Wall Street Breakfast: Must-Know News

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Includes: AAIGY, AIG, BAC, C, FNMA, GE, GLD, HTHIY, MHVYF, PCLN, QQQ, RBS, SPY, TI, USO
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.

Futures point to more losses. U.S. stock futures fell in European trading, signalling further losses following yesterday's carnage. Asian and European shares also dropped across the board as multiple worries combined, particularly the weak U.S. economy and the EU's sovereign-debt vortex. The latter continued to spiral, with Italian and Spanish debt yields increasing again and the ECB flittering on the edges by confining its bond buying to Portuguese and Irish debt. France's Nicolas Sarkozy is due to discuss the crisis with Germany's Angela Merkel and Spain's Jose Luis Rodriguez Zapatero amid calls for EU leaders to gain a grip.

Investors await employment figures. A key moment for gauging today's market direction will come with U.S. employment figures this morning. Economists estimate that nonfarm payrolls climbed by 85,000 in July following a measly 18,000 increase in June, which was way below expectations. The July unemployment rate is expected to have stayed at 9.2%. Trader Manoj Ladwa said the market seems to have factored in weak employment numbers, so shares "could recover some losses later in the session."

Switzerland, Japan struggle against safe haven status. The Swiss franc hit a fresh record high of 1.071 to the euro, although it later retreated following a report the Swiss National Bank is ready to intervene again. In midday European trading, the franc was -0.6% vs. the euro and -0.2% vs. the dollar. The yen also rose, although concerns about further intervention by the government impeded gains here too. Notwithstanding, the yen was +0.6% vs. the euro and +1% vs. dollar.

Surveying yesterday's wreckage. The S&P 500 and Nasdaq - both solidly red for the year - have managed to reach correction status (10% drop) in just 9 days, while the Russell 2000 is down 7% for year. The worst performing sector was energy, falling 6.8% as crude oil plummeted a similar amount. Transports fell 5.1% and are down 7.7% for the year.

No end in sight for BofA's mortgage costs. Bank of America's (NYSE:BAC) mortgage liability woes continued yesterday after New York Attorney General Eric Schneiderman asked a judge to reject the bank's proposed $8.5B settlement with investors over toxic loans. Schneiderman, who joined a growing number of investors in opposing the deal, said the proposed payment is far less than the losses suffered. In addition, BofA said yesterday it may face further claims from Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FNMA) to purchase bad loans despite coming to a $3B agreement with them earlier this year.

RBS plummets after H1 loss. RBS (NYSE:RBS) made a far greater-than-expected H1 net loss of £1.43B ($2.33B) compared with a net profit of £9M a year earlier, sending its shares down 8.8% in London, although that was up from -20% at the open. RBS's loss was due to a £733M impairment on its Greek government bonds and an £850M provision for missold payment-protection insurance. Group revenue fell 7.6% to 14.34B.

AIG Q2 profit $1.84B. AIG (NYSE:AIG) swung to a Q2 net profit of $1.84B from a loss of $2.66B a year earlier, when it was saddled with charges tied to discontinued operations. AIG also benefited from a rise in the market cap of Asian life insurer AIA Group (OTC:AAIGY), in which it owns a third. However, AIG's operating income of $0.69 missed expectations, while the combined operating income of its two main insurance units, Chartis and SunAmerica, fell a combined 15%.

Priceline soars as guidance, Q2 profit top estimates. Q2 earnings that beat analyst expectations and a forecast that it will do the same in Q3 sent Priceline's (NASDAQ:PCLN) shares soaring 9.65% in after-hours trading. The travel Web site's EPS more than doubled to $5.02 a share while Q2 gross travel bookings jumped 70% to $5.8B. Priceline also forecast Q3 EPS excluding items of $9.10-$9.30 vs. Street estimates of $7.97. The company is benefiting from bargain-hunting shoppers against the background of the weak economy, and its ability to take share of the international hotel market through Booking.com.

Telecom Italia takes huge writedown but shares soar. Telecom Italia (NYSE:TI) posted a €2B net loss ($2.8B) in the first half compared with a net profit of €1.2B a year earlier after taking a goodwill write-down of €3.2B due to the deterioration of the financial markets and rising interest rates. However, revenue grew 10% to €14.5B and TI confirmed its full-year targets of broadly stable revenue and EBITDA, easing fears of a guidance cut. The writedown had been on the cards and shares are soaring 11.24% premarket.

Hitachi, Mitsubishi Heavy merger in doubt again. Talks between Hitachi (HIT) and Mitsubishi Heavy Industries (OTCPK:MHVYF) about a tie-up are reportedly in danger of collapsing, as Hitachi wants a full merger while Mitsubishi prefers to combine selected businesses. News of the talks surfaced yesterday, although they've been denied by officials at both companies despite Hitachi's president admitting them on TV. A full-blown merger would create an infrastructure company with revenues of $150B a year, second only to GE (NYSE:GE) in the sector.

California subpoenas Citigroup. California Attorney General Kamala Harris has reportedly subpoenaed Citigroup (NYSE:C), seeking information about how it sold mortgage-backed securities in the state. The move comes after Harris announced in May the creation of a fraud task force to investigate "every step" of the mortgage process.

Senate to approve FAA funding bill. The Senate is due to today vote on a House-passed bill that will temporarily end the partial shutdown of the FAA after the Democrats and Republicans agreed on a deal yesterday. Once the measure is approved, the FAA's funding will be extended into September, allowing 4,000 furloughed FAA employees to return to their jobs and 70,000 workers to idled construction projects. The agreement puts off until after the summer recess the broader issues that divided legislators, including union representation.

Today's Markets:

In Asia, Japan -3.7% to 9300. Hong Kong -4.3% to 20946. China -2.1% to 2626. India -2.2% to 17306.
In Europe, at midday, London -2.2%. Paris -0.1%. Frankfurt -1.6%.
Futures at 7:00: Dow -0.3%. S&P -0.1%. Nasdaq -0.3%. Crude -1% to $85.79. Gold +0.5% to $1667.10.

Friday's economic calendar:
6:00 Monster Employment Index
8:30 Nonfarm Payrolls
3:00 PM Consumer Credit

Earnings Results: Companies that beat EPS expectations last night and today include LinkedIn (shares flat), Fluor (+6.9%) and EOG Resources (+1%). Those that missed forecasts include First Solar (-4.6%). Click here for details.

Notable earnings before Friday's open: AES, BPO, HFC, IGTE, PG, PPL, VIA.B, WCRX, WIN

Notable earnings after Friday's close: GXP

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