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.

Boehner pulls debt bill. Republican and Democratic leaders plan to meet today to discuss strategy after John Boehner last night again postponed a House vote on his debt-reduction bill following his failure to overcome a rebellion within GOP ranks. Should the debt-ceiling not be raised by August 2, however, sources said bondholders would get priority to avoid a default. But with the deadline only four days away, investors have pulled billions of dollars from money-market funds, which have consequently lowered lending in short-term markets and so reduced the cash available to corporations, banks and investors.

EU puts Spain on review for downgrade, bond yields rise. Greece's second bailout and EU measures to prevent contagion may now be acting as a catalyst for the crisis spreading after Moody's early today put Spain's government-bond ratings on review for a possible downgrade from AA2. One reason is the government's continued funding pressures, which the precedent set by Greece's bailout is "likely to exacerbate." In response, Spanish 10-year bond yields rose towards levels seen before details of Greece's new rescue were known, while Italian yields also increased. Moody's later placed on review for downgrade five Spanish financial institutions, including Banco Santander (STD) and BBVA (NYSE:BBVA). There is also speculation the government will today announce general elections for November 20.

Eurozone inflation drops. Eurozone inflation unexpectedly fell to +2.5% in July from +2.7% in June, although that's still above the ECB's 2% target. Nonetheless, the drop may persuade the bank to hold off from raising interest in the coming months after increasing rates twice since April. The ECB is due to meet on Thursday to discuss the matter.

Starbucks profit rises 33%, raises outlook. Starbucks (NASDAQ:SBUX) FQ3 earnings beat expectations as EPS jumped by a third to $0.36 and revenue rose 12% to $2.93B, boosted by the company attracting more customers who also spent more money. Starbucks benefited from the termination of its distribution deal with Kraft as well, with revenue from its consumer products unit rising over 25%. Starbucks raised its FY 2011 guidance to in line with analyst expectations and said it plans to open 800 stores in FY 2012.

Nestle among those interested in Pfizer nutritions unit. Nestle (OTCPK:NSRGY), Danone (OTCQX:DANOY) and Abbott Laboratories (NYSE:ABT) are likely to bid for Pfizer's (NYSE:PFE) infant-nutrition unit, sources said, with Mead Johnson Nutrition (NYSE:MJN) and Unilever (NYSE:UL) also possibly interested. Pfizer intends to send information to prospective suitors in September about the unit, which may fetch up to $10.5B. The company is divesting the subsidiary along with its animal health operations, for which it reportedly favors a spin-off.

Verizon, Vodafone get $10B windfall. Vodafone's (NASDAQ:VOD) shares rose 5.4% premarket following yesterday's announcement it would receive a $4.5B dividend from Verizon Wireless, with the U.K. company using the money to pay £2B ($3.26B) to its shareholders. Verizon Communications (NYSE:VZ), which owns 55% of Verizon Wireless to Vodafone's 45%, will receive $5.5B. This will help Verizon Comm offset its declining land-line business and cover the cost of its own dividend.

Mixed news for Madoff victims. The trustee recovering money for Bernie Madoff's investors has reached a settlement of over $1B with Tremont Group Holdings, one of the largest alleged feeders of money into Madoff's Ponzi scheme. Irving Picard had accused Tremont of missing warning signs of the wrongdoing. Following the deal, Picard has recovered around $11B for the victims, or more than half the $17.3B he estimates to have been lost. However, Picard received a setback when a judge rejected several of his lawsuits against banks, eliminating claims of $6.6B against HSBC (HBC) and $2B against three dozen other defendants.

Economy expected to have weakened in Q2. Q2 GDP figures are due out this morning, with economists estimating growth decelerated to 1.8% from 1.9% in Q1. This would mark the slowest back-to-back quarters since the recession ended two years ago. A main reason for the softening is weak consumer spending - which accounts for about 70% of the economy - due to dismal hiring and high energy prices. Corporate investment was probably a driver of growth, although one concern is that economic expansion came from an increase in inventories rather than from demand.

McKesson net profit rises, lifts guidance. McKesson's (NYSE:MCK) FQ1 EPS excluding items rose to $1.27 from $1.16 a year earlier and comfortably beat expectations as revenues climbed 9% to $29.04B. The company enjoyed growth at its core drug-distribution business and technology and software ops. Perhaps more importantly, McKesson also raised its FY 2012 forecast - with one of the lowest Price/Earnings To Growth ratios on the NYSE for a U.S. drug wholesaler, investors are more keenly focused on its guidance than any other metric at present.

Charred shrink wrap discovered in Merck products. Burned bits of plastic shrink wrap have been found in vials of Merck (NYSE:MRK) vaccines produced at its West Point plant in Pennsylvania, in the latest problems to affect the facility. Merck said it's not aware of any health reactions caused by the fault, although an FDA report said patient risk couldn't be ruled out.

Sky backs Murdoch, to return £1B to investors. BSkyB (BSYBY.PK) today said it will buy back £750M ($1.23B) in shares and pay out a further £253M in dividends to placate shareholders who lost out after News Corp. (NASDAQ:NWS) dropped its takeover bid. The announcement comes a day after the company's board gave Chairman James Murdoch its full backing - for now - despite calls by some shareholders for him to quit because of the phone-hacking scandal. A weakening of support could have put Murdoch's succession at News Corp. into further jeopardy.

China's HNA in talks to buy GE's SeaCo unit. Chinese airline and hotel operator HNA Group is in exclusive negotiations to buy a shipping container lessor co-owned by GE (NYSE:GE) in a deal that could be worth over $1B, sources said. HNA has edged ahead of at least three other interested parties, including Textainer (NYSE:TGH), for GE SeaCo. The sale is part of GE's strategy of divesting none-core assets.

Today's Markets:
In Asia, Japan -0.7% to 9833. Hong Kong -0.6% to 22440. China -0.3% to 2702. India 0.0% to 18197.
In Europe, at midday, London -0.9%. Paris -1.4%. Frankfurt -1.0%.
Futures at 7:00: Dow -0.6%. S&P -0.5%. Nasdaq -0.4%. Crude -0.7% to $96.77. Gold flat at $1616.60.

Friday's Economic Calendar:
8:30 Employment Cost Index
8:30 ISM New York Business Index
8:30 GDP Q2
9:45 Chicago PMI
9:55 Reuters/UofM Consumer Sentiment
3:00 PM USDA Ag. Prices
3:15 PM Fed's Lockhart: Monetary Policy

Earnings Results: Today Premarket, Yesterday After-Hours

Notable earnings before Friday's open: ACI, AEP, AGP, AIV, AMGN, AON, AXL, CPN, CVH, CVX, HP, ITT, LPX, MRK, NEM, NWL, PPC, TOT, WY

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