Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Today's Markets

  • Asia was a mixed bag Friday. Nikkei closed flat, Hang Seng gained 0.53%, while Shanghai fell 1.21%.
  • Europe was in the red at the end of the morning session. FTSE -0.9%. CAC -1%. DAX -0.94%.
  • U.S. index futures are lower at 7:30, after spending much of the evening in positive territory. Dow -0.25%. S&P -0.3%. Nasdaq -0.47%.

Must-Know News

  • Greenspan: Recession knocks at the door. Former Fed chairman Alan Greenspan says the U.S. is on the edge of recession, and that the odds of an economic downturn are greater than 50-50. Home prices will continue to fall, which has already begun to take a toll on consumer spending.
  • Bernanke, Paulson see sluggish growth, not recession. Fed chairman Ben Bernanke and Treasury Secretary Henry Paulson both acknowledged the U.S. economic outlook has worsened, and came under criticism for failing to take bolder steps to prevent a slowdown. Bernanke implied the Fed was will to continue with rate-cuts in order to ease problems in the housing and mortgage-lending markets. Both stopped short of expressing anxiety over a recession, but predicted a period of sluggish growth which may pick up later in the year.
  • Spitzer to bond insurers: bulk up or lose munis. NY Gov. Eliot Spitzer said he's giving bond insurers (MBI, ABK, PMI) 3-5 days to raise capital to hedge their exposure, or resolve their problems in other ways, after which regulators may strip them of their healthier muni bond portfolios and leave them to manage the riskier portfolios on their own. Yesterday, FGIC (owned in part by Blackstone Group (NYSE:BX) and PMI) became the first bond insurer to suffer a much-feared Moody's downgrade from AAA to A3 (six grades lower). MBIA said yesterday Bill Ackman's public estimate that it faces more than $11B in potential losses is untrue, and an attempt to capitalize on his short position.
  • Auto loans succumb to credit woes. Auto loans at least two months delinquent hit a 10-year high, up 12% from a month ago and 44% from last year.
  • Negative home equity could hurt banks. Sales of previously-owned homes fell 21% in Q4, while prices fell in more than half of the country. As home prices fall below the value of their mortgages, cash-strapped homeowners are becoming incentivized to walk away and saddle banks with their devalued homes and debt.
  • Citi bars hedge fund exits. Citigroup (NYSE:C) suspended withdrawals from a corporate-debt hedge fund after investors threatened to take out more than 30% of the fund's $500M. The move is yet another "black eye for the financial behemoth's troubled foray into new types of investments." Meanwhile, Citi's Falcon Plus Strategies fund plunged 52% in Q4 amid bad bets that the credit market crisis was on the mend. The average CDO held by the fund is now worth just 25% of its initial value.
  • Probe focuses on Bear call. Sources says a criminal investigation of the Bear Stearns (NYSE:BSC) hedge funds' collapse could hinge on whether executives misled investors about the funds' state during a conference call last spring. During the call, fund manager Ralph Cioffi said he was "cautiously optimistic" Bear could hedge its risky subprime-tied holdings, all the while moving $2M of his own money to a less-risky fund.
  • UBS writedowns may hit $36B. Analysts say UBS (NYSE:UBS), the world's #1 money manager for the wealthy, may need to double its subprime writedowns from a current $18 billion to a whopping $36B. Shares are down more than 11% over the past two days.
  • United, Continental talks advance. United Airlines (UAUA) and Continental (NYSE:CAL) are in advanced negotiations and could move quickly if and when Delta (NYSE:DAL) and Northwest (NWA) strike a deal. The two must wait for DAL/NWA because Northwest can potentially block any deal involving Continental until it merges itself. Meanwhile, United is still considering a bid for Delta if Delta fails to close a deal with Northwest; the two discussed a tie-up last month.
  • Times changing. The New York Times (NYSE:NYT) will cut 100 newsroom jobs this year, mainly through buyouts and attrition, with the possibility of layoffs. The Times has over 1,300 newsroom employees, the largest number in its history; no other U.S. newspaper has more than about 900.
  • Newspapers join forces to gain online ad foothold. Four newspaper giants -- Tribune, Gannett (NYSE:GCI), Hearst and The New York Times (NYT) -- are joining forces to sell online ads. Each will transfer a portion of its online ad space to quadrantONE, a joint venture. “We want to control our own destiny,” one exec. said, rather than giving ad portfolios to companies like Google (NASDAQ:GOOG), Yahoo! (NASDAQ:YHOO) and Microsoft (NASDAQ:MSFT).
  • Takeover target Clear Channel (CCU-OLD) reported Q4 EPS of $0.45 on revenue of $1.84B, vs. consensus estimates of $0.43 on revenue of $1.86 billion. DealReporter says the private-equity deal is close to being finalized. At $30.13, shares still trade at a massive discount to the $39.20/share takeout price, as investors worry whether the buyers remain committed.
  • Chipotle misses. Chipotle Mexican Grill (NYSE:CMG) reported Q4 EPS of $0.53, short of Street estimates of $0.55. Revenue of $288.9 was in line. CMG expects to open 130-140 new restaurants in 2008, and comps in the low to middle single digits. "As we move into 2008, we fully recognize the operating environment will continue to be a challenge, characterized by pressures on food costs and restaurant level margins," it said.
  • China trade surplus widened more than forecast to $19.5B in January
  • Exxon claim is fraction of asset freeze: Venezuela
  • No extension for Newmont unit
  • Build-a-Bear profit declines
  • Dendreon soars on survival data

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