Rachael had a baby boy over the weekend; she and the baby are doing nicely!

• Broader pay curbs for banks. The Federal Reserve is considering a far-reaching plan to regulate pay for tens of thousands of bankers nationwide. Compensation policies at thousands of bank holding companies would be subject to approval from the Fed, which would be able to reject any policies that encourage employees (regardless of seniority) to take too much risk. Details could still be revised but a final proposal will reportedly be ready in a few weeks, and the measure would require a vote by the Fed's board but no congressional approval.
• New SEC rules on ratings agencies. The SEC voted unanimously to impose new rules on credit rating agencies in an effort to eliminate the practice of ratings shopping and to protect investors through stronger regulation. Among the new measures, ratings agencies will be required to disclose their data and processes for determining a particular credit rating, and will have to reveal more information about past ratings. As expected, the SEC also proposed a ban on flash trading.
• American Air flies high on financing. American Airlines (AMR) announced yesterday that it had secured $2.9B in financing, raising $1B through the advance sale of frequent flier miles to credit-card partner Citigroup (C) and arranging $1.9B in financing from GE Capital Aviation Services (GE). The news, which sent shares up nearly 20%, should ease investors' concerns about liquidity and also paves the way for a potential tie-up with Japan Airlines (see below).
• Everyone wants a piece of JAL. American Airlines (AMR), which has reportedly been in 'intense negotiations' with Japan Airlines for over a month, may join with Oneworld alliance partners British Airways (BAIRY.PK) and Qantas to deepen their ties with JAL. Sources said the proposal would include a capital injection from American Airlines but not necessarily from British Airways or Qantas, in a move meant to thwart Delta (DAL) and its rival alliance from luring away Oneworld's only Japanese carrier.
• UBS under investigation, again. UBS (UBS) is the subject of a probe by Switzerland's stock exchange for possible breaches of rules regarding publication of price-sensitive information and information on its board. SIX Exchange Regulation said the potential violations occurred from 2007 to the end of 2008, but declined to provide additional details.
• Google edges into display ads. Google (GOOG) announced a major overhaul of its DoubleClick ad exchange as part of its push into the graphical display ads market, what CEO Eric Schmidt called "the next billion dollar business" at Google. To compete with market leaders Yahoo (YHOO) and AOL (TWX), Google will combine DoubleClick exchange with its own advertising system and technology, and will feature tools that allow advertisers to more precisely target their audiences and monitor results. Google is also moving into print publishing for the first time with an arrangement with a printing company to offer 2M out-of-copyright books.
• Lloyds may limit gov't asset protection. Lloyds (LYG) is in talks to scale back its participation in a U.K. program meant to insure it against credit losses. Encouraged by "improving economic conditions," Lloyds said it may reduce the number of toxic assets it chooses to place in the U.K.'s asset protection scheme and that it is discussing all "possible alternatives" with financial regulators.
• Citi looks to slip out of oil trading. Citigroup (C) is looking to spin off its controversial energy trading unit, Phibro. CEO Vikram Pandit told a New York audience Thursday he wanted to reduce Citi's ownership in the unit, and get it to manage money from outside investors, transforming it from a proprietary trading unit to an asset manager. Pandit also admitted that head trader Andrew Hall's much-discussed $100M pay package was too much for an employee to earn given the bank's circumstances.
• Palm beats with strong Pre sales. Palm (PALM) reported a smaller-than-expected quarterly loss yesterday (see details below), but shares traded down nearly 3% in after hours trading on a weak FQ2 sales forecast and plans to sell 16M of common stock. Palm shipped 823,000 smartphones in FQ1 vs. Wall Street estimates in the range of 700,000-800,000. (Read Palm's earnings call transcript)
• Money market withdrawals increase. A federal guarantee to safeguard money market assets is set to expire today, prompting investors to increase their withdrawals. On Tuesday and Wednesday, investors withdrew a much larger than usual total of $55B from money market funds. For the most part, however, industry participants think "folks who wanted out of money funds have already taken their cash and put it elsewhere," so while outflows will likely continue, they won't be panicked.
• Housing starts tick up (.pdf). Housing Starts came in at 598,000 in August, up 1.5% from July, and in line with consensus. Permits came in at 579,000, up 2.7% from July, vs. consensus of 583,000. Starts were down 29.6% from a year ago, while permits were down 32.4%.
• Jobless claims decline. Initial Jobless Claims were 545K, down 12K from a week ago (revised) and better than the 575K consensus. Continuing claims rose 129K to 6.23M.
• Philly Fed looks up (.pdf). The Philadelphia Fed's Business Outlook Survey registered a strong +14.1 in September vs. +4.2 in August and consensus of +8. This is the highest reading since June 2007. New orders, shipments and general activity posted gains for the second month in a row.

Earnings: Thursday After Close

• IHS (IHS): FQ3 EPS of $0.66 beats by $0.06. Revenue of $239M (+15%) vs. $235M. Sees full-year revenue growth of 14-15% Y/Y. (PR)
• Palm (PALM): FQ1 EPS of -$0.10 beats by $0.14. Revenue of $361M (-2%), excluding deferred sales of Pre smartphone, vs. $298M. Sees Q2 revenue of $240M-270M vs. $344M, and full-year revenue of $1.6B-1.8B vs. $1.57B. (PR)

Today's Markets

Asia markets finished the week with modest losses, except for China which fell more than 3%, but Europe has inched back into positive ground, as have futures.

• Cuomo subpoenas BoA directors. New York Attorney General Andrew Cuomo subpoenaed five board members from Bank of America (BAC) in connection with the probe over Merrill Lynch bonuses. The five directors will likely be asked how much they knew about Merrill's losses, what role they played in disclosure decisions, whether there was pressure from government officials and whether the board sought outside counsel. Cuomo is also considering possible civil fraud charges against CEO Ken Lewis.
• eBay faces Skype lawsuit. The founders of Skype software have filed a copyright lawsuit against current owner eBay (EBAY) and the proposed buyers of a 65% stake in Skype, alleging breach of licensing terms and escalating eBay's ongoing legal drama over the unit. eBay denied the claims, but the suit could complicate the deal which is due to close in Q4 2009.
• Kodak takes a moment for financing. Eastman Kodak (EK) plans to raise up to $700M in debt to shore up its balance sheet. The financing, which is being led by Kohlberg Kravis Roberts, gives Kodak more financial breathing room and will help it pay off debt due next year. However, the deal is not without its costs and KKR could end up with as much as a 20% equity stake in Kodak through warrants issued as part of the deal. Shares -2.7% premarket (7:00 ET).
• FDIC repackages loans. The FDIC launched a new program yesterday to package loans from failed banks and subsidize their purchase by investors. To kick-off the long-awaited program, the FDIC announced a partnership with Residential Credit Solutions to take ownership of loans originally worth $1.3B. Officials said a second deal will follow soon, and others will be announced before the end of the year.
• Insurance regulators target ratings agencies. Regulators of some of the largest bond buyers in the world are considering cutting the role of ratings agencies in the market in response to the poor job the agencies did with complex mortgage securities. State insurance regulators are in the early stages of reassessing their reliance on firms like Moody's (MCO) and Standard & Poor's (MHP) and may opt instead for analysis from other financial firms with expertise in valuing the securities.
• California AG targets ratings agencies. In addition to being challenged by insurance regulators (see above) and facing heightened scrutiny from the SEC, ratings agencies will soon be under investigation by California Attorney General Jerry Brown for the role they played in the economic crisis through their evaluations of asset-backed securities. Ratings agencies "worked behind the scenes with the same Wall Street firms that created [the securities]," said Brown, earning "billions of dollars in revenue, at a rate double what they earned for rating other financial products." Brown didn't specify which companies will be investigated.
• Google focused on book deal. Google (GOOG) is reportedly in talks with the Department of Justice and a group of authors and publishers to modify its book-scanning settlement, with the hope of easing regulators' concerns that Google's ambitious project will discourage companies from competing for access to books online. Meanwhile, Google is buying reCaptcha, an online fraud prevention start-up, to use in its book-scanning project. Terms of the deal weren't disclosed.
• Oracle's sales cloud tech recovery hopes. Oracle (ORCL) reported quarterly earnings in-line with estimates (see details below), but its software sales were sharply lower than expected. New license sales were down 17% vs. the 4-14% decline Oracle had forecast, disappointing analysts hoping to see further signs of a tech sector rebound. Shares -2.1% premarket (7:00 ET). (Read Oracle's earnings call transcript)
• Toyota revs up for U.S. sales push. Toyota (TM) is planning a major marketing campaign to lift U.S. sales in Q4. The effort will cost $1B, which is 30-40% more than Toyota usually spends in a quarter, and will include subsidized leases and loans, customer incentives and financial support for dealer advertisements. The company also intends to expand its line of Prius hybrids.
• BoJ holds rates steady. As expected, the Bank of Japan left its key interest rate unchanged at 0.1%, but raised its economic forecast for the first time since July. The bank said "Japan's economic conditions are showing signs of recovery," a marked improvement from July's comment that the country's economy had "stopped worsening." (Read BoJ's statement (.pdf))
• Housing index ticks up. The NAHB Housing Market Index increased by 1 point to 19, its third straight gain and its highest point since May 2008. Current sales expectations and prospective buyer traffic ticked up, but expectations for the next six months declined slightly, likely as a result of the expected expiration of the homebuyer tax credit.
• Consumer prices rise. The Consumer Price Index rose 0.4% in August from the previous month and fell 1.5% Y/Y, vs. consensus of +0.3% and -1.7%. Core CPI rose 0.1% M/M and 1.4% Y/Y, both in-line with consensus.
• TIC: Foreign purchases fall. July Treasury International Capital data was released yesterday, with net foreign purchases of long-term securities registering at $15.3B, way down from June's $90.7B. Foreigners picked up $44B in long-term U.S. securities ($32.1B by private investors and $12B by official institutions), and U.S. residents bought $28.8B in foreign debt.
• Industrial production increases. Industrial Production rose 0.8% in August vs. consensus of +0.6%, the second straight monthly gain. July's increase was revised to +1% from +0.5%. Ex-auto, manufacturing was +0.4%. Capacity utilization rose to 69.6% from 69%, but is still 11.3 points below its historical average.
• Current account deficit. The Current Account Deficit was $98.8B in Q2 vs. consensus of $92B. The Q1 deficit was revised to $104.5B from $101.5B. The deficit on both goods and services moved lower.

Earnings: Thursday Before Open

• Pier 1 Imports (PIR): Q2 EPS of -$0.17 vs. consensus of -$0.22 (may not be comparable). Revenue of $287M (-11%) vs. $282M. Comparable store sales -7.6%. (PR)

Earnings: Wednesday After Close

• CKE Restaurants (CKR): Q2 EPS of $0.22 in-line. Revenue of $336M (-5%) vs. $341M. Same-store sales declined 2.3%. (PR)
• CLARCOR (CLC): FQ3 EPS of $0.42 misses by $0.01. Revenue of $230M (-17%) vs. $246M. (PR)
• Herman Miller (MLHR): FQ1 EPS of $0.22 beats by $0.03. Revenue of $324M (-32%) vs. $326M. (PR)
• Oracle (ORCL): FQ1 EPS of $0.30 in-line. Revenue of $5.1B (-5%) vs. $5.3B. Operating margin up 570bp to 46%; reduced value of foreign currencies hurt EPS by $0.02. (PR)
• The Dress Barn (DBRN): FQ4 EPS of $0.39 beats by $0.02. Revenue of $399M (+4%) vs. $401M. (PR)

Today's Markets

Markets worldwide are showing gains.

• Bernanke: Bye, bye recession. Answering questions after a rehashed speech at the Brookings Institute, Bernanke noted that "from a technical perspective the recession is very likely over at this point." It was his most explicit comment to date that the contraction is over, though he acknowledged the economy would continue to feel weak for some time, and that unemployment will likely be slow to come down.
• Adobe closes 'game-changing' deal. Along with reporting earnings yesterday (see details below), Adobe (ADBE) announced it will acquire web-measurement firm Omniture (OMTR) for $1.8B in cash, a 45% premium to Omniture's 30-day average price. Adobe CEO Shantanu Narayen called the deal a 'game-changer' that will let the company create an "end to end platform to transform digital media and advertising." More modestly, Adobe is hoping the deal will help it turn around declining sales. In after hours trading, ADBE -4.15%, OMTR +25.1%. (Read Omniture's press release)
• BNY Mellon settles Russian lawsuit. Bank of New York Mellon (BK) reached an out-of-court settlement with Russia over the government's $22.5B lawsuit. As part of the settlement over a decade-old tax revenue scandal, Russia will receive $14M for trial expenses and get a $4B discounted loan from the bank as an 'act of goodwill.'
• Lawmakers ready to pare gov't stakes. As Citigroup (C) reportedly works towards lowering the government's 34% stake in the bank and raises $5B in government-guaranteed bonds, Republican lawmakers appear equally eager to part ways with the financial albatross. The lawmakers are drafting legislation that would create an independent trust to sell off U.S. ownership in firms where the government holds more than a 15% stake, including in Citigroup, AIG (AIG), General Motors and Chrysler. C +4.4%, AIG +1.9% premarket (7:00 ET).
• SEC takes aim at ratings agencies. Moody's (MCO), Standard & Poor's (MHP) and Fitch Ratings may have to provide increased disclosures and greater accountability for debt analyses following their performances with troubled mortgage securities. In a meeting tomorrow, the SEC is reportedly planning to propose that companies disclose the grades they received on bonds while shopping among ratings agencies, while the agencies may be required to disclose revenue from their biggest clients and could face increased lawsuits from investors.
• Treasury takes steps to avoid debt ceiling. The Treasury is expected to start winding down its temporary Supplementary Financing Program, which sold special short-term securities and placed the proceeds in an account at the Federal Reserve. The program ballooned to $560B last year before falling to $200B for much of 2009, and the Treasury may reduce that to as little as $15B, largely to avoid hitting the $12.1T debt ceiling. As a result, the Fed may have to inject more money into the economy which could make it harder to raise interest rates later.
• IMF plays ref on unwinding gov't support. Reinforcing its role as a referee in the global recovery, the IMF released a paper laying out guidelines for how governments should wind down support of the financial sector. Among its recommendations, the IMF said central banks should be reimbursed by governments for losses on any crisis-related interventions. The paper also suggests the global costs of financial bailouts may be lower than expected because governments announced larger support packages than they actually implemented. (Read the IMF's overview and report (.pdf))
• Lehman feels cheated. In court papers filed yesterday, Lehman Brothers Holdings said Barclays Capital (BCS) received an $8.2B 'windfall profit' in the fire sale of Lehman's U.S. brokerage because 'critical changes' were made to the deal between the time the sale order was signed and the deal actually closed. Lehman is asking the court to amend the deal and a hearing is scheduled for next month.
• Air travel forecasts lose altitude. The International Air Transport Association revised its projections of 2009 industry losses and now expects the total global loss to reach $11B, $2B worse than its previous estimate. 2010 losses are expected to reach $3.8B. The IATA also revised its 2008 loss estimate to $16.8B from $10.4B on changes in goodwill valuation and fuel hedges. "The bottom line of this crisis," said the group, "is larger than the impact of 9/11."
• MBA apps fall. Mortgage applications fell 8.6% from the previous week, MBA reported. The average interest rate on 30-year fixed-rate mortgages rose to 5.08% from 5.02%.
• PPI climbs. The Producer Price Index rose 1.7% in August vs. consensus of +0.8%, with core PPI inching up 0.2% vs. +0.1% consensus. Headline inflation was down 4.3% from the previous year, although core PPI was up 2.3%. Energy prices were up 7.1% from July.
• Retail sales jump on auto purchases. August's retail sales were up 2.7% to $351.4B, better than the expected +1.9%. Ex-auto, sales rose 1.1% vs. +0.4% consensus. A massive increase in auto sales fueled the spike in the headline number, but sales remain 5.3% below August 2008 levels.
• Empire State Mfg improves. The Empire State Manufacturing Survey registered +18.9 in August, better than the consensus of +15, up from +12.1 the month before and the highest since late 2007. The average workweek index, which is considered a strong indicator of future employment trends, rose strongly for a second straight month, climbing 12 points to +6 and marking the first positive reading in a year.
• Inventories fall. Business inventories decreased 1% in July to $1.332T vs. consensus of -0.9%. June's inventories were revised to -1.4% from -1.1%. Inventories are down 11.8% compared to the previous year. Sales were up 0.1% to $978B. The inventories/sales ratio rose to 1.36 from 1.27.
• Consumer confidence dips again. ABC's Consumer Confidence Poll came in at -49, down from -48 for its second straight weekly decline. This week, 43% of Americans feel the economy is getting worse, up 12 points from last month. Only 44% rate their personal finances positively and only 24% think it's a good time to buy things.

Earnings: Tuesday After Close

• Adobe (ADBE): FQ3 EPS of $0.35 beats by $0.01. Revenue of $698M (-21%) vs. $686M. To offer $1.8B for Web consultant Omniture (OMTR). Shares -4.15% AH. (PR)

Today's Markets

Asia closed mostly positive, and markets elsewhere are trading up.

• Escalating trade tensions. On Friday, the U.S. announced a tariff on Chinese tires in a move some say may actually be a precursor to a campaign to reduce trade barriers. Each of the four presidents that served before Obama moved to protect domestic industries early in their term before making a push for freer trade. Whatever the end goal may be, China 'strongly opposes' the tariffs and said it may turn to the WTO to intervene, and yesterday announced it's initiating antidumping procedures against imported U.S. chicken and auto products.
• Obama renews push for financial reforms. Just ahead of the one year anniversary of Lehman Brothers' collapse, Obama is heading to Wall Street to explain how the government plans to unwind its involvement in the financial sector and to renew his push for regulatory reform. Obama is expected to ask for the support of the financial community in implementing new market regulations and will call for greater global coordination on financial oversight. In conjunction with Obama's remarks, the Treasury will release a document called "The Next Phase" (.pdf), outlining ways in which emergency measures are being reduced.
• Deutsche Telekom sprints for next deal. Just days after announcing plans to merge U.K. operations with France Telecom (FTE), Deutsche Telekom (DT) is reportedly considering a bid for Sprint Nextel (S). Deutsche Telekom, a distant fourth in the U.S. market behind Sprint, Verizon Wireless (VZ) and AT&T (T), has apparently been researching a possible Sprint tie-up for over a year, but began serious due diligence three months ago. A potentially costly offer could be submitted in the next few weeks. DT -1.4%, S +10.1% premarket (7:00 ET).
• J&J renegotiates Elan deal. Johnson & Johnson (JNJ) is reportedly in talks to cut the price of its $1.5B deal with Elan (ELN), following a court order that the J&J tie-up violates a partnership between Elan and Biogen Idec (BIIB). J&J wants to reduce the deal's price tag by at least $100M, and new terms could be announced in the coming days.
• Plenty of suitors for JAL. American Airlines (AMR) and Delta Air Lines (DAL) are both said to be considering rival investments in Japan Airlines, with Delta prepared to inject up to ¥50B in a tie-up that would include code sharing on international flights. American Airlines is looking to buy equity in JAL in part to prevent it from switching over to a rival airline network, though both American and Delta also see this as a way to grow revenue from Asia. JAL is Asia's largest airline by revenue but lost $1B last quarter and is under pressure to cut costs and raise money.
• BIS: Higher taxes for larger banks. The Bank for International Settlements [BIS] published its Quarterly Review (.pdf) yesterday, expressing 'cautious optimism' on the state of the global economy but noting that interbank lending fell $812B during the previous quarter. The BIS recommended that big banks pay higher taxes to offset the disproportionately large systemic risks they pose.
• BlackRock plans internal trading platform. BlackRock (BLK) is set to create its own global trading platform, allowing BlackRock clients to conduct deals with one another through internal trades that completely bypass Wall Street. BlackRock says it's not trying to marginalize Wall Street, though the move is certainly a sign of increased resistance to paying fees for securities trades that have small margins and rely on large volumes to achieve profitability. The plan is still in early stages, and will probably be introduced for stocks first, followed by fixed income.
• Gas firms give go-ahead on Gorgon. Chevron (CVX), Exxon Mobil (XOM) and Royal Dutch Shell (RDS.A) approved development of the Gorgon liquefied natural gas project in Australia, paving the way for a venture that could earn A$300B ($258B) in gas sales to China, India and Japan in its first twenty years. The project's first phase will cost A$43B with the first LNG exports expected in 2014.
• China in power-plant talks with AES. Sovereign wealth fund China Investment Corp. is said to be in talks to take a significant minority stake in power-plant developer AES Corp. (AES). Sources said the two sides are also discussing a possible joint venture in which China Investment Corp. would contribute capital to fund AES' plans to develop power plants around the globe.
• Friday failures. Three more bank failures on Friday, bringing this year's total to 92 and costing the FDIC's insurance fund around $2B. Most of those losses come from the seizure of Corus Bank, whose 11 branches and $7B in deposits will be assumed by MB Financial (MBFI). (Read the FDIC's press releases: I, II, III)

Today's Markets

Asia closed mostly down. European markets and U.S. futures start the week in the red.

• Probe into TARP influence on SEC fines. SEC Inspector General David Kotz has launched an inquiry into whether the SEC's imposition of fines on financial firms may be influenced by TARP, since the fines it assesses on TARP recipients could be passed along to hurt U.S. taxpayers. In particular, Kotz will look at the SEC's decision to settle with Bank of America (BAC) for $33M. Rep. Elijah Cummings requested the investigation, and said that in addition to Bank of America, "it is conceivable to expect that additional violations of securities laws will be revealed” at other banks that took aid.
• China to allow foreign listings. China is gearing up to transform Shanghai into a major finance center and to become a larger player on the international financial stage. In its most recent move, it plans to finally start allowing foreign companies to list on the Shanghai stock exchange. Foreign listings will begin with a pilot phase, with the first few companies expected to be listed early next year. China is also nearing a deal that would open Taiwan's stock exchange to mainland investment. Earlier this week, the finance ministry announced a small but groundbreaking step earlier this week by saying it plans to sell 6B yuan ($878M) of bonds in Hong Kong as part of a strategy to "improve the international status" of its currency.
• Magna wins Opel bid. After months of deliberation, General Motors decided to sell a 55% stake in its Opel unit to the consortium of Magna International (MGA) and Russia's Sberbank, while keeping a 35% stake for itself and a 10% stake for employees. The deal is a victory for Germany's Angela Merkel, who had lobbied for Magna's bid and could get a boost in the upcoming elections, as well as for Russia, which has aggressively pushed for a role in the consolidating global car market. Details of German financing for the deal will be finalized in the next few weeks. (Read GM's press release)
• More signs of a China recovery? China's industrial output rose at a faster pace than forecast in August (+12.3%), new lending spiked to 410B yuan ($60B, vs. consensus of 320B yuan), and retail sales were up a robust 15.4%, sending the Shanghai Composite up 2.2%. Strategists say policy stimulus is driving the robust growth, and note the biggest challenge Beijing now faces is how to take its foot off the gas before it's too late.
• Geithner: Time to start unwinding gov't support. Testifying before the Congressional Oversight Panel, Geithner said the economy is strengthening, which leaves room for the government to begin unwinding some of its emergency support measures. Though the economy still has problems to correct, "it is clear that we have stepped back from the brink and that we are pointed in the right direction." As a result of this improvement, "we are now in a position to evolve our strategy as we move from crisis response to recovery." (Read Geithner's prepared testimony (.pdf))
• Ex-AIG exec to face grand jury. Federal prosecutors are reportedly preparing to impanel a grand jury to consider the indictment of former AIG (AIG) executive Joseph Cassano on charges of securities fraud. Cassano led the AIG Financial Products unit that nearly caused the insurer to collapse a year ago, and the Justice Department and SEC have been investigating whether Cassano misled investors by overstating the value of mortgage-related contracts and by failing to disclose material facts to AIG's external auditor.
• Heightened scrutiny on Microhoo deal. The Justice Department has expanded its review of the search deal between Microsoft (MSFT) and Yahoo (YHOO) and has asked both firms for more details on the proposed partnership. Though this means the deal will be subject to extensive examination rather than immediate approval, a Microsoft spokesman said the company expected as much when it announced the deal in July.
• Morgan Stanley gets new chief. Morgan Stanley (MS) CEO John Mack plans to step on January 1 and will be replaced by co-president James Gorman. Mack will retain his position as chairman. (Read the press release)
• Jobless claims decline. Initial jobless claims came in at 550K, down 26K from a week ago (revised) and better than the 565K consensus. Continuing claims fell 159K to 6.088M.
• International trade. July's trade balance was -$32B vs. consensus of -$27.3B. June's balance was revised to -$27.5B from -$27B. Exports rose to $127.6B from $124.9B in June, while imports were up to $159.6B from $152.4B.

Earnings: Thursday After Close

• National Semiconductor (NSM): FQ1 EPS of $0.13 beats by $0.06. Revenue of $314M (-33%) vs. $300M. (PR)

Today's Markets

Most overseas markets moved higher Friday, led by sharp gains in China. Futures are marginally higher.

• BoA bites back against Cuomo. Bank of America (BAC) said it's 'surprised and disappointed' by accusations that's it's hiding behind attorney-client privilege, and called New York Attorney General Andrew Cuomo's allegations 'spurious' and 'simply wrong.' Meanwhile, Bank of America and the SEC are making their third attempt to convince Judge Jed Rakoff to approve a $33M settlement over disclosures of Merrill Lynch bonuses. The SEC called the settlement 'fair' and 'reasonable,' and Bank of America said it's prepared to litigate if the settlement isn't approved.
• Phasing out debt guarantees. The FDIC is considering a six-month, emergency-only extension to its debt guarantee program and is seeking public comment on the proposal, with FDIC's Sheila Bair noting "it has been a successful program but we would like to end it." The guarantee program had around $320B in outstanding debt guaranteed as of the end of July, and whether it expires Oct. 31 as planned or is extended by six months, the phase-out should provide an early indicator for how banks fare once emergency government support measures have been removed.
• U.S. levies duties on Chinese steel. In the largest countervailing duty case to date against Chinese-made products, the U.S. Commerce Department decided to impose preliminary duties of up to 31% on Chinese steel pipe because of unfair subsidies, bringing average duties on the $2.8B of annual imports to 21.3%. China 'strongly opposes' the ruling, which is only the latest in a series of events contributing to escalating trade tensions.
• Beige Book: Signs of slow improvement. In the Federal Reserve's latest Beige Book, most districts reported the economy was firming up overall and stability increasing, though many sectors still show weaknesses. In particular, despite some improvements in residential real estate, commercial real estate remains weak and non-residential construction activity is down. Credit remains tight, loan demand is down and retail sales are soft. (Read the Beige Book summary)
• OPEC holds steady. As expected, OPEC agreed to keep its oil production quotas unchanged, betting a recovery in the global economy will help keep prices near the current $72/barrel. The decision comes even as the Energy Information Administration's latest forecast calls for weaker oil demand and higher supply, which is projected to result in a daily world surplus of 70,000 barrels.
• Beijing Automotive steers for Saab. After a failed bid for Opel, Beijing Automotive is joining Koenigsegg Group's offer to buy General Motors' Saab. Beijing Automotive will become a minority shareholder in the bidding team, with the hope that a successful bid will allow it to spur model development and sales growth. (Read the memorandum of understanding)
• Apple's iPod refresh fails to dazzle. Investors were generally unimpressed at Apple's (AAPL) "Let's Rock" event yesterday, where Apple introduced a new version of iTunes, updated iPhone software and an iPod Nano with video camera and FM radio. Many had been hoping to see a camera on the iPod Touch and there was no sign of a much-talked-about tablet device. With no major product surprises, much of the attention was focused on CEO Steve Jobs, who made his first public appearance since returning from medical leave.
• Foreclosures remain elevated. U.S. foreclosure filings topped 300,000 for the sixth month in a row, coming in at 358,471 in August, according to RealtyTrac Inc. The number is just 0.5% below July's record all-time high, and is up 18% from August 2008. Nevada had the highest foreclosure rate, followed by Florida and California. With unemployment hovering at 9.7%, RealtyTrac expects foreclosures to rise for another year.
• Google preps for micropayments. Google (GOOG) plans to introduce a micropayments platform within the next year to help newspapers charge for their content. The move would create a direct competitor for Journalism Online, a site launched by media executives that aims to provide one-stop subscriptions for newspapers and magazines that want to charge for online content. (Read Google's micropayments plan (.pdf))
• Retail sales inch up. Chain store sales rose 0.2% in the first week of September, Redbook reported, better than the -0.3% expected. According to ICSC, weekly sales rose 0.6% from the previous week but dipped 0.1% vs. the previous year. Sales for September are expected to be down 2% vs. the previous year.

Earnings: Thursday Before Open

• Lululemon Athletica (LULU): Q2 EPS of $0.13 beats by $0.03. Revenue of $98M vs. $88M. (PR)

Earnings: Wednesday After Close

• Men's Wearhouse (MW): Q2 EPS of $0.75 beats by $0.14. Revenue of $526M (-4%) vs. $523M. Sees Q3 EPS of $0.27-0.30 vs. $0.32. (PR)
• Navistar International (NAV): FQ3 EPS of -$0.16 does not compare to consensus of $0.69. Revenue of $2.5B (-38%) vs. $2.7B. Lowers full-year EPS guidance, which includes effects of Ford (F) settlement, to $4.95-5.25 vs. $2.92. (10-Q)
• NCI Building Systems (NCS): FQ3 EPS of $0.25 beats by $0.14. Revenue of $238M (-50%) vs. $263M. (PR)
• Smith & Wesson (SWHC): FQ1 EPS of $0.21 beats by $0.11. Revenue of $102M (+30%) vs. $94M. (PR)

Today's Markets

Asia locked in some gains but European markets and U.S. futures are trading down.

• Cuomo continues BoA battle. New York Attorney General Andrew Cuomo moved closer to filing securities-fraud charges against Bank of America (BAC) executives, citing at least four failures to disclose key details about the Merrill Lynch takeover. Cuomo also said the bank, which 'sought guidance' before a December 2008 shareholder vote to see if it was possible to back out of the deal, can't continue to claim attorney-client privilege without revealing the substance of its lawyers' advice. Cuomo set a Sept. 14 deadline to receive the requested information before he may proceed with charging individual executives. (Read Cuomo's letter to BoA (.pdf))
• First Solar plans China venture. First Solar (FSLR) announced a memorandum of understanding with the Chinese government to build the world's largest solar plant in China. The 2-gigawatt power plant, which will generate enough energy to power around 3M Chinese households, is the first major entry of a U.S. company into Asia's rapidly growing alternative energy sector. Shares +1.2% premarket (7:00 ET), after gaining 10.6% yesterday. (Read First Solar's press release)
• NYSE sells Amex stakes to brokerages. NYSE Euronext (NYX) is selling a major stake in the options exchange NYSE Amex it purchased last year as part of an effort to revive the division. NYSE Euronext will remain the largest shareholder but will sell stakes to seven large brokerages, including Bank of America (BAC), Barclays (BCS), Goldman Sachs (GS) and UBS (UBS). NYSE Amex was once the country's second-largest options exchange but it has lost market share for eight years in a row, dropping to 5.8% from 28.6%. (Read NYSE Euronext's press release)
• U.S., U.K. AAA ratings safe. Moody's said the triple-A sovereign debt ratings of the U.K. and the U.S. aren't at risk in the 'near future.' The ratings agency said only a sustained increase in government debt over several years would warrant a downgrade, but that it doesn't anticipate such an event. The comments could help lift the battered British pound.
• So long, auto bailout funds. When it comes to the government's investment in General Motors and Chrysler, "Congress and ultimately the American taxpayer have been left in the dark," according to a new report by the Congressional Oversight Panel. The auto task force "failed to disclose to the public both the factors and criteria it used in its viability assessments, the scope of outside involvement in its evaluations, and its basis and reasoning for selecting particular benchmarks," and taxpayers are unlikely to recover their $81B investment. (Read the panel's report)
• Mass. reaches Madoff settlement. Massachusetts reached an $8M settlement with Madoff feeder fund Fairfield Greenwich Group, the first state to reach such an agreement. Fairfield will fully repay Massachusetts investors, including interest payments, but didn't admit or deny wrongdoing.
• Price cuts and Pixis at Palm. In an effort to gain market share, Palm (PALM) cut the price of its Pre smartphone by $50 and announced plans to start selling Pixi, a cheaper, thinner touchscreen phone that will go on sale later this year. The Pixi announcement may get overshadowed by Apple (AAPL), which is updating its iPod line today, and Motorola (MOT), which is announcing new phones tomorrow.
• Barrick bets on rising gold. Barrick Gold (ABX) will issue $3B in stock, taking a $5.6B charge to Q3 earnings, to exit all of its fixed-price gold contracts and some of its floating hedges. Barrick's bet is that gold prices will continue to rise and the deal will therefore remove the hedging which has been a major drag on its shares.
• CNPC gets funding more oil takeovers. State-run China National Petroleum Corp. [CNPC], the parent company of PetroChina (PTR), received a $30B loan to fund overseas expansion. The five-year loan will be provided at a discount and underscores China's increasing efforts to secure long-term energy sources for the country. Separately, CNPC dropped its $460M buyout offer for oil producer Verenex Energy after the Libyan government refused to approve the takeover.
• Geely mulls Volvo bid. China's Geely Automobile Holdings said its parent company, Geely Holding Group, is interested in bidding for Ford's (F) Volvo unit, making it the latest in a string of Chinese carmakers to pursue a foreign brand during an industry overhaul. Though some analysts doubt Geely's ability to manage an international brand, the move would boost Geely's profile while giving it access to Volvo technology it needs to upgrade its cars.
• CIC eyes U.S. real estate. China's $300B sovereign wealth fund is reportedly considering major investments in distressed U.S. real estate. In addition to potential purchases of commercial mortgage-backed securities, China Investment Corp. is also considering ownership stakes in buildings and an investment via the Treasury's Public-Private Investment Program.
• Bankrupt publisher finds buyer. Sun-Times Media Group, the bankrupt owner of the Chicago Sun-Times and dozens of local newspapers, reached a deal to sell most of its assets to a group led by local businessman James C. Tyree. The deal is subject to competitive bidding by other parties and needs court approval.
• MBA apps rise. Mortgage applications rose 17% from the previous week, MBA reported. The average interest rate on 30-year fixed-rate mortgages fell to 5.02% from 5.15%.
• Employment trends. The Conference Board's Employment Trends Index inched down 0.1% in August from the previous month and was down 18.5% from the previous year. "The fact that the index cannot get off the ground is another sign of a weak recovery, perhaps a jobless one," said Gad Levanon, Senior Economist at The Conference Board. According to Manpower, hiring plans for Q4 are at the lowest level in the history of its Employment Outlook Survey (.pdf). However, while the outlook was bleak for job seekers, it looks good for those with jobs, with a strong 69% of employers saying they plan to keep things stable.
• Record plunge in consumer credit. Consumer credit was down $21.5B in July to $2.47T, marking the biggest decline on record and a 10.5% annual rate. Economists had expected it to decline by $4.5B. July was the sixth month in a row, and the ninth of the past ten months, that consumers reduced their debt. Credit-card debt fell for a record 11th straight month, by $6.1B or an annualized 8.5%.
• Consumer confidence slips. ABC's Consumer Confidence Poll registered at -48, down from -45 and breaking a streak of four weeks without a slip. The index was led down by personal-finance ratings, with only 45% of Americans feeling positive about their own finances, down from 49% two weeks ago. Only 25% felt it's a good time to buy things, while just 8% rated the national economy positively.

Earnings: Tuesday After Close

• FuelCell Energy (FCEL): FQ3 EPS of -$0.21 beats by $0.03. Revenue of $23M (-18%) vs. $28M. (PR)
• Pep Boys (PBY): Q2 EPS of $0.15 beats by $0.01. Revenue of $489M (-2%) vs. $503M. (PR)

Today's Markets

• In Asia, Nikkei -0.8% to 10,312. Hang Seng -1% to 20,851. Shanghai +0.5% to 2,946. BSE +0.4% to 16,184.
• In Europe at midday, London +0.5%. Paris +0.3%. Frankfurt +0.5%.
• Futures: Dow -0.2%. S&P -0.1%. Nasdaq -0.2%. Crude -0.3% to $70.87. Gold -0.3% to $996.50.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  7:45 ICSC Retail Store Sales
  8:00 Fed's Evans speaks on inflation
  8:55 Redbook
  10:00 Quarterly Services Survey
  1:55 PM Fed's Fisher speaks on the economy
  2:00 PM Fed's Beige Book
• Notable earnings after Wednesday's close: NAV, NCS, SWHC

Seeking Alpha editor Eli Hoffmann contributed to this post.

• Krafting a Cadbury deal. Cadbury (CBY) rejected a £10.2B ($16.7B) acquisition offer from Kraft (KFT) yesterday, saying the bid 'fundamentally undervalues' the company and paving the way for possible counteroffers, including from rivals Hershey (HSY) and Nestle (NSRGY.PK). The offer was a 31% premium to Cadbury's Friday close, and Kraft said it remains committed to reaching a deal. However, analysts suggested Kraft may have to raise its offer as much as 40% to get Cadbury to accept. KFT -2.3%, CBY +41% premarket (7:00 ET). (Read Kraft's press release (.pdf))
• U.K. mobile phone merger. Earlier this morning, Deutsche Telekom (DT) and France Telecom (FTE) announced plans to join their U.K. operations in a 'merger of equals,' surpassing Telefonica (TEF) as Britain's largest mobile phone operator. The joint venture will have 30M customers, control 38% of the U.K.'s highly competitive mobile market and generate £4B ($5.7B) of savings. Separately, Telefonica reached an agreement to expand its strategic alliance with China Unicom (CHU), giving the Spanish firm a stronger foothold in the world's largest mobile phone market. (Read the Deutsche Telekom press release)
• G-20 keeps banking reform alive. Over the weekend, G-20 finance ministers and regulators announced new, tougher guidelines that would force banks to raise billions more in capital over the coming months. Full details are not yet finalized, but central bank governors and bank supervisors from 27 countries said they would present concrete proposals by the end of this year. (Read the G-20's plans for strengthening the financial system (.pdf))
• AIG continues to shed units. AIG (AIG) may be looking to take its time on the sale of some major assets, but it's open to quick sales of smaller units. Case-in-point: Saturday's agreement to sell an asset-management division to Hong Kong tycoon Richard Li's Pacific Century Group for $500M, below the $800M price tag potential bidders were discussing several months ago. In its press release, AIG said the deal 'provides fair value' for the unit. Meanwhile, Chinatrust Financial has reportedly outbid rivals by offering $2.4B for AIG's Taiwan Nan Shan Life unit. AIG had targeted the unit to bring in $2B.
• Pro-Linux group closes in on MSFT patents. The Open Invention Network, a group which supports open-source software and includes such giants as IBM (IBM) and Sony (SNE), is nearing an agreement to acquire 22 of Microsoft's (MSFT) patents in an effort to avoid any legal threats that could discourage the adoption of Linux. Microsoft has suggested in the past that the Linux operating system may violate some of its patents. The patents are currently held by Allied Security Trust, which bought the patents from Microsoft earlier this year.
• Abu Dhabi challenges chip firms. Abu Dhabi's Advanced Technology Investment Co. [ATIC] agreed to buy Chartered Semiconductor Manufacturing (CHRT) for $1.8B in cash yesterday. ATIC's second major investment in the industry, the deal will allow its semiconductor joint venture to better compete with Taiwan's leading contract-chip manufacturers, including Taiwan Semiconductor Manufacturing (TSM) and United Microelectronics (UMC). (Read ATIC's press release (.pdf))
• WTO ruling gives Boeing fans ammo. After the WTO's preliminary ruling that Airbus received illegal subsidies from European governments, pro-Boeing (BA) lawmakers in the U.S. are pushing the Pentagon to keep the ruling in mind for its $40B tender to supply tanker planes. However, upside implications of the ruling may be limited, as "we live in a glass house of global subsidies" and future WTO victories may be harder to come by following the U.S. provision of billions of dollars to banks and automakers.
• Google shelves European book plan. Bowing to pressure from European publishers, Google (GOOG) said it will remove all copyright-protected European books from its book scanning program. Google also promised to put two non-U.S. representatives on the governing board of the Books Rights Registry, which will oversee Google's settlement with publishers. Shares +1% premarket (7:00 ET).
• OPEC happy with oil prices. Ahead of tomorrow's OPEC meeting, Saudi Oil Minister Ali al-Naimi said the oil market is in 'good shape' and 'everybody likes' the current price. The group is expected to leave output quotas unchanged. Taking advantage of the production cuts is Russia, which is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse.

Earnings: Tuesday Before Open

• Smithfield Foods (SFD): FQ1 EPS of -$0.56 misses by $0.01. Revenue of $2.7B (-14%) vs. $2.8B. (PR)

Today's Markets

Markets are up across the globe.

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• Weinswig's focus is on major retailers like Wal-Mart (WMT), Home Depot (HD) and Target (TGT).
• Buying retail stocks has become very story-specific. Technology and top talent are key components of a winning story. Retailers investing in their technology include Saks (SKS), J.C. Penney (JCP), Home Depot and Nordstrom (JWN).
• Consumers are adjusting to the new normal, with value taking on a larger role. Even among cheaper items, units per transaction are down as consumers try to work within a budget. People are also eating at home more often, helping traffic at stores that sell food.
• Wal-Mart's store traffic has been positive, but it hasn't done as well as many expected. Weinswig has a Hold rating on the stock.
• Target was downgraded to Sell in February 2008 because of concerns over credit, women's apparel and a lack of a value message vs. Wal-Mart. Those concerns still remain.
• Costco (COST) is a Hold as well because it's skewed towards big-ticket items like washing machines, where sales have been weak. They also sell gasoline but prices have been weak. Weinswig sees Costco as "an extremely expensive grocery store" that trades at around nine times enterprise value to Ebitda. Kroger (KR) or Safeway (SWY) are more compelling buys.
• Weinswig likes J.C. Penney because of its exclusive-label and private-label merchandise which accounts for around 52% of sales. The stock's valuation is attractive and annual sales of $125M five years from now could be too low an estimate.

(The full interview is available here.)

• Elan risks losing blockbuster drug. A federal judge ruled that Elan's (ELN) recent deal with Johnson & Johnson (JNJ) violates a collaboration with Biogen Idec (BIIB) to jointly market multiple sclerosis drug Tysabri. Elan must now alter its J&J deal by September 26, or potentially lose all its rights to Tysabri, a drug with nearly $1B in annual revenue.
• Prius' patent problem. Toyota (TM) is facing a patent-infringement claim that could potentially prevent it from exporting the Prius and other hybrid models to the U.S. The complaint was filed yesterday by closely-held Paice LLC, which already won a 2005 case that the Prius and two other hybrids used Paice inventions.
• Beijing to raise quotas on foreign investors. Chinese authorities late Friday proposed changes to current restrictions on foreign investment, including raising the ceiling on investments by individual institutions by 25% to $1B, and shortening the duration of lock-ups to one-year from three. The announcement, which came after Shanghai's close, sparked a late-afternoon rally in Hong Kong, sending the Hang Seng up 2.8%. While the implications of the proposed changes are unclear given the size of China's markets, strategists were encouraged that Beijing is considering increased foreign investment.
• Losses rising at FHA. As its mortgage-related losses pile up, the Federal Housing Administration is at risk of seeing its reserves fall below the level mandated by Congress. The agency has rapidly increased its role in guaranteeing loans as part of an effort to stabilize the housing market, but its mounting losses raise concerns about whether the attempted rescuer will need its own taxpayer bailout. Another option is that the FHA may have to raise the premiums borrowers pay, although the agency says if there is a shortfall, it won't have to do anything other than report it to lawmakers.
• Deutsche Telekom shops U.K. unit. Deutsche Telekom (DT) has initiated discussions with Vodafone (VOD), France Telecom (FTE) and Telefonica (TEF) about selling its flagging T-Mobile U.K. unit. Talks are still in preliminary stages, but an improving global economy has raised hopes the unit could bring in as much as €4B ($5.7B). In the meantime, Deutsche Telekom is working to improve the unit's performance so that it can either demand a more attractive sale price or, if the bids are too low, it can cancel the sale and continue to operate the unit.
• Cloudy prospects for Oracle-Sun deal. The European Commission put Oracle's (ORCL) planned takeover of Sun Microsystems (JAVA) on hold, citing 'serious doubts' about competition in the database sector if the world's leading proprietary database company is allowed to take over the world's leading open source database company. As the European Commission investigates the $7.4B deal, rivals Hewlett-Packard (HPQ), Dell (DELL) and IBM (IBM) win another chance to lure away Sun's customers.
• Gearing up for the G-20 meeting. Ahead of a meeting of G-20 finance ministers this weekend: the U.S., U.K., Germany and France called for work to begin on coordinated exit strategies, though they acknowledged the crisis is not yet over; ECB president Jean-Claude Trichet outlined for the first time the principles the ECB will use to unwind its exceptional policy measures; Geithner is pushing for an international accord on capital and liquidity rules, with consensus by the end of 2010 and implementation by the end of 2012; and, the U.K., France and Germany want 'binding rules' to rein in compensation at financial institutions, though a cap on total bonus pools could cause as many problems as it solves. A full G-20 summit will take place September 24-25.
• Microsoft gets the last word, for now. Microsoft (MSFT) won a delay on a court order that would have required the software maker to change its Word program immediately or halt sales. The order won't take effect until an appeal of the underlying patent case is resolved, with oral arguments scheduled for September 23.
• Berkshire not in the mood for ratings firm. For the second time in two months, Berkshire Hathaway (BRK.A) reduced its holdings of Moody's Corp. (MCO), this time by 2%. The sales come as the ratings firm experiences profit declines and widespread criticism over its ratings of mortgage-backed securities. With 39.2M shares remaining, Berkshire is still Moody's largest shareholder.
• Android sprinting towards mass acceptance. Sprint (S) will begin selling its first mobile phone based on Google's (GOOG) Android operating platform in October. The move should help Android gain wider acceptance, as consumers have been slow to embrace the platform which has only been available through T-Mobile USA (DT).
• Small steps to a new reserve currency. The U.S. dollar is safe as the world's reserve currency for now, but China took the first step towards a new reserve currency by agreeing to buy $50B of the IMF's Special Drawing Rights. The deal marks the first such agreement in the IMF's history and China's first concrete step in achieving its long-term stated currency goal.
• Same-store sales down but not out. Retailers' same-store sales fell for the 12th month in a row in August, but the decline was smaller than July's drop and half of retailers beat expectations, some by large margins (including Target (TGT), Costco (COST) and Gap (GPS)). Analysts were generally positive about the results, upgrading a number of retailers' shares. (See the store-by-store breakdown: I, II, III, IV, V)
• Monster's index improves (.pdf). Monster's online employment index rose 7 points in August to 121, its highest monthly rate of increase since August 2005. Year on year, declines slowed to 24%, the most moderate slowdown so far this year.
• Jobless claims miss estimates. Initial Jobless Claims came in at 570,000, down 4K from a week ago (revised) but worse than the 562K consensus. Continuing claims rose 92K to 6.234M.

Earnings: Friday Before Open

• H&R Block (HRB): FQ1 EPS of -$0.39 misses by $0.02. Revenue of $275M (+1.3%) vs. $280M. Full-year guidance in line. (PR)

Earnings: Thursday After Close

• Cooper Companies (COO): FQ3 EPS of $0.54 misses by $0.08. Revenue of $285M (+2%) vs. $289M. Sees Q4 EPS of $0.66-0.68 vs. $0.60 and full-year EPS of $2.27-2.29 vs. $2.30. (PR)
• Esterline Technologies (ESL): FQ3 EPS of $1.09 beats by $0.19. Revenue of $362M (-1%) vs. $368M. (PR)
• Quiksilver (ZQK): FQ3 EPS of $0.03 in-line. Revenue of $501M (-11%) vs. $480M. (PR)
• Shanda Interactive Entertainment (SNDA): Q2 EPS of $0.90 beats by $0.06. Revenue of $181M (+48%) vs. $179M. Hopes to raise $800M spinning off games unit in planned U.S. IPO. (PR)
• Ulta Salon (ULTA): Q2 EPS of $0.10 beats by $0.05. Revenue of $274M (+10%) vs. $271M. (PR)

Today's Markets

Asia markets were mostly higher Friday, as is Europe. Futures edged higher overnight.

• Dainippon buys U.S. drugmaker. Dainippon Sumitomo Pharma has agreed to buy U.S. drugmaker Sepracor (SEPR) for $2.6B in an all-cash deal marking a 28% premium to Sepracor's closing price on Tuesday. The acquisition will help Dainippon promote its experimental schizophrenia drug, which has performed well in late-stage trials, and will give the company access to Sepracor's insomnia, asthma and epilepsy drugs. The purchase is the latest in a trend of Japanese pharmaceutical firms buying U.S. rivals.
• Berkshire, Leucadia bet on real estate. Berkshire Hathaway (BRK.A) and Leucadia National (LUK) are jointly buying Capmark Financial Group's loan-servicing and mortgage business, paying up to $490M in a bet on the U.S. real estate market. In a separate statement, Capmark, which is one of the largest U.S. commercial real estate finance companies, said it may file for bankruptcy after its Q2 loss of about $1.6B. Private equity firm KKR has already written down its Capmark investment to zero. (Read Capmark's quarterly report (.pdf), including comments on the Berkshire deal and possible bankruptcy)
• Boeing expected to win WTO case. The World Trade Organization is reportedly set to rule in favor of the U.S. and Boeing (BA) in a case about $15B in European government loans to Airbus that Boeing argues are illegal subsidies. The ruling, expected tomorrow, concerns loans provided by the U.K., Spain, Germany and France over four decades, and is a preliminary ruling in a five-year dispute between Boeing and Airbus.
• JBS close to deal with Pilgrim's Pride. Brazilian beef giant JBS is reportedly in final stage negotiations to buy bankrupt poultry producer Pilgrim's Pride (PGPDQ.PK) for around $2.5B. The deal would shake up the global meat industry and create a new rival for Tyson Foods (TSN), the largest U.S. meat company producing beef, chicken and pork. A deal would be subject to scrutiny from U.S. antitrust regulators who have previously said they want to take a closer look at competition in the agricultural industry. In a bonus for banks and bondholders, however, Pilgrim's creditors would likely be paid in full.
• Ratings firms lose free speech case. A judge refused to dismiss a class-action lawsuit brought against Moody's Investors Service (MCO), Standard & Poor's (MHP) and Morgan Stanley (MS). The two ratings agencies had argued that investors couldn't sue over deceptive ratings of private-placement notes because those opinions are protected by free-speech rights. However, the judge said First Amendment rights don't apply in this case because the firm's comments were distributed to a select group of investors and not to the general public. The ruling could affect Fitch Group and other rating agencies that have made similar claims.
• Cisco, EMC mull tech services JV. Cisco Systems (CSCO) and EMC Corp. (EMC) are reportedly in discussions to create a joint venture, code-named Alpine, that would provide technology services for large businesses. The move is part of an effort by the companies to branch out in the increasingly competitive technology sector.
• Pfizer pays record pfine. Pfizer (PFE) agreed to pay a record $2.3B fine to settle civil and criminal charges over its marketing of Bextra and other drugs. Pfizer, which was deemed a repeat offender in marketing drugs for unapproved uses, will plead guilty to one felony for misbranding Bextra, which was removed from the market in 2005 over safety concerns. The settlement is the result of a four-year investigation prompted by six whistleblowers. (Read the complaint against Pfizer (.pdf))
• SEC blasted over Madoff failure. A scathing report from a federal watchdog faults the SEC for not catching Bernie Madoff's Ponzi scheme earlier. According to the report, the SEC fumbled five initial probes without ever conducting a 'thorough and competent' review; caught Madoff in lies and misrepresentations but didn't follow up; was 'confused' about some aspects of his operations; and failed to notice his statements included only average daily prices, not transaction prices. The SEC was also tipped off in March 2008 that Madoff was keeping two sets of records but chose not to investigate. SEC's Mary Schapiro said the agency is being overhauled and the handling of Madoff's case "is a failure that we continue to regret." (Read the executive summary of the report (.pdf))
• G-20 finance ministers prepare to meet. Ahead of a meeting of G-20 finance ministers this weekend, Geithner warned it's 'too early' for nations to begin exiting from stimulus programs, although it's not too early to discuss it. Geithner said the U.S. wants to build a new 'international capital accord' to limit the amount of leverage firms can take on. Other countries, including Germany, are in favor of unwinding stimulus measures sooner rather than later amid ballooning fiscal deficits and the possibility of inflation, while U.K. regulators are pushing for systemically important banks to draw up 'living wills,' or plans to wind themselves down in the event they fail.
• Cerberus bars fund withdrawals. After a wave of redemption requests, Cerberus is barring investors in two new funds from withdrawing money for three years. The multi-year lock-up is rare among hedge funds, but other companies may follow suit after the industry experienced over $500B of redemptions in the past year.
• FOMC is cautiously hopeful. In the recently released FOMC minutes, policy makers noted many of the risks to the U.S. economy had eased 'considerably' and expressed confidence that the country's downturn is ending. Members remained concerned that future growth will remain weak and could be vulnerable to shocks. Inflation is expected to remain subdued, and the minutes suggest the Federal Reserve is unlikely to raise interest rates anytime soon. (Read the FOMC minutes)
• YouTube in talks to stream movies. YouTube (GOOG) is said to be in preliminary discussions with Sony Pictures Entertainment (SNE), Lions Gate Entertainment (LGF) and Warner Bros. (TWX) to create an online rental service for streaming new movies. If plans move forward, YouTube's new service will compete with online movie rentals offered by Amazon (AMZN), Apple (AAPL) and Netflix (NFLX).
• SEC, CFTC meet for the first time ever. The SEC and the Commodity Futures Trading Commission enter their second day of joint meetings as the two try to work towards streamlining their regulatory oversight. This marks the first time the agencies have ever held a joint meeting. Though the steps toward harmonization have thus far been timid, any progress at all is welcome as industry insiders say turf wars between the SEC and CFTC are hampering innovation. (Read Schapiro's comments and Gensler's comments (.pdf), or watch the live broadcast at 9:00 ET)
• Jobs reports. The Challenger Job-Cut Report showed firing announcements were down 21% in August to 76,456, reversing last month's increase. Seasonal downsizing is expected for the next four months, but "if monthly job-cut levels remain near 100,000 or lower, it will be a strong indication that the economy and job market are improving." According to the ADP Jobs Report (.pdf), employment was down 298,000 in August vs. consensus of -250,000, the smallest decline since September 2008. July's losses were revised to -360,000. Employment "is still likely to decline for at least several more months, albeit at a diminishing rate."
• Productivity increases. Nonfarm Productivity increased 6.6% in the second quarter, an upward revision from preliminary estimates of +6.4% and the largest productivity increase since Q3 2003. Unit labor costs were down 5.9% vs. prior estimates of -5.8%. Manufacturing sector productivity rose 4.9% vs. prior estimates of +5.3%.
• Factory orders rise. Factory Orders rose 1.3% ($4.6B) in July to $355.5B vs. consensus of +2.2%. June's orders were revised to +0.9% from +0.4%. Shipments fell $0.2B. Inventories fell for the seventh straight month, dropping 0.9% to $313.7B.

Earnings: Thursday Before Open

• Ciena (CIEN): FQ3 EPS of -$0.05 beats by $0.08. Revenue of $165M (-35%) vs. $153M. (PR)
• Del Monte Foods Company (DLM): FQ1 EPS of $0.30 beats by $0.26. Revenue of $814M (+12%) vs. $772M. Issues upside EPS guidance for FY '10 of $0.88-0.92 vs. $0.80 consensus, up from previous guidance of $0.76-0.80. Shares +12% premarket (8:10 ET). (PR)

Earnings: Wednesday After Close

• ABM Industries (ABM): FQ3 EPS of $0.36 beats by $0.01. Revenue of $871M (-6%) vs. $896M. (PR)
• Collective Brands (PSS): Q2 EPS of $0.29 misses by $0.04. Revenue of $836M (-8%) vs. $843M. (PR)
• Greif Inc. (GEF): FQ3 EPS of $0.88 beats by $0.02. Revenue of $718M (-31%) vs. $769M. (PR)
• Hovnanian (HOV): FQ3 EPS of -$2.16 misses by $0.64. Revenue of $387M (-46%) vs. $392M. (PR)
• SAIC (SAI): Q2 EPS of $0.31 beats by $0.01. Revenue of $2.8B (+8%) vs. $2.7B. (PR)

Today's Markets

Asian markets were mixed, European markets are range-bound, and U.S. futures are seeing mild gains.

• Wells Fargo to repay TARP. Wells Fargo (WFC) shares were buffeted by speculation yesterday amid rumors of a secondary offering, but the bank said it plans to repay its $25B in TARP funds by the end of the year without raising additional equity. According to CEO John Stumpf, "we are now earning capital so quickly, organically, we don't want to dilute our existing shareholders." Stumpf said the money would be repaid 'shortly' but declined to provide a date. Shares +0.6% premarket (7:00 ET).
• Regulators may delay Oracle-Sun deal. Less than two days before a key deadline, the European Commission is reportedly weighing whether to delay Oracle's (ORCL) planned $7.4B takeover of Sun Microsystems (JAVA) over concerns about Oracle's access to Sun's MySQL database. A delay in regulatory approval would put Oracle months behind schedule and give competitors like Hewlett-Packard (HPQ) and IBM (IBM) more time to lure away hardware customers. U.S. antitrust authorities approved the deal last week.
• BP's 'giant' oil find. BP (BP) announced this morning a 'giant' oil discovery in a very deep well drilled in U.S. waters in the Gulf of Mexico, but said an appraisal is necessary to determine the exact size and commerciality of the find. BP is already the largest individual producer in the area. Shares +3.6% premarket (7:00 ET).
• RHJ sweetens Opel bid. As General Motors continues to stall over its Opel decision, RHJ International (RHJIF.PK) has raised its bid for the unit. The company is now willing to offer GM €300M ($431M) in cash for a 50.1% stake, €25M more than its initial bid. RHJ also said it would ask for only €3.2B in state aid, down from €3.8B, and would repay the loans in 2013, a year earlier than previously planned.
• MBA: Time for a Fannie/Freddie overhaul. The Mortgage Bankers Association, a major industry trade group, is calling on lawmakers to break Fannie Mae (FNM) and Freddie Mac (FRE) into several smaller, privately held companies that would issue mortgage securities with an explicit government guarantee. The new companies would have to pay fees into a federal insurance fund which would kick in only in the event of catastrophic losses. Fannie and Freddie both fell more than 17% in trading yesterday, following an earlier analyst report that the firms have 'no fundamental value remaining,' and are continuing to trade down premarket. FNM -5%, FRE -4.2% (7:00 ET).
• Last clunkers boost for auto sales. August U.S. motor vehicle sales reached their highest pace in twelve months thanks to a large boost from the cash-for-clunkers program. Firms sold 1.3M cars and light trucks in August, pushing the annualized selling pace to 14.09M vehicles vs. July's 11.24M. However, analysts are expecting a September slowdown following the end of the clunkers program. Here's the breakdown:
  -Ford (F): +17% to 176,323 vs. consensus of +39%, excluding 5,826 units at Volvo, a second straight increase. Model standouts: Fusion sales: +131.6%; Focus +55.9%; Flex +106.5%.
  -Chrysler: -15% to 93,222 units. Chrysler brand vehicles -23% to 18,619; Jeep -6% to 22,041; Dodge down to 52,562 units.
  -General Motors: -20.2% to 246,479 vehicles. Pontiac +23.3% to 29,921 units; Chevrolet -9.2% to 168.130. Cadillac -55% to 6,931. Buick -51.7% to 8,612.
  -Honda (HMC): +14.2% to 161,439 vehicles, vs. consensus of +3.2%, its second-best month ever. Honda Fit +194.1% to 13,593; Civic +49.6% to 43,294; CR-V +58.3% to 30,284.
  -Toyota (TM): +10.5% to 225,088 vehicles, vs. consensus of +8.9%. Toyota brand +15.2% to 202,196; Lexus -18.8% to 22,892. Toyota passenger cars +32.4% to record 142,529 units. Toyota light trucks -12.1%. Hybrids +28.6%.
  -Nissan (NSANY): -2.9% to 105,312 vehicles. Nissan brand vehicles +0.2% to 97,580; Infiniti -30.2% to 7,732.
  -Daimler (DAI): -10.5% to 18,734 units. Mercedes-Benz -7.5% to 17,112; Smart car sales -33% to 1,622.
  -Volkswagen (VLKAY.PK): +11.4% to 24,823, its best sales month since December 2005. Jetta +14.8%.
  -Kia: +60.4% to 40,198 vehicles. Sportage more than doubles, to 7,558 units.
  -Hyundai: +47% to 60,467 vehicles, its monthly record, and its eighth straight month of Y/Y gains. Elantra +116% to 21,673 units.
  -Porsche: +9% to 1,526 units. Porsche 911 +92% to 673; Cayenne -34% to 509.
• Buying private banking growth. Credit Suisse (CS) and Julius Baer Holding both said they would consider acquisitions to grow their private banking businesses. Credit Suisse declined to comment on whether it planned to bid for ING Group's (ING) private banking units in Asia and Switzerland.
• New Nokia phones with Facebook link. Nokia (NOK) launched two new phone models today and announced a location-based service deal with Facebook. The X6 and X3 phones will ship next quarter and are priced at €450 ($641) and €115, and a smaller version of the N97 smartphone was unveiled as well. Nokia will also allow users to directly update their Facebook locations and status messages through their Nokia Ovi accounts.
• Freedom falls to bankruptcy. As expected, Freedom Communications, which owns over 30 daily newspapers and 8 TV stations, formally declared bankruptcy. The Tuesday filing was part of a prepackaged plan approved by a majority of the company's lenders.
• MBA apps fall. Mortgage applications fell 2.2% from last week, MBA reported. The average interest rate on 30-year fixed-rate mortgages fell to 5.15% from 5.24%.
• Retail sales decline. Chain store sales fell 0.6% in August from a month before, Redbook reported, in-line with consensus. Sales were down 4.3% Y/Y. According to ICSC, weekly sales were down 0.7% Y/Y and fell 0.5% from the previous week.
• Manufacturing improves. The ISM Manufacturing Index reached 52.9 in August, better than the consensus of 50.5 and an improvement over July's 48.9. The move above 50 marks the first expansion since January 2008, as well as the seventh consecutive monthly increase.
• Construction spending dips down (.pdf). Construction Spending fell 0.2% in July to $958B/year, slightly worse than the consensus of 0%, and 10.5% below the year-ago estimate. For the first seven months, spending was $543.8B, 11.4% below the same period in 2008.
• Home sales tick up. Pending Home Sales rose 3.2% in July to 97.6, the sixth straight monthly gain and better than the +1.5% consensus. The National Association of Realtors noted the recovery is broad-based with housing affordability at record highs.
• Consumer confidence holds steady. ABC's Consumer Confidence Poll came in at -45, matching last week and marking its fourth straight week without a retreat. However, it's still only nine points above its January record low. Only 8% think the economy's not in bad shape, while just 27% think it's a good time to buy things, and 48% rate their personal finances positively.

Earnings: Wednesday Before Open

• Joy Global (JOYG): FQ3 EPS of $1.21 beats by $0.26. Revenue of $956M (+6%) vs. $902M. (PR)

Earnings: Tuesday After Close

• ADC Telecommunications (ADCT): FQ3 EPS of $0.17 beats by $0.03. Revenue of $283M (-26%). (PR)
• Pike Electric (PIKE): FQ4 EPS of $0.07 in-line. Revenue of $128.5M (-7%) vs. $129.5M. (PR)
• Take-Two Interactive Software (TTWO): FQ3 EPS of -$0.66 beats by $0.02. Revenue of $139M (-68%) vs. $125M. (PR)
• VeriFone (PAY): FQ3 EPS of $0.26 beats by $0.08. Revenue of $211M (-18%) vs. $202M. Sees Q4 EPS of $0.23-0.25 vs. $0.19 and revenue of $208M-215M vs. $203M. Sees full-year EPS of $0.83-0.85 vs. $0.70 and revenue of $835M-842M vs. $821M. (PR)

Today's Markets

Mild-to-moderate losses across the board.

• Skype to get new owner. eBay (EBAY) is expected to announce this morning that it has reached a deal to sell its Skype unit to a group of private investors. The investment group likely includes new venture capital firm Andreessen Horowitz, as well as early Skype investor Index Ventures and private-equity firm Silver Lake Partners. The price of the deal is still unknown, but eBay has said previously that it wants around $2B for Skype. Shares +2% premarket (7:00 ET).
• BoA ready to repay? Bank of America (BAC) is reportedly offering to repay part of its bailout money, and the U.S. is pressuring the bank to pay at least $500M to cancel a potential loss-share deal with the government. Sources said both sets of discussions relate to extra aid Bank of America received to complete its acquisition of Merrill Lynch. If Bank of America repays the additional $20B it was given in January, it will no longer be considered an 'exceptional' aid recipient and therefore won't be subject to the intense scrutiny of Congress and pay czar Kenneth Feinberg. Shares -2.4% premarket (7:00 ET).
• Disney's marvelous acquisition. Disney (DIS) agreed to acquire Marvel Entertainment (MVL) in a stock-cash transaction worth around $4B, a 29% premium for Marvel shareholders. Disney will begin to feature Marvel's portfolio of over 5,000 characters in Disney movies, theme park rides, TV shows and merchandise, a move which may help Disney better target the demographic of boys from their preteen years into young adulthood. S&P warned it may downgrade Disney because the relatively expensive acquisition, combined with stock buyback plans and the potential for continued recession-related declines, could lead to "debt leverage remaining above our threshold for an extended period." The deal is a setback for Paramount (VIA), which will be able to complete but not extend a recent distribution deal with Marvel, and for Electronic Arts (ERTS), which some analysts had thought might be acquired by Disney, a deal that no longer seems likely in the short term. (Read Disney's press release)
• AIG loses Starr case. A federal judge ruled against AIG (AIG) in its efforts to win $4.3B in damages from Starr International, the company run by former AIG chief Hank Greenberg. The judge affirmed a jury verdict that found no breach of trust by Starr for selling AIG stock rather than using its AIG shares to fund an executive retirement program for generations of the insurer's employees. Separately, AIG, Greenberg and former CFO Howard Smith agreed to enter binding arbitration by October 15 to settle various outstanding legal disputes. Shares -6.9% premarket (7:00 ET).
• Citi sheds credit card portfolios. As part of its effort to shed weak businesses, Citigroup (C) said it sold three credit card portfolios representing $1.3B in managed assets, but didn't disclose the terms of the deal. Though the sale is relatively small, the lack of transparency didn't sit well with critics, who noted the taxpayer-funded bank "said it had sold undisclosed assets to an undisclosed buyer for an undisclosed price, resulting in an undisclosed profit or loss." Sources said the buyer is likely U.S. Bancorp (USB). C -3.6% premarket (7:00 ET).
• PetroChina buys Canadian oil stake. PetroChina (PTR) moved forward in its quest for overseas expansion, agreeing to pay C$1.9B ($1.7B) to closely-held Athabasca Oil Sands Corp. for a stake in a Canadian oil sands project. PetroChina's deals represent around 20% of China's $17B in spending on overseas energy assets since December, and this is PetroChina's largest North American acquisition to date.
• Icahn offloads Yahoo shares. Activist investor Carl Icahn disclosed in a regulatory filing that he sold 12.7M shares of Yahoo (YHOO) at the end of August, bringing his stake down to 4.48%. Icahn said he remains 'optimistic' about Yahoo's long-term outlook and the sales were only meant to 'provide a more desired balance' in his portfolios.
• Sony goes Chrome. Sony (SNE) plans to put Google's (GOOG) Chrome browser on Vaio laptops in the U.S., the first such deal for Chrome since it was announced last year. Google declined to disclose details of the deal, which went into effect this summer, and said it's looking to reach similar arrangements with other computer makers. Without those partnerships, Google's Sony deal may be too small to matter.
• Apple may opt for more carriers, face SEC probe. Piper Jaffray analyst Gene Munster wrote in a research note that Apple (AAPL) is likely to add new U.S. carriers for its iPhone within a year. Repeated speculation points to Verizon (VZ) as a likely addition, while AT&T (T) faces questions about how much it really gained from its role as exclusive carrier. Separately, the Huffington Post reported the SEC is investigating possible insider-trading offenses in shares of Apple, including whether anyone was given enhanced insight into Steve Jobs' health condition or if some investors had advanced notice of iPod sales results. Both Apple and the SEC declined to comment. AAPL -1.3% premarket (7:00 ET).
• JetBlue, Lufthansa to share codes. JetBlue (JBLU) and Lufthansa announced a code-sharing agreement allowing the airliners to expand their networks through connecting flights. Lufthansa holds a 19% stake in JetBlue, but the relationship has raised some concerns among rivals and this latest move will likely exacerbate those concerns. The deal must be approved by the Department of Transportation.
• Big Tobacco files free speech suit. Tobacco company R.J. Reynolds (RAI) joined other tobacco makers in suing the FDA, challenging the regulator's new authority over tobacco. The companies say their First Amendment rights to free speech have been violated and the law's provisions "severely restrict the few remaining channels we have to communicate with adult tobacco consumers."
• Charities scammed by Madoff face clawbacks. Madoff liquidator Irving Picard said he may sue charities that were Madoff clients to reclaim the fake profits they withdrew. By law, Picard must file clawback suits against investors that profited from Madoff's scam, even if they did so unknowingly. Picard, who until now hadn't outlined his strategy for dealing with charities, said charitable organizations aren't exempt from such 'avoidance actions.'
• Cities are gloomy on shrinking revenues. City revenues fell in FY '09 for the first time in seven years, according to a report by the National League of Cities to be released later today. Weak growth in property taxes and sharp declines in sales taxes, income taxes and state aid contributed to a 0.4% decline in city revenues even as expenses rose 2.5%, creating the worst outlook in the 24 years since surveying began. Nor is relief in sight, as tax revenue is expected to lag any economic recovery.
• European leaders target bank pay. German Chancellor Angela Merkel and French President Nicolas Sarkozy promised to fight excessive pay in financial firms and to toughen regulation of the financial sector. The U.K.'s Gordon Brown echoed those sentiments, saying excessive pay must be reined in and compensation should be based on long-term success rather than short-term speculative gains. The comments come ahead of a G-20 meeting in Pittsburgh on Sept. 24-25.
• Commercial mortgage defaults rising. The commercial mortgage default rate more than doubled in Q2 as compared to the year before, reaching 2.88% of outstanding balances. Commercial mortgage-backed securities [CMBS] account for 22% of the $3.4T in commercial real estate debt, and researchers believe defaults on CMBS could pass 7% by the end of the year.
• Chicago business activity improves (.pdf). The Chicago Purchasing Managers Index registered at 50 in August, better than the consensus of 48 and up from 43.4 in July. This is the index's highest level since September 2008. New orders were up 4.5 to 52.5, while prices paid jumped 15 points to 50.
• European joblessness climbs (.pdf). Unemployment in the 16-nation eurozone climbed to a new ten-year high of 9.5% in July even as the economy began to signal a recovery. Across the entire 27-nation European Union, unemployment rose to 9% in July. Spain leads the bloc in joblessness, with nearly one in five workers without a job.

Earnings: Monday After Close

• Benihana (BNHN): FQ1 EPS of $0.05 misses by $0.05. Revenue of $96M (+2%) vs. $97M. Sees full-year EPS of $0.40-0.45 vs. $0.46, and full-year revenue of $305M-310M vs. $323M. (PR)
• Culp (CFI): FQ1 EPS of $0.15 beats by $0.03. Revenue of $46M (-23%) vs. $45M. Sees Q2 revenue down 5%. (PR)
• Sina (SINA): Q2 EPS of $0.29 in-line. Revenue of $90M (-1%) vs. $88M. Sees Q3 revenue of $91M-94M vs. $96M. (PR)

Today's Markets

In Asia, stocks managed to pull back into positive territory after yesterday's selloff. European markets and U.S. futures are slipping.

• Lawmakers aim to curb Fed powers. Rep. Barney Frank said he's planning legislation to restrict the Federal Reserve's ability to make emergency loans and to require a 'complete audit' of the bank. Frank, who has been working with Rep. Ron Paul on draft language, said the audit could be arranged in such a way as to preserve the Fed's monetary policy independence. Separately, Fed officials said the bank has made a $14B profit on loans extended to financial institutions, though that figure includes only some of the Fed's loan programs and hasn't been audited or risk-adjusted.
• ILFC chief may buy part of AIG unit. AIG (AIG) CEO Robert Benmosche has said he won't be rushed into asset sales, a promise that has pleased many investors but left some company executives dissatisfied. In particular, Steven Udvar-Hazy, the CEO of AIG's aircraft-leasing business, is frustrated by the nearly year-long delay in the unit's sale, and is in early discussions to buy around $2B of the company's aircraft portfolio to start a rival business. If Hazy leaves the International Lease Finance Corp. to set up his own company, a move that would require both government and AIG approval, sources said Middle East and Chinese interests will likely provide the necessary funding. Shares -7.4% premarket (7:00 ET).
• Baker Hughes buys BJ Services. Baker Hughes (BHI) agreed to acquire BJ Services (BJS) in a cash-stock deal worth $5.5B. BJ Services' shareholders will get 0.4 shares of Baker Hughes and $2.69, marking a 16.3% premium over Friday's close. Baker Hughes says the deal will result in annual savings of $75M in 2010 and $150M in 2011, and "further enhances its position as a top-tier global oilfield services company." BHI -2.1%, BJS +13.1% premarket (7:00 ET). (Read the companies' press release)
• Lehman claims could reach $100B. The U.K. branch of Lehman Brothers may claim as much as $100B against the collapsed bank, with a large part of the claims resulting from guarantees issued by the parent company to its subsidiaries. PriceWaterhouseCoopers, the U.K. liquidator, said it's working to sift through the claims of 'more than 100' Lehman units that are connected to the London branch in a way which will "reduce the likelihood of affiliates suing each other in pursuit of amounts that are owed between the different Lehman estates."
• FDIC faces mounting bank failures. The FDIC closed three more banks on Friday, with an expected cost to the FDIC's deposit insurance fund of $446M. The closures bring this year's total failures to 84 and mark the fastest pace of bank closures in 17 years. To encourage potential buyers of failed banks, the FDIC has agreed to numerous loss-share transactions, assuming most of the risk on $80B in loans and other assets. The agency said it expects around $14B in future losses on the agreements signed so far, but its total exposure is about six times the $10.4B left in its insurance fund. (Read the FDIC's bank closure press releases I, II, III)
• Cerberus investors flee. Investors are pulling out of hedge funds run by Cerberus Capital Management en masse, leaving management surprised by the size of the requested withdrawals and prompting plans for Q4 fundraising. Investors have asked for the return of over $5.5B, or nearly 71% of the hedge fund assets. Nor are the heavy withdrawals limited to Cerberus; in the nine months that ended June 30, investors withdrew around $300B from hedge funds, contributing to a marked contraction in the once-booming industry.
• PetroChina boosts capacity. After posting a 7.2% fall in H1 profit last week, PetroChina (PTR) unveiled plans to increase its capacity. The planned investments, totaling $3.2B, include buying a stake in a Turkmenistan gas field from parent company China National Petroleum Corp. for $1.2B, and buying ten of CNPC's petrochemical refineries in China for $1.6B. PetroChina President Zhou Jiping said he hopes to maintain double-digit growth in natural gas output over the next few years.
• Freedom going bankrupt. Freedom Communications, which owns over 30 daily newspapers and 8 TV stations, reportedly plans to declare bankruptcy this week and has reached debt restructuring agreements with its lenders. Private-equity firms Blackstone Group (BX) and Providence Equity Partners, which paid $460M in 2004 for a 40% stake in Freedom, have both written down the value of their investment to zero.
• France goes after tax evaders. Not to be left out, France has obtained the names of up to 3,000 suspected tax evaders with Swiss bank accounts worth around €3B ($4.3B). Budget minister Eric Woerth said if the individuals don't come forward voluntarily, then "we will bring them to justice. We are in the process of constructing a post-crisis capitalism, and the banks are an essential link in this change."
• Study lifts new AstraZeneca drug. A medical study covering 18,000 patients in 43 countries found Brilinta, AstraZeneca's (AZN) experimental anti-clotting drug, was 16% more effective in preventing heart attacks, strokes and deaths than treatment with Plavix, a blockbuster drug from Sanofi-Aventis (SNY) and Bristol-Myers Squibb (BMY). The study firmly positions Brilinta as a rival to Plavix and the nearly $10B in annual revenue it generates. A new Eli Lilly (LLY) drug called Effient also outperformed Plavix but at the price of increased bleeding risk.
• GM forges China JV. General Motors agreed to a 50-50 joint venture with Chinese automaker FAW Group. GM will invest 2B yuan ($293M) to make light-duty trucks and vans in the northeast China city of Changchun, primarily for sale in China though some could be exported in the future.
• Yen rises on election landslide. As was widely expected, the Democratic Party of Japan won a landslide victory against the Liberal Democratic Party which had governed for fifty years. The news helped lift the yen, which strengthened for a fifth day against the euro and gained versus all 16 major counterparts, but failed to buoy the Nikkei, which turned negative after hitting an 11-month high.

Earnings: Friday After Close

• Sun Microsystems (JAVA): FQ4 EPS of -$0.20 misses by $0.14. Revenue of $2.6B (-31%) vs. $2.9B. (10-K)