Wall Street Breakfast: Must-Know News

U.S. Markets

• U.S. stocks declined Friday, with the DJIA closing down 1.92% at 12,606.30, the Nasdaq down 1.95% at 2,439.94 and the S&P 500 down 1.36% at 1,401.02. The S&P 500 has fallen 4.59% on the year so far, making 2008 the fourth-worst start to any year in the history of the index. Investors were put off on Friday by the announcement of rising credit-card defaults at American Express (AXP), which sent its shares down 10%, and by news of weakening consumer spending. Luxury jeweler Tiffany & Co. (TIF) fell 11.21% to a 52-week low after it lowered the top end of its 2007 profit forecast, while McDonald's Corp. (MCD) fell 6.62% to a four-month low. Gold penetrated $900 an ounce for the first time Friday before settling at $897.70. Oil fell $1.02 to $92.90 a barrel, and the dollar closed down against the euro and the yen. The yield on 10-year Treasurys gained 0.08% to 3.785%.
• Consumer spending, excluding sales of gasoline and autos, fell 0.7% in December, according to SpendingPulse, a retail data service. The last time consumer spending fell during a presidential election year was 1980, a trend that helped Ronald Reagan take the White House from incumbent Jimmy Carter.
• Federal Reserve Chairman Ben Bernanke pledged to speak more openly and more frequently about the state of the nation's economy.
• U.S. gasoline prices have risen almost $0.10 over the past three weeks, according to the Lundberg Survey of 7,000 stations, released Sunday. The average price of regular gasoline was $3.07 a gallon on Friday, mid-grade was $3.19, and premium was $3.30. The country's least expensive gasoline was in Cheyenne, WY and the most expensive in San Francisco, CA.

Global Markets

• Asia: Asian markets were bumpy Monday, with the Taiwanese Taiex index posting a 1.79% advance following the landslide electoral victory of pro-China opposition party Kuomintang. Japan was closed for a holiday. The Hang Seng ascended to 27142.88 before declining 1.48% to 26468.13. The Shanghai Composite gave up early gains to slide 0.5%, pulled down by U.S.-listed stocks like China Petroleum & Chemical (SNP) and PetroChina (PTR). Apple (AAPL) and China Mobile (CHL) have terminated discussions on launching the iPhone in China, possibly because of technical and revenue-sharing issues. Chinese auto production and sales grew 22% in 2007, national media reported Sunday.
• Europe: European markets slipped in early trading Monday, with the FTSE declining 0.2%, the DAX 0.03% and the CAC 0.1%. French utility Suez (SZEZY.PK) fell 4.6% after Credit Agricole said it will cut its stake. Supermarket group Tesco (TSCDF.PK) fell 2.2% following a downgrade.

Must-Know News for Monday

• Citigroup could write off up to $24 billion. A CNBC report published Monday said the banking giant (C) might write off up to $24 billion in subprime and credit-related losses and lay off as many as 20,000 jobs. Analysts also speculate that the bank will either cut or suspend its dividend.
• Saudi prince might boost stake in Citi together with Chinese -- provided the Chinese government gives OK. Prince Alwaleed bin Talal is rumored to be considering adding to his stake in Citigroup (C), together with the China Development Bank. The prince's potential stake has not been disclosed, but China Development is believed to want to invest about $2 billion. The WSJ reports, however, that opposition from the Chinese government to the investment was expressed over the weekend.
• Merrill is seeking another capital infusion; SEC probes front-running. The Financial Times reported Sunday that the U.S. investment bank is pursuing a new, $4 billion capital raising. The Kuwait Investment Authority is expected to be a "significant investor." Other investors might come from Europe. In other Merrill news, the SEC is investigating whether employees at the brokerage placed trades for Merrill's own account ahead of client orders from Fidelity Investments from 2002 through 2005.
• UBS, facing more writedowns, might split up. European banking giant UBS AG (UBS) might divide its investment banking and money management operations into two companies, SonntagsZeitung reported. The bank might also take another $5-8 billion in writedowns in addition to the $10 billion in writedowns it announced December 10.
• Lockheed's helicopter contract hits flak. After a series of delays and engineering problems concerning Lockheed Martin's (LMT) multibillion-dollar contract to manufacture a Marine One 28-helicopter fleet for the President's use, the Navy is considering several options, including cancellation.
• BHP Billiton might sweeten offer for Rio Tinto, paper says. Australian Business reported Monday that BHP Billiton (BHP) is considering adding cash to its proposal to buy Rio Tinto (RTP) and raising the proportion of shares in the offer ahead of a February 6 deadline. The speculation sent Rio Tinto shares up 2% in London trading.
• L.G. Philips posts best-ever quarterly profit. The Korean flat-screen manufacturer (LPL) reported a 760 billion won ($811.2 million) October-December net profit, well ahead of analyst expectations of 665.6 billion won and reversing a year-ago loss.
• Toyota to bring plug-in car to market. Toyota (TM) said Sunday it plans to produce its first plug-in hybrid car by 2010. The vehicle will compete with General Motors' (GM) Chevrolet Volt, also scheduled for a 2010 release.
• General Motors takes stake in Coskata. General Motors (GM) announced Sunday that it has bought a portion of Coskata Inc., a biofuel company that has developed a "commercially viable" means of producing ethanol from cellulose.
• Boeing sells 24 Dreamliners to Gulf Air. In a deal worth $6 billion, the national airline of Bahrain has agreed to purchase 16 Boeing (BA) 787-8 planes and options for another eight. Delivery is to begin in 2016.
• Wal-Mart to challenge Tesco in smaller-format stores. Wal-Mart (WMT) plans to open grocery stores in Arizona in 2008. They will be about double the size of Tesco's (TSCDF.PK) Fresh & Easy markets (though only one-tenth the size of traditional Wal-Marts) and will be located a mile from Tesco locations.
• Kazakhstan to double stake in Kashagan oil field. JSC NC KazMunaiGaz will pay $1.78 billion for an additional 8% of the huge field in the Caspian Sea, bringing its stake to 16.6%. The purchase will reduce the stakes of all the other shareholders, who include Eni SpA (ENI), Exxon Mobil (XOM), Total SA (TOT) and Royal Dutch Shell (RDSA).
• NYSE Euronext to buy Wombat. The stock exchange operator (NYX) said Monday it will buy privately-held Wombat Financial Software, which has a high-speed market data and messaging platform, for $200 million in cash.

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