Saturday night the U.S. House of Representatives brought us one large step closer to a national healthcare system. Investors should be cognizant of the financial effects that would follow.

In the extreme short-run, it would be reasonable to assume that the U.S. stock market would react negatively, although short-term price movements are often chaotic. In the intermediate-term, if the legislation goes forward, the healthcare sector should perform at a lower level than in periods prior to national healthcare.

This is good news for SPPI as Zevalin will now be reimbursed at an average sales price (ASP) of most other cancer drugs. As I understand it, this ruling means that Zevain should now be reimbursed at a price +5% to +6% from its current price. It should be noted that the new price will be effective as of January 1, 2010.

National healthcare wherever it is implemented squeezes prices and profits of the private businesses involved in the system.

Obamacare in the U.S. will be no different. For investors in healthcare companies, it is a good idea to begin to think through which companies will be most severely negatively impacted or least impacted, to potentially make deletions or substitutions.

Sentiment

Stocks are trading broadly lower despite a batch of better-than-expected earnings and economic news Friday. Microsoft (MSFT) is up 5.3 percent and helped lift both the Dow and the NAZ early after the software giant reported a quarterly profit of 40 cents per share on $12.92 billion in revenues. Analysts were expecting 32 cents on 12.32 billion.

Better than expected results from Amazon.com (AMZN), Ingersoll Rand (IR), Honeywell (HON), Fortune Brands (FO), and Whirlpool (WHR) also helped set a positive tone for morning trading.

Q3 2009 Earnings Call

October 20, 2009 8:30 am ET

• Apple: What recession? Apple (AAPL) customers continued to buy up iPhones and Mac computers, seemingly ignoring the recession and helping the company's Q4 results shine. "We are thrilled to have sold more Macs and iPhones than in any previous quarter," Steve Jobs said. Apple easily exceeded analysts' Q4 earnings expectations as back-to-school promotions drove sales: revenue grew 25% to $9.87B versus last year's quarter, while net income surged 47% to $1.67B (see more numbers below). Apple shares rose 7.2% to $203.43 in after-hours trading; the stock has more than doubled this year. Read Apple's earnings call.
• Lehman's Europe unit readies $90B claim. Lehman's European arm, now managed by PricewaterhouseCoopers, is preparing a new $90B claim against the U.S. parent of the failed bank - bringing the unit's total claims against various Lehman entities globally to $208B. PwC fees for managing the wind-down so far: €168M ($253M).
• Icahn targets CIT. Corporate raider Carl Icahn turned up the heat on CIT Group (CIT) Monday, slamming the company for unfairly favoring large bondholders with its revised debt exchange offer and saying he was prepared to offer a better deal by lending the company $6B and saving it $150M in fees. In a letter to CIT's board, Icahn said the proposed alternative $6B loan package is "the latest example of incompetent and unconscionable behavior" from CIT's board. Prospective lenders, he says, would get well in excess of what the current syndicated loan market should dictate, in exchange for voting their debt in favor of the company's reorganization plan.
• Morgan confirms Van Kampen sale to Invesco. Morgan Stanley (MS) confirmed Monday that it's selling its retail asset-management business, including the Van Kampen fund unit, to Invesco (IVZ), for $1.5B in stock and cash, including a 9.4% stake in Invesco. "By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player," co-president James Gorman said. The deal, rumored for months and expected to close in mid-2010, will remove some sales limits that Van Kampen managers faced since Morgan's JV with Smith Barney closed.
• Bernanke warns U.S., Asia to mind the gap. Fed chairman Ben Bernanke called on U.S. and Asian leaders to "avoid ever-increasing and unsustainable imbalances in trade and capital flows," saying the U.S. financial system is currently "overwhelmed" by an inflow of capital. Speaking Monday at a San Fran. Fed conference on Asia, Bernanke warned that while the U.S. trade deficits with developing countries are not as onerous as they were two years ago, they are still a threat to the global economy. World leaders believe global economic growth must begin to depend less on the U.S. consumer.
• Fed tests exit tool... As global central banks begin to weigh inflation risks, the Fed confirmed Monday it has begun experimenting with "triparty" reverse repo agreements, but says their actual use is not imminent. In a reverse repo, the Fed pledges mortgage-backed securities and Treasurys it bought as collateral for short-term loans, thereby draining cash from the financial system. Reverse repos are normally the domain of the 18 primary dealers; the experiment involves extending that to deals with the $2.5T money-market mutual fund business.
• ... while Australia says inflation risk looms. The Reserve Bank of Australia believes that the risk to global economic growth is passing, and that the bigger threat is now inflation. "Keeping interest rates at very low levels for an extended period could therefore threaten the achievement of the inflation target over the medium term," according to minutes from its Oct. 6 meeting, released Tuesday. At the meeting, the RBA unexpectedly raised its policy rate by 0.25% to 3.25% - its first such hike since March 2008, and the first in a major developed economy since the start of the financial crisis last year.
• Galleon faces massive withdrawals. Clients of hedge-fund giant Galleon jumped ship Monday after Friday's arrest of co-founder Raj Rajaratnam, forcing Galleon to unload some of its holdings, including tech stocks. So far, investors have requested $1.3B of the total $3.7B Galleon manages, and two of its brokerage firms - Bank of America (BAC) and Barclays (BCS) - have cut off relations with the firm. In a letter to investors and employees Monday evening, Rajaratnam said the charges "are, without exception, entirely baseless," and vowed to defend the firm.
• Financial sector fraud on the rise. Fraud is increasing twice as fast in the financial sector as in other sectors, according to Kroll's annual Global Fraud Report, released Monday. In a survey, senior executives said North America had been particularly hit hard by the financial crisis: the average financial services company lost over $15M to fraud over the past three years. The report comes as sources say investigators plan to charge 10 more securities dealers with insider trading, some linked to Galleon Group, which is at the center of one of the biggest-ever undercover operations into illegal trading (see above).
• Bair speaks up for small banks. FDIC head Sheila Bair warned Monday small community banks are struggling to compete against their too-big-to-fail rivals. "Too big to fail has become worse," she said, "it's become explicit when it was implicit before." Bair contends government guarantees create competitive disparities between large and small banks, because "everybody knows small institutions can fail," making it more expensive for them to raise capital and secure funding.
• China fires new salvo in trade tussle. In the latest in a series of China-U.S. trade disputes, China's Ministry of Commerce took preliminary measures Monday to impose tariffs of as much as 36% on certain nylon imports from the U.S., saying the imports have damaged the domestic industry. The ruling affects imports of Nylon 6, used to manufacture a variety of products, including toothpaste and chiffon. Affected U.S. firms include BASF's (BASFY.PK) U.S. arm and Honeywell (HON).
• Group support for Microsoft/Yahoo tie-up. In an open letter, advertising industry heavyweights urged the Department of Justice to fast-track approval of a Microsoft (MSFT) / Yahoo (YHOO) tie-up, saying the potential benefits for advertisers, marketing services agencies, Web site publishers and consumers are "too important to wait for." Google (GOOG) remained more circumspect, perhaps because it doesn’t want to alienate customers.

Earnings: Before Open

• Autoliv (ALV): Q3 EPS of $0.36 beats by $0.08. Revenue of $1.33B (-14.2%) vs. $1.28B. Shares -0.4% premarket. (PR)
• Bank of New York Mellon (BK): Q3 EPS of $0.54 beats by $0.06. Revenue of $3.33B (+3.7%) vs. $3.18B. Provision for credit losses goes to $147M from $61M last quarter. (PR)
• Biogen Idec (BIIB): Q3 EPS of $1.12 beats by $0.08. Revenue of $1.12B (+2.8%) in-line. Shares -1.9% premarket. (PR)
• BlackRock (BLK): Q3 EPS of $2.10 beats by $0.17. Revenue of $1.14B (-13.2%) in-line. "Improving investor sentiment was the most important factor in third quarter results. Clients are putting money back to work in the markets, driving inflows in equities and bonds, and outflows in money market funds industry-wide." Shares +0.9% premarket. (PR)
• Brinker International (EAT): FQ1 EPS of $0.17 beats by $0.02. Revenue of $778M (-20.9%) vs. $766M. Cost of sales fell to 28.2% from 28.4% last quarter. (PR)
• Caterpillar (CAT): Q3 EPS of $0.64 beats by $0.58. Revenue of $7.29B vs. $7.49B. "We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s. We are seeing encouraging signs that indicate a recovery may be underway." Shares +4.4% premarket. (PR)
• China Mobile (CHL): Q3 net profit of 28.6B yuan ($4.2B), up 2.6% from 27.9B last year, short of consensus of 29.2B. Sales rose 9% to 114.1B yuan. Ebitda rose 5% to 57.8B yuan, short of 58.1B consensus. (Bloomberg)
• China Telecom (CHA): Q3 profit of 2.39B yuan ($350M), down from 4.6B last year, and well short of consensus of 3.68B. Ebitda profit margin slipped to 41.1% from 42.3%. (Reuters)
• Coach (COH): FQ1 EPS of $0.44 beats by $0.05. Revenue of $761M (+1.1%) vs. $754M. (PR)
• Coca-Cola (KO): Q3 EPS of $0.82 in-line. Revenue of $8.04B (-4.2%) vs. $8.11B. "We expect the consumer to continue facing economic uncertainties into 2010 and for consumer sentiment to recover slowly.: Shares -1.2% premarket. (PR)
• Comerica (CMA): Q3 EPS of -$0.10 beats by $0.43. $311M provision for loan losses, unchanged from Q2. (PR)
• Diamondrock Hospitality (DRH): Q3 FFO of $0.19 beats by $0.02. Revenue of $138M (-14.6%) vs. $134M. (PR)
• DuPont (DD): Q3 EPS of $0.45 beats by $0.12. Revenue of $5.96B (-18.3%) vs. $6.14B. Sees full-year EPS of $1.95-2.05 vs. $1.83. "We see overall sequential improvement in our industrial businesses as market conditions begin to firm." (PR)
• Forest Laboratories (FRX): FQ2 EPS of $0.85 misses by $0.01. Revenue of $963M (+4%) vs. $1B. (PR)
• Great Atlantic & Pacific Tea Company (GAP): FQ2 EPS of -$1.18 misses by $0.47. Revenue of $2.06B (-5.4%) vs. $2.13B. "The current challenging economy continues to impact our business. The macro headwinds including rising unemployment, intensifying price competition and now also deflation are creating an even more difficult short-term economic environment." Shares -9.7% premarket. (PR)
• Illinois Tool Works (ITW): Q3 EPS of $0.60 beats by $0.07. Revenue of $3.58B (-19.8%) in-line. Operating margin 13.5% up from 9.9% last quarter. (PR)
• Invesco (IVZ): Q3 EPS of $0.24 in-line. Revenue of $706M vs. $687M. Shares +3.6% premarket. IVZ announced yesterday it would acquire Morgan Stanley's (MS) retail asset management business, including Van Kampen Investments." (PR)
• Jefferies Group (JEF): Q3 EPS of $0.42 beats by $0.14. Revenue of $M (+154.5%) in-line. Shares +6.1% premarket. (PR)
• Journal Communications (JRN): Q3 EPS of $0.02 misses by $0.06. Revenue of $105M (-22.9%) vs. $108M. (PR)
• LaBranche (LAB): Q3 EPS of -$0.22 misses by $0.27. Revenue of $M in-line. Shares -4.9% premarket. (PR)
• Lockheed Martin (LMT): Q3 EPS of $2.07 vs. consensus of $1.83. Revenue of $11.06B (+4.5%) vs. $11.4B. (PR)
• Lexmark (LXK): Q3 EPS of $0.65 beats by $0.20. Revenue of $958M (+6%) vs. $901M. Gross margin 32.7% vs. 32.5%. Sees Q4 EPS of $0.50-0.60 vs. $0.47, revenue "up slightly." Stronger than expected customer demand drove better than expected growth. (PR)
• Marshall & Ilsley (MI): Q3 EPS of -$0.68 in-line. Average loans and leases fell 6% to $47.1B. "There are some encouraging early signs that credit quality is improving, but we realize it will take a few more quarters to fully address our problem loans." Announces $775M common stock offering. Shares -10.2% premarket. (PR)
• Parker-Hannifin (PH): FQ1 EPS of $0.45 beats by $0.28. Revenue of $2.24B (-27%) vs. $2.17B. Shares +4.9% premarket. (PR)
• Peabody (BTU): Q3 EPS of $0.49 beats by $0.26. Revenue of $1.67B (+24.6%) vs. $1.42B. Shares +4.2% premarket. (PR)
• Pfizer (PFE): Q3 EPS of $0.51 beats by $0.03. Revenue of $11.62B (-2.9%) vs. $11.41B. Sees full-year EPS of $2.00-2.05 vs. $1.98. (PR)
• Precision Castparts (PCP): FQ2 EPS of $1.54 misses by $0.09. Revenue of $1.3B (-27.6%) vs. $1.4B. "From a top-line perspective, overall sales declines seem to be bottoming out in the second quarter." Shares -3.1% premarket. (PR)
• Regions Financial (RF): Q3 EPS of -$0.37 misses by $0.12. Revenue of $1.62B (-20.3%) vs. $1.58B. Allowance for credit losses +2.9% to $1.025B. Shares +0.35% premarket. (PR)
• Sherwin Williams (SHW): Q3 EPS of $1.51 beats by $0.16. Revenue of $2B (-12%) in-line. Sees Q4 EPS of $0.35-0.55 vs. $0.61, and revenue down 8-12% Y/Y. (PR)
• State Street (STT): Q3 EPS of $1.05 beats by $0.01. Revenue of $2.24B (-19.3%) in-line. Shares -0.75% premarket. (PR)
• UAL (UAUA): Q3 EPS of -$0.43 beats by $0.51. Revenue of $4.43B (-20.3%) in-line. Shares +8.1% premarket. (PR)
• UnitedHealth (UNH): Q3 EPS of $0.89 beats by $0.12. Revenue of $21.7B (+7.6%) vs. $21.56B. (PR)
• United Technologies (UTX): Q3 EPS of $1.14 beats by $0.02. Revenue of $13.38B (-11.3%) in-line. "Order rates for most of our businesses have largely stabilized, although the shape of recovery is still uncertain." (PR)
• Western Union (WU): Q3 EPS of $0.33 beats by $0.01. Revenue of $1.31B (-4.6%) in-line. Says recent stabilization trends are encouraging. (PR)

Earnings: Mon. After Close

• Apple (AAPL): FQ4 EPS of $1.82 beats by $0.40. Sales of $9.87B vs. $9.2B. Sees FQ1 EPS of $1.70-1.87 vs. consensus of $1.91 on sales of $11.3-11.6B, in line. Sold 3.05M Macs, 10.2M iPods, and 7.4M iPhones during quarter. Gross margin 36.6%. Shares +5.9% AH. (PR)
• Atheros Communications (ATHR): Q3 EPS of $0.46 beats by $0.08. Revenue of $157M (+13%) vs. $147M. Shares +2.1% AH. (PR)
• Boston Scientific (BSX): Q3 EPS of $0.19 beats by $0.05. Revenue of $2.03B (+3%) vs. $2.04B. Sees Q4 EPS of $0.17-0.21 vs. $0.17. Expects full-year adjusted EPS of $0.75-0.79 vs. $0.56. Shares -7% AH. (PR)
• JDA Software Group (JDAS): Q3 EPS of $0.40 beats by $0.04. Revenue of $96M (-3%) vs. $92M. Shares -2.8% AH. (PR)
• Lincare (LNCR): Q3 EPS of $0.53 beats by $0.01. Revenue of $393M (-3%) vs. $391M. Shares -0.8% AH. (PR)
• Packaging Corp. of America (PKG): Q3 EPS of $0.25 in-line. Revenue of $554M (-11%) vs. $549M. Sees Q4 EPS of $0.13 vs. $0.17. Shares -7.4% AH. (PR)
• Steel Dynamics (STLD): Q3 EPS of $0.30 beats by $0.07. Revenue of $1.2B (-54%) vs. $1.1B. Shares +2.6% AH. (PR)
• Texas Instruments (TXN): Q3 EPS of $0.42 beats by $0.03. Revenue of $2.9B (-15%) vs. $2.8B. Sees Q4 EPS of $0.42-0.50 vs. $0.40. "Our balance sheet is strong and has allowed us to opportunistically make investments in Analog and Embedded Processing throughout this downturn that should provide returns for years to come." Shares +2% AH. (PR)
• UDR Inc. (UDR): Q3 FFO of $0.31 beats by $0.01. Rental income of $150M (+2%) vs. $149M. Lowers full-year FFO guidance to $1.14-1.20 from $1.23-1.35, vs. consensus of $1.27. Shares -0.5% AH. (PR)
• Volterra Semiconductor (VLTR): Q3 EPS of $0.19 misses by $0.01. Revenue of $29.7M (-3%) in-line. Shares -10.3% AH. (PR)
• Werner (WERN): Q3 EPS of $0.26 beats by $0.06. Revenue of $429M (-27%) vs. $428M. Shares +3.3% AH. (PR)
• Zions Bancorp (ZION): Q3 EPS of -$1.41 misses by $0.17. Revenue of $753M (+29%) vs. $633M. Shares -1.1% AH. (PR)

Today's Markets

Asian markets were mostly higher Tuesday, while Europe stocks were mostly lower. Nasdaq futures are well higher on the strength of Apple's (AAPL) blowout Q4; other indexes are flat.

The founders of the Galleon Group, a hedge fund started in 1997 and which has a technology and healthcare focus, have been charged with insider trading. Galleon is one of the 250 hedge and institutional investment funds that are available on AlphaClone. The fund's Top 10 Holding Clone, which invests quarterly in the the fund's ten largest holdings at the time they are disclosed, is up 48.2% so far this year but has not performed very well over time returning a negative 3.9% annualized over five years and a dismal negative 18% annualized since 2000 (all returns as of 10/15/09 close). We thought we'd list the fund's 50 largest holdings below (as of 6/30/09). Now that the fund will almost certainly wind down, perhaps there are some good short opportunities.

As subscribers to the BioMedReports FDA Calendar know, a special panel is slated to meet next week to discuss whether the agency should approve the drug. The documents were posted ahead of the meeting as part of the agency's briefing materials.

Co-authored by Michael D. Becker, Jeffrey Martini, Ph.D., and Janet L. Dally

In the United States, up to 50 million people live with chronic pain, with the majority of these patients not satisfied with their current pain treatments. Pain is defined clinically as an unpleasant emotional experience resulting from real or potential tissue damage and is generally divided into two categories based on cause:

Access Pharma (ACCP.OB) is an emerging bio-pharmaceutical company which is focusing on the development of a late-stage, diversified oncology pipeline in addition to a treatment called MuGard is cleared for marketing in the U.S., Europe, and other key global markets for a common side effect of some cancer treatments known as mucositis (painful sores in the mouth and GI mucosal lining).

In addition, the Company is developing earlier stage compounds in its pipeline and has an oral cobalamin nanopolymer drug delivery technology (based on the uptake process for vitamin B-12 in the gut) which has demonstrated positive results for the delivery of insulin by mouth in preclinical animal models (e.g. 80% oral bioavailability for long-acting insulin taken by mouth rather than injection.

by Marie Daghlian

Finally, in the past two weeks 20 biotech companies have received noncompliance or delisting notices from Nasdaq while one company, Inhibitex (INHX), announced that it had regained compliance with Nasdaq listing rules. And Ivivi Technologies, a New Jersey medtech company which had received a noncompliance notice in June, sold its assets to an entity controlled by its CEO Steven Gluckstern for an aggregate purchase price of $3.5 million.

After being refused twice, Biogen Idec (BIIB) launched a hostile bid to acquire its development partner, Facet Biotech (FACT) for $14.50 per share, by taking its offer directly to Facet’s shareholders. Biogen also sent a letter to Facet’s Board stating that Facet’s cash balance is less than Biogen’s offer price. The deal is valued at approximately $356 million. The tender offer will expire at 12:00 midnight, ET, on Oct. 19, 2009.

As a reminder, Biogen had initially approached Facet with an offer of $15 per share on Aug. 17, 2009. However, Facet did not accept the offer as the company believed that it was not in the best interests of its shareholders. Soon thereafter, Facet entered into a collaboration with Trubion Pharmaceuticals (TRBN - Analyst Report), a move that was criticized by Biogen.

After getting caught trying to do a sneaky back door agreement with Johnson & Johnson (JNJ) over the US giant financing a possible buyout of Biogen Idec’s (BIIB) stake in MS drug Tysabri, Elan (ELN) was left looking suitably contrite Tuesday after it announced that it had revised the terms of its agreement with J&J.

In July, Elan unveiled a deal with J&J that looked to be the answer to all of its debt problems, as J&J promised to invest $1bn in the group in return for early stage Alzheimer’s products and a stake in Elan. J&J also agreed to contribute to the development of its experimental Alzheimer’s drug bapineuzumab (J&J comes riding to Elan’s rescue, July 2, 2009).

• Citigroup looks to cut U.S. stake. Sources say Citigroup (C) is working on a plan to pare the government's 34% stake in the bank, including a multibillion-dollar public stock sale followed by a buyback of some of the government's shares. Citi spoke briefly with the Treasury over the weekend, which said it has no objections as long as the bank first raises offsetting capital. Any move would give a clearer picture of how the government plans to balance its desire to wind down financial system intervention against its continued concerns over the health of the banking industry.
• Judge blocks $33M settlement. U.S. District Court Judge Jed Rakoff told the SEC and Bank of America (BAC) their proposed $33M settlement over the lack of disclosure of $3.6B in bonuses just before BofA's merger with Merrill Lynch was "neither fair, nor reasonable, nor adequate." Judge Rakoff demanded the case be tried in court, calling their proposed consent judgement "a contrivance designed to provide the S.E.C. with the facade of enforcement and the management of the Bank with a quick resolution of an embarrassing inquiry - all at the expense of the sole alleged victims, the shareholders." (see Judge Rakoff's order (.pdf))
• Obama says they can. Speaking to Wall Street Monday, U.S. President Barack Obama told financial leaders to expect new regulations. Potential new rules include: a new consumer financial protection agency, higher capital requirements for banks and a systemic risk regulator. Obama also said that the necessity for bailouts are waning, and that the financial sector is showing improvement. Still,the president stressed that the lessons from the past year must not be ignored.
• Lacker says bank reforms miss mark. Richmond Fed president Jeffrey Lacker pushed back against proposed changes to financial system regulation, saying in a speech Monday that creating an apparatus for the government to 'resolve' big financial firms without forcing them into bankruptcy could weaken market discipline and lead to greater volatility. "The leading proposals before Congress concentrate almost exclusively on expanding government protection and regulation, but I believe we would be better off placing greater reliance on market-based incentives for prudent risk management," Lacker said.
• Lilly slashes costs, jobs. Eli Lilly (LLY) announced Monday it will cut company costs up to $1B, including eliminating 5,500 jobs over the next two years. The company plans to restructure several of its business units in response to generic competition to its antipsychotic drug Zyprexa, as well as its 2008 purchase of ImClone Systems.
• Avaya takes the call. Nortel’s corporate networking unit will be acquired by privately-owned Avaya for $915M, over Verizon's (VZ) objections. Nortel, which went into bankruptcy in January, decided selling off its main businesses was a better option for creditors than trying to reorganize. The sale follows Ericsson AB's (ERIC) purchase of Nortel's wireless business in July of this year.
• EU wants details on GM loan. The EU Commission has asked Germany for the country's formal plan to inject €3B ($4.38B) in loan gurantees to GM's European Opel unit. Meanwhile, a meeting today between German and European government officials over state aid for the new company is unlikely to produce any results because the buyer, Magna (MGA), has yet to submit a detailed business plan. The turnaround may include cutting over 10,000 jobs.
• So goes the year. Today marks one year following the collapse of Lehman Brothers, and risk appetite is back, with five U.S. banks recently reporting large gains from their trading desks. While some argue that recovery is clearly on the way as China's economy grows, others warn investors should not count on government bailouts for future growth.
• Elan, J&J fix JV. Elan (ELN) dropped the value of its $1.5B deal with Johnson & Johnson (JNJ) by $115M after a ruling earlier this month that its terms violated Elan and Biogen Idec's (BIIB) partnership over their MS drug Tysabri. Under the original deal, J&J had the option of financing Elan's purchase of Biogen's stake in Tysabri under certain circumstances; the new deal eliminates this clause.
• ING hits roadblock on government aid. Shares of ING Group (ING) fell 3.8% in Amsterdam following media reports saying European Competition authorities will reject the Dutch government's €22B guarantee of ING's U.S. Alt-A portfolio over concerns the terms may be too sweet. Analysts say ING could have to pay €1-1.7B more if the deal is rejected.
• Genworth seeks $500M: Genworth Financial (GNW) fell in AH trading Monday after saying it's looking to raise $500M in an offering led by Goldman Sachs (GS), BofA Merrill Lynch (BAC) and Deutsche Bank (DB). Shares will be diluted as a result, but some analysts say after five consecutive quarterly losses, totaling more than $2B, it's a good sign that the company is in the position to issue at all.

Today's Markets

Overseas stocks posted modest gains Tuesday, while U.S. futures are down a drop ahead of today's retail sales data (full calendar).

• Asia: Nikkei +0.15% to 10,218. Hang Seng -0.31% to 20,866. Shanghai +0.23% to 3,034. BSE +1.48% to 16,454.
• Europe at midday: London +0.2%. Paris +0.3%. Frankfurt -0.1%.
• Futures at 7:00: Dow -0.1% at 9542. S&P -0.1% to 1042. Nasdaq -0.1%.
  Crude +0.6% to $69.28. Gold flat at $1001. 30-year Tsy -0.08%.
  Euro -0.1% vs. dollar. Yen -0.5%. Pound -0.5%.

Tuesday's Economic Calendar

7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
8:55 Redbook
10:00 Business Inventories
5:00 PM ABC Consumer Confidence Index

The US equity market snapped a 5-day winning streak on Friday, with the S&P500 closing down an insignificant 0.1% after a modest pull-back in the financial sector (which may continue today on the back of the Stiglitz comments, see below and news of Three More Bank Closings Brings 2009 Total To 92 in what is becoming known as Failure Friday!)

The Treasury market closed essentially unchanged having failed to sustain the rally that took place earlier in the day. In FX, the Yen was the main mover, appreciating to levels last seen in February following a slew of better than expected Chinese economic reports. Conversely, the Yen may also have been helped by the US decision to slap large tariffs on China’s tires for the next three years, with the likelihood that China will retaliate with some measures of its own (whilst small in direct importance – and in my view unlikely to lead to a full-blown trade war – these measures will tend to add to already heavily negative Dollar sentiment).

• 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.