- ConocoPhillips to split into two, CEO to retire. ConocoPhillips (COP) plans to split into two stand-alone, publicly-traded companies - Exploration & Production and Refining & Marketing. The separation is expected to be completed in H1 2012, at which point CEO Jim Mulva intends to retire. The move doesn't require a shareholder vote but is subject to market conditions and regulatory approvals.
- JPMorgan net profit rises to $5.4B. JPMorgan's (JPM) Q2 2011 net income jumped to $5.4B from $4.8B a year earlier and beat expectations as revenue rose 7% to $27.4B. The company said it estimates its Basel III Tier 1 Common ratio at 7.6% at the end of Q2, "greater than the level we expect will be required under the proposed rules for up to five years." JPMorgan intends to keep its capital ratios approximately where they are as the bank does not see a need for higher ratios ahead of time.
- Moody's throws downgrade warning into the mix. Amid apparently deteriorating deficit talks, Moody's has become the first ratings agency to place the U.S.'s AAA rating on review for a possible downgrade, citing the "rising possibility" that the $14.29T borrowing limit won't be raised. As if to underscore the assessment, President Obama soon afterwards walked out of negotiations, while John Boehner described the White House's proposed cuts as "gimmicks and accounting tricks." In Congressional testimony, Ben Bernanke said the U.S. would pay creditors and stop benefit payments if the limit wasn't raised, although S&P has privately said this could also trigger a downgrade.
- Gold extends record highs. Gold has continued yesterday's march upwards, boosted by the prospects of more U.S. stimulus, as well as by fears about U.S. and European debt. In European trading, spot gold hit a fresh record of $1,592.70 an ounce. The metal was first supported by Ben Bernanke saying QE3 was a possibility and laying out other options if the economic weakness persisted. However, Dallas Fed Chief Richard Fisher cast doubts on the effectiveness of more easing, saying "U.S. banks and businesses are awash in liquidity. Adding more is not the answer."
- Borders on the edge. Borders (OTC:BGPIQ) is close to liquidation after a committee of its unsecured creditors rejected a proposal by private equity firm Najafi to pay $215.1M for most of the book retailer's assets and to assume $220M of liabilities. Creditors are concerned the agreement would enable Najafi to buy Borders cheaply and then liquidate it later without letting creditors benefit. Borders, which employs 11,000 people, is still hoping other bidders - who will keep it open - will emerge in time for a court-supervised auction on Tuesday next week.
- Google Q2 profits expected to rise. Google's Q211 earnings are due out later today, when it is forecast to report that EPS excluding items grew to $7.84 from $6.45 and that revenue increased to $6.54B from $5.09B. However, investors will want to know more about the "six-front war" Google is fighting in mobile, local, applications, and other areas - including Google+ - and how much more profligate it has become in doing so. Further information about various investigations Google is facing would probably also be appreciated.
- Italy to vote on austerity. Italy's two parliamentary houses are due to vote today and tomorrow on a €47B ($66.7B) austerity package, which, if authorized, will help provide short-term relief over the sustainability of the country's €1.8T debt, and reassure investors about its mostly unstable politics. Italy passed another key test today with the sale of long-term debt, albeit at higher yields. Meanwhile, there is still concern at the failure of the EU to finalize a second bailout for Greece, with Fitch becoming the latest agency to downgrade the country to its lowest possible rating.
- SEC scrutinizes banks' legal liabilities. Following Bank of America's (BAC) surprise revelation that it would take Q2 mortgage-related charges of $20.6B, the SEC is exploring whether banks have given shareholders enough warning about their potential legal liabilities, sources say. The agency could eventually take enforcement action if settlements turn out to be significantly higher than the forecast. However, lawyers caution that the SEC would have difficulty winning cases because of the wide discretion given to banks in estimating losses.
- Morgan Stanley weighs lay-offs. Morgan Stanley (MS) is reportedly considering axing several thousand staff to offset what it fears will be sluggish profits during the rest of the year. Morgan Stanley has confirmed it will cut 300 people from its brokerage division, but it may also lay off traders and investment bankers. The losses would add to those at other banks in the U.S. and Europe, with UBS (UBS) and Credit Suisse (CS) reportedly set to slash thousands of jobs as well.
- News Corp. U.K. TV interests under threat. U.K. Deputy PM Nick Clegg has upped the political pressure on regulators looking at whether News Corp. (NWS) should be allowed to keep its stake in BSkyB (OTCQX:BSYBY) in the wake of the phone-hacking scandal. If regulators find News Corp. is not "fit and proper," to own a TV station, about which Clegg said there are "big questions," the company would have to sell its 39% stake in Sky. News Corp. yesterday withdrew its bid to buy the 61% stake it doesn't own.
- Joy in talks to buy Chinese peer. Joy Global (JOYG) is reportedly in talks to buy Chinese coal-mining equipment company International Mining Machinery, which has a market capitalization of about HK$8.5B ($1.1B). A deal could help Joy block (or at least slow) rival Caterpillar (CAT) from gaining further scale in China, the world's largest coal-mining market. It would also add to Joy's purchase of Rowan Companies' (RDC) drilling and mining equipment unit for $1.1B.
- Sweden raids Nasdaq OMX. Sweden's competition authority raided Nasdaq OMX (NDAQ), the country's leading exchange, last month following a complaint from small local rival Burgundy, officials said today. The agency is investigating whether OMX, a Verizon (VZ) customer, applied pressure on the telecom company not to house Burgundy's servers, thereby helping to shut it out of the market for Nordic securities.
Earnings: Thursday Before Open
Earnings: Wednesday After Close
- Marriott International (MAR): Q2 EPS of $0.37 in-line. Revenue of $2.97B (+7.3% Y/Y). Shares -4.9% AH. (PR)
- Yum! Brands (YUM): Q2 EPS of $0.66 beats by $0.05. Revenue of $2.8B (+9.4% Y/Y). Shares +2.5% AH. (PR)
- In Asia, Japan -0.3% to 9936. Hong Kong +0.1% to 21940. China +0.5% to 2810. India +0.1% to 18618.
- In Europe, at midday, London -0.9%. Paris -0.9%. Frankfurt -0.8%.
- Futures at 7:00: Dow -0.1%. S&P +0.1%. Nasdaq +0.2%. Crude flat at $98.04. Gold +0.6% to $1594.40.
Thursday's Economic Calendar
- 8:30 Producer Price Index
8:30 Retail Sales
8:30 Initial Jobless Claims
9:30 Hearing: Consumer Financial Protection (Warren)
10:00 Senate Hearing: Monetary Policy (Bernanke)
10:00 Business Inventories
10:30 EIA Natural Gas Inventory
1:00 PM Results of $13B, 30-Year Note Auction
2:00 PM Hearing: Financial Stability Oversight
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
- Notable earnings before Thursday's open: FCS, JPM, PGR
- Notable earnings after Thursday's close: CBST, GOOG,
The Market Currents team contributed to this post.
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