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

[Matt Castle:]

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!

2008 Jan 31 02:36 AM

[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.

2008 Feb 01 12:18 AM