AT&T to take $7.6B non-cash gain. AT&T (T) will book a non-cash gain of approximately $7.6B on its Q4 earnings, due to changes in its pension-fund and retiree-benefit plans. AT&T has altered its assumptions on interest rates and is enjoying a better-than-expected return on assets, However, the carrier is also taking a $500M charge for a voluntary retirement package that 4,200 workers accepted. Shares were +0.5% premarket. (8-K)
Chinese factory activity shrinks for 1st time in 6 months. Chinese HSBC flash PMI has dropped to below 50 - the line separating contraction from expansion - for the first time in half a year, falling to 49.6 in January from 50.5 in December and missing consensus for a rise to 50.6. "The weak flash PMI will inevitably inflame China slowdown worries, but this is only one data point," says strategist Linus Yip. "If more data start to also show a deeper slowdown, Beijing may be forced to stimulate."
EBay flies as Icahn proposes PayPal spinoff. eBay's (EBAY) Q4 net income rose to $850M from $751M, but all the post-match chat was dominated by news that Carl Icahn has taken a 0.8% stake in the company and called for it to spin off PayPal. eBay swiftly rejected Icahn's demand, pointing to the ties between its e-commerce operations and the online payments company. Perhaps not coincidentally, eBay has authorized a new $5B buyback. The company's Q4 adjusted EPS was $0.81 and beat consensus but revenue missed expectations despite growing 13.5% to $4.53B. Shares were +4.2% premarket.
Top Stock News
Netflix soars after crushing estimates. Netflix's (NFLX) shares stormed 16.6% higher premarket following a banner Q4 as net profit surged to $48M from $8M a year earlier, EPS of $0.79 topped consensus, and revenue rose 25% to $1.18B and also beat analyst expectations. Netflix added 2.33M subscribers in the U.S., and it now has well over 30M domestically and more than 44M in total. The company expects to gain another 2.25M U.S. members in Q1, and it plans to start a "substantial" expansion in Europe, where it sees a large opportunity.
Report: U.S. mulls whether Berkshire Hathaway is a SIFI. The U.S. Financial Stability Oversight Council is considering whether to designate Berkshire Hathaway (BRK.A) as a systemically important financial institution (SIFI), Bloomberg reports. The holding company is the world's fourth-largest reinsurer, and had $458.1B of assets and $5.8B in derivative liabilities as of September 30. As of Friday, the firm had $31.4B in credit-default swaps linked to its debt. Berkshire also owns major stakes in Wells Fargo (WFC) and American Express (AXP).
IBM to sell low-end server unit to Lenovo for $2.3B. As flagged in the press, IBM (IBM) has agreed to sell its low-end x86 server business to Lenovo (OTCPK:LNVGY) for $2.3B, of which $2B will be in cash and the rest in stock. "This divestiture allows IBM to focus on system and software innovations...such as cognitive computing, Big Data and cloud," says IBM's Steve Mills. The deal comes after the company's hardware division suffered another wretched quarter in Q4, with x86 sales dropping 16%.
Toyota remains top dog; eyes 10M+ sales in 2014. Toyota's (TM) sales increased 2% to 9.98M vehicles in 2013, enabling the Japanese company to maintain its crown as the world's largest carmaker for the second year in a row, ahead of GM (GM) and Volkswagen (OTCQX:VLKAY). With Toyota benefiting from the weaker yen, the firm forecasts that sales in 2014 will pass 10M for the first time and rise to 10.32M.
Top Economic & Other News
U.S. has until late next month to increase debt limit. Congress has until late February to lift the $16.7T debt ceiling and avert a U.S. default, Treasury Secretary Jacob Lew said yesterday. The cap is suspended until February 7, after which the Treasury can juggle the money about for a bit before running out of cash. The question is how much the GOP will try to use the debt limit to extract concessions from the Democrats, such as with a decision on the Keystone XL pipeline.
Eurozone business activity marches to high of over 2 1/2 years. Eurozone composite output PMI has climbed to a 31-month high of 53.2 in January from 52.1 in December and surpassed forecasts of 52.4, with the manufacturing and services sectors improving nicely. However, "the upturn remains fragile," says Markit. "Companies cut employment again, and selling prices continued to fall amid still-weak demand. Deflationary forces are clearly a concern in many countries." The euro was +0.65% at $1.3635 at the time of writing.
Spain's fragile recovery continues. Spain's economy grew for the second quarter in a row in Q4, the Bank of Spain says, expanding by 0.3% on quarter. However, the recovery remains fragile, with 2013 GDP falling 1.2%. In addition, unemployment edged up to 26.03% last quarter from 25.98% previously and was above consensus of 26%. Still, the number of people out of work dropped by 8,400. The IBEX 35 was +0.5% at the time of writing.
Top Ideas: Movers and Great Calls
1) Energy expert Richard Zeits wrote on January 6 that the market simply hadn't caught up with the favorable economics of Bill Barrett's (BBG) acreage in two younger oil plays. Shares are +16.3% since. Read article »
2) On September 10, Douglas Ehrman laid out the short case for Nintendo (OTCPK:NTDOY), forecasting lower-than-expected sales of its handheld 3DS console and targeting near-term downside of 21-31%. After Nintendo announced weak 3DS sales and guided for a full-year loss on Friday, the stock is -21% to date. Read article »
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In Asia, Japan -0.8% to 15696. Hong Kong -1.5% to 22734. China -0.5% to 2042. India +0.2% to 21374.
In Europe, at midday, London -0.1%. Paris +0.1%. Frankfurt -0.1%.
Futures at 6:20: Dow -0.3%. S&P -0.3%. Nasdaq flat. Crude flat at $96.72. Gold +0.5% to $1244.90.
Ten-year Treasury Yield -2 bps to 2.85%.
Today's economic calendar:
8:30 Initial Jobless Claims
9:00 PMI Manufacturing Index Flash
9:45 Bloomberg Consumer Comfort Index
10:00 Existing Home Sales
10:00 FHFA House Price Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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