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  • Inflation will not deter rate cuts - Kohn. Worrisome inflation numbers will not prevent the Fed from cutting interest rates again at a scheduled March 18 meeting, if not sooner, Vice Chairman Donald Kohn says. He predicted an eventual return to growth, but said adverse risks abound. Traders give an 88% chance the Fed will lower its target to 2.5% from 3% at its next policy meeting.
  • Toll misses, sees glimmers of hope. Number-one U.S. luxury homebuilder Toll Brothers (NYSE:TOL) posted a $0.61/share loss, exceeding the -$0.44 expected by analysts. The loss included a $245M writedown, net of which Toll earned $0.35/share. Net contracts signed fell 50% to $375M; backlog fell 42% to $2.4B. CEO Robert Toll was again critical of the media's relentless 'drumbeat' recession talk, which he said dampens consumers' moods and keeps them from buying. Toll said selling remains weak, but that it sees a few "glimmers of hope."
  • EU hits Microsoft with $1.3B fine. The EU fined Microsoft (NASDAQ:MSFT) a record $1.3 billion (€899M) for overcharging developers for interoperability information needed to develop Windows-compatible software. Microsoft noted the fines related to past issues that have been resolved. Microsoft has dropped licensee royalty demands from 2.98%-3.87% to 0.5-0.7% and later to a flat fee of $14,000 for interoperability info and a worldwide patent license for 0.4%. There was speculation a penalty could go as high as €1.5B ($2.2B).
  • Big Blue buyback. IBM (NYSE:IBM) ignited stock markets Tuesday by announcing its second $15B share repurchase plan in less than one year. "The willingness to make continued share buybacks speaks to strong faith in the business model," S&P analyst Thomas Smith said. Shares rose 3.9%.
  • Dollar tumbles. The U.S. dollar hit record lows against the euro after weak consumer confidence and surprise inflation raised the odds of further interest-rate cuts. Consumer Confidence fell to 75 vs. 82 consensus, down from 87.3 -- its lowest in nearly 15 years. Both core (+0.4%) and headline (+1%) wholesale inflation surprised to the upside; 12-month PPI of 7.4% is at its highest in over 25 years.
  • Airline talks hit impasse. A long-awaited merger between Delta Air Lines (NYSE:DAL) and Northwest Airlines (NWA) remains elusive after Delta executives told employees in an internal memo they have yet to see a "potential transaction [that] meets all our principles." Pilots unions have failed to agree on seniority issues. Delta pilots fear losing seniority upgrades they received after the company emerged from bankruptcy in 2005, while Northwest pilots think a proposed deal gives Delta pilots priority on sought-after long-haul wide-body flights.
  • Job cuts at Nortel. Nortel (NT) lost $844M ($1.70/share) in Q4 on revenue of $3.2B, including a $1.04B tax-related charge, and said it would reduce its global workforce by about 2,100. Analysts expected revenue of $3.28B and EPS of $0.47 net of charges. For 2008, Nortel sees low-single-digit revenue growth; analysts were looking for 4%. The company expects to save about $300M/year on the layoffs, which will cost it about $525M. There is speculation Nortel is in talks with Motorola (MOT) about combing the companies' wireless-infrastructure units.
  • Issuers to SEC: Give us a break. Hospitals and brokerage firms are petitioning the SEC to allow issuers to bid on their own auction-rate bonds -- normally considered manipulation -- in order to stem the recent outbreak of failed auctions. Such a move would allow issuers to temporarily or permanently retire their securities, whose interest rates have soared. Yesterday Texas Instruments (NASDAQ:TXN) said failed auctions on $575M of its debt will limit its ability to sell the securities.
  • J&J, Amgen fall on new study. Anemia drugs Aranesp and Procrit sold by Amgen (NASDAQ:AMGN) and Johnson & Johnson (NYSE:JNJ) raise the risk of death among cancer patients by about 10%, a new study of previous trials found. Amgen played down the study, saying the risks are already in the drugs' labels. The FDA will convene in March to decide whether to impose further restrictions on the drugs, commonly used to treat chemotherapy-induced anemia. Shares of Amgen and J&J were down 3.2% and 1.15% in Frankfurt.
  • Google drops on weak click-throughs. Google (NASDAQ:GOOG) fell 4.6% after comScore reported flat click-through revenue growth vs. a (disappointing) 25% gain in Q4; click-through rates were at their lowest recorded. The data suggests internet advertising may be more vulnerable to a slowdown than had been thought. There is disagreement among analysts as to the reliability of the data.
  • China opens doors for two more primary brokers. JPMorgan (NYSE:JPM) and U.K. bank Standard Chartered became the second and third foreign banks licensed to underwrite Chinese government bonds, joining HSBC (HBC). Bond demand in China is strong, even amid rising inflation, although JPMorgan says the real payoff will be tighter ties with Chinese authorities.
  • Rubbermaid taps into touchless restrooms. Newell Rubbermaid (NYSE:NWL) is buying Technical Concepts, a maker of touch-free public restroom equipment, for $445 million. CEO Mark Ketchum called the acquisition a "trend-forward" deal, as Rubbermaid hopes to capitalize on growing global demand for touch-free restroom products after the Asian SARS outbreak.
  • STMicro jumps after French gov't raises stake. Shares of STMicroelectronics (NYSE:STM) gained 2.2% in Paris after the French government boosted its holding in the firm by buying a 2.85% stake for a price 19% higher than Tuesday's close. STMicro shares are down more than 40% since last April.
  • Slick move by buyout firms. Buyout giants Blackstone (NYSE:BX) and First Reserve will announce a $2B partnership with Europe's number-one independent oil refiner, Petroplus, to invest in U.S. refineries. The deal illustrates how private-equity firms, unable to finance big acquisitions, are finding inventive ways to invest their money.
  • Democrat Wants More Housing Aid
  • 'Shrek 3' Sales Boost DreamWorks
  • N.Y. Times to Meet Dissidents' Slate
  • Bush to veto bill rolling back tax breaks for oil

Today's Markets

  • Asia markets were higher on Wednesday after Tuesday's rally in the U.S.: Nikkei +1.49%. Hang Seng +3.24%. Shanghai +2.26%.
  • Europe at midday: FTSE -0.63%. CAC -0.58%. DAX -0.38%.
  • U.S. futures at 7:35 AM: Dow -0.15%. S&P -0.24%. Nasdaq -0.26%.

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Source: Wall Street Breakfast: Must-Know News