- Bailout bill 2.0. The Senate easily passed (74 to 25) a much-modified bailout bill (.pdf), but its numerous provisions may complicate the $700B package's trip through the House. Additions include an increase in FDIC bank deposit insurance (to $250K from $100K); a suspension of mark-to-market accounting which pegs companies' assets to their current market value; and an unrelated $150B tax-cut package. From an original three pages, the proposal is now a bulging 400+. Senators and House leaders were cautiously optimistic the bill would gain House approval on Thursday or Friday.
- Buffett backs GE. Shares of GE (NYSE:GE) closed down 3.9% Wednesday to $24.50, giving back most of a mid-day surge after it announced Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) was taking a $3B stake in the struggling conglomerate. GE sold Buffett $3B in perpetual preferred stock with a dividend of 10%, callable after three years at a 10% premium. Berkshire also gets warrants to buy $3B in GE shares at $22.25 any time during the next five years. Buffett said he's "confident that GE will continue to be successful in the years to come." Concurrently, GE announced a public stock offering of at least $12B. Bespoke compares Buffett's GE stake with his recent investment in Goldman Sachs (NYSE:GS).
- UBS turns a profit. Full earnings aren't scheduled until Nov. 4, but UBS (NYSE:UBS) released an early statement today showing it will record a small net profit for Q3 despite "extremely volatile" market conditions. UBS also reassured investors that it is working to maintain a solid capital base. Chairman Peter Kurer said the bank, which had posted net losses in four consecutive quarters, will be profitable overall in 2009. Shares gained 8.6% in Zurich.
- Car sales slump, again. U.S. car sales fell 27% in September to 965K - a 15-year low. Seasonally adjusted, annual sales stand at just 12.5M, down from 16.19M a year ago. Of note was the weak performance by Japanese firms, until now somewhat shielded from the U.S. carnage: Toyota's (NYSE:TM) sales fell 32.3%, Honda's (NYSE:HMC) dropped 24% and Nissan's (OTCPK:NSANY) plunged 37%. Among Detroit's Big Three, Ford's (NYSE:F) sales fell 34%, Chrysler's 33%, while GM (NYSE:GM) fared the best, losing just 15.8% - possibly a result of aggressive incentives and a move to boost less-profitable fleet sales. GM's sales chief Mark LaNeve was realistic about the firm's 'standout' performance: "A few years ago I would have jumped out the window with these numbers, and we're on the 39th floor here." Asia carmaker shares sagged Thursday: TM -3.4%. HMC -4.5%. OTCPK:NSANY -4%.
- Lilly lusts ImClone. Sources say Eli Lilly (NYSE:LLY) is ImClone's mysterious "large pharma" suitor, and is in advanced talks to acquire ImClone for $70/share - or $6.1B. IMCL Chairman Carl Icahn says the nameless firm has completed due diligence, and made a proposal not subject to financing. A formal offer could prompt 17% stakeholder Bristol-Myers (NYSE:BMY) to increase its unsolicited $62/share bid for ImClone.
- SEC stretches short-selling ban. The SEC, while conceding "short selling plays an important role in the market for a variety of reasons" - extended its short-selling ban to Oct. 17. It hopes to have permanent legislation in place by the time the extension expires.
- Fed weighs further rate cuts. The Fed is considering more interest-rate cuts, even if Congress passes a $700B rescue plan, in the face of a deteriorating economic outlook - WSJ reports. The risk of a catastrophic severe recession, while small, has re-emerged in recent weeks - as witnessed by yesterday's weak auto sales and factory numbers (see above, below). Earlier this year, Fed officials had believed such a threat had dissipated.
- Sigma sinking. The $27B London-based investment fund Sigma Finance Corp. is facing imminent liquidation after a sharp fall in the value of its investments, which included Lehman Brothers debt. Forced to default on its borrowing agreements because of the drop in value, investors in the fund's debt holding paper could be left with as little as $0.15 on the dollar, and banks that lent to Sigma will be able to sell $25B in collateral, adding to credit market pain. A list of Sigma assets has already circulated amongst potential buyers to start getting a sense of their worth. Sigma is the last major survivor of the structured investment vehicles breed of investment funds.
- Modest rise in job recruitment. Monster's Employment Index edged up to 160 from 159. It is the second consecutive month of slight growth, but there is little to suggest a change in underlying soft demand. "The modest rise... reflects the typical pick up seen in overall recruitment activity during the outset of the fall hiring season," it said. "Although the index is down 14% Y/Y, there are some bright spots, including increased online demand for occupations in public administration and healthcare."
- Roche readies to prove M&A still alive and well. Despite recent market turmoil and tight credit markets, Roche Holding (OTCQX:RHHBY) is still confident it can raise the financing for its bid for Genentech (Private:DNA), a total of $43.7B for the 44% of the biotech giant it doesn't already own. Although Genentech's shares closed yesterday at $86.50, beneath the $89/share offer, a spokesman said the offer "undervalues the company." No news from Roche about whether it plans to raise its offer or keep it unchanged. Even if Roche's offer is ultimately rejected, its ability to successfully fund its bid would provide a critical sign of life for mergers and acquisitions outside the financial sector.
- Manufacturing plunges. The ISM's index of factory activity fell to 43.5 in September, compared with 49.9 in August and 50.0 in July, well below consensus forecasts of 49.5. A reading below 50 indicates contracting economic activity; September's is the lowest since Oct. 2001. The index "indicates a significantly faster rate of decline in manufacturing during September, marking a departure from the 2008 trend toward negligible growth or contraction each month," ISM said. Price inflation also slowed, to just 53.5 vs. 77 in August and 88.5 in July.
- Construction spending surprises. Construction spending was flat in September, slightly better than the 0.5% decline forecast. Residential construction is down 27.9% from a year ago.
- Mortgage demand dives. Mortgage applications dropped by 23% over the last week, MBA said. Refinancing plummeted by 34.7%. 30-year fixed rate mortgages were essentially flat at 6.07%.
Earnings: Thursday Before Open
- Marriott International (NASDAQ:MAR): Q3 EPS of $0.34 beats by $0.02. Revenue of $2.96B (+0.7%) in-line. [PR]
Earnings: Wednesday After Close
- Micron Technology (NASDAQ:MU): FQ4 EPS of -$0.27 misses by $0.05. Revenue of $1.45B (+0.9%) vs. $1.55B. Shares -4.65%. [PR]
- Asian markets closed mixed: Nikkei -1.88% to 11,155. Hang Seng +1.08% to 18,211. Shanghai -0.16% to 2,294. BSE Sensex closed.
- Europe is higher at midday. London +1.6%. Paris +1.1%. Frankfurt +0.7%.
- U.S. futures are under pressure. Dow -0.6%. S&P -0.71%. Nasdaq -0.16%. Crude -1.22% to $97.33. Gold -1.71% to $872.60.
Thursday's Economic Calendar
6:00 Monster Employment Index
7:45 ECB Announcement
8:30 Jobless Claims
10:00 Factory Orders
10:35 EIA Natural Gas Report
- 4:30 PM Money Supply
- Notable earnings before Thursday's open: MAR, STX
- Notable earnings after Thursday's close: LWSN
Seeking Alpha editor Rachael Granby contributed to this post.
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