Wall Street Breakfast: Must-Know News

Today's Markets

• Asia: Nikkei: -0.99%, Hang Seng: -2.63%, Shanghai: -0.97%.

  Europe: FTSE: -0.87%, DAX: -0.73%, CAC: -1.60%.

  U.S. futures are lower ahead of the Fed's rate decision: DJIA: -0.30%, S&P 500: -0.35%, Nasdaq: -0.62%.

Must-Know News for Wednesday

• VMWare loses a third of its value on revenue miss, outlook. Shares of the virtualization software company (VMW) plunged 33.89% to close at $54.87 Tuesday on a report of Q4 revenue of $412 million, $5 million shy of analyst expectations. The company is projecting 50% revenue growth for 2008, below analysts' prior forecasts of 55-57%.
• UBS AG posts record loss. The European bank (UBS) reported a Q4 net loss of 12.5 billion Swiss francs ($11.4 billion), almost twice what analysts had been expecting, due to writedowns on assets linked to U.S. subprime mortgages.
• SocGen gains on buyout talk, but government warns off foreign predators. Societe Generale (SCGLY.PK) ADRs rose 7.67% on speculation that BNP Paribas (BNPQY.PK) might make an offer. France warned foreign banks to keep their hands off: "The government is determined that Societe Generale remains a great French bank," said Prime Minister Francois Fillon.
• Yahoo will lay off up to 1,000 employees. The company (YHOO) also posted a 23% decline in Q4 net income. Shares fell 9.23% after hours.
• S&P home price index drops for 11th straight month. The Standard & Poor’s/Case-Shiller index showed a 7.7% drop from a year ago after a 6.1% fall in October. "The housing market is going to continue to look quite dismal for some time as the imbalances are worked out," said Lehman Brothers economist Michelle Meyer.
• Sprint revives WiMax JV talks with Clearwire. Dan Hesse, the new CEO of Sprint Nextel (S), is resuming talks with Clearwire (CLWR) to form a WiMax JV with possible funding from Google (GOOG), Intel (INTC) and Best Buy (BBY). Sprint shares gained 8.32% on the news; Clearwire shares shot up 23.21%.
• Silence by prospective buyer spooks Clear Channel investors. Shares of Clear Channel Communications (CCU) shed 7.16% Tuesday when Anthony J. DiNovi, a senior executive at buyout firm Thomas H. Lee Partners, declined comment on the firm's pending $19 billion buyout of the media company.
• Countrywide reports wider-than-expected loss; BofA affirms buyout. The mortgage lender (CFC) posted a $421.9 million (-$0.79/share) Q4 loss, but shares rose 6% on relief that its pending acquisition by Bank of America (BAC) will likely take place. "Everything is a go to complete this transaction," said BofA CEO Kenneth Lewis.
• Lehman boosts dividend. In a striking contrast to the moves of several other financial institutions of late, Lehman Brothers (LEH) raised its dividend 13% to $0.68. Shares rose 3.13% and another 1.9% after hours.
• Merck's bottom line threatened by legal trouble over Fosamax. Patients are alleging that Merck's (MRK) osteoporosis treatment Fosamax causes a painful bone-wasting condition -- a so-called "signature injury" that can be more easily linked to a specific drug than the heart attacks and strokes allegedly caused by Merck's withdrawn painkiller Vioxx.
• FBI opens subprime probe. The FBI is investigating 14 as-yet unspecified firms, including companies that bundled mortgages into securities and banks that held them, for accounting fraud and insider trading.
• Regulators mull closure of swaps loophole. Insurance regulators are considering closing a legal loophole that permits bond insurers to issue credit-default swaps through shell companies, or "transformers." Bond insurers are now struggling to satisfy billions of dollars' worth of guarantees they provided on those swaps.
• What decoupling? IMF says slow U.S. growth will drag on global economies. The International Monetary Fund forecasts that U.S. economic growth will slow to 1.5% in 2008 from 2.2% in 2007. Worldwide growth is expected to slow in turn to 4.1% this year from 4.9% last year.
• Durable goods surged in December. Orders for business equipment, particularly in the defense sector, rose 5.2% last month. Civilian aircraft, computers and machinery categories also showed strong gains.
• U.S. Steel posts 88% earnings drop. U.S. Steel (X) reported Q4 net income of $35 million ($0.29/share) versus $297 million ($2.50) a year ago on lower steel prices, Canadian outages, acquisition costs and job cuts in Europe. Shares fell 6.8%.
• Court overturns Costco's victory. A federal appeals court has reversed most of a 2006 district-court ruling that favored Costco (COST). The retailer had claimed that Washington state's regulations concerning the pricing of liquor restrict competitive practices.
• Lilly posts earnings beat. Eli Lilly (LLY) reported a 10% rise in Q4 profit to $986 million ($0.90/share), slightly ahead of analyst expectations. Including items, net income increased six-fold from the year-ago quarter to $850 million ($0.78/share). Shares rose 1.77%.
• Morgan Stanley Reclassifies Assets, Receives Subpoenas on Subprime Debt
• Microsoft oversight extended to 2009
• Energy Dept. Might Drop Support for FutureGen Power Plant
• Slimmer Margins at Valero
• J.B. Hunt Profit Falls 6% On Higher Operating Costs

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

Comments

[VTCastle]

Hey Judith,

Just wanted to say I really like these posts. I've been reading them now for 1-2 weeks and it's a great way to get review what went on after the close in less than 5 minutes. Bravo!

[Judith Levy]

I appreciate it, VT! Glad to hear you're enjoying the Breakfast. For more news, check out Seeking Alpha's Under the Radar daily feature, which complements the Breakfast each day.