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Wall Street Breakfast: Must-Know News

Jun 9 2011, 07:20 by: SA Editor Yigal Grayeff  |  includes: C, GLD, GOOG, GS, JPM, LMT, MA, NOK, NTDOY.PK, NVS, QQQ, SNE, SPY, TGT, TXN, USO, V, WFC, WMT, XOM

  • Citi confirms data breach of online accounts. Citigroup (C) has become the latest victim of a security breach, with the bank confirming that hackers have obtained access to the data of hundreds of thousands of bank card customers after attacking Citi Account Online. Citigroup said the hackers were able to view clients' account numbers and contact information - including their email addresses - although not their birth dates, social security numbers, card expiration dates or CVV security codes. The break-in at Citigroup follows recent attacks on Lockheed Martin (LMT), Sony (SNE), Nintendo (NTDOY.PK) and Google (GOOG).
  • Goldman the subject of yet another probe. The SEC is investigating whether Goldman Sachs (GS) and other major banks may have broken bribery laws in dealings with Libya's sovereign-wealth fund, sources said. Officials are scrutinizing a $50M fee Goldman offered to pay the fund as part of a proposal to help the latter recoup losses of 98% on $1.3B that it invested with the bank. The SEC inquiry is separate from its broad antibribery probe of the financial sector's ties to sovereign-wealth funds. The investigation also adds to a number of inqiuries into Goldman's role in the financial crisis.
  • S&P cuts Nokia rating, CTO leaves. The woe has continued for Nokia (NOK) today as S&P cut its debt rating on the company to BBB+/A-2 with a negative outlook. In addition, the company said CTO Richard Green had taken a leave of absence for personal reasons, although a Finnish newspaper had reported that Green left because of disagreements on strategy and was unlikely to return. S&P's move followed a downgrade by Fitch earlier this week, with the consensus appearing to be growing that Nokia, which issued a profit warning last week, is losing market share so fast that recovery may not be possible.
  • TI knocked by Nokia. Shares in Texas Instruments (TXN) dropped 5% in post-market trading but then recovered to +1% after the semiconductor company indicated that weak sales at Nokia (NOK), its only known cellular client, would hit its Q2'11 performance. TI lowered its outlook to net profit of $0.51-$0.55 a share and sales of $3.36B-$3.5B from prior estimates of $0.52-$0.60 and $3.41B-$3.69B. Analysts were forecasting $0.57 and $3.55B. However, a Sanford C. Bernstein analyst said that the problems at Nokia aren't a big worry for TI, as the U.S. firm is winding down its cellular business.
  • Exxon buys two gas companies for $1.7B. Exxon Mobil (XOM) has continued its strategy of picking up natural gas assets with the purchases of privately held Phillips Resources and related company TWP for $1.69B. The acquisitions give Exxon access to 317,000 acres in the Marcellus Shale, which stretches beneath several eastern states, and follow Exxon's $34.9B buy of XTO Energy last year. Although heavy supplies have hit gas prices, Exxon believes that in the long term, power generation in developing countries such as China and India will boost demand. News of the acquisitions follows Exxon's disclosure early yesterday of a natural gas discovery and two major oil finds in the Gulf of Mexico.
  • Novartis vaccine protects against cause of meningitis. Novartis' (NVS) Bexsero vaccine is effective in protecting young children against MenB, the most common cause of meningitis, late-stage studies of over 1,500 infants have shown. Novartis has filed for approval in Europe and other countries such as Canada, and is now working to design a U.S.-specific phase III trial. An analyst said the vaccine could generate peak sales of $2B. If Bexsero is authorized, Novartis will have vaccines that can protect against all causes of meningitis.
  • Debt talks to continue as Fitch warns of downgrade. Congressional leaders and White House officials are due to meet today to continue talks on raising the U.S.'s $14.3T borrowing limit and cutting the deficit, a day after Fitch became the third ratings agency to threaten to downgrade the government's credit status if the ceiling isn't lifted. Republicans and Democrats have until August 2 to reach a deal or risk the U.S. defaulting. Fitch, which followed Moody's and S&P in warning about a downgrade, said a failure to increase the limit would imply a crisis of governance.
  • Economists: U.S. trade gap widened in April. Economists estimate that the trade deficit widened to $48.8B in April from $48.2B in March, as increased oil prices outweighed a drop in shipments of vehicles and parts from earthquake-stricken Japan. The figures are due out this morning.
  • Government mulls payroll tax break to boost hiring. White House advisers are considering a temporary cut in employer contributions to payroll taxes in order to stimulate hiring, sources said. Last week, data showed that unemployment in May unexpectedly rose to 9.1% from 9%, although the Fed's Beige Book yesterday said the job market has continued to gradually improve. The Fed also said the economy is expanding despite problems with supply-chain shocks, high food and gasoline prices, and severe weather. While "a few Districts indicated some deceleration" and housing remained poor, manufacturing grew in most parts of the country and consumer spending was steady or modestly higher.
  • Senate rejects delaying credit card caps. Shares in Visa (V -3.9%), Mastercard (MA -1.5%) and banks fell yesterday after the Senate rejected a proposal to delay by six months a plan to limit debit-card swipe fees. The caps, scheduled to take effect on July 21, would cut revenue by about $12B a year at lenders such as Citigroup (C -2.05%), Wells Fargo (WFC -1.6%) and JPMorgan (JPM -0.8%), although Wal-Mart (WMT -0.3%) and Target (TGT -0.4%) would benefit.
  • Japan's GDP contraction less than thought. Japan's latest GDP figures show the economy shrank an annualized real 3.5% in Q1'11, slightly less than preliminary estimates of -3.7%. The immediate cause of the upgrade was an improvement in private sector investment in inventory, indicating a possible upturn in production, which slowed significantly following the March earthquake. A widespread view is that the Japanese economy has been showing signs of a rebound, or at least signs of bottoming, with a JPMorgan economist saying the country "is now on a V-shaped recovery track."

Today's Markets

  • In Asia, Japan +0.2% to 9467. Hong Kong -0.2% to 22610. China -1.7% to 2703. India -0.1% to 18385.
  • In Europe, at midday, London flat. Paris flat. Frankfurt +0.1%.
  • Futures at 7:00: Dow +0.2%. S&P +0.3%. Nasdaq +0.2%. Crude +0.2% to $100.91. Gold -0.3% to $1534.70.

Thursday's Economic Calendar

  • Notable earnings after Thursday's close: NSM

The SA Currents team contributed to this post.


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Yigal Grayeff submits: