New York sues JPMorgan over Bear Stearns fraud allegations. The legal liabilities of banks over the financial crisis seem to be never-ending: New York's AG has sued JPMorgan (JPM) over alleged widespread fraud at its Bear Stearns unit in the sale of mortgage-backed securities in the run-up to the financial crisis. The suit cites $22.5B of losses that investors suffered in securities that Bear Stearns issued before its takeover by JPMorgan.
Spain wants to request aid, Germany says hold on. Spain is prepared to request an EU bailout as soon as this weekend, but Germany wants Madrid to wait because of political considerations, especially so soon after the Bundestag authorized the €100B rescue of Spanish banks, Reuters reports. The countries have played down the speculation. Brussels wants Spain to apply for the aid and won't impose conditions harsher than the reforms the country has already announced.
Top Stock News
Boeing engineers, technicians reject deal. Boeing's (BA) engineers and technical workers overwhelmingly and unsurprisingly rejected the company's latest contract offer late yesterday. Boeing will now renew talks with the Speea union to thrash out a deal that will cover 23,000 employees. Analysts don't expect the vote to hurt Boeing's operations or stock in the short term, as staff can work beyond the existing contract's expiration on Saturday.
Boeing gets $6B order for 60 737 MAX jets. Low-cost Brazilian airline GOL Linhas (GOL) has agreed to purchase 60 Boeing (BA) 737 MAX airplanes, with the jets scheduled for delivery in 2018. The order is valued at approximately $6B, making it the largest ever from an airline in South America. The booking brings to 724 the number of 737 MAXs that have been ordered so far.
ThyssenKrupp mulls sale of $5B U.S. steel plant. ThyssenKrupp (OTC:TYEKF) is considering selling its two-year-old $5B high-tech steel plant in Alabama and its $6.8B facility in Brazil after a strategy to transport slabs from the latter facility for processing into high-grade sheets at the U.S. factory led to massive losses. Those officially or unofficially interested in the Alabama plant include Nucor (NUE), U.S. Steel (X) and ArcelorMittal (MT).
GE exploits ultra-low rates with $7B debt sale. GE (GE) has sold $7B worth of bonds in the third-largest corporate-debt sale this year and the conglomerate's first since 2007. With Treasury yields at rock bottom, GE's bonds provide a better return: the conglomerate sold $2B in 3-year paper at 0.859% vs. 0.308% for comparable Treasurys, $3B of 10-year bonds at 2.727% vs. 1.625%, and $2B in 30-year debt at 4.158% vs. 2.821%, the WSJ reports.
Microsoft waits on Intel for W8 Pro tablet. Windows 8 Pro tablet development is being held up by Intel's (INTC) delayed delivery of power management software, Bloomberg reports. Microsoft (MSFT) therefore hasn't yet approved any tablets running on Intel's Clover Trail Atom CPU, even though the latter has just announced a long list of devices that will be developed by top OEMs and use the system.
CFOs: 20% of firms legally fudge the books. With earnings season just around the corner, the WSJ reports on a recent survey of CFOs which found that they reckon 20% of companies use legal accounting methods to report earnings that don't fully reflect firms' underlying operations, with the magnitude of the misrepresentation 10% of EPS. Red flags include earnings that don't correlate with cash flows, sudden changes in reserves, and large and frequent one-off items.
MetLife can stress over stress test for longer. MetLife (MET) has received a second extension from the Fed for its stress test, giving the company until January 5 to resubmit its capital plans. The extension comes as MetLife sheds assets to minimize Fed oversight, which will allow the company to start raising its dividend and begin repurchasing its shares.
PetSmart promoted to S&P 500. PetSmart (PETM) will be added to the S&P 500 after the close on Thursday, replacing Sunoco (SUN) following the latter's buyout by ETP. Cabela's (CAB) will take PetSmart's position in the S&P MidCap 400, while Acorda Therapeutics (ACOR) will replace Cabela's in the S&P SmallCap 600.
Top Economic & Other News
Moody's skeptical about Spanish stress tests. Spanish banks could require cash infusions of €70B-€105B, Moody's has estimated, well above the €53.7B gap found by independent stress tests. However, the agency said a recapitalization is still "intrinsically credit positive" for Spain's lenders, as it would involve more capital and banks than previous attempts.
Postal Service defaults again while Congress campaigns. The Postal Service has defaulted on a $5.6B payment for its retiree funds, which was due at the end of September, adding to a $5.1B payment the USPS missed earlier this year. The agency also expects net operating losses of $15B for FY 2012. The USPS badly needs Congress to authorize cost cuts, but the legislature is adjourned until after the elections.
Volcker: QE3 to have little effect. Former Fed Chairman Paul Volcker yesterday played down the impact of QE3, saying: "It's not going to have a profound effect on the economy and it's not going to have any effect on inflation in the short run."
WWII bombs - the latest hazard for oil drillers. As deepwater drilling technology advances, thousands of bombs that the U.S. dumped into the Gulf of Mexico after World War II have become a hazard. The records of where these munitions were offloaded are incomplete, and cargo was probably thrown into the sea outside of designated areas. Decades later, no one really knows where the bombs are or exactly how many were dumped.
In Asia, Japan -0.1%. China, Hong Kong and India closed.
In Europe, at midday, London +0.2%. Paris +0.2%. Frankfurt +0.4%.
Futures at 7:00: Dow +0.4%. S&P +0.55%. Nasdaq +0.5%. Crude +0.2% to $92.64. Gold -0.1% to $1781.70.
Today's economic calendar:
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:45 ISM New York Business Index
Notable earnings before today's open: MOS
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