- Boeing faces worker walkout. Boeing (NYSE:BA) failed to reach an agreement with its largest union about wage raises and benefits. The union has given Boeing 48 hours to improve its offer before workers go on strike, which could further delay the 787 Dreamliner. A strike could cost Boeing as much as $120M daily in lost revenue.
- JPMorgan swaps out municipal derivatives. With seven former bankers under investigation by the Justice Department over possible municipal swaps abuse, JPMorgan Chase (NYSE:JPM) will stop selling the interest-rate swaps to government borrowers. The $2.6T U.S. municipal bond market has recently been hit by an anti-trust suit, in which JPMorgan is named, and the near-bankruptcy of the largest county in Alabama, where JPMorgan led the group of banks that overcharged the county by as much as $100M.
- BP considering management change. BP (NYSE:BP) and its quartet of billionaire partners in Russian oil venture TNK-BP are close to resolving a management conflict that would see CEO Robert Dudley fired by the end of the year, and independent directors come on its board. Tensions over management's strategy have hurt BP's shares and Russia's reputation with investors. Shares are up 3.85% in London (4:43am).
- Unilever hires new boss. Unilever (NYSE:UN), the second-largest food and detergent maker, has hired executive Paul Polman from rival Nestle (OTCPK:NSRGF) to take over as CEO. Unilever's current CEO, Patrick Cescau, will retire by the end of the year. "Polman is probably the best candidate in the world to become CEO," food industry consultant James Amoroso says. Investors agree: shares are up 5.7% in Amsterdam (4:29am).
- NY AG to question BofA execs. The New York AG's office is sending out subpoenas this week to several Bank of America (NYSE:BAC) executives in connection to the ongoing probe of the bank's auction-rate securities [ARS] sales. Though recent reports suggested that the bank was nearing a settlement, the AG's actions seem to suggest otherwise, as the targeting of individual execs will only intensify the investigation.
- AIG ponders good bank/bad bank. Sources say AIG (NYSE:AIG) is working with JPMorgan (JPM) to spin off its most toxic assets into a separate company. The 'good bank/bad bank' tactic is not unfamiliar, but a source says this one could 'dwarf' others past. "We are conducting a comprehensive review of all AIG's businesses with the objectives of improving results, reducing AIG's risk profile and protecting our capital base," CEO Robert Willumstad said in June. A progress report is due Sep. 25. Of course, any move raises the uncomfortable question of who owns the firm that gets all the junk?
- National City reels in the line. National City (NCC), in an effort to reduce its exposure to risky debt, is offering customers $200 to close down their home-equity lines. Analysts say other banks could mimic the deal if it works - choosing to spend money now rather than risk further exposure to the U.S. housing slump. NCC will also waive its termination fee, normally up to $350. The firm had $18B of untapped home-equity lines on its books at the end of Q2.
- Merrill debates price on sale of bad loans. Merrill Lynch's (MER) plans to sell a significant amount of toxic debt to a Korean firm are stumbling over price disputes. Failure to reach an agreement on price may be a sign that Merrill, as well as Lehman Brothers (LEH) and others, still overvalue some assets and will need to cut their asking price as mortgage-related losses grow.
- Turbulence ahead for airliners. The global airline industry could face a $5.2B loss this year, and another $4.1B in 2009, said the International Air Transport Association [IATA]. Slowing growth in passenger traffic and higher fuel prices ($113/barrel average for H1, vs. $73/barrel last year) are hurting profit margins across the board and putting some airlines at risk of bankruptcy. The IATA's director general predicted it would be at least another two years before the industry begins to recover.
- GMAC to shutter offices, downsize workforce. GMAC (NYSE:GKM), the auto finance and mortgage company, will cut about 5,000 jobs from its Residential Capital division, approximately 57% of ResCap employees. GMAC will also close all 200 of its GMAC Mortgage retail offices. The moves come in response to the weak housing and credit markets, and the cuts will likely happen this year. GMAC is owned by Cerberus Capital Management and General Motors (NYSE:GM).
- Oil regulators look for pricing foul play. Regulators from the Commodity Futures Trading Commission [CFTC] are investigating whether data manipulation is contributing to crude oil price fluctuations. One of the CFTC's concerns is that companies may be misrepresenting their actual inventory levels in order to benefit trading positions they hold. It isn't clear whether CFTC is looking into specific energy companies or just the industry as a whole, but regulators were tipped off to the potential foul play by sources in the oil-trading world.
- To bid or not to bid? Recent reports say Tokyo Mitsubishi, Japan's biggest bank, may make a bid for a controlling stake in ailing investment bank Lehman (LEH). Sources close to the bank say it sees Lehman as a "once in a lifetime" opportunity, but is expected to wait on a bid until after Lehman's Q3 earnings report next week. Tokyo Mitsubishi strongly downplayed the report, with an official claiming the bank was not interested in a Lehman stake.
- Auto sales plummet. As expected, U.S. automakers posted double-digit sales declines for August. The industry's closely-watched seasonally adjusted annual rate of sales [SAAR] plunged to 13.7M cars and trucks from 16.3M last year. August's sales mark the tenth consecutive month of U.S. declines.
- Fed's Beige Book economic overview. The Fed's Beige Book showed most districts describe economic activity as weak, soft or subdued. Consumer spending is slow, and despite some declines in food and energy prices, purchasing is still focused on necessities. More worrisome is a noted drop in exports, the economy's final pillar: "Many firms express concern that foreign demand growth is now slowing."
- Mortgage apps rise. MBA Mortgage Applications jumped 7.5% over the previous week. The 30-year average mortgage rate fell to 6.39% from 6.44%, and refinances increased 2.1%.
- August job-cuts lower than July. The Challenger Job-Cut Report, released yesterday, showed August layoff announcements fell 14% from the previous month to 88,736, but were 12% higher than the previous year. Hardest-hit were the auto, government/non-profit and retail sectors.
- Retail sales are up... Retail chain store sales rose 0.1% from a week ago, and 2.2% vs. last year, the ICSC reported. "Rampant" sales promotions and cheaper gas prices helped drive traffic.
- ...and down. Redbook data showed national chain store sales fell 1.6% vs. July, but gained 1.7% vs. a year ago - slightly higher than forecast. Back-to-school shopping, bargain hunting, and stocking-up in fear of Hurricane Gustav drove sales.
- Factory orders beat consensus. July Factory Orders were up 1.3%, better than the expected gain of 1.0%. June Factory Orders were revised to +2.1% from +1.7%. July's orders marked the fifth straight month of growth, and the highest level since at least 1992.
Earnings: Thursday Before Open
- Ciena (NYSE:CIEN): FQ3 EPS of $0.37 in-line. Revenue of $253M (+23.5%) in-line. Sees FQ4 revenue of $190-210M vs. $263M. [PR]
- Toll Brothers (NYSE:TOL): FQ3 EPS of -$0.18 beats by $0.18. Revenue of $798M (-34.2%) vs. $772M. Shares [PR]
Earnings: Wednesday After Close
- Collective Brands (NYSE:PSS): Q2 EPS of $0.54 beats by $0.23. Revenue of $912M (+30.4%) vs. $885M. Shares +1.1%. [PR]
- Guess? (NYSE:GES): Q2 EPS of $0.57 beats by $0.08. Revenue of $515M (+32.7%) vs. $461M. Ups dividend to $0.10 from $0.08. Shares +0.05%. [PR]
- Hovnanian (NYSE:HOV): FQ3 EPS of -$2.67 misses by $1.10. Revenue of $716.5M (-36.6%) vs. $703M. Shares -6.3%. [PR]
- H&R Block (NYSE:HRB): FQ1 EPS of -$0.40 misses by $0.05. Revenue of $340M (-10.9%) vs. $378M. Shares -2.9%. [PR]
- SAIC (SAI): Q2 EPS of $0.26 in-line. Revenue of $2.56B (+15.2%) vs. $2.45B. Shares +0.7%. [PR]
- Asia markets closed mostly down. Nikkei -1.0% to 12,558. Hang Seng -0.95% to 20,389. Shanghai +0.03% to 2,277. BSE -1.0% to 14,899.
- In Europe at midday, London +0.4%. Paris -0.6%. Frankfurt -1.1%.
- U.S. futures at 7:10: Dow -0.35%. S&P -0.39%. Nasdaq -0.53%. Crude +0.67% to $110.08. Gold +0.67% to $813.60.
Thursday's Economic Calendar
- 6:00 Chain Store Sales
6:30 Monster Employment Index
7:00 BoE Announcement
7:45 ECB Announcement
8:15 ADP Jobs Report
8:30 Jobless Claims
8:30 Productivity and Costs
10:00 ISM Non-Manufacturing Survey
10:35 EIA Natural Gas
10:35 EIA Petroleum Status
1:40 PM Fed's Fisher speaks on U.S. economic challenges
2:00 PM Fed's Yellen speaks on U.S. economic outlook
4:30 PM Money Supply
- Notable earnings before Thursday's open: CIEN, TOL
- Notable earnings after Thursday's close: ADCT, TTWO, ZQK
Seeking Alpha editor Eli Hoffmann contributed to this post.
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