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.

  • SAP to pay Oracle $1.3B in damages. A federal jury ruled SAP (NYSE:SAP) must pay Oracle (NASDAQ:ORCL) $1.3B in damages for copyright infringement. SAP had admitted liability by its TomorrowNow unit, which it closed in 2008, but its lawyers told the jury at trial that it should owe only $40M in damages. Oracle said the verdict is "the largest amount ever awarded for software piracy," while a disappointed SAP promised to "pursue all available options, including post-trial motions and appeal if necessary." Premarket: ORCL +2.1%, SAP -2.2% (7:00 ET).
  • Ireland discusses bailout size, set to take majority bank stake. The EU and IMF haven't yet determined the exact size of Ireland's aid package, but PM Brian Cowen said a figure of around €85B ($113B) had been discussed, which could be used to recapitalize the banks and fund the public finances. As part of the deal, the government is poised to take a majority stake in the Bank of Ireland (NYSE:IRE) in a move that would leave the country without a significant lender independent of state control. The terms of the bailout may also include a new bank levy, creating a way for Ireland to increase its 'tax yield' from the corporate sector without raising the 12.5% corporate tax rate that Irish officials are fighting so hard to maintain. S&P lowered Ireland's debt rating two notches to A, with a negative outlook. Premarket: IRE -25.3%, AIB -9.1%, euro -0.1% vs. the dollar (7:00 ET).
  • FDA approval boosts Lilly, Acrux. The FDA approved Axiron, Eli Lilly's (NYSE:LLY) topical solution for testosterone replacement therapy in men. The U.S. testosterone market is estimated at $1B and is expected to grow 20% annually. Acrux (OTCPK:ARUXF), Lilly's Australian partner on the drug, rose 9.1% in Aussie trading.
  • Insider trading probe picks up steam. Federal officials appear to be rapidly expanding the scope of their insider trading probe: hedge fund Citadel Investment Group reportedly received a wide-ranging subpoena from the Justice Department; mutual fund Wellington Management is said to have received a document request from the FBI; and, mutual fund provider Janus Capital (NYSE:JNS) said it received an inquiry for general information and plans to cooperate fully. Other subpoena recipients reportedly include hedge funds Millennium Capital Management and Maverick Capital Management*, while SAC Capital Advisors sent investors a letter yesterday confirming it had received several 'extraordinarily broad' subpoenas which don't "shed much light on whom or what the government may be investigating." (*Update, Nov. 27: Maverick Capital reports it has not received a subpoena in connection with this insider trading probe).
  • FOMC struggles with dual mandate. Minutes released yesterday from the FOMC's Nov. 2-3 meeting show officials were at odds over the wisdom of their new bond-buying program, particularly its effects on the dollar, though there was still general support for QE2. FOMC members turned more negative on the outlook for growth and employment, with some members saying it could take more than six years for the jobless rate to return to normal. Fed officials see growth of 3% to 3.6% next year, down from an earlier prediction of 3.5% to 4.2% growth, while the new forecast for 2010 growth is 2.5%, down from a prior forecast of 3% to 3.5%. "The FOMC thinks that it will be failing on both sides of its dual mandate three years from now," said economist Stephen Stanley in response to the minutes, so "it is easy to understand their dovishness given that outlook... odds of the FOMC cutting QE2 short prior to the June endpoint are pretty close to zero." (More: Fed considered targeting long-term interest rate)
  • More problem banks, uneven sector recovery. Commercial banks earned $14.5B in Q3, the FDIC said in its latest Quarterly Banking Profile, an increase of $12.5B from the year-earlier period and the fifth consecutive quarter of year-over-year increases. The results are below Q2's $21.4B profit; the FDIC largely attributes the decline to $10.4B in writedowns by Bank of America (NYSE:BAC). Bank debt holdings declined just $6.8B, suggesting a two-year contraction in loan portfolios "may have run its course." Loan-loss reserves shrunk for the first time since Q4 2006, due almost entirely to big banks reducing provisions, even as smaller banks continued to build them. The number of banks at risk of failure climbed to 860 as of Q3 but the FDIC said the industry's health continues to improve overall, though many point out the recovery of larger financial firms is not being shared equally by many smaller banks.
  • Treasury's GM proceeds boosts TARP recovery. The Treasury announced yesterday the delivery of $11.7B in proceeds from GM's (NYSE:GM) initial public offering, bringing the total of TARP funds returned to taxpayers to $252B so far. The Treasury could receive another $1.8B from the IPO if an overallotment option is fully exercised, and said it will receive another $2.1B in December when GM repurchases preferred stock.
  • Court ruling hurts Air Products' pursuit of Airgas. The Delaware Supreme Court reversed a ruling that would have allowed Airgas (ARG) shareholders to move up the next annual meeting to January 15. The ruling is a setback for suitor Air Products and Chemicals (NYSE:APD), which needs the meeting to replace ARG's directors. Air Products' attempts to win Airgas shareholder support will now have to wait until at least next fall. Air Products, which has said in the past it doesn't want the process to drag out indefinitely, may either raise its bid to persuade Airgas' board or drop the bid altogether. In yesterday's trading, ARG -5.9%, APD -1.1%.
  • Sojitz, Lynas form rare-earth deal. Japanese trading house Sojitz reached a deal with Australian mining company Lynas (OTCPK:LYSCF) on the supply of rare earth metals, and plans to announce details of the agreement later today. The announcement comes one day after Australia vowed to become a future long-term supplier of rare earths to Japan following China's increasingly tight export quotas of the crucial metals. Media reports said Sojitz would pay around $300M for the rights to buy 8,500 tons of rare earth metals annually, representing around 30% of annual demand in Japan; a Sojitz spokesman declined to comment on the figures. In Aussie trading, Lynas rose 10.5%.
  • Cerberus looks to sell Chrysler Financial. Cerberus Capital Management is reportedly shopping auto lender Chrysler Financial, which the P-E firm acquired in 2007. The unit has a book value of $6B-7B, and Cerberus has been soliciting interest from large banks.

Earnings: Tuesday After Close

  • Guess? (NYSE:GES): Q3 EPS of $0.75 beats by $0.16. Revenue of $614M (+17.4%) vs. $580M. Shares +8.7% AH. (PR)
  • J Crew Group (JCG): Q3 EPS of $0.58 beats by $0.04. Revenue of $430M (+3.7%) in-line. Shares -0.4% AH. (PR, earnings call transcript)
  • TiVo (NASDAQ:TIVO): Q3 EPS of -$0.18 misses by $0.01. Revenue of $41.3M (-12.2%) vs. $41.4M. Shares -2.8% AH. (PR, earnings call transcript)

Today's Markets

  • In Asia, Japan -0.8% to 10030. Hong Kong +0.6% to 23024. China +1.1% to 2859.94. India -1.2% to 19460.
  • In Europe, at midday, London +0.6%. Paris +0.2%. Frankfurt +1.1%.
  • Futures at 7:00: Dow +0.3%. S&P +0.3%. Nasdaq +0.2%. Crude +0.5% to $81.69. Gold -0.2% to $1375.40.

Wednesday's Economic Calendar

Seeking Alpha's News Currents team contributed to this post.

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