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.
  • NAND glut slims Intel margins. Intel (NASDAQ:INTC) dropped its gross-margin forecast to 54% from 56% late Monday amid lower-than-expected NAND flash chip prices, but said no other parts of its earnings outlook would be affected. Last week, J.P. Morgan analyst Christopher Danley cut his estimates due to "excess microprocessor inventory." Shares fell 2.3% AH.
  • Europe frets strong euro. European officials are growing increasingly concerned that the euro's record gains against the dollar will exacerbate the region's economic slowdown. The euro is up 16% vs. the dollar over the past 12 months. A strong euro may force the ECB to cut interest rates despite 14-year highs in inflation.
  • Auto sales sag. The dreary auto sales predicted in 2008 are living up to their expectations. Overall light vehicle sales fell 6.3% in February after a 4% drop in January. Chrysler (DAI) sales fell 14%, GM (NYSE:GM) sales were down 12.9%, Ford (NYSE:F) sales fell 6.6%, Toyota (NYSE:TM) sales were down 2.8%, while Nissan's (OTCPK:NSANY) sales inched up 1.2%. GM and Ford announced North American production cuts of 5% and 10% in Q2.
  • Fannie, Freddie agree to home appraisal watchdog. Taking aim at inflated home appraisals -- one of the root causes of the subprime mortgage crisis -- regulators moved Monday to require government-sponsored lenders Fannie Mae (FNM) and Freddie Mac (FRE) to insure the integrity of future valuations by breaking all business ties with home appraisers. New York AG Andrew Cuomo called the move "one of the greatest, most dramatic reforms of the housing industry in the last 20 years."
  • Commercial construction slowing. Spending on commercial construction fell 0.8% in January, amid a 1.7% drop in overall construction -- its steepest in 14 years. Commercial construction was assumed to have been stronger than its residential counterpart. Architects' billings are down 14% from their peak, and commercial property values fell 1.5% in December. Besides builders, a construction contraction bodes ill for light-truck makers and makers of heavy equipment.
  • Citi still needs cash. Dubai International Capital says Citigroup (NYSE:C) and other financial institutions need "a lot more money" to rescue them. Citi received $7.5B in November from Abu Dubai and said in January it was getting another $14.5B from the governments of Singapore and Kuwait and others. Merrill analyst Guy Moszkowski told clients Citi will lose $1.66/share this quarter amid a $15B writedown on mortgage-related assets and a possible $3B writedown on leveraged debt and commercial real estate.
  • When things go bad. Citigroup (C) and Wachovia (NASDAQ:WB) are facing lawsuits from hedge funds who allege the banks turned to them to reduce their marketplace exposure through credit default swaps, but were not frank in revealing inflated risk factors they were aware of.
  • Citi's revamp underwhelms. Citigroup (C) is reorganizing its wealth-management unit into segments determined by the net worth of their clients. The move suggests new CEO Vikram Pandit is more likely to fine-tune the bank's structure than to initiate sweeping changes many investors hoped for.
  • Statoil goes deep. Norway's Statoil (NYSE:STO) said Tuesday it will acquire stakes in heavy-oil and deep-water projects in Brazil and the Gulf of Mexico from Anadarko Petroleum (NYSE:APC) for $1.8B. The deal is in line with StatoilHydro's deepwater and heavy oil focus, and significantly bolsters its reserves and resources, executive VP Peter Mellbye said. Statoil now owns 100% of Brazil's Peregrino heavy oil field and receives a 25% stake in the Gulf of Mexico Kaskida discovery.
  • BP tragedy settlement grows. BP is now allocating $2.13B for claims relating to the fatal Texas refinery accident in 2005 -- much higher than the $1.6B provision it previously disclosed. Shares fell 1.6% in London.
  • Bayer loses control of contraceptive patent. A U.S. court invalidated Bayer's (OTCPK:BAYRY) patent on its Yasmin contraceptive, opening the door for Barr Pharmaceuticals (BRL) to produce a generic copy. Yasmin was Bayer's single biggest revenue driver last year with $1.58B in sales. The ruling may also threaten its Yaz birth control pill, which is protected by the same patent. Bayer fell 4.1% in Frankfurt, while Barr gained 9.5% in AH trading.
  • Court deadlock hurts Pfizer. A 4-4 Supreme Court split over the question of whether pharma companies can be sued for drug-related injuries in cases where they committed no fraud means a product-liability case against Pfizer's (NYSE:PFE) Rezulin will go forward. Rezulin was canned in 2000 after being linked to hundreds of deaths and cases of liver failure. Wyeth (WYE) has a similar challenge awaiting trial. Pfizer shares are down 0.4% in Frankfurt.

Today's Markets

  • In Asia, markets were generally weak Tuesday. Nikkei 0.0%. Hang Seng -1.97%. Shanghai -2.32%. BSE Sensex -2.03%.
  • European markets are showing weakness at midday. FTSE -0.81%. CAC -1%. DAX -1.45%.
  • U.S. futures are down at 7:00 AM. Dow -0.82%. S&P -0.98%. Nasdaq -1.01%.

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