- FDA approves new lupus drug. The FDA approved the first new drug for lupus in over fifty years, a victory for Human Genome Sciences (HGSI) and GlaxoSmithKline (GSK), the drug's co-marketers. It's also a milestone in the effort to use the human genome to develop new medicines. Analysts expect the bioengineered drug, called Benlysta, will be a blockbuster that will eventually see sales of over $1B annually. Premarket: GSK +1%, HGSI halted (7:00 ET).
- Starbucks, Green Mountain reach coffee deal. Starbucks (SBUX) said this morning that it will produce and sell its coffee and its Tazo brand tea via Green Mountain Coffee Roasters' (GMCR) K-Cup portion packs for use in the Keurig single-cup brewing system. The move widens the selection for users of Green Mountain's Keurig system, ends speculation that Starbucks would roll out its own single-cup brewer, and follows speculation last month that the two would join forces in the booming $4B single-serving market. Premarket: SBUX +0.6%, GMCR +7.7% (7:15 ET).
- Pimco zeroes out Treasury holdings. Bond giant Pimco confirmed it has unloaded all of its U.S. government holdings, including Treasurys, in the Total Return Fund. The $237B fund previously had 12% of its assets in U.S. government holdings, and had as much as 63% of its assets in U.S. government-related debt in late 2009. Bill Gross, the fund's manager, is trying to get out ahead of the end of QE2, when he expects a rise in bond yields, and a concurrent fall in bond prices, would drive down the value of the fund's holdings.
- China posts surprise trade deficit. China surprised markets by posting a $7.3B trade deficit in February, marking China's first deficit in eleven months, its largest deficit in seven years and a significant reversal from January's $6.5B trade surplus. Economists had expected a $5B surplus. Monthly exports grew 2.4% Y/Y and imports grew 19.4% Y/Y, down from 37.7% and 51% growth respectively in January (though January's figures were somewhat distorted by the Chinese New Year holidays). Though the slowdown could reduce pressure on China to allow the yuan to appreciate, many economists are reluctant to draw too many conclusions from a single month's data.
- Spain downgrade sends euro tumbling. Moody's has downgraded Spain to Aa2 from Aa1, saying that the cost of restructuring the country's banking sector will be €40B-€50B ($55B-$69B) rather than the €20B forecast by the government. The ratings agency also said the risks to government finances remain 'skewed to the downside' and gave the country a negative outlook. The downgrade comes as the Bank of Spain prepares to present details on its estimates on bank recapitalization needs later today. The news hurt European bond prices and the euro, which was -0.5% at $1.3833 (7:00 ET).
- H&R Block climbs on earnings. H&R Block (HRB) reported FQ3 earnings yesterday (see details below), beating profit estimates and noting that a slow start to tax season has now given way to 'significant growth' in returns prepared and tax preparation revenues. Total tax returns prepared through the end of February were up 6% from the prior year, while digital tax returns were up 12.7%, and the company believes it "gained share in both retail and online within the highly competitive early season.” In after-hours trading, HRB +6%.
- Sony reshuffles core businesses. Sony (SNE) announced plans to reorganize its main electronics businesses and will create a massive new consumer group to be led by Kazuo Hirai. Hirai previously oversaw Sony's PlayStation business, and his new appointment has reignited speculation that the rising executive might eventually be chosen as a successor to CEO Howard Stringer. Though he praised Hirai, Stringer said he didn't plan to step down anytime soon and the company hadn't yet decided on an eventual replacement.
- Microsoft's Kinect sales hit 10M. Microsoft (MSFT) has sold 10M Kinects just four months after launching the accessory for its Xbox computer-gaming console in November. The figures indicate that Microsoft's strategy of picking a pure gesture-control technology to counter the success of the Nintendo Wii, which uses a hand-held controller, is paying off. The Kinect's success is helping to boost Microsoft's earnings, and the company forecast in January that revenue in its entertainment and devices division will rise 50% in Q1 2011 after increasing 55% to $3.7B in Q4 2010.
- HCA Holdings shoots out of the gate. HCA Holdings (HCA) raised $3.8B in its initial public offering yesterday, selling a higher-than-expected 126.2M shares for $30 each, the high end of the expected price range. Enthusiastic investors made it the largest U.S. private-equity backed IPO ever, and shrugged off concerns about the hospital operator's high debt levels. The IPO's success will likely encourage private-equity firms to move forward with public offerings of investments made at the height of the credit bubble.
- Libya's oil terminal blazes. As fighting continues in Libya, Gaddafi's forces initiated air and artillery strikes on some of Libya's oil facilities. The country's largest crude processing plant was hit, while the nation’s largest oil terminal, at the port of Sidra, is in flames. NATO defense ministers will meet in Brussels today to discuss possible military options in response to the aerial and artillery attacks. Crude futures -0.6% to $103.73 (7:00 ET).
- Icahn to raise Dynegy stake. Activist investor Carl Icahn reached an agreement with Dynegy (DYN) to buy up to 19.99999% of the company while retaining his voting rights, waiving a section of Delaware's corporate law which would have prevented Icahn from voting his shares on any deal he puts together for Dynegy over the next three years. The agreement comes just one day after Dynegy warned it may have to file for bankruptcy, and following shareholders' recent rejection of Icahn's $665M buyout offer.
- Tokyo, Osaka eye tie-up as exchanges consolidate. The Tokyo Stock Exchange, the world's fourth-biggest exchange by trading volume, said it will hold merger discussions with smaller rival Osaka Securities Exchange, as the industry undergoes a wave of consolidation. TSE chief executive Atsushi Saito said combining TSE's dominant position in equities trading and Osaka's strength in derivatives could make for an effective alliance. However, analysts question whether creating an 'all-Japan' bourse will be effective in reversing the TSE's decline or in keeping pace with the global consolidation of exchanges.
- Foreclosure filings at three-year low. Foreclosure filings fell to a three-year low in February, according to a new report by RealtyTrac. A total of 225,101 properties received foreclosure-related notices in February, a 14% reduction from the previous month and a 27% reduction from the previous year. RealtyTrac CEO James Saccacio said "we expect to see the numbers bounce back, but that will likely take several months. And monthly volume may never return to its peak in March 2010 of more than 367,000 properties receiving foreclosure filings."
- Republicans oppose robo-signing settlement. Republican lawmakers have 'significant concerns' with a settlement proposal sent last week from federal regulators and state attorneys general to some of the country's largest mortgage servicers. The proposal called for increased efforts to keep borrowers in their homes, including reductions in loan principal. Republicans who oppose the settlement sent Geithner a letter yesterday saying they have concerns about the potential "effect on the financial system, as well as concerns that the administration and state agencies are attempting to legislate through litigation."
Earnings: Thursday Before Open
- Smithfield Foods (SFD): FQ3 EPS of $0.84 beats by $0.18. Revenue of $3.19B (+10.4% Y/Y) beats by $0.03B. (PR)
Earnings: Wednesday After Close
- H&R Block (HRB): FQ3 EPS of $0.14 may not be comparable with consensus of $0.00. Revenue of $852M (-9% Y/Y) in-line. Shares +6% AH. (PR, earnings call transcript)
- Molycorp (MCP): Q4 EPS of -$0.03 beats by $0.04. Revenue of $21.7M (+886% Y/Y) beats by $8.3M. Shares +4.8% AH. (PR)
- In Asia, Japan -1.5% to 10434. Hong Kong -0.8% to 23615. China -1.5% to 2958. India -0.8% to 18328.
- In Europe, at midday, London -1.1%. Paris -0.7%. Frankfurt -1.0%.
- Futures at 7:00: Dow -0.4%. S&P -0.5%. Nasdaq -0.7%. Crude -0.7% to $103.68. Gold -0.6% to $1421.40.
Thursday's Economic Calendar
- 8:30 Trade Balance
8:30 Initial Jobless Claims
9:00 Fed's Consumer Advisory Council Meeting
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
1:00 PM Results of $13B, 30-Year Note Auction
1:30 PM Hearing: "Who's Watching Wall Street's Watchdog?"
2:00 PM Treasury Budget
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
- Notable earnings before Thursday's open: DLM, SFD
- Notable earnings after Thursday's close: ARO, DNN, NSM
The SA Currents team contributed to this post.
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