Wall Street Breakfast: Must-Know News

by: Rachael Granby
Rachael Granby
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.

  • Greece asks for aid to be activated. "The time has come" for Greece to request the activation of the €45B ($61B) aid package offered by the EU and the IMF, said Prime Minister George Papandreou. The bailout is "a necessity. It is an extreme necessity, it is a national necessity." Eurozone officials, who weren't notified in advance that Greece planned to ask for aid, will decide on the release of the aid after the European Commission and the European Central Bank rule that the Greek request is valid. The move comes a day after new data showed Greece's debt crisis to be worse than previously believed. The euro rebounded from a one-year low against the dollar following the announcement; EUR +0.2% at 7:00 ET.
  • US Airways ends United merger talks. US Airways (LCC) said yesterday that it had ended merger talks with United Airlines (UAUA). US Airways CEO Doug Parker said "it remains our belief that consolidation makes sense in an industry as fragmented as ours" but the firm intends to remain a standalone carrier for the foreseeable future. "As I have said many times, it is not necessary for us to be direct participants in a merger because the entire industry benefits when consolidation occurs." The spotlight now turns to rumored talks between United and Continental (NYSE:CAL), with sources suggesting the two are considering a stock-for-stock merger with no premium.
  • Gov't considers AIG sale plan. The government is reportedly considering a two-year plan to offload its nearly 80% stake in AIG (NYSE:AIG). The proposal would involve converting preferred shares into common shares for open market sales, and could be announced as soon as the fourth quarter. Premarket: AIG -0.5% (7:00 ET).
  • Palm loses a suitor. Taiwan's HTC has reportedly decided not to bid for Palm (PALM) after reviewing the company's numbers, as "there just weren't enough synergies to take the deal forward," said one source. This leaves Lenovo (OTCPK:LNVGY) as the last major Asian bidder expected to show interest in Palm.
  • Lawmakers: Ratings agencies at fault. A congressional panel concluded that ratings agencies Moody's (NYSE:MCO) and S&P were improperly influenced by the banks that paid them fees, and willfully ignored signs of fraud in the lending industry prior to the financial crisis. Once the crisis became apparent, the ratings agencies failed to respond quickly enough, leading to mass downgrades on billions of dollars in investments and causing trauma to the financial system. The panel will hold another hearing on the matter today.
  • Geithner uses G-20 to push yuan issue. G-20 finance chiefs are meeting today amid speculation that the group will press China for a currency revaluation. Earlier this week, India, Brazil, the IMF and the EU backed a stronger yuan, and Geithner has called the talks an "avenue for advancing U.S. interests” on China's currency. Meanwhile, Sen. Lindsey Graham, co-author of a bill aimed at stopping China from 'manipulating' its currency, said the bill could get 80-90 votes and could be approved this year. "I understand why the administration is reluctant to push China, but unfortunately we're running out of time," said Graham.
  • More Goldman actions in the spotlight. Additional questionable activities by Goldman Sachs (NYSE:GS) are starting to be revealed. One source said that a Goldman director tipped off hedge-fund billionaire Raj Rajaratnam about a planned $5B investment into the company by Berkshire Hathaway (NYSE:BRK.A) before the deal was publicly announced. Other sources alleged that Goldman served as both an underwriter and an investor in Lloyds' (NYSE:LYG) major refinancing deal late last year, raising serious conflict of interest problems. Goldman insists that its underwriters are barred from knowing anything about the investment activity of proprietary traders.
  • Details on Citi's failed bid for WaMu. A recently released document provides details of Citigroup's (NYSE:C) unsuccessful bid for Washington Mutual in 2008. Citigroup had offered no upfront cash and had proposed that the government absorb the majority of WaMu's losses, capping Citigroup's financial exposure at $10B. Terms of the offer were previously kept secret by the FDIC. The new information appears to weaken claims by WaMu's now-bankrupt parent that the FDIC bent over backwards to give JPMorgan (NYSE:JPM), the eventual buyer, a sweetened deal.
  • HSBC, U.S. Bancorp settle auction-rate charges. The brokerage units of HSBC (HBC) and U.S. Bancorp (NYSE:USB) agreed to pay a combined $1.78M in fines to settle charges that they misled investors over auction-rate securities, but did not admit wrongdoing. Regulators had claimed that the banks failed to properly disclose the risks associated with ARS, leaving customers unprepared for the market's failure. HSBC also agreed to buy back more of the debt from its customers, in addition to the $562M it has already repurchased. Premarket: HBC -0.5% (7:00 ET).
  • Microsoft, AMZN earnings may hurt tech. Disappointments from Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) could hurt tech stocks today. Microsoft posted a better-than-expected quarterly profit (see details below) thanks to sales of Windows 7, but its shares fell around 5% as investors expected more from a recovering tech sector. Amazon also beat earnings expectations (see below) but forecast lower earnings for the second quarter. The company estimates operating profit in Q2 will be $220M-320M, shy of the $327.8M analysts have been expecting.
  • Obama asks Wall St. to support reform. Speaking in New York yesterday, Obama challenged financial firms to line up behind financial reform "not only because it is in the interest of your industry, but also because it’s in the interest of your country." Despite Obama's criticism of Wall Street's "reckless risk-taking" and "furious efforts" to fight regulation, financial executives and industry groups found his tone more conciliatory than in the past, and are trying to come to terms with reforms that are likely inevitable.
  • Fitch warns Japan. Fitch warned Japan that its sovereign debt rating would be at risk unless it sees a sustained economic recovery and fiscal consolidation. This is the second time in six months that Fitch has voiced concerns about Japan's fiscal position.

Earnings: Friday Before Open

  • Ericsson (NASDAQ:ERIC) : Q1 EPS of SEK 0.39 misses by SEK 0.38. Revenue of SEK 45.1B (-9.1%) vs. SEK 48.3B. Shares +4.7% premarket. (PR)
  • Schlumberger (NYSE:SLB): Q1 EPS of $0.62 beats by $0.01. Revenue of $5.6B (-6.7%) vs. $5.7B. (PR)

Earnings: Thursday After Close

  • Amazon.com (AMZN): Q1 EPS of $0.66 beats by $0.05. Revenue of $7.13B (+45.9%) vs. $6.87B. Sees Q2 operating income of $220-320M vs. $328M consensus. Shares -4.9% (4:16) premarket. (PR)

  • American Express (NYSE:AXP): Q1 EPS of $0.73 beats by $0.09. Revenue of $6.61B (+11.5%) vs. $6.34B. Provisions for losses $687M, down 50% year-over-year. Shares +1.3% AH. (PR)

  • Capital One Financial (NYSE:COF): Q1 EPS of $1.40 beats by $0.82. Revenue of $4.29B (+48.8%) vs. $4.13B. Shares +5.6% AH. (PR)

  • Cheesecake Factory (NASDAQ:CAKE): Q1 EPS of $0.31 beats by $0.05. Revenue of $405M (+3.2%) vs. $400M. Shares -5.6% AH. (PR)
  • Chubb (NYSE:CB): Q1 EPS of $1.14 beats by $0.19. Revenue of $2.8B (+0.8%) vs. $2.7B. Shares +0.3% AH. (PR)
  • Developers Diversified Realty (NYSE:DDR): Q1 EPS of $0.28 in-line. Revenue of $207M (-0.5%) vs. $187M. Shares -1.6% AH. (PR)
  • Federated Investors (NYSE:FII): Q1 EPS of $0.38 misses by $0.05. Revenue of $233M (-25.1%) vs. $257M. (PR)
  • International Game Technology (NYSE:IGT): Q2 EPS of $0.20 in-line. Revenue of $498M (+4.6%) vs. $512M. Shares +1.0% AH. (PR)
  • Lattice Semiconductor (NASDAQ:LSCC): Q1 EPS of $0.10 beats by $0.03. Revenue of $70.4M (+27.8%) vs. $67.5M. Shares +2.0% AH. (PR)
  • Microsoft (MSFT): Q3 EPS of $0.45 beats by $0.03. Revenue of $14.5B (+6.2%) vs. $14.39B. Lowers expense guidance. Shares -2.9% (5:39) premarket. (PR)

  • NCR (NYSE:NCR): Q1 EPS of -$0.12 misses by $0.04. Revenue of $1.0B in-line. Shares -5.8% AH. (PR)
  • OSI Pharmaceuticals (OSIP): Q1 EPS of $0.63 beats by $0.30. Revenue of $106.6M (+13.4%) vs. $115M. Shares +0.4% AH. (PR)
  • PMC - Sierra (NASDAQ:PMCS): Q1 EPS of $0.19 beats by $0.02. Revenue of $152.8M (+48.9%) vs. $150M. Shares -3.7% AH. (PR)
  • Rambus (NASDAQ:RMBS): Q1 EPS of $1.28 beats by $. Revenue of $162M (+492.4%) vs. $50M. Shares +3.6% AH (PR)
  • Riverbed Technology (NASDAQ:RVBD): Q1 EPS of $0.20 beats by $0.02. Revenue of $112M (+27.4%) vs. $109M. Shares +2.4% AH. (PR)

  • STMicroelectronics (NYSE:STM): Q1 EPS of $0.07 misses by $0.01. Revenue of $2.3B (+40.1%) vs. $2.4B. Shares -4.1% AH. (PR)
  • Western Digital (NYSE:WDC): Q3 EPS of $1.71 beats by $0.16. Revenue of $2.6B (+65.9%) vs. $2.5B. Shares +0.8% AH. (PR)

Today's Markets

  • In Asia, Nikkei -0.3% to 10914. Hang Seng -1.0% to 21244. Shanghai -0.5% to 2984. BSE +0.7% to 17694.
  • In Europe at midday, London +0.8% to 5709. Paris +0.6% to 3949. Frankfurt +1.3% to 6247.
  • Futures: Dow +0.15%. S&P +0.3%. Nasdaq +0.1%. Crude -0.2% to $83.51. Gold -0.2% to $1140.10.

Friday's Economic Calendar

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.

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