- Fannie Mae: Smaller loss, less gov't aid. Fannie Mae (OTCQB:FNMA) posted a $1.2B net loss in Q2 and asked the government for another $1.5B in aid. Though the numbers are still ugly, this is Fannie's smallest loss in three years and its smallest quarterly request for assistance since November 2008. Delinquency rates have been dropping, but continued weakness in the housing market could dampen Fannie's efforts to turn around its 12-quarter losing streak. Separately, the White House denied reports that it planned to change its policy towards Fannie and Freddie Mac (OTCQB:FMCC), after analysts had speculated the Obama administration might tweak rules at the mortgage giants to spark a refinancing wave.
- FCC aborts net neutrality talks. The FCC abruptly ended closed-door talks with internet and telecom giants over net neutrality, saying the two sides couldn't reach a compromise on ways to regulate internet traffic. Sources said FCC officials felt the talks had been undermined by reports of a deal between Verizon (VZ) and Google (GOOG) that would allow the phone giant to prioritize some broadband traffic in exchange for a premium.
- A win, and a possible loss, for Oracle. In a legal filing, SAP (SAP) said it would accept responsibility for copyright infringement by a discontinued business and pay restitution to rival Oracle (ORCL). However, SAP plans to present information showing Oracle's damages were substantially less than the $1B it claims, with damages likely to be in the "tens of millions" of dollars. Separately, sources said Oracle may have to pay damages of up to $1B in the Justice Department's software-overcharging suit, as the company may have overbilled the government by 35% or more.
- BofA wants to loosen gov't leash. Bank of America (BAC) is trying to get the government to release it from a confidential memorandum of understanding put in place during the financial crisis. The 15-month-old sanctions restrain BofA from certain actions, such as raising its dividend, and subject the bank to increased regulatory scrutiny of both large decisions and day-to-day operations. Officials from the Fed and the Office of the Comptroller of the Currency have been somewhat reluctant to lift the memorandum, and are engaged in negotiations with the bank while they evaluate whether BofA satisfied all of their requirements.
- Winners and losers from Russia's wheat whipsaw. After initially promising to keep grain exports stable, Russia said it would ban grain exports because of the country's worst drought in at least a century. The news lifted shares of U.S. grain merchants like Archer Daniels Midland (ADM, +5.7% in yesterday's trading) and Bunge (BG, +5.6%), but higher wheat prices will become a challenge for cereal and bread producers like General Mills (GIS, -2.2%), Kellogg (K, -1.75%) and Sara Lee (SLE, -2%). Wheat's price spike (contracts for Dec. delivery +6.5% earlier today, +25% this week) could also spur demand for the dollar and the loonie; trade balance is often overlooked in currency valuation, and North American producers stand to increase exports in the wake of Russia's moratorium.
- CNOOC eyes prized BP asset. CNOOC (CEO), China's biggest offshore oil producer, may bid for one of BP's (BP) prize Latin American assets: its 60% stake in Argentina's Pan American Energy, which could be worth $20B as reserves and output have risen. BP has said it's not putting on a fire sale, but industry sources say PAE is likely up for sale because it's less critical than some of BP's other assets. Separately, BP completed cementing the Gulf of Mexico well yesterday afternoon, effectively sealing it for good, and is now monitoring the well to check the procedure's success. Premarket: BP +1.4% (7:00 ET).
- RBS' profit beat. Royal Bank of Scotland (RBS) reported H1 net income of £9M ($14M), beating analysts' expectations of a £47M loss and a £1.04B loss in the year-earlier period. A reduction in bad-loan provisions and writedowns on credit market investments helped the bank return to profitability for the first time since 2007. Net interest income rose to £7.2B from £6.9B as margins widened. Premarket: RBS +1.6% (7:00 ET).
- Boeing loses airplane orders. Boeing (BA) customers canceled 26 new commercial airplane orders valued at $5.8B this week, after earlier reports that Dubai Aerospace Enterprise may be forced to cancel aircraft orders because of growing financial difficulties. Boeing declined to comment.
- White House stands behind Ford. The White House unveiled a $250M loan guarantee for Ford (F) yesterday as part of its push to double exports over the next five years. The loan guarantee will finance $3.1B of export sales for more than 200K Ford vehicles for buyers in Canada and Mexico. Obama also said taxpayers will be fully repaid and even make a return on the government's bailout of General Motors.
- Parts shortages send companies scrambling. Continued supply shortages are crimping sales in the electronics industry, leaving companies scrambling to reconfigure products and paying up to stockpile key parts. The shortage stems from manufacturers' inability to ramp up production fast enough to meet rebounding demand. Companies that have seen a Q2 sales hit include GE (GE), which said supply constraints for its healthcare equipment cost the company $50M in sales, and Ericsson (ERIC) which said the shortages cost the company $400M-550M. The shortages, though easing, are expected to last for the rest of the year.
- Goldman charges 4 cents for Indian sale. Goldman Sachs (GS) may earn a whopping 2 rupees ($0.04) in its first job managing a share sale by an Indian state-owned company. Sources said Goldman tied for the lowest bid among 17 firms vying to manage the $1.8B offer by Power Grid Corporation of India Ltd. by offering to work for a fee of 0.00000001% of the sale proceeds, vs. an average of around 4% on money raised for U.S. offerings. It's not just Goldman; many Wall Street firms are charging near-zero fees for India's state sales in hopes it will win them more investment banking work in Asia's third-largest economy.
- White House economic adviser steps down. Key White House economic adviser Christina Romer said she'll step down from her post effective Sept. 3 to return to her teaching post at the University of California at Berkeley. Romer, who helped oversee the Obama administration's response to the financial crisis, is the second key economic player to leave the White House in recent months.
Earnings: Friday Before Open
- Pepco (POM): Q2 EPS of $0.34 beats by $0.14. Revenue of $1.6B (-1.8%) vs. $2.4B. (PR)
- Warner Chilcott (WCRX): Q2 EPS of $0.98 beats by $0.17. Revenue of $815.6M (+225%) vs. $753M. (PR)
Earnings: Thursday After Close
- Activision (ATVI): Q2 EPS of $0.06 beats by $0.01. Revenue of $683M (-14.7%) vs. $720M. (PR)
- Assured Guaranty (AGO): Q2 EPS of $0.91 beats by $0.19. Revenue of $424M (+269%) vs. $398M. (PR)
- CF Industries (CF): Q2 EPS of $2.51 may not be comparable to consensus of $3.16. Revenue of $1.3B (+32%) vs. $1.2B. (PR)
- Crocs (CROX): Q2 EPS of $0.37 beats by $0.15. Revenue of $228M vs. $221M. (PR)
- DCT Industrial Trust (DCT): Q2 EPS of $0.10 in-line. (PR)
- Eclipsys (ECLP): Q2 EPS of $0.16 beats by $0.02. Revenue of $133M (+2.8%) vs. $137M. (PR)
- EOG Resources (EOG): Q2 EPS of $0.18 misses by $0.07. Revenue of $1.4B (+57.7%) vs. $1.2B. (PR)
- Great Plains Energy (GXP): Q2 EPS of $0.47 beats by $0.06. Revenue of $552M (+14.9%) vs. $538M. (PR)
- Kraft (KFT): Q2 EPS of $0.60 beats by $0.08. Revenue of $12.2B (+25.3%) vs. $12.3B. (PR)
- Live Nation (LYV): Q2 EPS of -$0.20 misses by $0.18. Revenue of $1.3B (+21%) vs. $1.4B. (PR)
- Medicis Pharmaceutical (MRX): Q2 EPS of $0.56 beats by $0.06. Revenue of $174M (+23%) vs. $171M. (PR)
- Microchip Technology (MCHP): FQ1 EPS of $0.47 misses by $0.04. Revenue of $321M (+66%) in-line. (PR)
- PerkinElmer (PKI): Q2 EPS of $0.38 beats by $0.05. Revenue of $498M (+13.6%) vs. $464M. (PR)
- Public Storage (PSA): Q2 EPS may not be comparable to consensus of $1.24. Revenue of $354M vs. $373M. (PR)
- Sapient (SAPE): Q2 EPS of $0.09 beats by $0.02. Revenue of $200M (+36%) vs. $195M. Shares +1.2% AH. (PR)
- Scientific Games (SGMS): Q2 EPS of -$0.05 misses by $0.18. Revenue of $233M (+3.6%) vs. $222M. (PR)
- Southwestern Energy (SWN): Q2 EPS of $0.35 misses by $0.01. Revenue of $590M (+23.5%) vs. $438M. (PR)
- Weingarten Realty Investors (WRI): Q2 EPS of $0.42 beats by $0.01. Revenue of $139M (-2.5%) vs. $137M. (PR)
- In Asia, Japan -0.1% to 9642. Hong Kong +0.6% to 21679. China +1.4% to 2658. India -0.2% to 18144.
- In Europe, at midday, London +0.6%. Paris +0.5%. Frankfurt +0.5%.
- Futures: Dow flat. S&P +0.1%. Nasdaq +0.1%. Crude -0.3% to $81.75. Gold -0.2% to $1196.40.
Friday's Economic Calendar
- 8:30 Nonfarm payrolls
9:00 Hearing: Community Reinvestment Act
3:00 PM Consumer Credit
- Notable earnings before Friday's open: AIG, MIR, PGN, POM, SHO, WCRX
Seeking Alpha's Market Currents team contributed to this post.
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