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.

  • All eyes on Lehman. Much-maligned Lehman (LEH) lost $500-700M on hedges gone awry, which will lead to an unexpectedly large Q2 loss, which may lead to it selling a strategic stake to an outside investor (possibly a Chinese or South Korean bank), or even selling itself. Shares fell 9.5% yesterday (to 22% below book value!) amid rumors it was approaching the Fed's discount window for help, which it denied, and after a WSJ article said it needed to raise as much as $4B. CDSs on Lehman debt rose to 240 BP yesterday up from 150 BP.
  • Bernanke boosts dollar. Fed Chairman Ben Bernanke said interest rates are well positioned to spur growth. More importantly, Bernanke broke a long-standing policy of relative silence on the dollar, saying Fed policy will ensure "the dollar remains a strong, stable currency." The dollar jumped against the yen and euro, while energy and commodity prices dropped. Aside from talking the dollar up, it's not entirely clear how Bernanke plans to support the waning dollar if it resumes its descent.
  • Global GDP forecast shrinks, again. The OECD (Organization for Economic Cooperation and Development) cut its combined GDP growth forecast for its 30 members to 1.8% in 2008 and 1.7% in 2009. As recently as December, the forecast was 2.3% growth for 2008 and 2.4% for 2009.
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  • Softbank, Telefonica take-on iPhone. Softbank (OTCPK:SFTBF), number-three Japan mobile carrier, will become the first reseller of Apple's (NASDAQ:AAPL) iPhones in Japan, beating out NTT DoCoMo (NYSE:DCM), which was the favorite. DoCoMo says it will still consider selling the phones if the price is right. Telefonica (NYSE:TEF) became the first Spain iPhone dealer.
  • Novartis acquires super-drug. Novartis AG (NYSE:NVS) is buying Protez Pharmaceuticals for $100M, acquiring rights to a broad-spectrum antibiotic effective against potentially fatal drug-resistant infections. NVS could pay another $300M depending on the drug's performance.
  • Car buyers go small. The Honda (NYSE:HMC) Civic was the best selling vehicle U.S. vehicle in May, deposing Ford's (NYSE:F) F-Series pick-up, which has worn the crown for the past 26 years, as car buyers opted for small, energy-efficient models and shunned large cars and light-trucks. By company: GM -28%. F -16%. TM -4.3%. OTCPK:NSANY +4.4%. HMC +11.3%. GM said it will close four truck plants, and save another $1B on top of already-announced savings. It also said it may stop making Hummers.
  • Icahn takes aim at Yang. Activist investor Carl Icahn said for first time yesterday he will oust Jerry Yang as Yahoo (NASDAQ:YHOO) CEO if his challenge for the board succeeds. After details of Yahoo's defense against Microsoft (NASDAQ:MSFT) emerged yesterday due to a shareholder lawsuit, Icahn said he's now convinced Microsoft distrusts Yahoo, and will not make another bid unless Yang and his board are ousted. Yahoo spokesman Brad Williams said the company is not aware of an alleged $40/share offer from Microsoft (MSFT) at the beginning of 2007.
  • Folgers deal brewing. J.M. Smucker (NYSE:SJM) will soon seal a deal to acquire Procter & Gamble's (NYSE:PG) Folgers coffee business for $2B or more, nearly doubling its size. P&G had said in January it would likely spin off Folgers.
  • Regulating the ratings firms. Sources say Moody's (MCO +2.5%), S&P (MHP +1.1%) and Fitch are on the verge of an agreement with NY AG Andrew Cuomo, who wants them to collect fees for all assessments, even when the issuer decides not to use their rating -- increasing their impartiality and making them less vulnerable to manipulation. They have also agreed to disclose fees earned for rating nonprime mortgage securities each quarter, which could help investors detect potential conflicts of interest.
  • AMD shakes things up. AMD (NYSE:AMD) today delivers its long-awaited Puma platform that, for the first time, will allow it to compete not only with Intel (NASDAQ:INTC) CPUs but with its chipsets and graphics solutions. AMD is partnering with Broadcom (BRCM) and others to offer Wi-Fi capability without having to leave its "integrated supply chain." Early adopters include Toshiba (OTCPK:TOSBF), NEC and Acer.
  • Steelmakers gain on repricing initiative. Steelmakers are trying to reprice 2008 contracts to bring them in line with spot prices. Longbow Research analyst Bob Richard says the companies are in for considerable earnings upside if they succeed. (X +3.7%, MT +2.5%, PKX +3.1%).
  • CFTC: Granular regulation. The CFTC issued its new agricultural initiatives. The regulator says it will collect more information from traders and be more transparent. It also disclosed an investigation into a recent spike in cotton futures, and withdrew its request to increase speculation limits.
  • Smith energizes its product line. Smith International (SII) said it is buying W-H Energy (WHQ) for $3.2B in cash and stock. With WHQ, Smith said its product line extends "from the rig floor to the drill bit."
  • United reduces fleet. United (UAUA) is grounding dozens of its least fuel-efficient planes to save money amid soaring fuel costs. It may also lay off workers and cut out some of its routes.
  • Europe retail sales disappoint. Eurozone retail sales plummeted in April: -2.9% from a year ago and -0.6% from last month, far worse than consensus estimates of -0.8% and +0.2%. March's number was revised to -2.3% vs. a prior -1.6%. European companies' net earnings fell 23.4% in Q1, vs. a decline of 13.4% for U.S. companies.
  • Japan shows resilience. Japanese capital investment fell less than expected in Q1: -5.3%, vs. a consensus of -7.3%.
  • Factory orders: +1.1% vs. -0.1% consensus. GDP forecasts will likely rise.
  • Retail chain-store sales rose 1.2% Y/Y, but fell 0.8% from a week ago. "Consumers are spending on only the items they need," the ICSC said. It says it sees little evidence of a spending lift from recent rebate checks.

Today's Markets

  • Asia closed down Wednesday, save Tokyo. Nikkei +1.59% to 14,436. Hang Seng -1.04% to 24,123. Shanghai -1.93% to 3,370. BSE Sensex -2.81% to 15,515.
  • In Europe, markets are down sharply at midday: London -1.7%. Paris -1.95%. Frankfurt -1.35%.
  • U.S. futures are lower at 7:10 AM: Dow -0.35%. S&P -0.44%. Nasdaq -0.34%. Crude -0.52% to $123.60. Gold -0.28% to $878.50.

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