Wall Street Breakfast: Must-Know News

• More rate cuts to come. Testifying before Congress, Fed chief Ben Bernanke hinted more rate cuts are on the way. While acknowledging that inflation remains a concern, Bernanke made it clear that the Fed was focused on the downside risk of weak housing, labor and credit markets.
• Paulson critiques homeowner rescue. Treasury Secretary Henry Paulson criticized proposed rescue plans for homeowners, saying many of the proposals were no more than "bailouts" for reckless lenders and speculators. He says the Fed's market-based approach, including voluntary concessions from mortgage lenders, will keep things under control, without the need for government stipends.
• Allegations against Alcoa. In a suit filed in the U.S., a company controlled by Bahrain accuses Alcoa (AL) of a 15-year conspiracy involving overcharging, fraud and bribery. The company alleges Alcoa routed payments for its aluminum products through multiple small firms in order to mask the fact the money was making its way back to Bahrain officials who graced Alcoa with contracts at prices 10% higher than the going rate.
• Tough quarter for Fannie. Fannie Mae (FNM) lost $3.56B, and said falling home prices will result in heavy losses from mortgage defaults; Fannie booked a $2.79B loan-loss provision, up from $221M a year ago. Ofheo, Fannie's regulator, said it might reduce the 30% capital surplus requirement to reduce strain on the company. Moody's said it may cut FNM's B+ financial-strength rating.
• RBS boosts earnings, dividend despite writedown. Royal Bank of Scotland (RBS) posted a 22% increase in full-year net profit, despite a $3.17B writedown on U.S. subprime mortgage losses and exposure to leveraged debt and bond insurers. RBS boosted its dividend by 10%.
• Deutsche Telecom tops targets. Deutsche Telekom (DT) earned an adjusted 808 million euros in Q4, beating estimates of 609M euros. The company said its business is stabilizing, and confirmed previous 2008 earnings forecasts for flat operating profit and cash flow. DT lost 527,000 fixed-line customers in the quarter, vs. 503,000 a year earlier.
• State Street gets active. State Street (STT) filed an application with the SEC to launch actively managed ETFs that "will seek to deliver risk-adjusted returns through a multi asset class investment strategy."
• Sears profits dive, beats expectations. Sears (SHLD) saw quarterly profits plummet 47.5% on increased markdowns and weak sales. EPS of $3.17/share was better than the $3.05 analysts expected. Sales fell 7% to $15.1B. "Our fourth quarter and full year results continued to be negatively impacted by the worsening economic conditions faced by both our customers and competitors as well as increased markdowns taken to clear excess inventory," interim CEO Bruce Johnson said.
• G7 keeps an eye on things. The G7 is closely monitoring global financial market turmoil, and will take action to enhance market conditions if necessary, Japan's top financial diplomat Naoyuki Shinohara said. "The world economy confronts a more challenging and uncertain environment than when we met in October. But we also shared the view that economic fundamentals remain pretty solid with regards to the global economy."
• Sprint Nextel Swings to Loss
• BP to Keep Alternative Energy Unit
• 3G iPhone To Include Infineon Chip, Launch By Mid-Year: UBS

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Comments

[RichardSchweitzer]

under STT did you mean to say "actively managed" rather than actively traded?

[SA EditorEli Hoffmann]

Yes I did. Thanks Richard. Corrected.