Wall Street Breakfast: Must-Know News

by: Rachael Granby
Rachael Granby
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.

Overnight gains evaporate. European markets have turned south after an early bounce, taking futures along for the ride, as jittery traders decided to take meager profits rather than wait for the results of today's G-20 meeting. At 7:00 AM ET, London -1.5%, Paris -2.3%, Frankfurt -2.6%, S&P -0.7%.

Global markets enter bear territory. Stocks tanked yesterday on concerns about the eurozone debt crisis, a possible slowdown in China and disappointment over Operation Twist. The Dow, S&P and Nasdaq all closed down more than 3%, and the MSCI All-Country World Index of 45 nations entered a bear market for the first time in over two years. Precious metals, copper, and oil were all down sharply, while long-term Treasurys continued to rally. As of 3:00 ET this morning, Asian markets are down but have recovered some of their losses after the G-20's statement (see below) and U.S. futures are showing some strength, with benchmark S&P +0.9%.

EU eyes bank recapitalization. The EU is reportedly looking into the swift recapitalization of 16 banks. The move would mostly affect mid-tier lenders that had struggled with the stress tests this summer. Seven are from Spain, two each from Germany, Greece, and Portugal, and one each from Italy, Cyprus, and Slovenia. However, not only mid-tier lenders are facing difficulties, with a report published yesterday noting that U.S. money market funds have slashed their exposure to Europe's banking sector to the lowest since at least 2006. As the region's woes intensify, European finance ministers are considering increasing the firepower of their bailout fund by expanding its scope, allowing the fund to buy the debt of stressed European governments, aid troubled banks and offer credit lines.

G-20 pledges bank support. A G-20 communique released late yesterday pledged to prevent the eurozone's debt crisis from destabilizing banks and markets, but failed to include any specifics on how this would be achieved. The group said it would create an "action plan" for short- and medium-term policies and would share the details at the G-20 summit in early November.

HP sends Apotheker packing. The rumors were true: Hewlett-Packard (NYSE:HPQ) CEO Leo Apotheker is stepping down after less than a year on the job, and is being replaced by Meg Whitman. Investors are less than enthralled with Apotheker's replacement, worried that it will be just more of the same at the faltering tech giant; analysts also worry about Whitman's lack of enterprise experience and mixed track record at eBay. Sources say the board has no immediate plans to cancel its PC spinoff. Shares of HP closed -4.9%.

BofA looks to offload pizza stake. Looking to raise cash, Bank of America (NYSE:BAC) is in talks to sell its share in NPC International - the largest U.S. Pizza Hut franchisee. BofA inherited NPC when it took over Merrill Lynch in 2009. Sources say the sale price could be more than $800M, but an analyst calculates the value as between $630-$735M. Separately, South Korea's sovereign wealth fund plans to increase its stake in BofA, saying the bank's shares "seem to have hit the bottom."

Nike climbs after raising forecast. Nike (NYSE:NKE) beat earnings estimates yesterday, posting FQ1 EPS of $1.36 vs. expectations of $1.32 on an 18% jump in Y/Y revenue that was boosted by currency gains. Futures orders jumped 13% ex-forex. Gross margins declined to 44.3% of sales vs. 47% Y/Y, due to higher product costs and larger discounting. Despite the weakening global economy, Nike expects revenue this year will increase in the low- to mid-teen percentage range, up from an earlier forecast of high-single to low-double digits. Shares +5.4% in AH trading.

Fannie Mae faulted on robo-signing lapses. An FHFA report released this morning said Fannie Mae (OTCQB:FNMA) failed to establish an "acceptable and effective" way to monitor foreclosure proceedings between 2006-2011, and missed chances to catch law firms illegally signing foreclosure documents. A separate report released today said the FHFA lacks examiners to monitor Fannie.

Yahoo for sale? Sources say Yahoo's (NASDAQ:YHOO) board hasn't begun its search for a Carol Bartz replacement. Instead, the board has spent its time reaching out to private-equity and media firms interested in buying all or part of the company, though the P-E firms have little interest in Yahoo's core business. The contacted media companies reportedly include Disney (NYSE:DIS) and News Corp. (NASDAQ:NWS).

Senate preps for yuan action. A bipartisan group of senators said yesterday they expect to overwhelmingly pass a bill next month to crack down on China's manipulation of the yuan. The bill would include a provision allowing U.S. companies to seek countervailing duties on Chinese goods on a case-by-case basis. If approved, tensions would undoubtedly increase with China, but it's unclear how much support the bill would garner in the House, and President Obama doesn't support the bill.

M&A slows down. Not entirely unexpected given recent market turmoil, but dealmakers say M&A slowed significantly in Q3, as companies either postponed their deal ambitions or found that reluctant lenders made financing hard to come by. Announced M&A deals for Q3 are down around 23% from the previous quarter, and analysts are paring their expectations for the rest of the year.

Today's Markets
Asia: Hong Kong -1.4%. China -0.4%. Japan closed. India -1.2%.
Europe at midday: London -0.3%. Paris -1.2%. Frankfurt -0.6%.
Futures at 7:00: S&P -0.76%. 10-yr -0.03%. Euro -0.05% vs. dollar. Crude -2.39% to $78.58. Gold -1.95% to $1705.55.

Friday's Economic Calendar
1:30 PM Fed's Dudley: 'Financial Stability and Economic Growth'
2:45 PM Fed's Williams: 'Unconventional Monetary Policy'

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