- Samsung mulls chipmaker purchase. Samsung may buy SanDisk (NASDAQ:SNDK), in what would be the company's largest acquisition to date. Samsung is trying to widen its lead over Toshiba (OTCPK:TOSBF) in the $15B market for chips used in cameras and portable music players. SanDisk, like other chipmakers, is under pressure to consolidate as prices fall, causing the company to post its largest quarterly loss in nearly seven years. SanDisk's reduced price has made it a potential buyout target to other firms as well, including Seagate Technology (NASDAQ:STX). SNDK is up 20.4% premarket.
- Bank loans from Fed set new high. U.S. banks hit a new record this week in the amount of funds borrowed from the Fed. The daily average of $18.98B beats last week's record of $18.47B. The increase in how much banks borrow from the Fed signals that banks are increasingly reluctant to lend to each other, making it more difficult for private and commercial consumers to obtain financing for home purchases and business operations.
- Believe it or not, China's CB needs cash. The People's Bank of China, China's highly-leveraged central bank, is in need of a capital infusion. It owns about $1T in Treasury and mortgage-backed debt - on a capital base of just $3.2B - the value of which is declining sharply on the heels of a strong yuan. It could, of course, print more money, but not without running the risk of stoking inflation. The predicament could prompt China to stop allowing the yuan to continue rising vs. the dollar, heightening its trade tensions with the U.S.
- Lehman mulls 'bad bank' build. Lehman (LEH) may spin off $32B of its commercial mortgages and real estate into a new 'bad bank' company (currently named 'Spinco') to relieve pressure on the parent. About $8B of the equity would come from Lehman; the entity would borrow the remaining $24B from Lehman or outside investors. The proposal, one of several under consideration, would allow LEH to shed about 80% of its commercial mortgages. Of course, assuming most of the $32B ends up coming from Lehman's coffers, one wonders how much if at all this changes the troubled bank's capital crisis.
- Atticus shrugs off liquidation rumors. Giant hedge fund Atticus Capital, with $14B under management, denies rampant speculation it may have to sell its positions and close down. Its two main funds have lost 25% and 32% this year, and investors are jittery after this week's news that Ospraie Management is closing its largest fund after substantial losses. The rumors helped fuel Thursday's heavy market losses, as other hedge funds sold positions in stocks that Atticus may be forced to liquidate if it closes its fund, including Union Pacific (NYSE:UNP), down 6%, and MasterCard (NYSE:MA), down 5.9%. Founder Tim Barakett said "we've heard these rumors as well and they're not true... In fact we have a large net cash position and are looking for opportunities to invest capital."
- Altria looking for new smokes. Altria (NYSE:MO) is in advanced talks to buy tobacco maker UST (NYSEARCA:UST) for over $10B. Sources involved in the negotiations said talks are at a delicate stage and could fall through, but are trying to complete the deal as soon as Monday. The acquisition would mark Altria's first major purchase since the company split in March.
- Goldman dings Merrill. Goldman downgrades Merrill (MER) to Sell from Neutral - and adds the firm to its Conviction Sell List. "Merrill currently trades at the highest price-to-book multiple in our large-cap brokerage universe, despite having some of the most significant exposures to troubled assets such as collateralized debt obligations, mortgages and leveraged loans," it said. "With these markets still under pressure, we believe additional write-downs and book value deterioration will continue to plague the stock."
- BofA ready for ARS settlement. It looks like the NY AG's attempt at saber-rattling has been successful. After subpoenas were sent to individual Bank of America execs (NYSE:BAC) this week, the country's second-largest bank said it wants to settle state and federal auction-rate securities [ARS] probes. A BofA spokeswoman said, "we understood that we had reached such an agreement in principle nearly two weeks ago," but the AG's office said yesterday that the investigation was continuing.
- Dell to sell. Dell (NASDAQ:DELL) plans to sell most, if not all, of its computer factories worldwide, and contract manufacturers to produce its computers - an acknowledgement its once-successful production model is no longer competitive. Sources say Dell hopes to complete the sales within the next 18 months as pressure mounts on the PC giant to improve profitability.
- Boeing, union extend strike deadline. Boeing (NYSE:BA) and its machinists union are back at the bargaining table. They've given themselves a two-day window to forge a deal and avert a potentially painful strike - but must overcome deeply entrenched differences. With 87% of voting workers favoring a strike Wednesday, Boeing may have to go a long way to tip the scales.
- Global stocks fall on U.S. woes. Global stocks hit a two-year low and government bonds surged on fears that U.S. economic troubles could make bets on growth elsewhere too risky. The sell-off followed a 3% Wall Street sell-off on Thursday, the largest decline in over two months, after job claims jumped unexpectedly and in anticipation of employment data to be released today. The MSCI All-Country World index was down 0.6%, its lowest level since August 2006.
- Tougher warnings for major drugs. The FDA has ordered stronger warnings for arthritis and autoimmune drugs marketed by Amgen (NASDAQ:AMGN), Wyeth (WYE) and Johnson & Johnson (NYSE:JNJ). Enbrel, sold by Amgen and Wyeth, and J&J's Remicade and Humira had $13.5B in combined sales last year, placing them among the biggest 25 drugs worldwide. Over 240 patients have developed infections in the decade since the drugs first started to be used. Some analysts believe the stronger warning labels won't hurt sales because the risks are already known.
- A slightly improved Monster. Monster's Employment Index ended a two-month decline, ticking up to 159 from 157. It's still down 14% from a year ago, and the small bounce falls short of indicating a change in underlying soft demand.
- ADP loss larger than expected. ADP's non-farm payrolls for August came in at -33,000 vs. -30,000 consensus. According to the report, released yesterday, "the decline in August continues the recent trend in employment that is consistent with an economy that is growing slowly but has not fallen into recession."
- More jobless claims. Initial jobless claims reached 444,000 vs. consensus of 420,000, up 15,000 from last week's 429,000 (revised from 425K). The Four-week average dropped 3,250 to 438,000. Economist Michael Gregory said, "we're continuing to get sort of a grinding slackening in the labor markets... Businesses are becoming more cautious about hiring and layoffs continue. At some point this begins to weigh increasingly heavily on the consumer."
- Productivity rises. Q2 Productivity rose 4.3% vs. +3.5% consensus, revised up from 2.2%. Unit labor costs were -0.5% vs. 0%, revised down from +1.3%. Hourly compensation increased 3.7%, but declined 1.3% after accounting for consumer price inflation. Says economist Peter Morici: "Rapidly rising productivity growth coupled with easing oil prices will bring down headline inflation, as well as the closely watched core index."
- Non-Mfg Survey shows signs of expansion. The ISM Non-Manufacturing Survey showed economic activity in the non-manufacturing sector grew in August, following two months of contraction. Its service sector index reading of 50.6 (50+ = expansion) exceeded estimates of 49.5.
- BoE leave rate unchanged... Bank of England kept its benchmark rate at 5%, as expected. Policy makers judged the fastest inflation in more than a decade outweighed the possibilty the U.K. economy is wading into recession.
- ...and ECB follows suit. Following in the footsteps of BoE, the ECB left its benchmark rate at 4.25%. President Jean-Claude Trichet weighed inflation of 3.8% against recent evidence that some eurozone nations are on the brink of recession.
Earnings: Thursday After Close
- ADC Telecommunications (ADCT): FQ3 EPS of $0.27 beats by $0.01. Revenue of $390M (+12.7%) vs. $388.5M. Shares +2.5% after hours. [PR]
- Quiksilver (NYSE:ZQK): FQ3 EPS of $0.25 beats by $0.04. Revenue of $565M (+6.9%) vs. $544M. Shares +12.7% after hours. [PR]
- Take-Two Interactive Software (NASDAQ:TTWO): FQ3 EPS of $0.93 beats by $0.39. Revenue of $434M (+110.2%) vs. $381M. Shares +0.5% after hours. [PR]
- Asia markets closed sharply lower. Nikkei -2.75% to 12,212. Hang Seng -2.24% to 19,933. Shanghai -3.29% to 2,202. BSE -2.79% to 14,484.
- In Europe markets are trading to the downside. London -1.2%. Paris -1.2%. Frankfurt -1.6%.
- U.S. futures are lower at 7:15 AM. Dow -0.46%. S&P -0.44%. Nasdaq -0.32%. Crude -1.2% to $106.59. Gold -0.56% to $798.70.
Friday's Economic Calendar
- 8:30 Non-farm payrolls
10:30 ECRI Weekly Leading Index
3:55 PM Fed's Yellen speaks on U.S. economic outlook
- Notable earnings before Friday's open: NSM OTCPK:SCMR
Seeking Alpha editor Eli Hoffmann contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.