Wall Street Breakfast: Verizon Gets Hit With Major East Coast Strike

by: Wall Street Breakfast
Wall Street Breakfast
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Nearly 40,000 Verizon employees on the East Coast have walked off the job after working without a contract since August due to unsuccessful negotiations. The strike is being led by the Communications Workers of America and the International Brotherhood of Electrical Workers, who say they're striking because the company wants to freeze pensions, make layoffs easier and rely more on contract workers. The protest marks the largest U.S. walkout in years, and brings back memories of the 2011 Verizon (NYSE:VZ) strike that lasted two weeks.


The trade picture in the world's second-largest economy staged a turnaround last month, although economists cautioned the data was heavily influenced by seasonal distortions from China's Lunar New Year holiday. After declines in both January and February, March exports surged 18.7% from a year earlier, while imports dipped only a slight 1.7%. In dollar terms, exports rose 11.5%, returning to growth for the first time in nine months, as imports fell by a less than expected 7.6%. Global equities are all higher on the news.

There's no denying that Japan's economic recovery is weak and prices don't seem to be rising, BOJ board member Yutaka Harada said today, outlining that's why the bank "has been enhancing its monetary easing by expanding QQE." Harada also confirmed the possibility of expanding negative interest rates at this month's policy meeting. The downbeat assessment comes after the IMF slashed its forecasts for Japanese growth for this year and next (along with other global economies), and predicted a contraction in 2017 if the country goes ahead with a planned sales-tax hike.

European privacy watchdogs will issue a judgment today about the new trans-Atlantic data agreement - known as the EU-U.S. Privacy Shield - that allows companies to move information between the two regions. Many of the regulators remain skeptical about the agreement, and if they rule that the deal does not meet Europe's tough privacy standards, it may cause headaches for global companies when handling personal digital information.

Ruling out a bid as a Republican presidential nominee, Paul Ryan has finally quashed rumors about his candidacy for the country's top job. "Let me be clear: I do not want nor will I accept the nomination of our party," the U.S. House Speaker declared. Some had speculated that Ryan could have entered the fray during a brokered Republican National Convention in July.

The United States and its regional allies have drawn up plans to supply more-powerful weapons to militants fighting the Syrian government, in the event the country’s six-week-old truce collapses, sources told WSJ. The preparations for a so-called Plan B center on providing vetted moderate rebels with weapons systems that would enable them to launch attacks against Syrian regime aircraft and artillery positions.

Policymakers in Washington raced on Tuesday to unveil a bill that would allow Puerto Rico to restructure its $70B burden, as Republicans and Democrats squabbled over the details. The federal legislation would create a seven-member oversight board appointed by President Obama from lists provided by majority and minority leaders in both chambers of Congress. It would also introduce so-called collective action clauses, which would separate creditors into different pools based on their holdings and allow them to vote on modifications to the debt.

Organized crime prosecutors have raided the law offices at the heart of the Panama Papers scandal, to search for evidence of illegal activities. But Mossack Fonseca still denies wrongdoing, stating that while it set up offshore and anonymous shell companies, it was not involved in how those accounts were used. Conspiracy theories are also swirling that the CIA was behind the leak, and could have hacked the Panama-based law firm.

Comments by Saudi Arabia's oil minister Ali al-Naimi in the al-Hayat newspaper, published today, appear to contradict yesterday's reports that Russia and the Kingdom had reached consensus on oil output ahead of an upcoming producer meeting in Doha. "Forget about this topic," he told the paper, when asked about any possible reduction to his country's production. Separately, the Seda weekly disclosed that Iran's oil minister would not be attending the April 17 talks but would be sending a representative instead. Crude futures -1.4% to $41.58/bbl.


Shares of Peabody Energy have been suspended after the U.S. coal giant voluntarily filed for Chapter 11. "Through this process, the company intends to...position [itself] for long-term success, while continuing to operate under the protection of the court process," the firm said in a statement. The bankruptcy comes in the wake of a sharp fall in coal prices that left Peabody (NYSE:BTU) unable to service a recent debt-fueled expansion into Australia, however its operations Down Under will not be included in the filings.

Chesapeake Energy has now climbed 67% since the beginning of the week following its recently renewed credit agreement. The company has been able to maintain a borrowing limit at $4B, at a time when many oil and gas producers are preparing for large cuts to their credit lines. Tudor Pickering Holt raised Chesapeake (NYSE:CHK) to Hold from Sell on the news, while Citi upgraded shares to Market Weight from Underweight.

McCormick & Co. has abandoned takeover talks with Premier Foods (OTCPK:PFODF), stating it would not be able to propose a price that the company would agree on, while delivering appropriate returns for McCormick (NYSE:MKC) shareholders. The board sees a "strong future" as an independent business, Premier said in response, maintaining its beliefs that foundations have been laid for significant growth and shareholder value creation. Premier Foods -25.1% in London.

At least half of the eight U.S. banks labeled "systemically important" are expected to receive "harsh verdicts" regarding their so-called living wills, sending them scrambling to revise plans about how they would handle a potential bankruptcy, WSJ reports. The move, which could come as soon as this week, would raise the prospect of higher capital requirements or other regulatory sanctions for some of the institutions, and underscore fears that the firms remain "too big to fail" without a taxpayer bailout. Related tickers: BK, STT, BAC, JPM, C, GS, MS, WFC

Separately, JPMorgan is cutting about 5% of jobs at its Asia wealth management business, as it refocuses staff on serving clients with higher investment thresholds. The announcement comes just hours ahead of JPM's Q1 results, and the earnings of major American financial institutions later this week. Bank of America (NYSE:BAC), BlackRock (NYSE:BLK) and Wells Fargo (NYSE:WFC) will report tomorrow, and Citigroup (NYSE:C) on Friday.

Google is scaling up its digital skills training programs to accommodate a million Africans in the next year, aiming to deal with high unemployment numbers across the continent. The tech giant plans to train 300K people in South Africa, 400K Nigerians, 200K Kenyans, and another 100K from other sub-Saharan countries. Google (GOOG, GOOGL) has partnered with Livity Africa to develop the training programs and is rolling out a new online education portal for learners in the region.

Adding to the list of woes it faces, Valeant Pharmaceuticals (VRX) has received a notice of default from bondholders Centerbridge Partners due to its failure to file its annual report. The drugmaker now has until June 11 to make the filing, but reiterated its intention to file it on or before April 29. Valeant's debt, split between about $12B in bank loans and about $19B in bonds, could signal a big potential weakness given the company's dimmer financial outlook.

Medivation rose 9.3% in extended trading on Tuesday after rebuffing a recent takeover approach from Sanofi (NASDAQ:SNY), which is pursuing the U.S. company to expand its cancer treatment business. According to Bloomberg, Sanofi is working with advisers on a potential offer and has not ruled out making a hostile bid, while Medivation (NASDAQ:MDVN) is seeking a higher price than initial proposals have indicated. Other suitors are also considering making offers.

Teen fashion retailer American Apparel is laying off hundreds of workers as it overhauls its production process, which could include outsourcing part of its production to another U.S. manufacturer, the LA Times reports. "If we do decide to produce some pieces out-of-house, they will still be American-made," Chief Executive Paula Schneider wrote in a letter. American Apparel (OTCPK:APPCQ) filed for bankruptcy in October following years of losses, but expects to be profitable in 2018.

VW Chairman Hans Dieter Poetsch has agreed to retroactively reduce a payout stemming from his previous job as CFO to help resolve a dispute over management bonuses in the midst of the company's emissions-cheating scandal, Bloomberg reports. Volkswagen's (VLKAY) supervisory board will also discuss a proposed cut of flexible executive compensation at its next meeting and the automaker will publish the management board's remuneration as part of its 2015 financial results on April 28.

Tuesday's Key Earnings

CSX Corp. (NYSE:CSX) +2.4% AH following in-line Q1 earnings.

Today's Markets

In Asia, Japan +2.8% to 16381. Hong Kong +3.2% to 21158. China +1.4% to 3066. India +1.9% to 25627.
In Europe, at midday, London +1.4%. Paris +2.5%. Frankfurt +2.1%.
Futures at 6:20, Dow +0.5%. S&P +0.5%. Nasdaq +0.8%. Crude -1.4% to $41.58. Gold -1.2% to $1246.
Ten-year Treasury Yield +1 bps to 1.79%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Retail Sales
8:30 Producer Price Index
10:00 Business Inventories
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $20B, 10-Year Note Auction
2:00 PM Fed's Beige Book

Companies reporting earnings today