- Toyota sputters as troubles grow. U.S. safety regulators launched a formal probe into brake problems on Toyota's (TM) 2010 Prius, and sources say Toyota plans to recall 270,000 Prius hybrids in the U.S. and Japan. Toyota is also facing at least 29 class action suits in the U.S. and Canada, demanding compensation for vehicle flaws the company has disclosed. However, more than half of the cases go beyond the floor mats and pedals cited by the company. The company also faces at least 10 lawsuits claiming death or injury from sudden vehicle acceleration.
- Ford finds hybrid brakes problem. Ford (F) seems to have caught the brake-problem contagion. It's partially recalling 17,600 hybrids because of a software problem that makes drivers feel the brakes have failed. Ford said the drivers never experience actual brake failure, and the partial recall is only for drivers to bring their cars in for a software fix. Shares -0.5% premarket (7:00 ET).
- BofA charged with securities fraud. New York Attorney General Andrew Cuomo filed securities fraud charges against Bank of America (BAC), former CEO Kenneth Lewis and former CFO Joe Price, alleging they hid massive losses at Merrill Lynch in order to get shareholder approval for the merger. Among other details, the civil suit shows BofA board members gathered on Sept. 15, 2008, thinking they would be approving a purchase of Lehman Brothers, not Merrill Lynch, but then signed off on the Merrill acquisition after just twenty-five hours of examining the books. Cuomo also alleged that BofA's law firm told the bank to disclose Merrill's losses, but the bank overruled that decision and "outside counsel was never again consulted about disclosure, even after the losses later doubled." Lewis and Price called the allegations "misguided" and "utterly false." Separately, BofA reached a $150M settlement with the SEC over Merrill-related charges; the settlement must be approved by Judge Jed Rakoff, who rejected an earlier one for $33M. Shares -1.1% premarket (7:00 ET).
- Air Products launches hostile bid for Airgas. After its previous offers were rebuffed, Air Products and Chemicals (APD) announced it's launching a hostile bid to buy rival Airgas (ARG) for around $60 per share in cash, a 38% premium to Airgas' closing price yesterday. Air Products said the deal is valued at around $7B, including debt, and that the company is prepared to launch a tender offer directly to shareholders in the coming weeks if a merger agreement isn't reached. A merger would create the largest industrial-gas maker in North America by revenue. ARG +13.7% premarket (7:00 ET).
- State Street reaches SEC settlement. State Street (STT) agreed to pay $313M back to investors as part of a settlement with the SEC and state regulators. State Street had been charged with alerting preferred clients to fund problems while withholding information from other investors who then suffered significant losses on their exposure to subprime mortgages. The firm was also accused of telling clients their assets were "diversified" when in fact they were concentrated in subprime loans.
- White House: How to double exports. The White House unveiled its new strategy for doubling U.S. exports in the next five years, trade advocacy, law enforcement and expanded credit. Commerce Secretary Gary Locke said exports have been "an economic blind spot," but will now be "front and center." However, Locke failed to say when the White House might send Congress three completed free-trade accords, with Colombia, Panama and South Korea.
- Berkshire sells debt, gets downgraded. Berkshire Hathaway (BRK.A) sold $8B of senior unsecured notes on Thursday to help finance its purchase of Burlington Northern Santa Fe (BNI). The offering is more than double the size of Berkshire's largest investment-grade bond. S&P said yesterday that it's downgrading Berkshire from AAA to AA+ because its acquisition of Burlington Northern will hurt liquidity.
- Possible IPO for T-mobile. Deutsche Telekom (DT) is reportedly considering an IPO for its T-Mobile USA, the fourth-largest U.S. wireless provider. Other options on the table include a partial spinoff, or a merger with a U.S. rival, though a merger is less likely because it would face regulatory challenges.
- DoJ has doubts on Google book deal. The Justice Department expressed concerns about Google's (GOOG) revised legal settlement with authors and publishers, saying there were still several antitrust and copyright problems with the agreement. Though a "properly structured" agreement could be beneficial to society, the DoJ feels Google, the Authors Guild and the Association of American Publishers are still trying to reach too broadly, using "the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute ... in this litigation."
- Geithner: Taxpayers face AIG loss. Testifying before the Senate Budget Committee, Geithner told lawmakers that he still sees a risk to taxpayers from the government's bailout of AIG (AIG). Though the Treasury's $30B loss estimate is significantly higher than the $9B forecast by the Congressional Budget Office, Geithner said the figures are "a fraction of what those estimates were six, nine, 12 months ago." Geithner flies out to Canada this weekend for G-7 talks.
- Blackstone, Resolution eye RBS branches. Buyout groups Resolution and Blackstone (BX) are in the running to join National Australia Bank in a potential bid for the 318 branches being sold by Royal Bank of Scotland (RBS). Other banks that have signaled an interest in the branches include Banco Santander (STD) and Virgin Money.
- GMAC trimming mortgage assets. GMAC, which is majority-owned by the government, plans to offload another $6.5B in mortgage assets, after writing them down to 40 cents on the dollar. The move brings GMAC's held-for-investment portfolio down to $12B from $25B in Q3. GMAC also posted Q4 results yesterday, reporting a net loss of $5B and a full-year loss of $10.3B. Most of the losses stemmed from "strategic mortgage actions."
- Aussies set royalty deadline for miners. Australian officials have given BHP Billiton (BHP) and Rio Tinto (RTP) until July 1 to start paying at least $300M a year more in iron ore royalties. The higher royalties are a non-negotiable "starting point" for approval of the companies' proposed $150B tie-up in Australia's Pilbara region. Premarket: BHP -1%, RTP -2.6% (7:00 ET).
- China plays chicken with U.S. trade ties. China plans to impose anti-dumping tariffs of up to 105.4% on U.S. broiler chicken imports, effective Feb. 13. Officials from China's Ministry of Commerce said the chickens had been sold at unfair prices, causing "substantial damage" to the domestic poultry industry.
- Retail sales show strength. Retail chains posted strong January sales, with most stores reporting better-than-expected numbers. Overall, January's same-store sales rose 3.3%, led by positive surprises from Nordstrom (JWN) and American Eagle (AEO), vs. analyst expectations of +2.5%. However industry experts suggest the momentum may be hard to maintain as unemployment remains elevated and consumers continue to spend frugally.
- Jobless claims rise. Initial Jobless Claims rose 8,000 to 480K vs. 460K consensus. Continuing claims rose 2,000 to 4,602,000.
Earnings: Friday Before Open
- Aetna (AET): Q4 EPS of $0.40 misses by $0.02. Revenue of $8.7B (+9%) vs. $8.6B. (PR)
- Apartment Investment and Management Company (AIV): Q4 EPS of $0.36 in-line. Revenue of $303M (-0.5%) vs. $296M. (PR)
- Beazer (BZH): FQ1 EPS of $1.09 beats by $1.99. Revenue of $218M (+0.3%) vs. $200M. (PR)
- Brookfield Properties (BPO): Q4 EPS of $0.43 beats by $0.11. Revenue of $106M (+14%) vs. $94M. (PR)
- Weyerhaeuser (WY): Q4 EPS of -$0.52 misses by $0.14. Revenue of $1.4B (-18.1%) vs. $1.3B. (PR)
Earnings: Thursday After Close
- Alkermes (ALKS): 2010 Q3 EPS of -$0.07 beats by $0.09. Revenue of $44M (-71.6%) vs. $156M. Shares +2.8% AH. (PR, earnings call transcript)
- Con-way (CNW): Q4 EPS of $0.00 (breakeven) misses by $0.14. Revenue of $1.1B (-1%) in-line. Shares -1.8% AH. (PR)
- Fidelity National Information Services (FIS): Q4 EPS of $0.44 beats by $0.01. Revenue of $1.3B (+3%) in-line. (PR, earnings call transcript)
- Illumina (ILMN): Q4 EPS of $0.29 beats by $0.09. Revenue of $181M (+12.2%) vs. $161M. Shares -3.4% AH. (PR, earnings call transcript)
- PerkinElmer (PKI): Q4 EPS of $0.43 beats by $0.02. Revenue of $498M (-0.3%) vs $500M. (PR, earnings call transcript)
- Pitney Bowes (PBI): Q4 EPS of $0.64 beats by $0.03. Revenue of $1.45B (-6%) in-line. Shares +0.7% AH. (PR, earnings call transcript)
- Sunoco (SUN): Q4 EPS of -$0.27 misses by $0.01. Revenue of $9B (+4%) vs. $8.3B. Sees fiscal 2010 Capex of about $840M. Expects a Q1 pretax charge of $185M-195M on loss related to sale of polypropylene unit. Shares -2% AH. (PR, earnings call transcript)
- Vertex Pharmaceuticals (VRTX): Q4 EPS of -$0.85 in-line. Revenue of $34M (+3.7%) vs. $33M. Shares +4.7% AH. (PR, earnings call transcript)
- In Asia, Nikkei -2.9% to 10,057. Hang Seng -3.3% to 19,665. Shanghai -1.9% to 2,939. BSE -2.7% to 15,791.
- In Europe at midday, London -1.8%. Paris -2.2%. Frankfurt -1.5%.
- Futures: Dow -0.5%. S&P -0.6%. Nasdaq -0.3%. Crude +0.1% to $73.23. Gold -0.7% to $1,055.10.
Friday's Economic Calendar
- Geithner: G7 meeting
8:30 Nonfarm Payrolls
11:00 Alan Krueger: Unemployment data
12:30 PM Hoenig: Nightly Business Report
3:00 PM Consumer Credit
5:15 PM James Bullard: Monetary Policy
- Notable earnings before Friday's open: AET, AIV, AXL, AYE, BPO, BZH, PPL, SPG, TE, TSN, WY, YRCW
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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