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  • U.S. seeks $1B from J&J to settle probe. Prosecutors are pushing Johnson & Johnson (NYSE:JNJ) to pay $1B to resolve a long-standing investigation into whether the company marketed its Risperdal anti-psychotic medicine for unapproved uses, sources said. Such a settlement would rank among the industry's largest and probably have a material impact on J&J's quarterly results. Earlier this week, the company said it had set aside an unspecified amount for a potential agreement.
  • Eurozone growth beats forecasts. Eurozone GDP grew 0.8% in Q1 2011 from the prior period and 2.5% year-on-year, beating expectations and marking the strongest annual growth rate since Q3 2007. The expansion was led by a surge from EU engine Germany, where GDP increased 1.5% from Q4 2010, while France expanded 1%. Even Greek GDP grew, its 0.8% rise greater than that of Italy and Spain; however, Portugal's economy contracted 0.7% after shrinking 0.6% in Q4. The surprising overall figures could fuel expectations that the ECB will again raise interest rates despite the massive debt problems in the eurozone.
  • Hormone drugs cost Pfizer $772M. Pfizer (NYSE:PFE) is spending $772M to resolve claims that hormone-replacement treatments made by its Wyeth unit caused breast cancer. The company has so far recorded charges of $472M for about one-third of lawsuits it has faced, and has set aside a provision of $300M for "the minimum expected costs" to resolve all other outstanding actions. A fund manager expressed satisfaction at the news. "I see this as an effort to clean up a long-standing litigation so they can go forward with their business plan,” he said. “This is probably a good thing for the stock.” Shares closed +1.4% but were -0.1% after hours.
  • Google under scrutiny for pharmacy ads. The U.S. government is investigating Google (NASDAQ:GOOG) for accepting ads from companies selling unlicensed pharmaceuticals. Earlier this week, the company said it had set aside $500M to resolve an unspecified justice department probe into its advertising practices. While Google has controls to distinguish legitimate retailers from frauds, the company still appears to be liable for running ads from rogue pharmacies. Separately, Facebook has admitted secretly hiring PR company Burson Marsteller to plant negative stories about Google.
  • Telefonica net profit falls. Telefonica's (NYSE:TEF) Q1 2011 net profit dropped 1.9% to €1.62B ($2.31B) due to lower margins and surging operating expenses, in a sign that troubles in its Spanish home market remain a headache for the company. Operating expenses rose 13% to €10.18B, with personnel expenses also up 13%. Telefonica's revenue rose 10.8% to €15.44B but sales in Spain fell 5.6%.
  • SEC seeks charges against individuals in bonds probe. The SEC is reportedly pushing to indict executives involved in alleged mortgage bond fraud as part of agreements it is negotiating with firms caught up in its investigation into collateralized debt obligations and other mortgage-related products. The SEC wants to charge executives involved in selling the deals and outsiders who managed the assets. This could include action against hedge fund managers who helped structure certain mortgage bond deals but then bet against them. The move by the SEC to pin blame on individuals follows criticism that past fraud settlements didn't include action against executives or other employees.
  • Drug makers rise on success of HIV drug study. A trial showing that early anti-retroviral drug treatment makes HIV sufferers less infectious yesterday boosted shares in pharmaceutical companies involved in the assessment. The drug makers included Abbott Labs (ABT +0.9%), Bristol-Myers Squibb (BMY +0.5%), Gilead Sciences (GILD +1.3%), GlaxoSmithKline (GSK +1.1%) and Merck (MRK +1.6%). The study comprised 1,763 couples where only one partner was infected with HIV, and showed that those who started treatment immediately after diagnosis were 96% less likely to transmit the virus to their partners than those who delayed therapy.
  • Major banks facing big capital surcharge. Banks deemed as 'systemically important financial institutions' face having to hold large amounts of top-quality capital to cope with unforeseen losses. Financial regulators and central bankers from the world's largest economies, meeting as the Financial Stability Board, are expected to decide this year which banks will be included in the category. The size of the surcharge will increase based on a lender's size, how connected it is to other banks and how easily it could be replaced in a crisis, global regulators have said. On Wednesday, HSBC (HBC) said it expects its surcharge to be set at 2.5%-3.5% of assets, adjusted for risk.
  • Inflation seen at 3.1%. CPI is expected to have risen 3.1% year-on-year in April as higher food and fuel prices continue to filter through to consumers. However, economists estimate that month-on-month CPI fell to +0.4% from +0.5% in March, with the core figure, excluding food and energy, forecast at +0.2% in April vs. +0.1% in March. The CPI numbers are due out this morning and will come a day after data showed that PPI rose 0.8% in April - which was higher than expected - due to increased fuel costs.
  • House panel OKs $690B in 2012 military spending. With battles raging over the deficit, the House's Armed Services Panel yesterday overwhelmingly approved $690B in fiscal 2012 military spending, including $119B for the war in Afghanistan and the transition in Iraq. For fiscal 2011, Congress had provided $668.6B. The approval of the defense budget came as White House-led negotiations continued between Democrats and Republicans over reducing the deficit and lifting the U.S.'s $14.3T debt ceiling, which will be hit on Monday. Joe Biden described the talks as tough but put on a brave face. "I'm convinced we can get to a significant downpayment on the $4T we all agree has to be cut," he said.
  • Japan PM OKs Tepco rescue plan. Overruling political opposition, Japanese PM Kan has approved a rescue plan for TEPCO (OTCPK:TKECF) to make sure the firm can pay compensation to victims. A key feature of the rescue is that TEPCO's compensation to victims won't be capped, nor will the amount of public financial support available to the company.

    Earnings: Thursday After Close

  • CA (NASDAQ:CA): FQ4 EPS of $0.48 misses by $0.02. Revenue of $1.1B (+5% Y/Y) in-line. Shares +0.2% AH. (PR, earnings call transcript)
  • Cornerstone OnDemand (NASDAQ:CSOD): Q1 EPS of -$0.26 misses by $0.02. Revenue of $15.7M (+63% Y/Y) beats by $1.7M. (PR, earnings call transcript)
  • Nordstrom (NYSE:JWN): Q1 EPS of $0.65 misses by $0.02. Revenue of $2.2B (+12% Y/Y) in-line. Shares -1.2% AH. (PR, earnings call transcript)
  • Nvidia (NASDAQ:NVDA): Q1 EPS of $0.27 beats by $0.08. Revenue of $962M beats by $1.5M. Shares +2.3% AH. (PR, earnings call transcript)
  • Sunpower (SPWRA): Q1 EPS of $0.15 misses by $0.02. Revenue of $451M (+30% Y/Y) misses by $28M. Shares -1.3% AH. (PR)

Today's Markets

  • In Asia, Japan -0.7% to 9649. Hong Kong +0.9% to 23276. China +1.0% to 2872. India +1.1% to 18531.
  • In Europe, at midday, London +0.7%. Paris +0.5%. Frankfurt +0.2%.
  • Futures at 7:00: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +0.9% to $99.86. Gold +0.45% to $1513.60.

Friday's Economic Calendar

8:30 Consumer Price Index
8:30 Real Earnings
9:55 Reuters/UofM Consumer Sentiment
10:30 ECRI Leading Index

  • Notable earnings before Friday's open: A

The SA Currents team contributed to this post.


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