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.

  • Gaddafi disdains protesters, son warns of bloodshed. All eyes are on Libya as soldiers fired on violent protesters in Tripoli this morning, even as embattled leader Muammar Gaddafi's grip on the nation wanes. In his first public appearance since the revolt broke out last week, a defiant Gaddafi disdained protesters and denied he's left the country. Human rights groups say more than 200 people have been killed in five days of violence; opposition groups put the figure much higher. In an appearance Monday, Gaddafi's son Saif al-Islam promised a conference on constitutional reforms within days, but said Libya would fight protesters calling for his father's ousting "to the last minute... until the last bullet," and warned that a civil war would lead to "hundreds of thousands of deaths."
  • Oil spikes as Libya crisis deepens. Crude futures soared in overnight trading, leading IEA chief economist Fatih Birol to raise the possibility the trade group might ask members to release some of their 1.6B barrels in oil reserves to keep a lid on prices. Crude futures are already up more than 9% from last week's close, and things could get worse if hostilities escalate in Libya - a trend that could easily stymie consumer spending and confound an already fragile recovery. "Given the pace at which events are unfolding it would be daft to rule out a spike to $140 or beyond," Capital Economics says. Threats from Gaddafi's son that the country's oil "will be burned" cannot be taken lightly; Libya accounts for almost 2% of global crude production.
  • Moody's warns of Japan ratings cut. Moody's downgraded Japan's sovereign rating outlook to Negative, and warned it may cut Japan's rating if the present government - the fifth since 2006 - can't garner support for proposed tax reforms the country needs to keep its $10T debt balloon from bursting. While a funding crisis doesn't seem likely in the short-term given the fact that 95% of its debt is held domestically, Moody's warned (free signup req'd) that "pressures could build up over the longer term" due to surging welfare costs and shrinking savings as Japan's population ages. Moody's outlook downgrade follows a similar warning earlier this month, and an S&P downgrade in January. Nikkei fell 1.8% Tuesday amid a broad drop in Asia markets due to rising tensions in Libya and the Middle East.
  • BHP/Chesapeake ink $4.75B shale gas deal. BHP Billiton (NYSE:BHP) said Monday it will pay $4.75B for Chesapeake Energy's (NYSE:CHK) 75% stake in the Arkansas Fayetteville shale natural gas field, just two weeks after it was put up for sale amid pressure from stakeholder Carl Icahn. The deal pits the global mining giant against China in a race for global energy assets; earlier this month PetroChina (NYSE:PTR) agreed to pay EnCana (NYSE:ECA) $5.4B for its shale gas stakes, and before that CNOOC (NYSE:CEO) bought $2.4B of CHK's shale assets. Analysts say the relatively low deal pricing reflects weak pricing for nat-gas, but BHP CEO Michael Yeager thinks gas prices will improve amid growing demand for clean energy, and said that even at current levels BHP could generate healthy margins. The deal may come as a relief to BHP investors, who have seen three mega-deals (takeover bids for Potash (NYSE:POT) and Rio Tinto (NYSE:RIO), and an iron-ore JV with RIO) disintegrate in recent years. Shares rose in Sydney Monday, but are -0.8% in premarket trading.
  • Santander dishes off 'non-core' Lat-Am insurance unit. Santander (STD) agreed to sell a 51% stake in its Latin America insurance business to Zurich Financial (OTC:ZFSVY) for $1.7B, giving Zurich access to the Spanish bank's 5,600 branches and 36M customers in the region. STD could earn another 20% on the deal if milestones are met over the next 25 years. Santander is the largest bank in the euro-zone by market cap, and the largest player in Latin America, where its growth helped it weather the financial crisis. But it has long said its global insurance operations aren't core to its business. STD -5.5% premarket.
  • Back on the offensive, BP pays $7.2B for India deepwater stake. BP (NYSE:BP) agreed to pay Reliance Industries $7.2B for a 30% stake in 23 oil and gas contracts to help explore deepwater fields in India, its second mega-deal in two months following January's $8B share-swap with Rosneft to explore and develop a huge property on the Arctic shelf. The moves underscore BP's post-Macondo approach - "a genuine focus on exploration and a shift toward resource and consumer markets," analyst Theepan Jothilingam said. BP predicts global energy use will rise by almost 40% by 2030, led by demand from emerging economies. BP shares were -1.9% premarket amid violence in Libya, where BP owns assets.
  • Holly and Frontier Oil to join in $7B deal. Refinery operators Holly (HOC) and Frontier Oil (NYSE:FTO) will combine operations in an all-stock "merger of equals" worth almost $7B combined. The deal creates the most profitable independent U.S. refiner on a per-barrel basis; the combo will have refining capacity of more than 440,000 BPD across five refineries. After the merger, Holly shareholders will own 51% of the joint company, for which Frontier shareholders will receive 0.481 Holly shares per share.
  • Geithner: Congress will boost debt limit. Treasury Secretary Geithner says there's "absolutely no risk" Congress won't raise the U.S. debt limit, downplaying the possibility temporary measures will be allowed to lapse March 4 amid a political showdown over entitlements. On Saturday, the House voted for spending cuts of $61B - likely the biggest one-time budget cut in history - but which will be opposed by Senate Democrats. Commenting to the BBC, Geithner said the White House's economic forecasts - viewed by some as overly optimistic - were "pretty conservative... only slightly above the consensus expectations."
  • China tightens the noose around internet search. Beijing launched its own search engine following Google's (NASDAQ:GOOG) decision last year to close its Chinese search engine over censorship. The site, which went live today, will be jointly operated by Xinhua News Agency and China Mobile (NYSE:CHL). Baidu.com (NASDAQ:BIDU) has climbed about 30% since Google left the Chinese search market; it claims 75.5% of the Chinese search market. A search on the new engine, named Panguso, for "Liu Xiaobo," the jailed activist and Nobel Peace Laureate, returned no results.

Earnings: Tue. Before Open

  • Diana Shipping (NYSE:DSX): Q4 EPS of $0.40 misses by $0.01. Time charter revenue of $73M (+24.4% Y/Y) beats by $3.7M. (PR)
  • Frontline (NYSE:FRO): Q4 EPS of -$0.17 misses by $0.11. Says "poor earnings are mainly a reflection of the weak global freight market. This weakness might continue until the current large gap between supply and demand in the tanker market narrows." Shares -2.9% premarket. (PR)
  • Home Depot (NYSE:HD): Q4 EPS of $0.36 beats by $0.05. Revenue of $15.1B (+3.8% Y/Y) beats by $300M. Comps were up 3.9% and 4.8% in U.S. Boosts dividend by 6% to $0.25/share and says longer-term dividend payout ratio is 40%. (PR)
  • Hormel Foods (NYSE:HRL): FQ1 EPS of $0.55 beats by $0.12. Revenue of $1.9B (+11.3% Y/Y) beats by $60M. (PR)
  • Macy's (NYSE:M): Q4 EPS of $1.59 beats by $0.07. Revenue of $8.3B (+4.9% Y/Y) in-line. Sees comps growth of 3% in 2011. Shares +1% premarket. (PR)
  • Medco Health Solutions (NYSE:MHS): Q4 EPS of $0.94 in-line. Revenue of $16.9B (+11.1% Y/Y) beats by $280M. (PR)
  • Medtronic (NYSE:MDT): FQ3 EPS of $0.86 beats by $0.02. Revenue of $3.96B (+2.9% Y/Y) in-line. Shares -0.7% premarket. (PR)
  • Melco Crown Entertainment (NASDAQ:MPEL): Q4 EPS of $0.03 misses by $0.01. Revenue of $774M (+93.3% Y/Y) beats by $21M. (PR)
  • NRG Energy (NYSE:NRG): Q4 EPS of -$0.07 vs. consensus of $0.40. Revenue of $1.8B (-15.2% Y/Y) vs. consensus of $2.9B. Shares -2.8% premarket. (PR)
  • Office Depot (NYSE:ODP): Q4 EPS of $0.09 beats by $0.12. Revenue of $2.96B (-3.4% Y/Y) in-line. (PR)
  • Petrohawk Energy (NYSE:HK): Q4 EPS of $0.11 misses by $0.04. Revenue of $402M (+13.3% Y/Y) misses by $53M. (PR)
  • R.R. Donnelley & Sons (NASDAQ:RRD): Q4 EPS of $0.51 beats by $0.05. Revenue of $2.7B (+4.7% Y/Y) in-line. (PR)
  • Trina Solar (NYSE:TSL): Q4 EPS of $1.87 beats by $0.78. Revenue of $642M (+105% Y/Y) beats by $117M. Shares +0.3% premarket. (PR)
  • V.F. Corp. (NYSE:VFC): Q4 EPS of $1.78 beats by $0.13. Revenue of $2.1B (+11% Y/Y) beats by $0.1B. Shares +2.5% premarket. (PR)
  • Wal-Mart (NYSE:WMT): Q4 EPS of $1.34 beats by $0.03. Revenue of $116.4B (+2.4% Y/Y) misses by $1.4B. Sees Q1 U.S. comps of -2% to flat vs. +0.8% consensus. "Some of the pricing and merchandising issues in Walmart ran deeper than we initially expected, and they require a response that will take time to see results. There is no greater priority for Bill or me than getting sales back into positive territory." (PR)

Today's Markets

  • Asia: Japan -1.8%. Hong Kong -2.1%. China -2.6%.
  • Europe at midday: London -1.1%. Paris -1.5%. Frankfurt -0.4%.
  • Futures at 7:00: S&P -1.3%. Dow -0.9%. Nasdaq -1.6%. Crude +7.5% to $96.50. Gold +0.6% to $1,397. Euro -0.1% vs. dollar. Pound -0.5%.

Tuesday's Economic Calendar

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