Wall Street Breakfast: Must-Know News

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Includes: AAPL, BAC, BAYRY, BX, FMCC, FNMA, GLD, INTC, JNJ, KKR, ON, QQQ, SPY, SSNLF, TXN, USO
by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
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.

Obama outlines $447B program to reduce unemployment. President Obama last night unveiled a $447B plan to bring down unemployment, including $240B in payroll tax relief, $49B for extending unemployment insurance, and $50B for transport infrastructure. Obama also intends to propose a deficit-reduction plan on September 19 that will cover the cost of his jobs bill. It will include "modest adjustments" to Medicare and Medicaid, as well as more taxes for the rich and corporations. Republicans gave a cautious welcome to Obama's employment program, but skepticism exists as to whether he'll get it through Congress intact, and whether it will have the desired impact.

BofA mulls plan to axe 40,000 jobs. Just as President Obama looks to create jobs, Bank of America (NYSE:BAC) is considering a plan to slash 40,000 positions over a number of years, The Wall Street Journal reports. The cuts would be part of BofA's "Project New BAC" overhaul and would mostly come in its consumer operations, with executives due to make final decisions today. The layoffs would add to 6,000 jobs already eliminated this year by the bank, which last month said it aims to reduce annual expenses by $6B.

Fannie and Freddie set to get off scot free. Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) are set to escape without having to pay any penalties as part of a deal they are forging with the SEC over whether they properly disclosed their exposure to subprime loans, The New York Times reports. The reason for the lack of fines is because of the companies' precarious finances, although they also won't have to admit fraud. The report comes just a week after Fannie's and Freddie's government overseer sued 17 large financial firms for misleading them into buying troubled loans.

Record-low mortgage rates increase urgency for refinancing. Rates on 30-year fixed-rate mortgages fell to 4.12% this week, the lowest in over 50 years. The drop is providing urgency to plans - which were referred to by President Obama last night - to allow homeowners to refinance their debt, The Wall Street Journal reports. The White House is mulling a revamp of the thus-far disappointing HARP scheme, while the Federal Housing Finance Agency is looking at how it can accommodate that effort. Economists estimate a refinancing program could save borrowers at least $20B.

Antitrust lawsuit against P-E firms widened. A federal judge has broadened the scope of an antitrust lawsuit against Blackstone (NYSE:BX), KKR (NYSE:KKR) and nine other major private-equity firms over a conspiracy to manipulate the markets for mammoth takeovers. Initially taking in 17 deals, plaintiffs can now seek information for 10 more, including the largest buyout ever: the $44B purchase of TXU by Goldman Sachs, KKR and two other companies. Whatever the result of the four-year case, the lawyers have reportedly done rather well, taking in over $100M in fees.

Japan Q2 GDP worse than thought. Japan's GDP contracted an annualized 2.1% in Q2, greater than the -1.3% initially estimated. A major reason for the downgrade was because firms cut back on capital spending following the March earthquake rather than increasing it, as previously thought. However, a government survey of 40 economists showed that GDP is expected to grow 4.95% in Q3 and 2.63% in Q4. This, though, is unlikely to stop Japan from warning about the danger of the strong yen at a G7 meeting of finance ministers in Marseille today.

Chinese inflation eases as industrial production slows. Chinese inflation fell in August to an annualized +6.2% from +6.5% in July as the price of food, particularly for pork, continued to rise steeply but at a slower pace. However, non-food inflation climbed to +3% from +2.9%, while growth in industrial production slowed to +13.5% from +14%. The figures may give the People's Bank of China pause for thought about whether to continue tightening - the bank has raised rates five times over the past year and increased reserve requirements to 21.5% for the biggest lenders.

FDA panel backs stroke treatment from J&J, Bayer. An FDA panel has recommended approval for Xarelto - a blood thinner from Johnson & Johnson (NYSE:JNJ) and Bayer AG (OTCPK:BAYRY) - for use in preventing strokes in patients with atrial fibrillation. The panel rejected an FDA staff analysis that found flaws in the treatment's clinical trials, prompting a Barclays Capital analyst to write that the "approval is potentially a Pyrrhic victory." This is because the "FDA may very well opt for a label that restricts Xarelto to a small part of the market." The agency's decision is due in November.

Deadline arrives for investors in Greek debt. Holders of Greek bonds have until today to say whether they'll participate in the country's debt swap, a key part of its €109B second rescue package. Greece has threatened to scuttle the bailout unless it gets a 90% takeup, and while it had a reported 75% earlier this week, a source says there could be a last-day rush. However, the process may become moot if Greece misses its deficit targets, as seems inevitable, and the EU and IMF carry out threats not to provide it with aid.

Apple gets second victory over Samsung in Germany. Apple (NASDAQ:AAPL) has won a second court battle in Germany against Samsung (OTC:SSNLF) after judges upheld a temporary ban on the sale of the latter's latest Galaxy tablets in the country. "The court is of the opinion that Apple's minimalistic design isn't the only technical solution to make a tablet computer - other designs are possible," the presiding judge said. However, she didn't ban sales of the tablet in other EU nations, as Apple had sought.

Natural disasters cost insurers $70B in H1. Earthquakes, floods and other disasters cost the global insurance sector $70B in the first half, Swiss Re said in its latest sigma study. This already makes 2011 the second-most expensive year in over 40 years, with the costliest being 2005, when claims hit $120B. The total H1 2011 losses to society, insured and uninsured, were almost $278B. Around 26,000 people were killed in the disasters, mostly in the Japan earthquake.

TI cuts Q3 forecasts. As expected, Texas Instruments (NYSE:TXN) has joined fellow chip makers Altera (NASDAQ:ALTR) and Fairchild (FCS) in lowering its guidance, saying it now expects Q3 EPS of $0.56-$0.60 on revenue of $3.23B-$3.37B. This compares with analyst forecasts of $0.60 and $3.52B. TI cited a drop in orders from customers across its product lines, and said that since the downturn is macro-driven, "we really have no insight as to how long it will take."

Today's Markets:
In Asia, Japan -0.6% to 8738. Hong Kong -0.2% to 19867. China -0.1% to 2498. India -1.7% to 16867.
In Europe, at midday, London -0.7%. Paris -1.3%. Frankfurt -1.1%.
Futures at 7:00: Dow -0.5%. S&P -0.65%. Nasdaq -0.7%. Crude -1.5% to $87.70. Gold -0.8% to $1842.20.

Friday's economic calendar:
10:00 Wholesale Trade
11:15 Fed's Williams: Risk Management in a Global Environment

Earnings Results: Companies that beat EPS expectations last night and today include Ulta Salon (ULTA shares +1.2%). Those that missed forecasts include Verint Systems (NASDAQ:VRNT). Full real-time earnings coverage here.

Notable earnings before Friday's open: KR, LULU

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