Wall Street Breakfast: Yellen Speech Takes Center Stage

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by: Wall Street Breakfast
Wall Street Breakfast
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.

U.S. Fed Chair Janet Yellen is due to speak at a highly anticipated Economic Club of New York luncheon today, and she has some explaining to do. On the heels of a surprisingly dovish press conference at the FOMC's March meeting, where a rate hike path was scaled back to perhaps two this year, a handful of Fed officials over the past week have suggested a rate increase could be coming soon. Other Fed speeches on today's calendar: San Francisco President John Williams and two appearances from Dallas President Robert Kaplan.

Economy

An EgyptAir domestic flight has landed in Cyprus after being hijacked on its journey from Alexandria to Cairo by Egyptian national Ibrahim Samaha. Although his motive is still unclear, sources are suggesting he wants to contact his ex-wife, who lives in Larnaca, and has asked for the freedom of Egyptian prisoners. Negotiations with the hijacker have resulted in the release of all passengers, except the crew and four foreigners, but the situation once again triggers questions about airport security.

Net foreign assets at Saudi Arabia's central bank dropped 17.3% from a year earlier to 2.19T riyals ($584B) in February, their lowest level since May 2012. The central bank, which acts as Saudi Arabia's sovereign wealth fund, has been drawing down its assets to cover a huge state budget deficit caused by low oil prices.

The Bank of England is warning that risks around Britain's referendum on the EU could push up borrowing costs, weaken the sterling and tighten rules for mortgage lending to landlords. "The outlook for financial stability in the United Kingdom has deteriorated," the BoE's Financial Policy Committee declared. The central bank previously announced contingency plans in case of financial instability, though it has steered clear of recommending whether Britain should stay or leave the union.

Retired Cuban leader Fidel Castro has slammed President Obama's recent visit to the island, warning his countrymen to beware of Washington's sweet talk as both nations embark on a long and uncertain path toward improved relations. Since officially taking over the presidency in 2008, Raul Castro has flirted with subtle economic liberalization, moves that would have been unimaginable under the elder Castro, who cultivated his political career around his personal enmity with the U.S.

Brazil's largest party will decide whether to break away from President Dilma Rousseff's floundering coalition today, sharply raising the odds she'll be impeached amid a corruption scandal. Brazil's stocks and currency rose Monday on the prospect of her removal. Many blame Rousseff for running Latin America's largest economy into the ground, as the country grapples with a major Zika epidemic and scrambles to host the Olympic Games in August.

Stocks

Yahoo has set an April 11 deadline for preliminary bids on its core Internet business and Asian assets, in an effort to trim down the field of about 40 players, WSJ reports. The process looks open, as Yahoo (NASDAQ:YHOO) is sending letters asking suitors for prices and what assets they hope to acquire. Bidders are also being pressed on financing details and tax implications for separating Alibaba (NYSE:BABA) and Yahoo Japan (OTCPK:YAHOY) assets from the company's core.

The boards of Sharp and Foxconn Technology will meet separately tomorrow to discuss a revised takeover package that could slash at least ¥245B ($2.2B) off the price tag for the troubled Japanese electronics maker. Over the past month, Foxconn (OTC:FXCOF) has sent hundreds of people to take stock of everything from Sharp's (OTCPK:SHCAY) information-technology infrastructure to its inventories, uncovering issues related to factory overcapacity and China sales that helped convince Sharp's lenders to agree to revised terms.

Virtual reality company Oculus has started shipping pre-orders of its highly awaited Rift headsets, about two years after the company was acquired by Facebook (NASDAQ:FB). The black headgear, priced at $599, comes with a remote, an audio system, a sensor and an Xbox One wireless controller. Oculus said there were more than 30 games available in the Oculus Store and it would soon add "feature-length movies, new partners and lots more content."

After successfully hacking the San Bernardino shooter's iPhone without Apple's (NASDAQ:AAPL) help, the FBI is seeking to drop its legal case forcing the tech giant to unlock the device. "This case should never have been brought," Apple said in a statement, but both sides still left important questions unanswered: How did the FBI how to break into the iPhone? Are newer devices vulnerable to the same hacking technique? Will the FBI share its information with state and local police agencies?

With Affymetrix spurning its deal in favor of an existing bid from Thermo Fisher (NYSE:TMO), Origin Technologies has withdrawn its higher $17/share cash offer. "We disagree with Affymetrix's assessment of the perceived risks of our proposal," said Origin President Wei Zhou. "It is an unfortunate outcome." Affymetrix (NASDAQ:AFFX) shares have risen 60% since Jan. 8, the last trading day before Thermo Fisher made its $14/share offer.

Valeant Pharmaceuticals slumped over 7% yesterday in response to the news that CEO Michael Pearson had been subpoenaed to testify before the Senate Special Committee on Aging on April 27. The committee is one of two investigating aggressive drug pricing. Will the committee get more cooperation from Valeant's (NYSE:VRX) Pearson than the House Committee on Oversight and Government Reform did from Martin Shkreli in February?

Upstart clinical diagnostics firm Theranos has gotten another black eye about its operations. In a study conducted by scientists at the Icahn School of Medicine at Mount Sinai, blood samples from 60 healthy adults were sent to Theranos (THER), LabCorp (NYSE:LH) and Quest Diagnostics (NYSE:DGX) to compare the accuracy of 22 common tests. The results of the study showed Theranos' test results were 160% more likely to be abnormal (the specific analyte cited was cholesterol, which Theranos showed a systematic bias toward lower values).

SunEdison plunged 21% in after-hours trading on Monday on reports that the SEC was investigating disclosures to investors about how much cash the solar company had on hand amid its stock crash last year. On a Nov. 10 call, SunEdison (SUNE) reported $1.4B in cash and said it had "sufficient liquidity" to weather a share price downturn and cover coming obligations, but WSJ sources say the figure was largely made up of money the firm could not access. SUNE has fallen 95% over the past 12 months.

Tesla is hoping to capture mainstream auto buyers with its Model 3, but it may need a federal court ruling to succeed, as the carmaker's direct-to-consumer sales are still prohibited by law in six states that represent about 18% of the U.S. new-car market. Tesla (NASDAQ:TSLA) is banking on a combination of new legislation, pending dealer applications and other factors to open doors to selling directly, but the company's legal staff is ready to use a 2013 federal appeals court ruling in New Orleans (that determined St. Joseph Abbey could sell monk-made coffins to customers without having a funeral director's license) if necessary.

Warren Buffett's stake in Wells Fargo (NYSE:WFC) hit 9.9% as of Dec. 31, most of which is held by Berkshire Hathaway (BRK.A, BRK.B). At 10%, Buffett would have to pass a review by the Federal Reserve in order to keep accumulating shares. While the central bank typically tries to limit the ties between non-financial companies and lenders, it has at times accepted a pledge by investors that they don't plan to influence a bank; this happened in the '90s when Buffett's stake in AmEx (NYSE:AXP) rose above 10%.

Sears Holdings CEO Eddie Lampert has acquired a portion of the company's new $750M loan in his latest bet on the parent of Sears department stores and Kmart discount shops. The loan is helping Sears (NASDAQ:SHLD) pay down some of its older debt as shoppers move away from malls in favor of Internet shopping and the company, which has lost more than $8B over the last five years, sees its sales plummet. Lampert, whose net worth is pegged by Forbes at $2.4B, is buying the debt through his hedge fund ESL Investments.

Virgin America has received buyout offers from JetBlue (NASDAQ:JBLU) and Alaska Air Group (NYSE:ALK), according to Bloomberg. The airline is still discussing the offers with the bidders, and a deal could be announced next week at the earliest. It is also unclear if other suitors will emerge, and Virgin America (NASDAQ:VA) may yet decide to abandon sale negotiations in favor of remaining independent.

Takata is likely to seek more capital around September as it expects its finances to take a hit from a rise in costs to recall potentially defective airbag parts. The Japanese supplier is expected to narrow down which companies to approach for investment, sources told Kyodo News, adding that candidates would include automakers such as top client Honda Motor (NYSE:HMC). More than 50M airbags around the world have so far been recalled to replace Takata's (OTCPK:TKTDY) inflators.

Investors in Uber and staff hoping for a fast flotation from the world's biggest ride-hailing service are set to be disappointed. "I'm going to make sure it happens as late as possible," CEO Travis Kalanick told CNBC, adding that he had no idea if Uber (Private:UBER) would go public in the next three to five years. That's because the unicorn, valued around $62.5B as of December, is in no shortage of private funding - which gives the company more freedom to manage its affairs.

While the battle for automated car driving roars ahead, the chief executive of the world’s second-largest motorcycle maker thinks it will take at least a decade to bring the same technology to two-wheelers on a commercial basis. "It's not a sense of crisis, but I want to make sure we stay ahead of the race," Yamaha Motor (OTCPK:YAMHF) CEO Hiroyuki Yanagi told FT. The company is starting with investments of up to $20M in Silicon Valley, where it set up a venture last summer to hunt for technologies in autonomous vehicles, robotics and drones.

Today's Markets

In Asia, Japan -0.2% to 17103. Hong Kong +0.1% to 20366. China -1.3% to 2920. India -0.3% to 24900.
In Europe, at midday, London +0.1%. Paris +0.6%. Frankfurt +0.2%.
Futures at 6:20, Dow -0.2%. S&P -0.1%. Nasdaq -0.1%. Crude -1.4% to $38.84. Gold -0.2% to $1217.80.
Ten-year Treasury Yield flat at 1.86%

Today's Economic Calendar

5:15 Fed's Williams: Monetary Policy and Global outlook
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
11:30 Janet Yellen speech
1:00 PM Results of $34B, 5-Year Note Auction

Companies reporting earnings today