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
Time Warner Cable turns down Charter's $61.3B bid. Time Warner Cable (TWC) has unequivocally rejected a $37.4B buyout proposal from Charter Communications (NASDAQ:CHTR) in a deal worth $61.3B when debt is included. Charter offered $132.50 a share comprising $83 in cash and $49.50 in stock. However, Time Warner says the bid values it at just 7X EBITDA, a multiple that is "well below past transactions in the cable sector." The carrier's shares were +1.6% at $134.55 premarket.

Congress agrees on how to divide up $1.01T pie. House and Senate negotiators have agreed on how to allocate $1.01T in funding through September 30 following Congressional approval of the budget guidelines in December. The 1,582-page deal eases some automatic spending reductions by providing an additional $45B for military and domestic discretionary programs. GOP and Democrat leaders are confident the bill will pass the House and the Senate, but probably not without much squawking.

Google makes foray into "Internet of Things" with $3.2B deal. Google (NASDAQ:GOOG) has agreed to acquire Nest Labs, a maker of "intelligent" thermostats and smoke alarms, for $3.2B. Nest was founded by former Apple (NASDAQ:AAPL) executive Tony Fadell, who is sometimes called the "godfather" of the iPod. The startup should provide a major boost to Google's home automation efforts, in which Android will doubtlessly play an important role. "Home automation is one of the bigger opportunities when you talk about the Internet of everything," says analyst Shyam Patil. "This acquisition furthers their strategy around that."

Top Stock News
AstraZeneca sees 2017 revenues in line with 2013. AstraZeneca (NYSE:AZN) believes it will return to growth "earlier than analyst consensus," and it expects 2017 revenues to be "broadly in line" with those of 2013. The company's earnings are being hit by patent expirations such as for cholesterol treatment Crestor. However, Deutsche Bank is skeptical: What does "broadly in line" mean?" the banks asks. "We forecast $24.3B of revenues in 2017 vs. $25.7B in 2013. Is that broadly in line?" Notwithstanding, AstraZeneca's shares were +2.75%. premarket.

Obamacare's got an age problem. Just 30% of the people who have bought insurance under Obamacare are aged 34 or younger, while a third are 55 or older, a government report says. That's a problem because the success of the Affordable Care Act hinges on signing up enough "young invincibles," who would need less care, in order to pay for the sick and elderly. The White House was banking on 40% of those who enroll being under 34. If the numbers don't balance out as needed, premiums could rise.

Pfizer's generics operations attract much interest. Valeant (NYSE:VRX), Actavis (NASDAQ:ACT) and Mylan (NASDAQ:MYL) are reportedly interested in acquiring Pfizer's (NYSE:PFE) branded generics business, which generated sales of $7B in the first nine months of 2013. However, while Pfizer said last year it could eventually sell the operations, it is not yet ready to do a deal. Another problem is that the unit is much larger than any of the three potential suitors. Pfizer could also receive a hefty tax bill from selling the business.

FBI investigating yet more market manipulation. The FBI suspects traders at two unnamed banks of conspiring to manipulate rates on major orders from Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) and of front running the government-sponsored enterprises (GSE) in the markets for interest-rate swaps. Senior management at the banks "planned and encouraged this behavior because it led to higher revenue for their respective parent banks," an FBI bulletin says.

Top Economic & Other News
Japan's current account deficit surges. Japan's current account deficit widened to a record ¥592.8B ($5.7B) in November from ¥127.9B in October and surpassed consensus of ¥380.4B. The increase comes amid a rise in the value of imports, particularly because of the weak yen, and higher demand for foreign energy because of the shutdown of nuclear plants. The long-term risk is that the deficit could become permanent, which could weaken confidence in Japan's massive debt.

U.K. CPI hits BOE goal for first time since November 2009. U.K. inflation hit the Bank of England's target of 2% for the first time in four years in December, falling from 2.1% in November. Annual inflation has now declined for six months in a row, but as Reuters' Jamie McGeever points out, CPI is still double wage growth, "so the income squeeze continues."

Eurozone industrial output rebounds. Eurozone industrial production swung to growth of 1.8% on month in November from a drop of 0.8% in October and comfortably topped consensus of +1.4%. On year, output jumped to 3% from 0.5% and was more than double expectations. The improvement was widespread, with Germany and France enjoying good growth and Ireland surging.

Top Ideas: Movers and Great Calls
1) On Friday, Josh Young highlighted the absurdly low valuation of AusTex Oil (OTCPK:ATXDY), which was trading at 1/3 of its proved reserve value despite outstanding growth rates. The stock is +30.6% since. Read article »
2) On September 16, Money Trees cited power systems manufacturer Magnetek (NYSEMKT:MAG) as an industry leader whose shares remained sharply undervalued due to a variety of factors. Shares are +42.9% since his call. Read article »

Top Ideas To Watch
1) Shares of offshore driller Northern Offshore (OTCPK:NFSHF) will rise, as coming revenue growth closes the stock's valuation gap relative to its peers, writes Street Smart Investor. Read article »
2) Analyst Shaun Currie, CFA says online job placement company Monster Worldwide (NYSE:MWW) offers upside from a pending asset sale, with strong fundamentals and a share buyback providing downside protection if the sale disappoints. Read article »

Top Ideas are the best long and short ideas on Seeking Alpha. SA PRO subscribers receive early access to these Top Ideas, which often move markets. For more information about SA PRO and becoming a subscriber, click here.

Today's Markets:
In Asia, Japan -3.1% to 15422.4. Hong Kong -0.4% to 22791. China +0.9% to 2027. India -0.5% to 21033.
In Europe, at midday, London -0.1%. Paris -0.4%. Frankfurt -0.5%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +0.1% to $91.93. Gold +0.2% to $1248.70.
Ten-year Treasury Yield +2 bps to 2.85%.

Today's economic calendar:
7:30 NFIB Small Business Optimism Index
7:45 ICSC Retail Store Sales
8:30 Retail Sales
8:30 Import/Export Prices
8:55 Redbook Chain Store Sales
10:00 Business Inventories

Notable earnings before today's open: OTC:CBSH, JPM, LEDS, SJR, WFC

Notable earnings after today's close: LLTC

See full real-time earnings coverage »

Wall Street Breakfast is sent out by email for free -- Get it now »