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  • Merrill tries to stem the tide. Merrill Lynch (MER) sells $30B+ in toxic assets at just $0.22 on the dollar, leading to a $5.7B writedown. Says it will raise $8.5B by selling common shares, meaning current shareholders can say goodbye to 38% of their holdings. An insider describes the move as an effort to "lance the boil" that has produced $46B+ in writedowns over the past year. -2.7% in Frankfurt.
  • BA/Iberia talk merger. British Airways (OTC:BAIRY) says it's in merger talks with Spain's Iberia. The discussions are considering a joined company, but both airlines' brands would be retained.
  • After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
  • ALU leaders step down. Alcatel-Lucent's (NYSE:ALU) merger architects, CEO Patricia Russo and Chairman Serge Tchuruk, are steping down after the company reported its sixth consecutive quarterly net loss (see below). "Our strategy is taking hold and our results are demonstrating good operational progress. That said, I believe it is the right time for me to step down," Russo said. Investors have wanted Russo out for more than a year; the news of the joint resignation sent shares up 4.7% in Paris.
  • Treasury 'cover' up. Four of the biggest U.S. banks - BAC, C, JPM and WFC - will begin issuing 'covered bonds' - a popular European instrument the Treasury hopes will thaw frozen credit markets and free up money for affordable mortgage financing. In Europe, the $2.75T covered bond market is the main source its banks' liquidity. Analysts said the new market could reach $1T in the U.S. within a few years - still just a fraction of the nation's $11T in home mortgages.
  • White House outlook turns dark grey. The sluggish economy and expensive stimulus package will swell the U.S. budget deficit to $482B in 2009 - $75B more than previous White House estimates. GDP is seen growing just 1.6% in 2008, down from a previous projection of 2.7%. In 2009 it expects 2.2% growth, down from 3%. (.pdf) The projection complicates the upcoming presidential skirmish: the ballooning could play havoc with McCain's planned tax cuts, and Obama's promised health-care expansion.
  • IMF pessimistic on U.S. The IMF riled markets Monday after it said there's no end to housing slump in sight. The fallout will continue to leak outside of just housing: "With delinquencies and foreclosures... rising sharply, and house prices continuing to fall, loan deterioration is becoming more widespread."
  • Wachovia downsizing? Wachovia (WB-OLD) may sell some of its non-essential assets - including Evergreen mutual funds, A.G Edwards brokerage, and/or its Northeast and Texas branches - in order to cope with widening losses. "Both of those franchises have real market value even with asset valuations being very low in financial services today," Bernstein's Bran Hintz said.
  • Mishkin's hard line. The Fed's Frederic Mishkin said once again that regulators should set concrete inflation goals, instead of their current use of comfort zones (or shmumfort zones as he calls them). He also wants the Fed increase its outlook to five years. Apparently, he's not too fond of their use of so-called core inflation, which factors out volatile food and energy prices. "It should be an inflation rate that actually affects people - people care a hell of a lot about what they are paying for gas."
  • ICSC Retail Sales: +1.2% (previous two weeks +0.1% and +0.2%). "Overall demand improved nicely... as a result of improved consumer traffic at discounters, dollar, office supply and electronic stores."

Earnings: Tuesday Before Open

  • AGCO (NYSE:AG): Q2 EPS of $1.34 beats by $0.37. Revenue of $2.4B (+40%) vs. $2.17B. Shares +5.35%. [PR]
  • AirTran (AAI): Q2 EPS of -$0.12 beats by $0.13. Revenue of $693M (+13%) vs. $702M. [PR]
  • Alcatel-Lucent (ALU) loses €1.1B vs. €586M a year ago. Revenue down 5.2% to €4.1B. CEO Russo and Chairman Tchuruk bow out gracefully after the sixth-straight post-merger quarterly loss. +4.7% in Paris.
  • Alpha Natural Resources (NYSE:ANR): Q2 EPS of $1.04 vs. $0.53 consensus. Revenue of $732M (+38.2%) vs. $571M. [PR]
  • BE Aerospace (NASDAQ:BEAV): Q2 EPS of $0.59 beats by $0.02. Revenue of $18.67B (+31.1%) vs. $19.6B. Sees 2009 EPS of $2.85 vs. $2.98. [PR]
  • BP (NYSE:BP): Q2 replacement cost net income after charges of $8.63B, well ahead of analyst consensus of $7.70B. Net profit of $9.47B ($49.8/share) up from $7.38B ($38.2/share) a year ago. Revenue +52% to $110.9B. +2% in London. [WSJ]
  • Coach (NYSE:COH): FQ4 EPS of $0.50 in-line. Revenue of $782M (+19.9%) vs. $776M. [PR]
  • Colgate-Palmolive Company (NYSE:CL): Q2 EPS of $0.98 beats by $0.04. Revenue of $3.96B (+16.4%) vs. $3.83B. [PR]
  • EarthLink (NASDAQ:ELNK): Q2 EPS of $0.51 beats by $0.15. Revenue of $312M (+27%) vs. $246M. [PR]
  • Jarden (NYSE:JAH): Q2 EPS of $0.72 beats by $0.08. Revenue of $1.36M (+29.5%) in-line. Shares +1%. [PR]
  • Lear (NYSE:LEA): Q2 EPS of $0.23 misses by $0.45. Revenue of $3.98B (-4.2%) vs. $3.91B. [PR]
  • Martha Stewart Living Omnimedia (NYSE:MSO): Q2 EPS of $0.05 beats by $0.01. Revenue of $77M (+5%) vs. $74.5M. [PR]
  • Masco (NYSE:MAS): Q2 EPS of $0.20 in-line. Revenue of $1.64B (-46.9%) vs. $2.65B. [PR]
  • McGraw-Hill Companies (MHP): Q2 EPS of $0.71 beats by $0.06. Revenue of $1.67M (-2.6%) in-line. Sees full-year EPS of $2.65-2.75 vs. $2.80. [PR]
  • NCR Corp. (NYSE:NCR): Q2 EPS of $0.40 beats by $0.05. Revenue of $1.33B (+13%) vs. $1.26B. [PR]
  • NRG Energy (NYSE:NRG): Q2 EPS of $0.49 misses by $0.06. Revenue of $1.32B (-14.3%) vs. $1.38B. [PR]
  • Nomura (NYSE:NMR), Japan's largest brokerage, posts an unexpected FQ1 loss after a 63.1B yen ($586M) provision for costs related to bond insurers. (Bloomberg)
  • Northrop Grumman (NYSE:NOC): Q2 EPS of $1.40 in-line. Revenue of $8.63B (+9.5%) vs. $8.28B. [PR]
  • SAP (NYSE:SAP): EPS of €0.42 beats by €0.02. Revenue of €2.86B vs. €2.81B. Shares +7%. [PR]
  • Safeco (SAF): Q2 EPS of $1.65 beats by $0.26. [PR]
  • Sepracor (SEPR): Q2 EPS of $0.06 vs. consensus of $0.23. Revenue of $294M (+6.3%) vs. $307M. [PR]
  • Sony (NYSE:SNE): FQ1 EPS of $0.31 misses by $0.09. Revenue of $18.67B (+0.1%) vs. $19.6B. Shares -3.2% in Tokyo. [PR]
  • Teva Pharmaceutical Industries (NYSE:TEVA): Q2 EPS of $0.65 beats by $0.01. Revenue of $2.82B (+18.3%) vs. $2.68B. [PR]
  • Under Armour (NYSE:UA): Q2 EPS of $0.03 beats by $0.02. Revenue of $157M (+30%) in-line. [PR]
  • United States Steel (NYSE:X): Q2 EPS of $5.65 beats by $1.74. Revenue of $6.74B (+59.5%) vs. $5.94B. Shares +6.65%. [PR]
  • Valero (NYSE:VLO): Q2 EPS of $1.37 beats by $0.04. Revenue of $36.64B (+51.4%) vs. $34.93B. Shares +2.2%. [PR]
  • Waste Management (WMI): Q2 EPS of $0.63 beats by $0.04. Revenue of $3.5B (+3.9%) vs. $3.43B. [PR]

Earnings: Monday After Close

  • Amgen (NASDAQ:AMGN): Q2 EPS of $1.14 beats by $0.12. Revenue of $3.76B vs. $3.58B. Shares +2.2%. [PR]
  • Atheros Communications (NASDAQ:ATHR): Q2 EPS of $0.31 beats by $0.01. Revenue of $121.5M (+20.5%) in-line. Shares 0.75%. [PR]
  • CF Industries (NYSE:CF): Q2 EPS of $5.02 beats by $1.42. Revenue of $1.16B (+36.8%) vs. $1.21B. Shares +0.4%. [PR]
  • Choice Hotels International (NYSE:CHH): Q2 EPS of $0.49 beats by $0.02. Revenue of $167M (+6.8%) vs. $164M. Sees Q3 EPS of $0.55 vs. $0.62. [PR]
  • CORUS Bankshares (CORS): Q2 EPS of $0.30 misses by $0.39. Revenue of $44+M (-46.5%) vs. $51M. [PR]
  • Electronic Data Systems (NASDAQ:EDS): Q2 EPS of $0.33 beats by $0.07. Revenue of $5.62B (+3.2%) vs. $5.71B. Shares +0.4%. [PR]
  • Plum Creek Timber (NYSE:PCL): Q2 EPS of $0.22 beats by $0.06. Revenue of $376M (-4.8%) vs. $346M. Shares -0.7%. [PR]
  • Questar (NYSE:STR): Q2 EPS of $0.998 beats by $0.13. Revenue of $857M (+54%) vs. $876M. [PR]
  • SL Green Realty (NYSE:SLG): Q2 EPS of $2 beats by $0.29. Revenue of $306M (+21.4%) vs. $262M. [PR]
  • Smurfit-Stone Container (NYSE:SSCC): Q2 EPS of -$0.12 misses by $0.01. Revenue of $1.84B (-1.9%) in-line. Shares +2.2%. [PR]
  • Universal Health Services (NYSE:UHS): Q2 EPS of $0.97 beats by $0.06. Revenue of $1.28B (+8.5%) in-line. Shares -0.6%. [PR]
  • XL Capital (NYSE:XL): Q2 EPS of $1.50 vs. $1.94 consensus. Cuts dividend. Announces $2.5B share offering. [PR]

Today's Markets

  • Asia fell sharply Tuesday. Nikkei -1.46% to 13,159. Hang Seng -1.89% to 22,258. Shanghai -1.82% to 2,850. BSE -3.89% to 13,792.
  • European bourses are mainly lower at midday. London +0.1%. Paris -1.3%. Frankfurt -0.9%.
  • Futures are flat. Dow -0.02%. S&P +0.06%. Nasdaq -0.04%. Crude +0.27% to $125.07. Gold -0.06% to $927.10.

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Source: Wall Street Breakfast: Must-Know News