- Lawmakers question mortgage securitization. The Senate Banking Committee is scheduled to hold a hearing today on problems with mortgage servicing, and is expected to take a sharply critical view of the securitization process and foreclosure-documentation practices. As a preemptive measure, the American Securitization Forum, a trade group for the securitization industry, released today a 28-page defense of its practices in bundling mortgages into securities, explaining that the process is both fair and legal. Also out today is a report from the Congressional Oversight Panel questioning whether improper document transfers during the securitization process could create additional liabilities for the country's largest banks; in a worst-case scenario, "consequences could be severe" and could cause billions of dollars in losses for major banks, primarily Citigroup (NYSE:C), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC). Premarket: C -0.9%, BAC -0.5% (7:00 ET).
- GM to expand IPO. Swept up with a growing sense of investor optimism, underwriters of GM's heavily oversubscribed IPO are reportedly planning to raise the deal's suggested price range above the original $26-29 range. The revised price range, which could be filed with regulators as soon as today, is likely to be $32-33/share, which should net the government $1.4B more than expected from the IPO. In conjunction with government officials, GM may also increase by as much as 20% the number of shares it plans to sell.
- Big names reshuffle portfolios. In a slew of stake reporting yesterday, Berkshire Hathaway (NYSE:BRK.A) disclosed that it had bought 2M shares of BNY Mellon (NYSE:BK), added to its Wells Fargo (WFC) holdings and exited its Home Depot (NYSE:HD) stake. Carl Icahn got into Mattel (NASDAQ:MAT) and out of Yahoo (NASDAQ:YHOO) and Wendy's/Arby's (NYSE:WEN). George Soros piled into gold, adding 5M shares of iShares Gold Trust (NYSEARCA:IAU) to nearly 5M shares of SPDR Gold Trust (NYSEARCA:GLD), and 705K call options on GLD. Blackstone (NYSE:BX) took big positions in iStar Financial (SFI) and Eastman Kodak (EK). Paulson & Co. trimmed its stakes in Bank of America (BAC) and Citigroup (C) but held onto SPDR Gold Trust.
- Dudley defends QE2. As QE2 criticisms continue to flow, NY Fed President Bill Dudley defended the latest round of quantitative easing. The goal is to ease financial conditions, he said, insisting that the Fed isn't trying to trigger further weakness in the dollar. He also noted that critics are underestimating the Fed's ability to raise interest rates as needed: "People do not understand clearly” that “we can have an enlarged balance sheet and not have a long-term inflation problem. We are very confident of our ability to exit when the time comes.”
- BHP still intent on large deals. Despite $100B in failed acquisition attempts, BHP Billiton (NYSE:BHP) has no plans to give up on large deals. "We're not about to change from transactions that potentially involve tier one assets, large tier one assets, expandable, quality assets and change that to go after second tier, lower quality acquisitions," Chairman Jac Nasser said this morning. "Don't look to us to be chasing smaller acquisitions of lower quality." Premarket: BHP -2.3% (7:00 ET).
- Ireland may be softening on bailout resistance. Irish officials continue to insist the country does not need a bailout, telling investors there's 'no reason' to ask for aid and that markets are “not reacting particularly rationally” given that Dublin's funding needs are met through mid-2011. However, Prime Minister Brian Cowen suggested Ireland may be willing to weigh EU aid for its struggling banks, and has put the issue on the agenda for today's regularly scheduled meeting of eurozone finance ministers.
- Home Depot's earnings beat. Home Depot (HD) posted better-than-expected Q3 earnings this morning (see details below), mostly due to tighter cost controls and its fourth consecutive quarter of positive same store sales. The company updated its FY'2010 guidance and expects to see sales increase 2.2% for the year, and for diluted EPS to increase 25% to $1.94 for the year.
- U.K. inflation rises. U.K. inflation unexpectedly rose higher above its target in October, prompting Bank of England Governor Mervyn King to write his fourth letter this year explaining why inflation is so high. King explained that the rise is probably temporary and spare capacity in the economy would bring inflation down in the medium-term. However, he also wrote that "the committee is ready to adjust policy — in either direction — in order to ensure that the risks to the outlook in the medium-term remain evenly balanced around the 2% target." October's CPI had come in at 3.2%.
- Infineon declares dividend after strong earnings. Infineon (OTCQX:IFNNY) will pay a dividend for the first time in a decade after posting a strong Q4 net profit of €390M ($530M), a sharp rise from last year's €11M net profit and substantially better than analysts' estimates of €213M. Rising demand for its chips helped lift sales 55% to €942M, while operating profit rose 33% to €171M. The dividend payout will be €0.10/share. In German trading, Infineon +4.1% (7:00 ET).
- Apple to sell Beatles songs. Apple (NASDAQ:AAPL) promises an 'exciting announcement' is coming today, and sources expect the company to fill a longstanding gap in its iTunes music collection by adding the Beatles catalog. Terms of the deal couldn't be determined, and the move could turn out to be more symbolic than substantial to sales. It's unclear whether other online music services will gain access to the catalog as well.
- GGP prices 135M shares. General Growth Properties (NYSE:GGP) priced 135M shares at $14.75 each yesterday, raising $2B to repay investors who helped finance the firm's bankruptcy exit. If a 20.25M share overallotment is exercised, GGP will have raised $2.3B. GGP closed flat yesterday at $15.40.
Earnings: Tuesday Before Open
- Home Depot (HD): Q3 EPS of $0.51 beats by $0.03. Revenue of $16.6B (+1.4%) in-line. (PR)
- Jacobs Engineering Group (NYSE:JEC): FQ4 EPS of $0.61 misses by $0.01. Revenue of $2.3B (-8.2%) vs. $2.5B. (PR)
Earnings: Monday After Close
- Molycorp (MCP): Q3 EPS of -$0.10 misses by $0.04. Revenue of $8.4M (+320%) vs. $13.6M. Shares -1.3% AH. (PR)
- Nordstrom (NYSE:JWN): Q3 EPS of $0.53 beats by $0.01. Revenue of $2.1B (+11.7%) in-line. Shares -1.9% AH. (PR,earnings call transcript)
- Urban Outfitters (NASDAQ:URBN): Q3 EPS of $0.43 beats by $0.01. Revenue of $574M (+13,4%) vs. $582M. Shares +6.2% AH. (PR,earnings call transcript)
- In Asia, Japan -0.3% to 9797.1. Hong Kong -1.4% to 23693. China -4.0% to 2895. India -2.2% to 19865.
- In Europe, at midday, London -1.5%. Paris -1.7%. Frankfurt -0.8%.
- Futures at 7:00: Dow -0.7%. S&P -0.6%. Nasdaq -0.8%. Crude -1.4% to $83.67. Gold -1% to $1355.50.
Tuesday's Economic Calendar
7:45 ICSC Retail Store Sales
8:00 WSJ's CEO Council Meeting
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
9:00 Treasury Quarterly Refunding
9:15 Industrial Production
10:00 NAHB Housing Market Index
2:30 PM Hearing: Problems in Mortgage Servicing
2:30 PM Confirmation Hearing: Peter Diamond (Fed Board)
5:30 PM Fed's Lockhart: 'Does the Fed Matter?'
- Notable earnings before Tuesday's open: ANF, ARM, DKS, HD, JEC, SKS, TJX, WMT
- Notable earnings after Tuesday's close: SINA
Seeking Alpha's Market Currents team contributed to this post.
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