Wall Street Breakfast: Must-Know News 7 comments
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- JPMorgan, Morgan Stanley take back $7B in ARS. JPMorgan (JPM) and Morgan Stanley (MS) settled with regulators Thursday, agreeing to buy back at part more than $7B in illiquid auction-rate securities that were marketed as near-cash equivalents. They will also will pay damages to retail clients who sold their holdings for a loss. "The industry is taking responsibility for correcting a problem they helped create and that's a good thing," NY AG Andrew Cuomo said. "The fundamental goal has been to return money into the hands of investors and that's what these deals do." JPM rose 3%; MS +1%.
- Economists expect GSE bailout. A WSJ survey of economists finds chances are better than 50/50 (59%) that the Treasury will ultimately prop up Fannie Mae (FNM) and Freddie Mac (FRE) with taxpayer money, despite Secretary Hank Paulson's insistence to the contrary. "Blank checks almost always get filled in and cashed," one says wryly. One-third think the GSEs should be nationalized now. FNM +7%; FRE +8%.
- Bank funds still draw. Funds that invest in banks are attracting more money, even as they post their biggest losses in almost five decades. Financial ETFs raised $8.6B since January - while banks in the S&P 500 lost 54% from their 2007 records. Robert Leiphart of Birinyi Associates explains "When people say, 'It's the worst it's ever been,' it's usually the bottom and the time to start to buy." Not everyone is so bullish: some are investing in bank funds to hedge short positions on financial stocks.
- Oil speculators: Slippery target. New data show oil market speculators are playing a more prominent role than previously understood. A recent reclassification of large market players bumped speculators' share of trade to 49% from 38%, a development that will bolster calls to increase regulation - and will force authorities to gain a better understanding of who's in the market and why they're there.
- Pickens still an oil bull. Despite oil's recent pullback, T. Boone Pickens says crude will not drop below $100 due to America's heavy dependence on foreign oil. Yesterday the NY Post reported Pickens' hedge fund, BP Capital, which manages about $7B in assets, plunged 35% in July.
- BP suffers Russia blow. A Moscow labor court banned TNK-BP (BP) CEO Robert Dudley from holding executive office in Russia for two years. BP's Russian JV partners "are getting away with nothing short of murder... they can terrorize BP, making any excuse to wrestle control of their joint venture," Oppenheimer analyst Fadel Gheit said. "You cannot run a company long distance like that." If TNK-BP is forced to take on a new CEO, Russian stakeholders will be in the driver's seat to make the choice.
- Google-powered smartphone by Christmas. A Google-powered (GOOG) phone is finally here, almost. T-Mobile (DT) will be the first carrier to offer a mobile phone powered by Google's Android software, and the phone is expected to go on sale in the U.S. before Christmas - possibly as early as October. The high-end phone is expected to compete with Apple's (AAPL) iPhone and other smartphones from Palm (PALM), RIM (RIMM), Microsoft (MSFT), and Nokia (NOK). The phone will have a touch screen, like the iPhone, and will also have a full five-row keyboard that slides out.
- Soros Fund buys big stake in Petrobras. Soros Fund Management bought an $811M stake in Petroleo Brasileiro [Petrobras](PBR) in Q2, making the Brazilian oil company its largest holding at 22% of the fund. Soros has been increasing his mining and commodities holdings, and in November Petrobras announced the discovery of a new oil field, the largest such find in the Americas in over thirty years. Share of Petrobras, however, have fallen 28% since June 30, marking a $235M loss in value for the fund.
- More newspaper downsizing. Gannett (GGI) said it is cutting jobs 1,000 jobs at its Community Publishing division. McClatchy (MNI) said it will freeze wages for all employees for one year. GGI +10.6%. MNI +2.6%.
- GM rises 10.6% on downsizing, Volt plans. GM (GM), struggling to turn profitable as demand falls for its cars and trucks, said Thursday it will cut capacity by 500,000 vehicles between now and 2010, moving production away from trucks, with minimal capital investments. It also said it will finalize the design of the all-electric Chevy Volt by mid-September, and hopes to have 50 prototypes by the end of 2008.
- Global picture gets gloomier. Four of the world's five top economies (U.S., euro-zone, Japan, U.K. Not: China) are now flirting with recession, a trend that will pressure multinational corporations and stock market investors who until recently thought the global marketplace had decoupled from the U.S. "The global economy is sputtering amidst a widening in the slowdown from the United States to Western Europe and Japan," JPMorgan economist David Hensley says, noting emerging economies are also beginning to feel the squeeze. Most recent data points: 0.2% GDP contraction in the euro-zone; 5.6% inflation in the U.S.
- CPI jumped to 5.6% Y/Y, way higher than the 5.1% consensus. Core CPI also exceeded expectations; +0.3% vs. +0.2%. Prices increased 0.8% from June, double economist consensus of 0.4%. Economist Keith Hembre says we've probably seen the peak of the inflation readings, at least in the near-term. Some anomalous readings are likely to reverse out in coming months.
- Weekly jobless claims were 450,000, down 10K from last week (revised to 460K from 455K), but 15K above consensus. The four-week moving average jumped by 19,500 to 440,500.
- Existing Home Sales fell 16% to 4.91M in Q2, the NAR says. Prices fell by 7.6% to $206,500 as surging foreclosures drove bargains. Foreclosures and short sales (homes sold for less than the unpaid mortgage balance) accounted for 1/3 of all Q2 sales.
- China's factory and property spending growth accelerates, with urban fixed-asset investment jumping 26.8% in H1 (vs. an expected 26.6%). The latest of several indicators underscoring the strength of the world's fastest-growing major economy.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
Earnings: Before Friday's Open
- Abercrombie & Fitch (ANF): Q2 EPS of $0.88 beats by $0.02. Revenue of $846M (+5.1%) vs. $851M. Sees 2009 EPS of $4.95-5.00 vs. $5.36. [PR]
- New York & Company (NWY): Q2 EPS of $0.14 beats by $0.05. Revenue of $296M (+3.8%) vs. $284M. [PR]
Earnings: After Thursday's Close
- Agilent Technologies (A): FQ3 EPS of $0.57 beats by $0.03. Revenue of $1.44B (+5.1%) in-line. Sees FQ4 EPS of $0.58-0.62 vs. $0.64. Shares +0.4%. [PR]
- Autodesk (ADSK): Q2 EPS of $0.56 beats by $0.04. Revenue of $619.5M (+17.8%) vs. $606M. Shares +8.9%. [PR]
- Kohl's (KSS): Q2 EPS of $0.77 beats by $0.04. Revenue of $3.73B (+3.8%) in-line. Sees Q3 EPS of $0.51-0.56 vs. $0.57. Shares +4%. [PR]
- Nordstrom (JWN): Q2 EPS of $0.65 beats by $0.01. Revenue of $2.29B (-4.3%) vs. $2.31B. Sees Q3 EPS of $0.49-0.54 vs. $0.56. Shares -2.1%. [PR]
Today's Markets
- Asia Friday: Nikkei +0.48% to 13,019. Hang Seng -1.09% to 21,161. Shanghai +0.56% to 2,451. BSE Sensex -2.44% to 14,724.
- Europe markets are higher at midday. London +0.1%. Paris +0.6%. Frankfurt +0.3%.
- U.S. futures: Dow +0.32%. S&P +0.31%. Nasdaq +0.29%. Crude -1.57% to $113.21. Gold -3.23% to $788.20. Silver -9.9% to $12.82.
Friday's Economic Calendar
- 8:30 Empire State Mfg Survey
9:00 Treasury International Capital
9:15 Industrial Production
10:00 UofM Consumer Confidence - Notable earnings before Friday's open: ANF, JCP
Seeking Alpha editor Rachael Granby contributed to this post.
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Shabbath Shalom!