- Greece gets junked, Portugal downgraded. Ratings agency S&P cut Greece to junk status and lowered its long-term sovereign credit rating to BB+ with a negative outlook. The cut sent Greece's bond yields and insurance costs to new records, with S&P suggesting that bondholders may recover as little as 30% of their investments if Greece restructures its debt. S&P also downgraded Portugal on "amplified fiscal risks," cutting the country's rating two notches to A- with a negative outlook. The news exacerbated fears of a debt contagion and raised the possibility that policymakers may need to widen a bailout package beyond Greece. European markets went into a tailspin yesterday, with the euro falling to a new one-year low against the dollar. European markets are still taking a beating today (7:00 ET): London -0.7%. Paris -2.5%. Frankfurt -1.6%.
- IMF may expand Greek aid. The IMF may increase its contribution to the Greek rescue package by €10B ($13.2B) amid growing fears that the current €45B commitment won't be enough to prevent Greece's debt from spiraling out of control. Expectations for the size of Greece's three-year rescue have increased to at least €70B, said policy specialists, though European officials continue to insist a default is "out of the question" and debt restructuring is not under consideration. Earlier today, Greek authorities placed a temporary ban on short selling as investors showed their growing doubts by dumping Greek stocks.
- Debt crisis quotables. "It's not a question of the danger of contagion; contagion has already happened," said OECD Secretary General Angel Gurria in an interview today. "This is like Ebola. When you realize you have it you have to cut your leg off in order to survive." The Greek crisis is "contaminating all the spreads and distorting all the risk-assessment measures. It's threatening the stability of the financial system."
- Republicans roll out counterproposal as financial reform stalls. For the second time in as many days, Republicans blocked efforts to move forward on financial reform, and presented their first counterproposal for what the reforms should entail. Among other details, the plan calls for a stronger divide between monetary and fiscal policy. Policy analysts said the "GOP bill is not conceptually that far from what the Democrats want," and the most likely scenario is bipartisan agreement on a moderate financial reform bill. Democrats will push for another procedural vote today to begin debate on the matter.
- No apologies from beleaguered Goldman. In a high-profile hearing yesterday, Goldman Sachs (GS) CEO Lloyd Blankfein and trader Fabrice Tourre appeared before a Senate subcommittee, both standing their ground against a slew of angry accusations. Lawmakers called Goldman's behavior "unethical" and repeatedly criticized the firm and its executives. Blankfein and Tourre denied wrongdoing (I, II), and refused to apologize for their actions or admit that Goldman helped push the country into recession. (More readings: How Goldman armed salespeople to dump bonds, finding the real villains in the Senate/Goldman showdown)
- Canada voids Lions Gate's poison pill. Canadian authorities have invalidated Lions Gate Entertainment's (LGF) 'poison pill' plan, handing a victory to Carl Icahn and his $7/share hostile bid. The "cease trade order" restores to shareholders the right to decide for themselves whether to accept the tender offer. Lions Gate said it's disappointed by the decision, and urged shareholders to reject Icahn's offer. Shares +6.8% in after hours trading.
- SEC probes 'side pockets.' The SEC is investigating whether hedge funds abused tools known as 'side pockets' to help stop clients from withdrawing their investments during the height of the financial crisis. Several other potential violations are being examined as well, including whether hedge funds are assigning fair value to assets, and whether they're accurately disclosing relevant information to investors. Sources said the SEC's enforcement division has two current investigations into the use of side pockets that it hopes to bring to the commission for approval within the next six months.
- Simon cuts voting rights to win over GGP. Simon Property Group (SPG) reportedly agreed to lower its voting stake in General Growth Properties (GGP) to try to win over GGP to its recapitalization plan. Under the new terms, Simon would take less than a 20% voting interest. Simon is also in talks to add Blackstone (BX) as a partner in the recapitalization bid.
- Baker Hughes, BJ Services get antitrust approval. The Justice Department said yesterday it will require Baker Hughes (BHI) and BJ Services (BJS) to divest assets in order to proceed with their proposed merger. Without the divestitures, the merger "would lead to higher prices and a reduction in service quality." The move isn't expected to have a material impact on the combined company.
- Supreme Court okays lawsuits against Merck. The Supreme Court ruled unanimously that securities lawsuits against Merck (MRK) can move forward. The suits allege that Merck misled shareholders over the dangers of painkiller Vioxx, which was removed from the market in 2004. Merck claimed investors should have known the drug was dangerous in 2001 and therefore the deadline for filing the suit had already passed.
- AstraZeneca settles drug marketing charges. AstraZeneca (AZN) agreed to pay $520M to settle charges that it illegally marketed its schizophrenia drug Seroquel for uses unapproved by the FDA. As a result of the off-label marketing, false claims to pay for the drug were submitted to government healthcare programs. Officials also claimed that AstraZeneca violated anti-kickback laws by paying doctors to sign articles the company had written about Seroquel. The $520M payment is the largest pharmaceutical civil settlement in U.S. history.
Earnings: Wednesday Before Open
- Dow Chemical (DOW): Q1 EPS of $0.43 beats by $0.13. Revenue of $13.4B (+48.4%) vs. $12.9B. Shares -3% premarket. (PR)
- First Industrial Realty Trust (FR): Q1 EPS of $0.22 misses by $0.04. Revenue of $89.8M (-19.4%) vs. $85.1M. (PR)
- Gulfmark Offshore (GLF): Q1 EPS of $0.25 misses by $0.04. Revenue of $84.7M (+3.7%) vs. $85.2M. (PR)
- Host Hotels & Resorts (HST): Q1 EPS of $0.09 misses by $0.01. Revenue of $823M (-4.7%) vs. $863M. (PR)
- Medco Health Solutions (MHS): Q1 EPS of $0.73 beats by $0.01. Revenue of $16.3B (+10%) vs. $16B. (PR)
- Praxair (PX): Q1 EPS of $1.09 in-line. Revenue of $2.4B (+14.4%) in-line. (PR)
- Royal Dutch Shell (RDS.A): Q1 EPS of $1.57 beats by $0.28. Shares +1.1% premarket. (PR)
- SAP AG (SAP): Q1 EPS of €0.37 in-line. Revenue of €2.5B (+6.4%) in-line. Shares -1.2% premarket. (PR)
- Thermo Fisher (TMO): Q1 EPS of $0.84 beats by $0.09. Revenue of $2.7B (+18.6%) vs. $2.5B. (PR)
- Tyco Electronics (TEL): Q2 EPS of $0.64 beats by $0.12. Revenue of $3B (+26.5%) in-line. (PR)
- United Microelectronics (UMC): Q1 EPS of $0.04 misses by $0.01. Revenue of $842M (+162.4%) vs. $870M. (PR)
- WellPoint Health Networks (WLP): Q1 EPS of $1.95 beats by $0.28. Revenue of $14.9B (-2.8%) vs. $14.7B. (PR)
Earnings: Tuesday After Close
- AFLAC (AFL): Q1 EPS of $1.41 beats by $0.09. Revenue of $5.1B (+5.1%) vs. $5.0B. Shares +0.6% AH. (PR)
- Amkor Technology (AMKR): Q1 EPS of $0.18 misses by $0.02. Revenue of $646M (+66.1%) vs. $644M. Shares -3.5% AH. (PR)
- Arris Group (ARRS): Q1 EPS of $0.24 beats by $0.04. Revenue of $266M (+5.2%) in-line. (PR)
- Broadcom (BRCM): Q1 EPS of $0.40 beats by $0.11. Revenue of $1.46B (+9%) vs. $1.38B. Shares +2.1% AH. (PR)
- Buffalo Wild Wings (BWLD): Q1 EPS of $0.58 beats by $0.01. Revenue of $152M (+15.7%) vs. $154M. "We are experiencing softness in April same-store sales of -3.7% at company-owned restaurants and -2.4% at franchised locations." Shares -19.6% AH. (PR)
- Century Aluminum Company (CENX): Q1 EPS of $0.06 vs. consensus of $0.19. Revenue of $285.4M (+27.1%) vs. $288.6M. Shares -0.5% AH. (PR)
- Dreamworks Animation SKG (DWA): Q1 EPS of $0.24 beats by $0.01. Revenue of $162M (-38.5%) vs. $136M. Shares +1% AH. (PR)
- DTE Energy Company (DTE): Q1 EPS of $1.38 beats by $0.18. Revenue of $2.5B (+8.8%) vs. $2.6B. (PR)
- East West Bancorp (EWBC): Q1 EPS of $0.13 beats by $0.06. Shares +3.4% AH. (PR)
- Fidelity National Information Services (FIS): Q1 EPS of $0.41 beats by $0.02. Revenue of $1.3B (+3.8%) vs. $1.2B. (PR)
- Flextronics International (FLEX): Q4 EPS of $0.16 beats by $0.01. Revenue of $6B (+6.4%) in-line. Shares -6.1% AH. (PR)
- Life Technologies (LIFE): Q1 EPS of $0.87 beats by $0.07. Revenue of $887M (+13%) vs. $864M. Shares +1.7% AH. (PR)
- Manitowoc (MTW): Q1 EPS of -$0.08 misses by $0.07. Revenue of $722M (-29.7%) vs. $809M. Shares -6.5% AH. (PR)
- Newfield Exploration (NFX): Q1 EPS of $1.19 beats by $0.08. Revenue of $458M (+74.8%) vs. $545M. (PR)
- Norfolk Southern (NSC): Q1 EPS of $0.75 beats by $0.09. Revenue of $2.2B (+15.2%) vs. $2.1B. Shares +1.1% AH. (PR)
- Phase Forward (PFWD): Q1 EPS of $0.12 in-line. Revenue of $57.5M (+17.8%) vs. $57M. (PR)
- Parametric Technology (PMTC): Q2 EPS of $0.20 beats by $0.01. Revenue of $241M (-5.7%) vs. $242M. Shares -6.5% AH. (PR)
- RF Micro Devices (RFMD): Q4 EPS of $0.16 beats by $0.05. Revenue of $261M (+51.4%) vs. $240M. Shares +4.4% AH. (PR)
- Robert Half International (RHI): Q1 EPS of $0.05 misses by $0.01. Revenue of $737M (-10.5%) vs. $751M. Shares -10% AH. (PR)
- Questar (STR): Q1 EPS of $0.73 misses by $0.02. Revenue of $984M (+6.7%) vs. $765M. (PR)
- In Asia, Japan -2.6% to 10925. Hong Kong -1.5% to 20949. China -0.3% to 2900. India -1.8% to 17380.
- In Europe, at midday, London -0.6%. Paris -2.5%. Frankfurt -1.4%.
- Futures: Dow -0.1%. S&P -0.1%. Nasdaq flat. Crude -0.4% to $82.10. Gold +0.1% to $1163.80.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
10:30 EIA Petroleum Status
1:00 PM 5-Yr Note Auction
2:15 PM FOMC Announcement
- Notable earnings before Wednesday's open: ABX, AOL, ATI, BEN, CMCSA, DOW, EQT, FR, GD, GLW, GT, HES, HL, HST, IACI, IVZ, JBLU, JNY, MHS, MPEL, MWV, NOC, OC, PX, RCL, RDS.A, ROK, S, SAP, SEE, SEIC, SO, TEL, TMO, UMC, VTR, WLP, WYN
- Notable earnings after Wednesday's close: ACE, AIZ, AKAM, ALL, AVB, BDN, BIDU, CBG, CBL, CCI, CDNS, CLF, COG, DRE, EFX, EQR, ESRX, FSLR, FTI, GG, GMCR, HLX, ICO, ILMN, KEG, LNC, LOGI, LSI, OI, OKE, ORLY, RYL, SCI, TQNT, TRN, V, VAR, VRSN, WLT, XLNX
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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