Wall Street Breakfast: Must-Know News

U.S. Markets

• The DJIA gained 1.36% Monday, in part on interest rate hopes, closing at 12,778.2. IBM (IBM) led gainers with a strong preliminary Q4 earnings report. The S&P 500 climbed 1.1% to 1,416.25 and the Nasdaq 1.6% to 2,478.30. Oil closed up $1.85 at $92.92 Monday on frosty U.S. weather forecasts and unrest in the Mideast. It continued upward in morning trading Tuesday on tensions in Iran and Nigeria. The dollar slipped against the yen and the euro in response to last week's remarks by Fed Chairman Ben Bernanke advocating "substantive" action at the central bank's next policy meeting. Gold closed up $5.50 at $901.60 an ounce.
• Former Fed Chairman Alan Greenspan said Monday that the U.S. is either already in or likely to soon enter a recession. "The symptoms are clearly there," he said.
• Retail sales are expected to rise 3.5% -- their slowest rate in six years -- according to the National Retail Federation. The Commerce Department will report December's total retail sales figures on Tuesday, which will provide a final figure for 2007. That year's sales growth is currently estimated at 4.0%.
• Senate investigators have issued subpoenas to Citigroup (C), Lehman Brothers Holdings (LEH), Morgan Stanley (MS), and UBS AG (UBS) concerning the alleged structuring of derivatives transactions to help offshore investors avoid U.S. withholding taxes.

Global Markets

• Asia: Most Asian markets declined Tuesday following intraday volatility. The Nikkei dipped below 14,000 for the first time since November 2005 on concerns that the yen's strength will hurt exports. Honda Motor Co. (HMC) was off as much as 4.4% and Sony (SNE) 2.2%. Bank of Japan Governor Toshihiko Fukui said again Tuesday that Japan's economic growth will likely continue to slow, suggesting the central bank will not raise interest rates this year. The Hang Seng declined 1.5%, in part reflecting the Chinese government's rejection of a proposed investment in Citigroup (C). HSBC Holdings (HBC) fell 1.9% and China Mobile (CHL) 2.1%. Taipei listings continued to rise following the Kuomintang's victory, with China Airlines (CHAWF.PK, up 6.8%) and Huaku Construction (up 6.9%) leading gainers.
• Europe: European shares fell Tuesday, led by retailers, on consumer spending fears. The FTSE lost 1.1%, the DAX 0.5% and the CAC 0.8%. British supermarket Tesco (TSCDY.PK) shed 2.7% following a disappointing comps report and luxury retailer Burberry fell 9.2% after it said it might miss estimates.

Must-Know News for Tuesday

• Citigroup expected to announce dividend cut, cash infusion and writedowns. The bank's (C) Q4 earnings report is expected to include news of a dividend reduction -- possibly by half -- and cost-cutting measures that could include over 20,000 layoffs, as well as a writedown of $20 billion in mortgage-related investments. Beijing rejected a $2 billion investment by the China Development Bank, but Citi is seeking at least $5 billion from the Government Investment Corp. of Singapore in addition to cash injections from Kuwait and Saudi Prince Alwaleed bin Talal.
• IBM surprises to the upside; shares rise. IBM (IBM) preannounced Q4 EPS of $2.80, 7.7% ahead of analyst expectations and 24% above last year's quarter. IBM shares led a rally on the Dow, closing up 5.39% at $102.93.
• Merrill receives capital injection from Japanese megabank. Merrill Lynch (MER) is expected to announce Tuesday that it will receive a ¥140 billion ($1.3 billion) recapitalization from a unit of Mizuho Financial Group (MFG).
• Harman International slashes outlook; shares plunge. The audio equipment and GPS manufacturer (HAR) reduced its fiscal 2008 EPS estimate to $3.00-3.10 from $4.14. Analysts had been expecting $4.30. Shares closed down 37.65% at $43.00.
• Sun Capital to launch hostile bid for Kellwood. Cardinal Integrated LLC, an affiliate of Sun Capital, is offering $21 per share for the shares of the apparel manufacturer (KWD) it does not already own. Kellwood has already rejected that price twice.
• Three French companies to co-build nuclear power plant in MidEast. In an announcement that coincided with the visit of French President Nicolas Sarkozy to the region, French oil company Total SA (TOT), utility Suez SA (SZEZY.PK) and nuclear engineering company Areva said they will construct a civil nuclear power plant in the U.A.E.
• Samsung posts Q4 earnings beat. Samsung Electronics (SSNLF.PK) reported a 6.6% drop in net income to 2.21 trillion won ($2.4 billion) from 2.37 trillion won a year ago, ahead of the 1.95 trillion won expected by analysts. Revenues were up 11% to 17.48 trillion won. Liquid-crystal display earnings tripled to set a company record.
• Trial shows popular drug offers no medical benefit. Merck (MRK) and Schering-Plough (SGP) said Monday that Zetia, the cholesterol treatment prescribed to a million people a week, does not reduce heart attacks, strokes or atherosclerosis. Schering-Plough's shares fell 7.97% and Merck's 1.27%.
• Coldwater Creek warns on Q4; shares tumble. The women's clothing retailer (CWTR) said it now forecasts a Q4 EPS loss of $0.16-0.20 versus earlier guidance of break-even. Analysts had been expecting a loss of $0.01. Shares fell 12.82% after hours.
• Legg Mason sells senior notes; offers Q3 earnings guidance. The money-management firm (LM) sold 2.5% nonvoting convertible senior notes valued at $1.25 billion and due in 2015 to an affiliate of Kohlberg Kravis Roberts. It also said it is forecasting Q3 EPS of $1.04-1.09, including a $0.16 charge. Analysts had been expecting $1.21.
• Sovereign Bancorp warns that Q4 will be hurt by charges. The Philadelphia bank (SOV) said results will reflect about $1.61 billion in pretax charges. It also announced it has discontinued its automobile lending originations in the Southeast and Southwest.
• Virgin Atlantic to fly biofuel-powered 747. As part of a joint project with Boeing (BA) and General Electric (GE), the British airline will fly a plane from London to the Netherlands next month powered by an alternative fuel-kerosene combination. The flight will be ten months ahead of schedule.
• FDA approves Tysabri for use in Crohn's disease. The medication, sold by by Elan Corp. (ELN) and Biogen Idec (BIIB), has been approved for use by Crohn's patients who have not had success with other treatments, including Johnson & Johnson's (JNJ) Remicade and Abbott Laboratories' (ABT) Humira.

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Comments

[Long-ShortGuy]

It's amazing that Alan Greenspan is the one to say we're now in recession, so soon afte handing Bernanke the hot potato.

[Atl Bob]

Looking for a confirmation- Didn't CNBC report this morning that there was a positive buzz on Sovereign (SOV) today after their report? Was there a merger potential mentioned?

[RobertNabloid]

I agree Long-Short Guy!