Wall Street Breakfast: Must-Know News

Today's Markets

• In Asia Thursday, the Nikkei was up 0.82%. India's BSE Sensex was down 3.38%. Shanghai and Hong Kong are closed for holidays.
• European indexes were all lower. FTSE: -1.5%. CAC: -1.3%. DAX: -1.2%.
• U.S. futures were down slightly from Wednesday's close. Dow: -0.1%. S&P: -0.15%. Nasdaq: -1.17%.

Must Know News

• Lacker, Plosser: Fed can't take eye off inflation. Philadelphia Fed President Charles Plosser said Wednesday that slow growth cannot be counted on to reduce inflation. Richmond Fed Bank President Jeffrey Lacker said that because of inflation, "we can't cut interest rates as aggressively in response to weakness in growth as we otherwise would."
• Shares fall on Cisco's gloomy outlook. Cisco Systems (CSCO) reported a 7.2% rise in net income and a 16.5% rise in sales for FQ2, but its 10% forecast for revenue growth this quarter -- significantly below the 16-17% range of recent quarters -- sent shares tumbling 8% after hours. The company's warning of reduced demand sent S&P futures down from +7 points to -10 points in a matter of minutes.
• Budding partnership. InBev and Anheuser-Busch (BUD) are in merger negotiations. However, a lack of disclosure by InBev indicates the talks are not yet of a concrete nature, which would require it to report to the Belgian CBFA. Belgian business weekly Trends quoted senior InBev executives as saying a merger is 'inevitable.'
• AT&T to expand wireless service. AT&T (T) will extend its 3G high-speed wireless service to 80 more markets this year, bringing its total number of U.S. markets to nearly 350.
• Costco comps beat estimates. Costco (COST) reported a 7% rise in same-store sales in January, ahead of expectations of 6.6%. Net sales were up 11% to $5.11 billion. Net of high gas prices and the effects of a weak dollar, the numbers were less impressive.
• Deutsche Bank beats; reports no new writedowns. The German bank (DB) reported Q4 net income of €953 million ($1.4B) versus €1.8 billion a year ago, beating analyst expectations of €887 million ($1.3 billion). Revenue was €7.3 billion ($10.7B). For FY 2007, the bank posted a profit of €6.5B ($9.5B), ahead of analysts' forecasts of €6.4B ($9.4B).
• DR Horton posts worse-than-expected loss. The homebuilder (DHI) reported a FQ1 loss of $0.41/share, $0.16 worse than -$0.25 analysts expected. The loss included a $245M charge for inventory impairments, and deposits and pre-acquisition costs on land it will not pursue. Revenue dropped 39% to $1.71B, better than the $1.62B consensus. Backlog was 8,138 homes ($2B), vs. 16,694 ($4.7B) a year ago.
• Infineon's weak outlook drags shares down. Infineon (IFX) posted a €396 million loss ($579M), reversing a €120 profit a year ago, but beat analyst estimates of -€445M. Sales sank 25% to €1.6B. Looking forward, IFX said sales will rise less than the 10% the company forecast in December, displeasing investors who took shares down 12% in Frankfurt. CEO Wolfgang Ziebart told investors wireless chip sales were weaker than normal. CFO Peter Fischl said Qimonda's (QI) financial situation was not worrisome, and that IFX would not need to help it with financing. IFX owns 77.5% of QI.
• Airline talks pick up speed. Merger talks between Delta (DAL) and Northwest (NWA) have intensified, and sources say a deal could be announced within two weeks. The proposed deal is a straight-up stock-for-stock (no premium) transaction. Early talks between United parent UAL (UAUA) and Continental (CAL) are also becoming more serious. Northwest holds a "golden share" of CAL stock that would allow it to block a major merger, but CAL can redeem the stake for $100 (yep) if the DAL/NWA merger goes through. Sources say that UAUA/CAL are poised to move forward quickly if another merger is announced.
• Rio Tinto rebuffs sweetened offer. Rio Tinto (RTP) has turned down a $147 billion offer from BHP Billiton (BHP). "BHP Billiton’s offers, while improved, still fail to recognize the underlying value of Rio Tinto’s quality assets and prospects," said Rio CEO Paul Skinner. BHP shares fell almost 5% in London on the prospect of a protracted bidding war.
• Macy's reverses strategic course, cuts jobs. Macy's (M), faced with below-estimate comps, is shifting its focus to local operations, consolidating its seven back offices and cutting about 2,500 jobs. The company is forecasting same-store sales growth this year ranging from a decline of 1% to an increase of 1.5%. Shares fell 4.6%.
• Time Warner lays out options for AOL. Jeff Bewkes, the new CEO of Time Warner (TWX), told investors he is looking for ways to cut costs at Time Warner Cable (TWC) and to "change" its 84%-ownership of the unit. He also confirmed that he is separating AOL's declining internet access operation from its Web portal and ad business. Barry Diller, Chairman of IAC/InterActiveCorp (IACI), said it is unlikely that IAC would be interested in buying AOL unless its price came down to "something ridiculous."
• BofA counterattacks in $22.5B Russian lawsuit. The Bank of America (BAC), which is facing a massive money-laundering suit brought by the Russian customs service, said Wednesday that a lawyer for the Russian side falsified evidence. The customs service calls the accusation "absolutely unfounded."
• Akamai trounces expectations. Akamai Technologies (AKAM) reported Q4 earnings of $35.9 million ($0.20/share), up from $20.6 million ($0.12) a year ago. Excluding items, Akamai would have earned $0.41/share, ahead of analyst forecasts of $0.37. Revenue was up 46% to $183.2 million; analysts were expecting $175 million. Shares rose 2% in AH trading.
• S&P overhauls system. Standard & Poor's (MHP) is taking 27 steps to boost confidence in the credit markets and bolster its own analytical credibility. They include rotation of lead rating analysts after five years of following the same company, additional training for analysts, and the use of new surveillance tools to track structured-finance performance.
• Worker productivity surprises in Q4; eases inflation fears. U.S. worker productivity rose an annualized 1.8% in Q4, ahead of forecasts of 0.5%. Labor costs, meanwhile, rose less than expected (2.1% versus 3.5%). The figures appear to belie concerns that the Fed's recent rate cuts would spur inflation.
• GM to boost ethanol-car lineup. General Motors (GM) said Wednesday that half the vehicles it will produce by 2012 will run on ethanol. GM will put 11 ethanol-capable vehicles on the market this year and another four in 2009. The company will produce its first four-cylinder ethanol-capable car in 2010.
• Shell declares force majeure in Nigeria after sabotage
• PepsiCo profit falls on lower volume
• Bank of England cuts interest rates by 0.25%

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Comments

[Tom B]

"GM to boost ethanol-car lineup." Are they insane? Another reason to short GM. Ethanol is an OBVIOUS bubble; there isn't enough arable land in the US to meet demand.

[vernhiker]

BofA money laundering??! That's a new one......Someone should check this out

[Syl]

Which bank corporation are you repoeting on? Bank of America or Bank of New York.