Wall Street Breakfast: Must-Know News

Today's Markets

• In Asia Friday, the Nikkei fell 1.44%, adding to Thursday's drop of 0.82%. India's BSE Sensex was down 0.33%. Shanghai and Hong Kong were closed for holidays.
• European markets are up mildly. FTSE: +0.4%. CAC: +0.2%. DAX: +0.6%.
• U.S. futures are down from Thursday's close as of 6:30 AM. Dow: -0.4%. S&P: -0.5%. Nasdaq: -0.6%.

Must Know News

• Stimulus bill wins vote. Congress approved a $168B economic stimulus bill, meaning more than 130 million households will begin receiving $600-1,200 rebate checks. The measure passed after Democrats dropped demands for billions in extra spending and tax breaks. President Bush called the legislation "an example of bipartisan cooperation at a time when the American people most expect it."
• No recession, says Yellen. Fed governor Janet Yellen says a slowing economy will not lead to "outright recession." Yellen was open to future rate cuts, in contrast to recent Fed speakers who have expressed concern the FOMC not go overboard. On the other hand, forecasting firm Global Insight says the economy is already in mild recession.
• Credit card woes. Credit-card delinquencies are on the rise as cash-strapped customers reach the end of their line. Lenders are tightening things, making it harder to find new sources of credit, all of which could further erode consumer spending.
• Merrill probe could go criminal. U.S. criminal prosecutors want to see the information gathered by the SEC in its civil investigation of Merrill Lynch's (MER) mortgage-securities policies, which is examining whether the firm booked mortgage bonds at inflated prices. The Justice Department's interest could be the precursor to criminal charges. Prosecutors are also looking at UBS's (UBS) mortgage valuations, and the collapse of Bear Stearns's (BSC) hedge funds.
• End in sight for writers' strike. Sources say major Hollywood studios and the Writers Guild are close to sealing a deal that could end the writers' strike by Monday.
• ALU misses, scraps dividend. Alcatel-Lucent (ALU) reported a Q4 adjusted loss of €0.02/share, missing consensus estimates of a profit of €0.10/share. Revenues rose 18.4% to €5.23B, vs. a €4.92B consensus. On the year, it lost €3.52B. ALU also suspended its dividend. For 2008, the company sees margins of 2.5%-5%, which one analyst said are "not good at all." CEO Patricia Russo: "The macroeconomic environment has created uncertainty in our markets in the last few months."
• Weyerhauser beats, revenues miss. Weyerhaeuser (WY) reported Q4 adjusted EPS of $0.42/share, better than the $0.35 consensus. Revenue fell 18% to $3.94B vs. a consensus of $4.13B.
• Another blowout for Activision. Activision (ATVI) reported FQ3 EPS of $0.86, beating Street estimates of $0.80. Revenue of $1.5B was higher than the $1.4B consensus. ATVI also boosted its 2008 EPS guidance to $1.07 vs. a consensus of $0.96 and revenue guidance to $2.7B vs. a consensus of $2.5B. An analyst called the success of its two big games, Guitar Hero III and Call of Duty 4, "incredible." Shares gained 2.3% in AH.
• Kodak says inkjet sales could triple. Eastman Kodak (EK) gave an upbeat 2008 forecast, saying it expects to exert growing pressure on HP's (HPQ) inkjet printers, possibly tripling sales. It sees $10.3-$10.5 billion in sales, vs. estimates of $9.9-$10.3 billion. Shares gained 3.1%.
• Weak guidance sinks RealNetworks. RealNetworks (RNWK) reported Q4 EPS of $0.02, better than consensus estimates of $0.01, and revenue of $156.9M vs. a consensus of $155.26M. RNWK foresees a Q1 loss of $0.01-0.08/share on revenue of $139M-$143M vs. estimates of -$0.01 on revenue of $151.71M; 2008 GAAP EPS of -$0.04 to -$0.09 on revenue of $612M-$632M vs. consensus of $0.10/share on revenue of $642.34M. Rhapsody subscribers were 1.9M, vs. 1.7M a year ago, but growth was slower than expected, CEO Rob Glaser said. Shares lost 4.3% in AH.
• Dismal January for retail. Retailers posted their worst monthly sales in five years; even gift-card redemptions were soft. Wal-Mart (WMT) lead the way with 0.5% comps growth vs. 2% estimates; more than half of all retailers missed expectations.
• Homebuilders' legal woes. KB Home (KBH) and Countrywide (CFC) are being sued by customers who allege the firms colluded to conceal declining home prices.
• Price tweaking costs Merck $650M. Merck (MRK) agreed to pay $650 million to settle lawsuits alleging it offered improper discounts to certain strategic buyers.
• Exxon wins court freeze. ExxonMobil (XOM) received court permission to freeze $12B in Venezuelan assets as payment for its stake in a project overtaken by the state last year.
• Total Music probed. The DoJ has launched a probe into fledgling music-industry initiative "Total Music," a JV between Sony (SNE) and Bertelsmann. The project is thought to offer users unlimited access to music from partner labels in exchange for a one-time per-gadget fee, and is seen as a team effort to dethrone Apple's (AAPL) iTunes Store's current dominance. The inquiry may examine the antitrust issue of a consortium cooperating to set prices.
• IONA confirms bid interest. IONA Technologies (IONA) confirmed recent speculation, saying it has received unsolicited interest from a third party to acquire the company.
• MGM Mirage expects to beat estimates
• Verizon to buy back up to 100 million shares
• Microsoft's Office push scrutinized by EU
• Lipitor ad lands Pfizer in hot water

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Comments

[Tom B]

"# Microsoft's Office push scrutinized by EU"

I think we can all agree that open document formats are better than closed ones. The interesting thing here, though, is that the EU is quite willing to probe MSFT over this one small thing. And, at the same time, many "neutral" pundits seem to believe MSFT can get away with destroying Yahoo without legal consequences. Most curious.