Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
Kimberly-Clark to spin off healthcare ops. Kimberly-Clark (NYSE:KMB) intends to spin its healthcare business off into a stand-alone, publicly traded firm with about $1.6B in annual sales. The unit's "strategic fit and growth priorities have changed over time and we now think that pursuing a spin-off makes sense," CEO Thomas Falk said. Kimberly-Clark hopes to complete the spin-off by the end of Q3 next year via a tax-free distribution of the new firm's common stock to the parent company's shareholders.

Chinese shares rise on reform optimism. The Shanghai Composite and Hang Seng have closed +1.7% after senior Chinese economic official Yang Weimin said the government approved a 20,000-word document at the Third Plenum this week about reforms involving 15 sectors. The document "seizes onto the most deep-seated problems in reforming our country's economic system," Yang said.

Obamacare fix puts insurers in a tough spot. President Obama will allow insurance companies to continue to offer existing policies in 2014 even if they fail to meet the standards set by the healthcare law. Obama's U-turn follows pressure from the public and his own party after it emerged that his repeated pledge that people could keep their insurance plans if they wanted to contradicted the terms of the law. However, the move is anything but easy and has prompted warnings that it could destabilize the market and result in higher premiums for consumers.

Top Stock News
Moody's cuts senior debt of major banks. Moody's has lowered the senior debt ratings of Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM) and BNY Mellon (NYSE:BK) by one notch, based on its updated views on U.S. government support and standalone bank considerations. The credit ratings of these banks had each benefited from the assumption of government support, Moody's said, and its rating actions reflect strengthened U.S. bank resolution tools that affect its assumptions about such support.

Australian PM could block ADM's $2.1B purchase of GrainCorp. Australian Prime Minister Tony Abbott may reportedly veto Archer Daniels Midland's (NYSE:ADM) A$2.2B ($2.1B) acquisition of crop handler GrainCorp (OTCPK:GRCLF) or impose conditions that would make the deal unviable. The ruling coalition is divided over the transaction, with some members, including Deputy Prime Minister Warren Truss, opposing it on the grounds of national interest. The decision is the first big test of Abbott's declaration that Australia is "open for business."

Sony to launch new gaming console in U.S. Sony's (NYSE:SNE) shares were -1.9% premarket ahead of the U.S. launch of the company's PlayStation 4 device. However, expectations have grown that PS4's lower price and its gaming focus will allow Sony to take the home-console crown back from Microsoft (NASDAQ:MSFT). Initial reviews have been decent, with Polygon, Joystiq, and Kotaku all heaping praise on PS4's DualShock 4 controller; Polygon calls it "the best controller Sony has ever made."

Samsung extends smartphone lead. Samsung (OTC:SSNLF, OTC:SSNGY) widened its lead over Apple (NASDAQ:AAPL) in the smartphone market in Q3, with Gartner estimating that Samsung sold 80.36M smartphones vs 55M a year earlier and Apple 30.33M vs 24.62M. The Korean company's market share held steady at 32.1% while Apple's dropped to 12.1% from 14.3%. Overall, the number of smartphones sold increased to 250.2M from 171.65M. By operating system, Google's (NASDAQ:GOOG) Android was well ahead with 205M devices, or 81.9% of the market, while Apple's iOS was a distant second.

Berkshire takes 40M-share stake in Exxon Mobil. Berkshire Hathaway (BRK.A, BRK.B) has bought a 40.1M-share position in Exxon Mobil (NYSE:XOM), apparently enough to make Warren Buffett's conglomerate the sixth-biggest holder of the oil major's shares. Berkshire also added to existing stakes in Bank of New York Mellon (BK), DaVita HealthCare Partners (NYSE:DVA), Suncor Energy (NYSE:SU), U.S. Bancorp (NYSE:USB) and VeriSign (NASDAQ:VRSN); Berkshire lowered its holdings in ConocoPhillips (NYSE:COP), DirecTV (DTV), GlaxoSmithKline (NYSE:GSK) and Sanofi (NYSE:SNY).

Top Economic & Other News
Eurozone inflation falls. Inflation fell further away from the European Central Bank's target of just under 2% in October, slowing to an expected 0.7% from 1.1% in September. On month, CPI dropped 0.1% after rising 0.5%. The decline in inflation possibly gives the ECB further room to cut interest rates to zero - although the Germans would surely have something to say about that - following the surprise reduction last week to 0.25%.

Bankrupt Jefferson looks to raise $1.7B in new debt. Jefferson County in Alabama intends to sell $1.7B in debt for its sewer system next week, with the high-yield warrants set to receive an investment-grade rating from S&P. This is all very nice, except that Jefferson is in Chapter 9 due to previous sewer-system debt that went bad and led to creditors having to take a $1.4B haircut on $3.1B of securities. "You always hear the threat that if you default on your debt, the market will freeze you out," says Belle Haven Investment CEO Matthew Dalton. "This deal washes that away" - so to speak.

TVA to close eight coal-fired power plants. The Tennessee Valley Authority intends to shut eight coal-fired power stations in Alabama and Kentucky as part of a 2011 agreement with the Environmental Protection Agency to retire 18 such facilities by 2018. While expected, the TVA's move is a further blow to the coal industry as it struggles to cope with stricter environmental regulations and low natural-gas prices. The TVA is also reviewing some of its other coal facilities.

Alpha-Rich Stock Movers and Great Calls
1) On Tuesday, Mike Arnold wrote that Cyan (CYNI) was selling at bargain-basement prices and was poised to double. Shares are +28.7% in the two days since. Read article »
2) On July 16, tech expert Ashraf Eassa called Logitech (NASDAQ:LOGI) "a classic turnaround play" with several catalysts. The stock is +56.1% to date. Read article »

Alpha-Rich Stocks To Watch
1) Caiman Valores says Talisman Energy (NYSE:TLM) has a number of catalysts - and a large stake held by Carl Icahn - which will create 50%+ upside. Read article »
2) Morningstar (NASDAQ:MORN) is being buffeted by competitive pressures and provides a compelling short opportunity, says Alpha Gen Capital. Read article »

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Today's Markets:
In Asia, Japan +1.9% to 15166. Hong Kong +1.7% to 23032. China +1.7% to 2136. India closed.
In Europe, at midday, London +0.4%. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:20: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +0.05% to $93.81. Gold -0.3% to $1281.90.
Ten-year Treasury Yield -2 bps to 2.71%.

Today's economic calendar:
8:30 Empire State Mfg Survey
8:30 Import/Export Prices
9:15 Industrial Production
10:00 Wholesale Trade

Notable earnings before today's open: MMS

See full real-time earnings coverage »

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