Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
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.

UBS rogue trader racks up $2B loss. In an instant, UBS's (NYSE:UBS) expected CHF500M Q3 profit looks poised to turn into a CHF1B-plus loss after the bank announced this morning a rogue trader racked up about $2B in trading losses. Shares sank as much as 10% in Zurich, perhaps an overreaction; or perhaps underscoring concerns over UBS's risk management; or perhaps because investors fear the "unauthorized trades" were due to I-bank traders trying a bit too hard to justify the unit's existence.

Some sunshine in Athens. Asian and European markets posted gains today, sending futures higher, as confidence grows that Europe can overcome its debt crisis. Greek PM Papandreou, German Chancellor Merkel and French President Sarkozy said after yesterday's conference call that they were "convinced that the future of Greece is in the euro-zone," though economists noted the generic statement is not a go-ahead on the next tranche of the Greek bailout, which the IMF could oppose.

More bad news for Netflix. Netflix (NASDAQ:NFLX) is -4.2% premarket after lowering its Q3 U.S. subscriber growth forecast to 21.8M streaming and 14.2M DVD, from a previous (July 25) 22M and 15M. "Despite the guidance revision, we remain convinced that the splitting of our services was the right long-term strategic choice," Netflix said. "We know our decision to split our services has upset many of our subscribers, which we don't take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come."

SEC MBS dragnet widens. The SEC is in advanced talks with Citigroup (NYSE:C) to settle allegations (read: a $200M fine) that the bank held short positions against a $1B mortgage-bond CDO it sold in 2007. SEC is also said to be negotiating a much smaller fine ($5M) with Credit Suisse (NYSE:CS), the CDO's collateral manager. Another probe is examining whether Mizuho (NYSE:MFG) misled investors in mortage-bond deals.

Trio of giants to take on Google in web ads. Ad executives say Yahoo (YHOO), Microsoft (NASDAQ:MSFT) and AOL Inc. (NYSE:AOL) are in the midst of forming a web ad alliance in an effort to take on Google (NASDAQ:GOOG). The pact is a "watered-down" version of a botched plan to combine ad inventory at Yahoo, Microsoft, and News Corp. (NASDAQ:NWS). Currently, the trio sells ads to marketers separately; a JV would supposedly simplify purchasing and potentially boost sinking ad rates, but executives are skeptical.

Bank hoist. Don't look now, but leveraged lending activity at U.S. banks is up 74% from a year ago - to $572B YTD - as banks with huge cash hoards seek decent returns. The degree of leverage being used is also up 14%.

Factory feebleness. U.S. manufacturers, who helped fuel the great bounce of 2009-2010, are growing increasingly cautious in their outlook. The U.S. economy "is clearly not recovering anymore," Cummins (NYSE:CMI) CEO Tom Linebarger said in an interview yesterday. So far, 2012 earnings growth forecasts are down to 16% from 19% as recently as June.

BP rises after nothing-new oil spill report. A report released Wednesday said BP managers were acutely aware of cost overruns that contributed to poor decisions that "added incremental risk, and may have contributed to the ultimate failure" of the Macondo well last year. The report also cites Transocean (NYSE:RIG) and Halliburton Company (NYSE:HAL), but stopped short of spreading out blame for the oil spill. Analysts said the report - which contained no new revelations - was net positive for BP, sending shares up 3.5% yesterday, and another 2.5% this morning in London.

Fizzling Pepsi shakes things up. PepsiCo (NYSE:PEP) unveiled management changes Wednesday as it struggles to keep up with Coca-Cola (NYSE:KO) and keep discontent investors in check. Frito-Lay CEO Albert Carey will now head up the U.S. beverages unit, a move CEO Indra Nooyi hopes will propel the struggling firm to "new levels of success." Shares rose 1.7%.

Clearwire, China Mobile ink 4G pact. Struggling carrier Clearwire (CLWR) climbed 7% after it announced a partnership with China Mobile (NYSE:CHL) for developing hardware supporting TD-LTE 4G technology. TD-LTE offers higher potential download capacity than the FDD-LTE solutions supported by Verizon (NYSE:VZ) and AT&T (NYSE:T), and can also be deployed in cheaper spectrum.

Cablevision climbs on content deal. Cablevision (NYSE:CVC) rose 7% Wed. after it inked a deal with Time Warner (NYSE:TWX) to allow subscribers to stream content to mobile devices. The deal comes as cable providers look to fend off Netflix (NFLX) and its ilk.

Facebook puts off IPO. Sources say Facebook won't IPO until late 2012 in order to keep employees focused on product development and not exits.

IPOs underwater but not drowning. 63% of 2011's IPOs are trading below their offering price. Highly-touted IPOs that are underwater include Pandora (NYSE:P), Boingo (NASDAQ:WIFI) and Renren (NYSE:RENN), while LinkedIn (LNKD), Dunkin' Brands (NASDAQ:DNKN) and Zillow (NASDAQ:Z) are among those bucking the trend. As for the glass-is-half-full argument, IPO stocks have not fallen as far as the overall stock market - down 6.5% vs. the 11.5% loss in the S&P 500.

Today's markets:

Asia: Japan +1.8%. Hong Kong +0.7%. China -0.2%. India +1.2%.
Europe at midday: London +1.6%. Paris +2.1%. Frankfurt +2.1%.
Futures at 7:00: S&P +0.66%. 10-yr -0.35%. Euro +0.41% vs. dollar. Crude +0.57% to $89.42. Gold -1.14% to $1803.35.

Thursday's economic calendar:

8:30 Consumer Price Index
8:30 Empire State Mfg Survey
8:30 Initial Jobless Claims
8:30 Current Account
8:30 Real Earnings
8:45 Regulation of Systemic Risk conference (Bernanke, Tarullo)
9:15 Industrial Production
10:00 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Notable earnings before Thursday's open: PIR

Notable earnings after Thursday's close: RIMM

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