Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
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.

  • Geithner denies departure. Tim Geithner says he'll remain in his post for the "foreseeable future," playing down reports that he's considering stepping down as Treasury Secretary once a deal is reached to raise the $14.3T national debt limit. Sources say the White House believes it has until July 22 to strike a budget deal, which would give legislators a week to draft a bill and get it through both houses before the Aug. 2 deadline.
  • Global manufacturing dries up. Global manufacturing, a key driver of economic growth, slowed for a second consecutive month (infographic). In China, PMI dropped to a 2.5-year low of 50.9, increasing concerns over a potential "hard landing." South Korea and Taiwan also posted 7-month lows, and India fell to a 9-month trough. Meanwhile, euro-area new orders fell for the first time in almost two years, and exports continue to drop.
  • UBS taps Weber as chairman. UBS (NYSE:UBS) tapped Axel Weber to join its board in 2012 and become chairman in 2013. Weber, formerly Germany's chief central banker, will be the firm's first non-Swiss chairman, and his appointment is likely to be followed by other top management moves. The move is a setback for Deutsche Bank (NYSE:DB) CEO Josef Ackermann, who had hoped to place Weber in a senior role.
  • Kodak plunges on negative ITC ruling. Kodak (EK) plunged 14.8% in post-market trading after the International Trade Commission ruled Apple (NASDAQ:AAPL) and Research In Motion (RIMM) didn't violate its image-preview technology patents. A favorable ruling could have brought $1B in royalties, and though Kodak may prevail with other claims, a large settlement is now unlikely. Kodak, which is struggling to regain profitability, relies on patent licensing for an ongoing revenue stream.
  • Paulson pushed BofA to shaft mortgage investors. Renowned hedge-fund manager John Paulson, a major Bank of America (NYSE:BAC) shareholder, pushed senior executives to fight investors' claims that the bank sold them toxic mortgage debt - which BofA ultimately settled Wednesday with an $8.5B pact. CEO Brian Moynihan's pledge last fall to fight investors with "hand-to-hand combat" was an attempt to placate Paulson and others, but management now believes settling the claims "will rejuvenate the company and put the worst of its crisis-era problems behind it." Paulson reportedly exited "a substantial portion" of his 124 million-share stake in BofA in the two months prior to the settlement.
  • RIM looks at splitting co-CEO jobs. RIM (RIMM) conceded to investor pressure, agreeing to study the possibility of splitting up its co-chair and co-CEO roles, which many blame for the company's woeful performance. In response, activist investor Northwest & Ethical Investments withdrew a proposed vote on the issue at RIM's July 12 annual meeting, although critics say the move is no more than a 'band-aid solution.' RIM's management structure was also questioned in a critical letter published yesterday by an anonymous senior insider.
  • Apple-led group buys Nortel patents for $4.5B. A consortium of tech giants won Nortel's auction, agreeing to pay $4.5B for a portfolio of over 6,000 patents and patent applications. By buying the patents together, the companies (Apple (AAPL), Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE), RIM (RIMM), Ericsson (NASDAQ:ERIC) and EMC (EMC)) should avoid licensing negotiations and protracted legal disputes. The main loser is Google (NASDAQ:GOOG), whose $900M stalking horse bid was trounced.
  • NY Fed halts mortgage bond auction. AIG (NYSE:AIG) may be feeling some Schadenfreude after the NY Fed suspended auctions of the remaining mortgage bonds in Maiden Lane II, citing low demand amid a retreat from riskier assets. In March, AIG offered to buy back the assets for $15.7B, but the Fed rejected the offer in favor of an auction. Maiden Lane II was created in the 2008 bailout of AIG to rescue some of its sub-prime bonds and stem its cash bleed.
  • Japan business confidence falls but CPI, jobless encourage. Business confidence in Japan (ETF: EWJ) fell to its lowest level in over a year, but the future outlook improved as parts shortages ease and factories steadily restore capacity following the devastating earthquake. Meanwhile, May core CPI came in above expectations at 0.6%, which is encouraging for a country that has had years of deflation, and suggests domestic demand may be rebounding. Japan's jobless figure was also better than expected, falling to 4.5% from 4.7% in April.
  • Corn futures extend losses following USDA report. Corn futures (ETF: CORN) extended Thursday's losses in overnight trading following a USDA report that showed inventories and acreage planted were much higher than the expected despite wet weather. The harvest month December corn contract dropped over 5%, taking the contract's two-day fall to nearly 10%. An Aug. 11 survey may provide a clearer picture of actual planted acreage.
  • Borders gets $215M opening bid. Borders Group (OTC:BGPIQ) has chosen Direct Brands, which owns Book of the Month Club, as the opening bidder in an upcoming bankruptcy auction after it made a $215.1M offer for the retailer's assets. The fate of the U.S.'s second-largest bookstore chain and over 11,000 jobs are riding on the result of the auction; Borders could be forced to accept a bid from liquidators if they were to provide a better deal for creditors.
  • Oshkosh jumps on Icahn buy. Activist investor Carl Icahn sent shares in Oshkosh (NYSE:OSK) 8.1% higher in extended trading after disclosing he'd bought a 9.5% stake in the 'undervalued' specialty truck and vehicle manufacturer for $129.5M. Oshkosh's stock is down around 17% this year, and Icahn intends to meet with the company's management to see how shareholder value can be enhanced.
  • Citi in exclusive talks to sell OneMain. Sources say Citigroup (NYSE:C) is in exclusive talks with the team of Leucadia National (NYSE:LUK) and Centerbridge Capital over the long-delayed sale of its OneMain (AKA CitiFinancial) consumer-financial services unit. OneMain has assets of $10B and a book value of $2B. A deal could bring in as much as $1B.

Earnings: Thursday After Close

  • Apollo Group (NASDAQ:APOL): FQ3 EPS of $1.51 beats by $0.18. Revenue of $1.23B (-7.3% Y/Y) beats by $0.02B. Shares -1.6% AH. (PR, earnings call transcript)
  • Darden Restaurants (NYSE:DRI): FQ4 EPS of $1.00 in-line. Revenue of $1.99B (+7% Y/Y) in-line. Shares -2.13% AH. (PR)

Today's Markets

  • In Asia, Japan +0.5% to 9868. Hong Kong closed. China -0.1% to 2759. India -0.4% to 18763.
  • In Europe, at midday, London +0.4%. Paris flat. Frankfurt +0.1%.
  • Futures at 7:00: Dow +0.2%. S&P flat. Nasdaq +0.2%. Crude -0.75% to $94.70. Gold -0.7% to $1492.

Friday's Economic Calendar

Auto sales
9:55 Reuters/UofM Consumer Sentiment
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 ECRI Leading Index

Seeking Alpha editors contributed to this post.

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