Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
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.

  • Bernanke on 60 Minutes: Exuberant confidence. "We're not very far from the level where the economy is not self-sustaining," Fed Chief Bernanke told 60 Minutes in an interview that aired last night. Bernanke warned it could take five years for unemployment to fall back to "normal" levels, but said that not only is he happy with the results of the Fed's recent $600B round of Treasury purchases (a.k.a. QE2), but that he would spend even more if the need arose. Bernanke insisted the Fed's accommodative policies won't trigger runaway inflation, saying he's "100% confident" the Fed has the tools to control it, and adding, "We’ve been very, very clear that we will not allow inflation to rise above 2%. We could raise interest rates in 15 minutes if we have to."
  • AOL mulls breakup, Yahoo merger. Sources say AOL Inc. (NYSE:AOL) "is actively exploring a breakup involving a complicated series of transactions that may lead to a merger with Yahoo (NASDAQ:YHOO)." Current plans in many ways resemble previous (unfruitful) discussions surrounding AOL's spinoff from Time Warner (NYSE:TWX), and would see AOL selling its legacy dial-up business to EarthLink (NASDAQ:ELNK) or United Online (NASDAQ:UNTD), and its display ad business to Yahoo.
  • Ackman offers to fund a Borders bid for Barnes & Noble. Hedge fund manager Bill Ackman is ready to finance a $16/share, $964M bid by Borders Group (BGP) for rival Barnes & Noble (NYSE:BKS), according to an SEC filing this morning. Barnes & Noble put itself up for sale in August. Ackman's Pershing Square would own a 37.3% stake in Borders Group if all warrants were exercised. Premarket: BGP +16%. BKS +18%.
  • China urges caution with volatile Korea situation. Chinese PM Hu Jintao warned President Obama this morning that Korea tensions could easily spiral out of control - their first discussion on the issue since the North shelled the South almost two weeks ago. Analysts said Hu tried his best to avoid siding with North Korea.
  • Carlyle targets 2011 IPO. Carlyle Group, the world's second-largest private-equity firm, is gearing up for an IPO in the hopes of overcoming the growing challenge of raising money for LBO funds. "Investors are reducing commitments to funds and making economic terms much less attractive," co-founder William Conway explained in an interview this weekend. Carlyle has led private-equity firms in 2010, participating in $16B of buyouts.
  • Moody's downgrades Hungary. Moody's cut Hungary's sovereign rating by two notches to Baa3, just above "junk" grade, and warned of further cuts if the government fails to put public finances on a sustainable footing. "We're expecting a deterioration of the structural budget balance, and that's something that bodes ill for the government's financial strength in Hungary," Moody's said. The forint slipped 0.7% vs. euro; Hungarian government bonds rose; and stocks dropped following the downgrade. The move was somewhat expected, although the two-notch slash took some economists by surprise.
  • Verigy spikes on Advantest bid. Advantest (NYSE:ATE) proposed to acquire Verigy (NASDAQ:VRGY) for $12.15/share, a 33% premium to Friday's close. Verigy's board reacted by saying that the bid is not superior to its proposed merger with LTX-Credence (LTXC), but that it "believes the Advantest proposal might lead to a superior transaction - so it has determined to engage in discussions with Advantest." Premarket: VRGY +37%. LTXC -14%.
  • Morgan targets fat-cat bonuses. Morgan Stanley (NYSE:MS) CEO James Gorman reportedly plans to "play hardball" with bankers' bonuses this year, and is bracing for some "difficult conversations." While many Wall Street firms have worked to scale back performance bonuses, Morgan has been itching to retool a compensation system that spawned a generation of high rollers. Sources say Gorman believes strongly in his bench, should starters decide to move on.
  • 3M to acquire Swiss toolmaker. 3M Company (NYSE:MMM) said Monday it will acquire Swiss toolmaker Winterthur Technologies for $450M. Winterthur is a leading global supplier of precision grinding technology, serving customers in the growing area of hard-to-grind precision applications in industrial, automotive, aircraft, and cutting tools - a market that is projected to grow by at least 4%/year.
  • Putting a stop to stub quotes. A new rule that requires market makers to submit bids and offers within 8% of prevailing prices for the biggest U.S. stocks goes live today. Until now, specialists often submitted placeholder "stub quotes," often for just pennies, many of which were triggered during the May 6 flash crash. "They were an anachronism," Bats Global Markets COO Chris Isaacson said. "This is a good change for the market."

Today's Markets

  • Asia: Japan -0.1%. Hong Kong -0.4%. China +0.5%. India +0.1%.
  • Europe: London -0.1%. Paris -0.6%. Frankfurt flat.
  • Futures at 7:00: S&P -0.33%. 10-yr +0.46%. Euro -1.15% vs. dollar. Crude -0.4% to $88.83. Gold +0.46% to $1412.60.

Monday's Economic Calendar

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