's U.K. unit or its directors because there is "insufficient evidence" to “provide a realistic prospect of conviction.”
- PNC says bye to TARP. PNC Financial (PNC) said late yesterday that it will repay its $7.6B of TARP funds. PNC will use $2.3B from the sale of its Global Investment Servicing to Bank of New York Mellon (BK), will offer $3B in common shares and will offer $1.5B-2B in senior notes, depending on market conditions. PNC -1.6% premarket (7:00 ET).
- Mixed support for the Volcker rule. After Paul Volcker testified in Congress on the need to curb banks' high-risk activities, Senate Banking Chairman Chris Dodd said he strongly supports Obama's proposals but criticized the White House for complicating financial reform efforts with the late addition of the 'Volcker rule.' Ranking Republican member Richard Shelby said at the hearing that he's willing to consider the rule, but changed his mind afterwards, and lambasted the White House for air-dropping its proposal unannounced into reform discussions. Other lawmakers said the rule appears either politically motivated or unnecessary.
- MetLife confirms Alico talks. In its quarterly earnings report, MetLife (MET) confirmed it's in talks with AIG (AIG) to buy the insurer's Alico unit. Under the terms being discussed, MetLife would reportedly pay $14B-15B and AIG has said around $9B of the proceeds would be used to repay federal bailout funds. Though sources say talks are going well, past negotiations between the two firms have fallen apart over pricing disputes.
- Kraft gets Cadbury at last. Kraft (KFT) finally won control of Cadbury (CBY) yesterday, as 72% of Cadbury shareholders accepted the £11.7B ($18.6B) takeover offer. Following the approval, S&P cut its rating on Kraft two notches to BBB, the second lowest investment grade, but gave the company a positive outlook and said it may revise the ratings upward if Kraft successfully integrates Cadbury and improves its credit profile. Moody's said it was no longer reviewing Kraft for a downgrade since the company is likely to restore in the next two years any damage to its credit profile from the acquisition.
- Auto sales gain strength. U.S. auto companies saw sales rebound in January from the previous year, with the notable exception of Toyota (TM). Overall, sales increased 6% from Jan. 2009. Here's the breakdown: Chrysler: -8% to 57,143 vehicles. GM: +14% to 146,825 vehicles, vs. expectations of +16%. Expecting a sustained recovery this year, boosts 2010 sales outlook to 12M vehicles, from 11.5M. Honda (HMC): -5% to 67,479 vehicles. Total car sales +2.7% to 41,638. Truck sales -15.3% to 25,841. Toyota (TM): -8.7% to 98,796 vehicles. Total vehicles -16% on an unadjusted basis. Nissan (NSANY.PK): +16.1% to 62,572 vehicles. Car sales up 31.5%; truck sales down 8.5%. Ford (F): +24% to 112,406 vehicles. Cars up 43%; crossovers up 20%; SUVs up 8%; trucks and vans up 14%.
- BofA brings back the thundering herd. Bank of America (BAC) plans to add as many as 2,000 people to its global wealth management division over the next year. The bank plans to hire and train new brokers, rather than compete for experienced talent, in order to keep costs down, but the move could make it more difficult for the bank to attract and retain wealthy investors.
- Soros mulls IPO to fund Brazil project. George Soros is considering an initial public offering for Adecoagro, his agriculture and renewable energy venture in Latin America. The IPO could help fund projects in Brazil including a $700M sugar mill. Soros and other investors formed the venture in 2002 to buy Argentine farmland after the peso crashed.
- News Corp. beats, raises outlook. News Corp. (NWS) reported better-than-expected quarterly earnings yesterday (see details below), and raised its earnings outlook for the rest of the year on the back of a rebound in advertising sales. The firm expects operating income to increase "in the low 20% range" and stronger results from its film division. It also expects to eventually get higher fees from cable- and satellite-TV companies that carry its Fox broadcast network.
- UPS profit soars. UPS (UPS) beat earnings estimates, reporting Q4 profit nearly three times higher than the year before. In an otherwise strong quarter, UPS' main weakness came from its money-losing freight business, and the company continues to position itself for a real but gradual economic rebound. UPS will cut spending in 2010, including through job cuts.
- Confidence wavers. ABC's Consumer Comfort Index inched down to -49 from -48 last week, bringing it slightly closer to the all-time low of -54. Positive ratings for the national economy actually bumped up, to 9% from 8%. However, those rating personal finances positively slipped to 45% from 47%, and only 22% say it's a good time to buy things.
- Vacancies grow. The U.S. vacancy rate in Q4 rose to 2.7% for homeowners, from 2.6%, and slipped to 10.7% for rentals from 11.1%. Margins of error are such that the changes aren't considered statistically significant. There were 2.09M empty properties on the market, up from 1.99M.
- Home sales rise. Pending home sales rose 1% in December to 96.6 month-on-month, better than the 0% expected and November's 16% drop to 96. Sales were up 10.9% year-over-year.
- Retail sales inch up. ICSC reported retail sales inched up 0.1% from the previous week, vs. -2.5% prior. Sales rose 0.4% from the previous year, vs. +1.9% prior. According to Redbook, chain store sales were up 0.8% from the previous year, vs. +1% prior.
Earnings: Wednesday Before Open
- Comcast (CMCSA): Q4 EPS of $0.33 beats by $0.06. Revenue of $9B (+2.9%) vs. $8.9B. (PR)
- Headwaters (HW): FQ1 EPS of -$0.23 misses by $0.08. Revenue of $140M (-16%) vs. $154M. (PR)
- Thermo Fisher (TMO): Q4 EPS of $0.91 beats by $0.03. Revenue of $2.8B (+7%) vs. $2.7B. (PR)
- Time Warner (TWX): Q4 EPS of $0.55 beats by $0.03. Revenue of $7.3B (+2%) vs. $7.1B. (PR)
- United Microelectronics (UMC): Q4 EPS of $0.06 beats by $0.02. Revenue of $868M (+50%) vs. $844M. (PR)
Earnings: Tuesday After Close
- Ace (ACE): Q4 EPS of $2.01 beats by $0.11. Gross premiums written of $4.5B (+4%). Shares +1.9% AH. (PR)
- AFLAC (AFL): Q4 operating earnings of $1.18 beats by $0.03. Revenue of $4.6B (+8%) vs. $5B. Shares +1.2% AH. (PR)
- C.H. Robinson Worldwide (CHRW): Q4 EPS of $0.52 misses by $0.04. Revenue of $2B (+3%) in-line. Shares -0.03% AH. (PR, earnings call transcript)
- Ctrip.com (CTRP): Q4 EPS of $0.24 beats by $0.04. Revenue of $83M (+43%) vs. $81M. Expects Q1 revenue to grow 30% Y/Y. Shares -5.4% AH. (PR, earnings call transcript)
- Fiserv (FISV): Q4 EPS of $0.94 in-line. Revenue of $1.06B (+2%) vs. $1.04B. Sees fiscal 2010 revenue up 1-3%. Shares +2.2% AH. (PR)
- JDS Uniphase (JDSU): FQ2 EPS of $0.12 beats by $0.03. Revenue of $344M (-3%) vs. $334M. Sees Q3 sales of $325M-350M vs. $323M. Shares +3.2% AH. (PR, earnings call transcript)
- Massey Energy Company (MEE): Q4 EPS of $0.28 beats by $0.01. Revenue of $584M (-23%) vs. $661M. Shares -0.7% AH. (PR, earnings call transcript)
- MetLife (MET): Q4 EPS of $0.96 beats by $0.01. Revenue of $12.3B (-12%) vs. $12.6B. Q4 premiums written of $9.3B. Shares -2.9% AH. (PR)
- Myriad Genetics (MYGN): FQ2 EPS of $0.36 beats by $0.02. Revenue of $93M (+11%) vs. $91.6M. Shares +7.1% AH. (PR)
- News Corp. (NWS): FQ2 EPS of $0.25 beats by $0.05. Revenue of $8.7B vs. $8.2B. Murdoch cites "strong top-line revenue growth" and "our underlying operating trends this quarter far outpace those of the same quarter last year." TV ad revenue is likely to be up 18-19% this quarter. Rupert Murdoch says he's got no interest in buying Miramax (DIS), but that the company is having internal discussions about a earnings. Shares +4.3% AH. (PR, earnings call transcript)
- Pioneer Natural Resources Company (PXD): Q4 EPS of $0.18 beats by $0.13. Revenue of $464M (-1%) vs. $409M. Shares +1.5% AH. (PR)
- Tesoro (TSO): Q4 EPS of -$1.30 misses by $0.38. Revenue of $4.7B (+10%) in-line. Shares -3% AH. (PR)
- Unum Group (UNM): Q4 EPS of $0.66 beats by $0.02. Revenue of $2.5B (+7%) vs. $2.6B. Sees 2010 EPS growth of 4-6%. Shares +0.05% AH. (PR)
- VeriSign (VRSN): Q4 EPS of $0.31 misses by $0.03. Revenue of $263M (+6%) vs. $261M. Shares -5.2% AH. (PR, earnings call transcript)
- In Asia, Nikkei +0.3% to 10,404. Hang Seng +2.2% to 20,722. Shanghai +2.4% to 3,004. BSE +2.1% to 16,496.
- In Europe at midday, London +0.3%. Paris +0.3%. Frankfurt +0.2%.
- Futures: Dow +0.15%. S&P +0.15%. Nasdaq +0.2%. Crude +0.7% to $77.75. Gold +0.3% to $1,120.50.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
10:00 ISM Non-Manufacturing Index
10:30 EIA Petroleum Inventories
1:00 PM Fed's Kevin Warsh: Regulatory Reform
- Notable earnings before Wednesday's open: BDK, CMCSA, HNT, HW, IP, ITT, NOV, PFE, ROP, TMO, TWX, UMC, WU
- Notable earnings after Wednesday's close: AFFX, AIZ, AKAM, AMP, AVB, BRCM, CBG, CBL, CDNS, CELL, CSCO, EQR, FNF, KIM, MWW, NVLS, ONNN, REG, SPF, STLD, THQI, URI, V, WFR, WLT, YUM
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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