- Some Toyota accidents pinned to driver errors. The Department of Transportation has analyzed dozens of data recorders from Toyota (TM) vehicles supposedly involved in sudden acceleration accidents, and has found that in many cases the throttles were wide open and the brakes were not engaged. In other words, some drivers who blamed their accidents on sudden acceleration problems were actually flooring the gas instead of stepping on the brake. Though the not-yet-released findings don't exonerate Toyota, they do lend credence to the firm's claims that after investigating nearly 2,000 sudden acceleration accidents, there have been no electronic glitches found in the computer-controlled throttle system.
- Glaxo agrees to Avandia settlement. GlaxoSmithKline (GSK) has reportedly agreed to pay around $460M to settle the majority of lawsuits alleging its Avandia drug for diabetes can cause heart attacks and strokes. According to sources, Glaxo is settling around 10,000 of the 13,000 lawsuits it faces, for an average of at least $46,000 each. Analysts view this as very positive news, having assumed a worst-case scenario payout of $500,000 per case. Premarket: GSK +1% (7:00 ET).
- German officials search Credit Suisse offices. German officials searched 13 Credit Suisse (CS) offices this morning, according to reports, as part of a probe into whether the bank helped clients evade taxes. Prosecutors announced in March that they had launched 1,100 tax evasion probes into Credit Suisse clients. Premarket: CS -2.3% (7:00 ET).
- EU approval for airline tie-up. EU competition officials approved a proposed merger between British Airways (OTC:BAIRY) and Spanish airline Iberia, saying the transaction, which will create Europe's third-largest airline by revenue, won't significantly hurt competition. Regulators also approved an alliance between the two airlines and American Airlines (AMR), which will allow all three to share revenue, combine their marketing and flight planning and collaborate on pricing on trans-Atlantic flights.
- EU okays Comcast-NBC deal. The European Commission gave its approval to a landmark deal in which Comcast (CMCSA) will take a controlling stake in NBC Universal (GE), creating a media superpower that will control both content and its delivery. The deal is still under regulatory review in the U.S. Premarket: GE +0.4% (7:00 ET).
- Small banks may struggle to repay TARP. A new report from the Congressional Oversight Panel found that the "one-size-fits-all" repayment terms of the Capital Purchase Program have been far more favorable to large banks than to small ones, and that "small banks may find it difficult or impossible to exit the program, particularly if the current distressed financial markets persist." The report recommends the Treasury take immediate steps to ensure as many banks as possible repay their TARP aid, and warns a lasting effect of TARP may be a more concentrated banking system.
- Nokia Siemens interested in Motorola unit. Nokia Siemens Network is said to be in talks to buy Motorola's (MOT) telecom-equipment arm for as much as $1.1B to $1.3B, and a deal could be reached in the next few weeks. Nokia Siemens Network, which is a joint venture of Nokia (NOK) and Siemens (SI), has been trying to break into the U.S. market through acquisitions, and last year unsuccessfully tried to buy two units from bankrupt Nortel Networks.
- Spotlight on BP's Libyan links. Lawmakers are calling for an investigation into BP's (BP) business interests in Libya, suggesting the oil company was part of a deal to free a convicted terrorist in exchange for oil licenses. BP said it is a "matter of public record" that it had shared its concern with the U.K. government at the slow progress in releasing Abdel Basset al-Megrahi, the Lockerbie bomber, on concerns a "delay might have negative consequences for U.K. commercial interests, including ratification of BP’s exploration agreement. However, we did not express a view about the specific form of the agreement... or make representations over the al-Megrahi case..." Premarket: BP +0.3% (7:00 ET).
- Amedisys plunges on weakening profit, business. Amedisys (AMED) closed down 24.1% yesterday, after warning its business weakened in Q2 and that its profits will fall short of analysts' forecasts. Calling the quarter a "wake-up call," the company will ratchet down its growth and restructure its two segments. Acknowledging that Amedisys (as well as other home-health-care providers) is currently under investigation for possible abuse of Medicare rules, CEO William Borne said "it's a distraction. We are reluctant to call it a correlation, but the timing is not lost on us that we have this outside noise."
- MBIA, AIG gain on Berkowitz investment, increased confidence. Bond insurer MBIA (MBI) and AIG (AIG) both saw strong gains in yesterday's trading after a filing late Monday showed Fairholme Capital Management's Bruce Berkowitz invested in the two firms. Berkowitz took an 11% stake in MBIA, and brought his AIG position up to 24.3% from 18.9%, making Fairholme AIG's largest private shareholder. MBIA closed +11.5%, AIG closed +6.8%.
- Trade balance unexpectedly widens. May's trade balance came in at -$42.3B, wider than both the -$38.9B expected and the -$40.3B recorded in April. It's the widest trade deficit in a year and a half, and prompted some economists to downgrade their estimates for Q2 economic growth. Others, including Morgan Stanley economists, took a more positive view, pointing to the hefty gain in imports as a sign that business and consumer spending is picking up and that the economy in Q2 was the healthiest in four years: “With much of the upside surprise in imports in a surge in capital goods, the outlook for domestic investment looks even stronger."
- Investors chipper over Intel results. Intel (INTC) handily beat analysts' earnings estimates (see details below), prompting the company to call Q2 the "best quarter in the company's 42-year history." Earnings per share, sales and margins all came in better than expected, and Q3 guidance was raised far above expectations. "The key reason everybody missed on it is - as they've been talking about for eight months - cloud infrastructure is just started," said one analyst, adding that the stock is "underpriced." Shares gained 6.7% in after-hours trading.
Earnings: Tuesday After Close
- Intel (INTC): Q2 EPS of $0.51 beats by $0.08. Revenue of $10.7B (+34.2%) vs. $10.3B. Shares +6.7% AH. (PR, earnings call transcript)
- Yum! Brands (YUM): Q2 EPS of $0.58 beats by $0.04. Revenue of $2.6B (+19.6%) vs. $2.5B. Shares -3.1% AH. (PR)
- In Asia, Japan +2.7% to 9795. Hong Kong +0.6% to 20561. China +0.8% to 2470. India -0.3% to 17938.
- In Europe, at midday, London -0.6%. Paris -0.7%. Frankfurt -0.1%.
- Futures: Dow +0.3%. S&P +0.4%. Nasdaq +0.8%. Crude -0.2% to $76.97. Gold flat at $1213.70.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:30 EIA Petroleum Inventories
1:00 PM $13B, 30-Year bond auction
2:00 PM FOMC minutes
- Notable earnings before Wednesday's open: PGR
- Notable earnings after Wednesday's close: MAR
Seeking Alpha's Market Currents team contributed to this post.
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