Wall Street Breakfast: Must-Know News

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Includes: AABA, AAPL, ALBCF, BAC, BRCD, C, F, GLD, GM, GS, HPQ, JPM, MFGLQ, NOK, QQQ, S, SPY, SSNLF, USB, 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.

H-P makes hand-brake U-Turn over PC unit. It's taken just five weeks for new H-P (NYSE:HPQ) CEO Meg Whitman to make her mark. In a dramatic reversal, H-P has decided to keep its mammoth PC division, as it would have cost far more than expected to divest the tightly integrated unit: an initial $1.5B and then $1B a year. Whitman is now also considering a revival of H-P's tablet computer, possibly with its WebOS operating system, whose own future has been uncertain. In addition, Whitman is splitting her duties with Chairman Ray Lane, who will focus on software and technology services while she takes charge of computer hardware and corporate functions. Margaret Thatcher once said, "U-turn if you want to, the lady's not for turning." Clearly, Whitman, who backed the initial strategy decisions as a board member, has no such qualms.

Portugal enters "Grecian vortex" as money supply plunges. It's just over a day old, but as in the past, events may already be overtaking the EU's latest debt deal. Real M1 deposits in Portugal have sunk an annualized 21% over the past six months, similar to that which Greece experienced before it lost control of its economy. M1 data is seen as a leading economic indicator for six months to a year ahead, with Ambrose Evans-Pritchard saying it has accurately predicted each stage of the crisis since 2007. Because of the ECB's tightening and Portugal's austerity, the country has entered what one observer calls a "Grecian vortex." The rescue machinery may "prove to be a Maginot Line," Pritchard wrote.

Italian bond yields rise above 6% in sale. As if to emphasize the skepticism about the EU debt deal, Italy sells €2.98B of 10-year notes priced to yield 6.06%, up from 5.86% last month. It's the highest yield since Italy joined the euro. A reminder: auctions require real buyers as the ECB is only allowed to participate in the secondary market. And 7% is when other EU countries sought a bailout.

Pressure mounts on MF Global. MF Global (MF) has drawn down and exhausted all its revolving credit lines over the past few days after stating as early as last Tuesday that it still had around $1.3B remaining, Bloomberg reports. It's been a horrendous week for MF, with the firm disclosing its biggest quarterly loss and having its ratings cut to junk by Moody’s and Fitch. This has caused MF to lose over half its value and its 6.25% bonds to trade at distressed levels. Dick Bove's take: the hysterical times we're experiencing have led to a run on a company that's actually solvent.

Sprint set to pay less in new Clearwire deal. Sprint (NYSE:S) is close to renewing an agreement to use Clearwire's (CLWR) network for another three-to-five years when the current pact ends in 2012, although the price Sprint will pay will probably fall, Bloomberg reports. Notwithstanding, the deal would provide Clearwire with increased visibility and reduce its risk, thereby helping it to raise the $1B it needs to upgrade its network and fund its operations. Uncertainty about Sprint's commitment to Clearwire sent the latter's shares plunging early this month, although Sprint's disclosure on Wednesday of negotiations helped them recover.

Brocade may renew attempt to sell itself. Brocade (NASDAQ:BRCD), which has a market cap of $2.18B, may be looking for an acquirer two years after failing in a previous attempt, The Wall Street Journal reports. However, it's unclear if there's any interest, with a big problem being that the market is moving away from the type of technology that Brocade uses in its storage-system switches.

Samsung deposes Apple to become smartphone king. Samsung (OTC:SSNLF) grabbed 23.8% of the market for smartphones in Q3 2011, breezing past Apple (NASDAQ:AAPL) (14.6%) to take the number one spot, Strategy Analytics said. Nokia (NYSE:NOK) was in third place with 14.4%, but remained the overall leading provider of handsets. Samsung's taking of the smartphone crown came after sales almost quadrupled year-on-year to a record 27.8M. This helped the South Korean company make a net profit of 3.44T won ($3.11B) in Q3, although that was down 23% due to weakness in sales of the firm's consumer products and electronic components.

Moody's upgrades Ford and GM. Moody's has increased the credit ratings of Ford (NYSE:F) and General Motors (NYSE:GM) one level each to Ba1, the highest non-investment grade, with a positive outlook on both. Moody's cited the companies' ability to remain competitive following recent labor union agreements. However, obtaining another upgrade may be more complicated, Moody's indicated. "One of the hurdles in getting to an investment-grade rating is the difficulty in gauging just how bad things could get in Europe," said analyst Bruce Clark.

Yahoo cooks up "cash-rich" scheme for Asian stakes. The speculation swirling round Yahoo (YHOO) shows no signs of abating, with The Wall Street Journal reporting that the Internet portal is examining a "cash-rich split-off" that could let it divest its 40%, $14B stake in Alibaba (OTC:ALBCF) without paying taxes on the profits. The savings could amount to about $5B, and Yahoo is looking at a similar structure for its 35% stake in Yahoo Japan, which is valued at $6B. Reuters reports that the sale of Yahoo itself is stuck, because of the company's lack of strategy and a confidentiality agreement that prevents potential suitors from forming consortiums.

Australian fund renews lawsuit against GS over CDOs. After failing in a lawsuit in July, Australian fund Basis Yield Alpha Fund is now suing Goldman Sachs (NYSE:GS) for $1B in damages for selling it CDOs despite the bank expecting the value of the securities to tumble. Basis Yield accuses GS of creating the assets, called Timberwolf 2007-1, to get toxic mortgage-backed securities off its books and then to bet against them. Earlier this year, a Senate report criticized GS for marketing Timberwolf even after a top executive told a colleague that it was a terrible deal.

JPMorgan leaves BofA to the wrath of the mob. Where Bank of America (NYSE:BAC) boldly goes, JPMorgan (NYSE:JPM) declines to follow, saying it won't charge fees on debit cards to make up for revenue lost due to new restrictions on transaction charges, credit cards and overdrafts. JPMorgan joins US Bancorp (NYSE:USB), Citigroup (NYSE:C) and other large banks in deciding to avoid the wrath of consumers and Washington. The banks, though, should be wary of tacking on other fees - a study by the Safe Banking Opportunities Project has found that "hidden or unexpected" charges are the top reason why the working poor close their accounts.

Today's Markets:
In Asia, Japan +1.4% to 9050. Hong Kong +1.7% to 20019. China +1.6% to 2473. India +3.0% to 17805.
In Europe, at midday, London -0.3%. Paris flat. Frankfurt +0.3%.
Futures at 7:00: Dow -0.35%. S&P -0.4%. Nasdaq -0.4%. Crude -1.6% to $92.44. Gold -0.5% to $1738.30.

Friday's economic calendar:
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:55 Reuters/UofM Consumer Sentiment

Earnings Results: Companies that beat EPS expectations last night and today include Advanced Micro Devices (AMD), Baidu.com (BIDU), Electronic Arts (ERTS), Expedia (EXPE), Gilead Sciences (GILD), Qlik Tech (QLIK), Las Vegas Sands (LVS), MetLife (MET), Newell Rubbermaid (NYSE:NWL).

Those that missed forecasts include Federated Investors (FII), Leggett & Platt (LEG), Principal Financial Group (PFG), Southwestern Energy (SWN).

Full real-time earnings coverage here.

Notable earnings before Friday's open: ACI, AGP, AIV, AON, BIIB, BWA, CEG, CI, CMC, COL, CPN, CVH, CVX, D, DTE, GT, IPG, ITT, LEA, LYB, MRK, NEM, NI, NWL, PEG, SWC, TEN, VSEA, WHR, WY.

Notable earnings after Friday's close: EEP.

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