Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
Microsoft closes in on CEO even though Mulally staying at Ford. Following months of reports, speculation, debate, and much else, Alan Mulally stated yesterday that he isn't leaving Ford (NYSE:F) to become Microsoft's (NASDAQ:MSFT) CEO. However the latter is reportedly close to naming a replacement for Steve Ballmer. Sources have told Reuters that Microsoft is down to a "handful" of candidates, including ex-Nokia (NYSE:NOK) chief Stephen Elop, and insiders Satya Nadella and Tony Bates.

Mortgage-bond probes just won't go away. The SEC and the special inspector general for TARP (Sigtarp) are reportedly probing several major banks over whether they cheated clients by deliberately mis-pricing residential mortgage bonds from 2009-2011 - after the financial crisis hit. Most of the usual suspects are under investigation, including JPMorgan (NYSE:JPM), Barclays (NYSE:BCS), Citigroup (NYSE:C), Deutsche Bank (NYSE:DB), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Royal Bank of Scotland (NYSE:RBS) and UBS (NYSE:UBS).

Top Stock News
Yet another oil train involved in accident. A Canadian National Railway (NYSE:CNI) train transporting propane and crude oil caught fire late yesterday after derailing in northwest New Brunswick in Canada. There don't appear to have been any injuries, while 45 homes were evacuated. The incident is the latest in a series of accidents over the past year involving oil trains, including one just over a week ago in North Dakota. The accidents have raised fears about safety and have come as the U.S. reviews the proposal to build the Keystone XL pipeline.

Forest closes in on Aptalis for $3B. Forest Laboratories (NYSE:FRX) is reportedly close to agreeing to buy Aptalis Holdings from private equity firm TPG Capital for $3B, with an announcement about the deal possible today. Forest has been looking to buy in treatments due to patent expirations on its own blockbuster drugs, such as the antidepressant Lexapro. Aptalis' therapies include those for cystic fibrosis and gastrointestinal disorders; the latter would complement Forest's Linzess.

Investors bet $34M that Supreme Court will back Aereo. Aereo has raised $34M in financing just days before the Supreme Court is due to decide on Friday on whether it will hear a lawsuit filed by broadcasters who want to shut the company down. With Aereo's backers including media mogul Barry Diller and InterActiveCorp (IACI), the firm streams local-TV signals over the Web for a monthly fee using thousands of tiny broadcast antennae. A legal victory for Aereo would cast doubt over whether pay-TV operators need to pay over-the-air broadcasters for the rights to their programming.

Gasoline, diesel futures up as cold causes refinery shutdowns. Gasoline and diesel futures rose sharply yesterday as frigid temperatures caused refinery shutdowns across the U.S., sparking concerns about refined product supplies. The record arctic chill froze pipes and caused air pressure problems for refiners such as Valero (NYSE:VLO) and Exxon (NYSE:XOM).

IBM not finding it elementary to make money from Watson. IBM (NYSE:IBM) CEO Virginia "Ginni" Rometty reportedly hopes that the company's "Jeopardy" winning Watson supercomputer will generate $1B by 2018 and $10B within ten years. The problem is that Watson had brought in less than $100M as of October, as various projects have gone awry or been far more difficult than expected. A service with Citigroup (C), for example, that would recommend financial products to consumers still hasn't been launched.

Focus on small companies wins out in 2013. The WSJ's quarterly ranking of the best 12-month performers among diversified U.S.-stock funds has been topped by Lord Abbett Micro Cap Growth (MUTF:LMIYX), which, as the name suggests, focuses on very small, very promising companies, and generated a 12-month return of 78.6%. You need "a strong stomach and a willingness to take risk, because there is huge money to be made when small growth stocks go on big runs," says the fund's lead manager, Thomas O'Halloran.

Top Economic & Other News
Congress works to spend $1.01T as latest deadline looms. Leading members of the House and Senate appropriations committees met yesterday as they sought to reach a deal on how to spend the $1.01T that Congress approved for this fiscal year. Negotiators are working on final sticking points involving healthcare and military spending, although they only have a week to avoid another government shutdown. There's talk of a short-term measure lasting just days to avoid that scenario.

Eurozone jobless rate unchanged in November. As expected, the eurozone's unemployment rate held steady at 12.1% in November. The lowest numbers were in Austria, Germany and Luxembourg, and the highest in Greece and Spain. No surprises there. Italian unemployment rose to a fresh record of 12.7% in November from 12.5% in October and topped consensus. Youth unemployment hit 41.6%, also a new high. The figures show that if the eurozone economy is recovering, as some data indicates (see below), it's all still very, very fragile.

German trade surplus grows as exports rise and imports fall. Germany's trade surplus rose to a seasonally adjusted €17.8B in November from €16.7B in October but missed consensus. Exports grew for the fourth month in a row, increasing 0.3% on month, while imports fell an unexpectedly sharp 1.1%. "Even if November is a bit weaker than the strong October - especially on the imports side - the data shows that the fourth quarter is picking up because of a German and global recovery," says economist Christian Schulz.

Move to renew jobless benefits progresses in Senate. The Senate has passed a procedural motion that will allow the chamber to start debating a proposal to renew benefits for the long-term jobless by three months at a cost of $6B+. The benefits expired last month, affecting 1.3M people. The Senate could vote on the bill this week and send it to the House, although it would probably need a deal over funding for representatives to agree to it.

Top Ideas Movers and Great Calls
1) On December 23, Dennis Beaudet argued that concerns about auto parts maker Martinrea International (OTC:MRETF) didn't warrant the recent sharp decline in the company's share price; it's a fall that has put the stock into deep value territory. Shares are +11.7% to date. Read article »
2) Dane Bowler wrote on May 20 that commercial mREIT Northstar Realty Finance (NRF) offered a sustainable and growing 8% yield, in addition to large potential capital appreciation. Despite weakness across the sector, shares are +44.9% since his call, excluding dividend payments. Read article »

Top Ideas To Watch
1) Shaun Currie, CFA, says hospitality software provider Agilysys (NASDAQ:AGYS) is on the cusp of major earnings growth, with an attractive balance sheet providing the support for 30% upside. Read article »
2) High-flying automotive supplier TRW Automotive (NYSE:TRW) isn't done rising, as it remains undervalued relative to peers and potential growth opportunities, writes Trading the Spread. Read article »

Top Ideas are the best long and short ideas on Seeking Alpha. SA PRO subscribers receive early access to these Top Ideas, which often move markets. For more information about SA PRO and becoming a subscriber, click here.

Today's Markets:
In Asia, Japan +1.9% to 16121. Hong Kong +1.3% to 22997. China -0.15% to 2044. India +0.2% to 20729.
In Europe, at midday, London -0.4%. Paris -0.1%. Frankfurt -0.2%.
Futures at 6:20: Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude +0.1% to $93.78. Gold -0.3% to $1226.10.
Ten-year Treasury Yield +1 bps at 2.96%.

Today's economic calendar:
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
10:30 EIA Petroleum Inventories
1:00 PM Results of $21B, 10-Year Bond Auction
2:00 PM FOMC minutes
3:00 PM Consumer Credit

Notable earnings before today's open: AZZ, GBX, MON, MSM, RPM, SCHN, STZ

Notable earnings after today's close: BBBY, GPN, RT, TXI, VOXX, WDFC

See full real-time earnings coverage »

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