- S&P gains some altitude. The S&P 500 closed at 1,150.24, a 17-month closing high, thanks to a late rally led by bank shares. Financial stocks continued their recent gains amid speculation that new banking regulations being studied by Congress could be watered down.
- Everything you ever wanted to know about Lehman's failure. A court-appointed examiner has at long last released his report on Lehman Brothers' (OTC:LEHMQ) failure. Among the most salient points in the 2,200 page report: Though the firm's directors didn't breach a fiduciary duty as it gathered toxic mortgages, their conduct was "subject to question." Misleading statements were certified by CEO Dick Fuld, CFO Erin Callan and others, and the firm was insolvent for weeks before it filed for bankruptcy. JPMorgan Chase (JPM) and Citigroup (C) helped cause the illiquidity that led to Lehman's collapse. Some assets were "improperly transferred" in Lehman's deal with Barclays (BCS).
- U.S. credit rating at risk. The triple-A credit rating of the U.S. is at risk, warned ratings agency S&P, unless the country creates a credible medium-term plan to rein in fiscal spending. If no action is taken, "external creditors could reduce their U.S. dollar holdings, especially if they conclude that eurozone members are adopting stronger macroeconomic policies." This could hurt the dollar's status as a global reserve currency and consequently "weigh on the AAA rating on the U.S."
- Agrium abandons CF bid, Yara abandons Terra bid. Agrium (AGU) has abandoned its $5.4B bid for CF Industries (CF), ending one part of the fertilizer war that's been going on for more than a year. The second part of that war was brought to a close this morning, when Yara International said it would not raise its $4.1B offer for Terra Industries (TRA) to meet CF's "superior" $4.7B offer. The two moves pave the way for CF to acquire Terra, as it planned.
- China tells U.S. to back off yuan appreciation calls. Chinese officials warned the U.S. not to make a political issue out of the yuan, while the White House is trying to decide whether to label China as a "currency manipulator" and yesterday called on the country to move to a "more market-oriented exchange rate." China said the U.S. should look to itself to boost exports (see below) and not blame other countries.
- Obama eyes Yellen for Fed slot. Obama reportedly plans to tap Janet Yellen to be vice chairman of the Federal Reserve Board. Yellen has been president of the Federal Reserve Bank of San Francisco since 2004 and a strong supporter of Bernanke's policies.
- Goldman gets go-ahead for ResCap sale. Sources say GMAC (GKM) has hired Goldman Sachs (GS) to sell its troubled mortgage unit ResCap. Warren Buffett (BRK.A), who already owns a chunk of the ResCap's debt, is seen as a likely buyer.
- U.S. export uptick at risk. A recovery in Asia and a weaker dollar are contributing to an upsurge in U.S. exports, but the trend could be cut short because of shipping bottlenecks which have left goods stranded in warehouses and shipping containers. During the recession, shipping rates dropped below the cost of operation for some routes, which led to carriers idling ships, cutting trips to the U.S., and reducing the speed at which their ships travel to save fuel. Many shippers have not yet reversed these measures, resulting in the current shipping shortage.
- Financial reform is coming. Sen. Chris Dodd failed to drum up bipartisan support for the financial reform bill, but said he's moving forward anyway. Though Dodd's decision to break off negotiations with Republicans could speed the bill's progress, it also makes it more likely that a substantive regulatory overhaul won't get approved. Dodd plans to introduce the legislation on Monday.
- EU pushing forward on hedge fund rules. The U.K.'s Gordon Brown and France's Nicolas Sarkozy will meet today to try to reach a compromise on proposed EU financial reforms. Specifically, the U.S. and U.K. are concerned that the tighter regulatory controls proposed could hurt the hedge fund and private equity industries.
- Americans are regaining wealth, but not spending it. There were some encouraging signs to be found in yesterday's Flow of Funds report. Though the gain was slight, household net worth rose 1.3% last quarter to $54.2T, the third consecutive quarterly gain. However, Americans' net worth would have to rise another 21% to return to its pre-recession peak of $65.9T. Real estate holdings edged up 0.2%, and the value of stocks climbed 4%. Household debt contracted at an annualized 1.75% in 2009, the first annual decline since records began in 1945.
- NHTSA wants more power over auto industry. As it comes under question for its handling of Toyota's (TM) safety problems, the National Highway Traffic Safety Administration may ask Congress for more authority to regulate the auto industry. The agency plans to take a "hard look" at its power to set safety standards, and warns current authority may be outdated given the modern technology used in cars. One lawmaker responded that the NHTSA's problems seem to have more to do with "ineptitude" and lack of money than with insufficient powers.
- Comcast-NBC deal to be reviewed. Federal antitrust regulators promised to undertake a rigorous review of the proposed deal between Comcast (CMCSA) and NBC (GE). Though many industry analysts expect the deal to be conditionally approved, lawmakers expressed concern at a hearing yesterday that combining both content and distribution into one company would potentially leave consumers with less programming and higher prices.
- AIG employees pay back $45M. AIG (AIG) will reportedly recoup $45M in controversial retention payments it made to employees in 2009. Employees have agreed to give back $40M, and the remaining $5M will be deducted from 2010 retention payments that were going to be paid to former AIG employees.
- Chicago exchange to get its IPO. As expected, the Chicago Board Options Exchange filed for an initial public offering in which it plans to raise as much as $300M. The IPO will be completed by the end of the second quarter, "pending favorable market conditions."
- Friday's failures come a bit early. Regulators closed New York City's LibertyPointe Bank yesterday, bringing this year's failures up to 27. The closure is estimated to cost the FDIC's insurance fund $24.8M.
Earnings: Thursday After Close
- Aeropostale (ARO): Q4 EPS of $0.99 beats by $0.04. Revenue of $801M (+16.1%) vs. $798M. Sees Q1 EPS above consensus. Shares +3.9% AH. (PR)
- Goldcorp (GG): Q4 EPS of $0.25 in-line. Revenue of $778M (+27.8%) vs. $732M. Shares +0.2% AH. (PR)
- Kodiak Oil & Gas (KOG): Q4 EPS of $0.00 misses by $0.01. Revenue of $4.8M (+292.6%) vs. $5.6M. (PR)
- National Semiconductor (NSM): FQ3 EPS of $0.22 beats by $0.04. Revenue of $362M (+24%) vs. $349M. Shares +4.6% premarket. (PR)
- Pall Corp. (PLL): Q1 EPS of $0.42 misses by $0.05. Revenue of $560M (+3.1%) vs. $589M. Guides FY10 EPS below consensus. Shares -4.2% AH. (PR)
- Quiksilver (ZQK): FQ1 EPS of -$0.02 beats by $0.09. Revenue of $433M (-2.4%) vs. $413M. Shares -1.3% AH. (PR)
Asian markets were mixed to finish off the week. Europe is higher, and futures are up a drop in light overnight trading.
- Asia: Japan +0.8%. Hong Kong -0.1%. China -1.2%. India -0.0%.
- Europe at midday: London +0.4%. Paris +0.5%. Frankfurt +0.7%.
- Futures at 7:00: Dow +0.2%. S&P +0.2% to 1153. Nasdaq +0.1%. Crude +0.7% to $82.70. Gold +0.8% to $1,117. 30-year bond -0.13%. 10-year -0.07%. Euro +0.8% vs. dollar. Yen -0.15%. Pound +0.7%.
Friday's Economic Calendar
- 8:30 Retail Sales
9:55 Reuters/UofM Consumer Sentiment
10:00 Business Inventories
- Notable earnings before Friday's open: ANN, NVAX
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this article.
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