Monday, December 29, 2008

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Kuwait quits Dow deal. Kuwait has notified Dow Chemical (DOW) that it's pulling out of their planned $17.4B petrochemical joint venture. Kuwaiti TV said the government no longer sees any benefit from the deal as a result of the global financial crisis and its impact on the OPEC producer. Kuwait's withdrawal deprives Dow of $9B earmarked for the acquisition of Rohm & Haas Co (ROH), and leaves the firm 'extremely disappointed.' DOW -2.5% premarket.
  • NYT shrinks down. The New York Times Co. (NYT) is turning to asset sales as it faces a $400M debt repayment and a 60% drop in its stock price this year. In addition to trying to offload its 17.5% stake in the parent company of the Boston Red Sox, NYT is also looking to raise money with a sale-leaseback of its headquarters building and may also try to sell off some smaller assets. A spokesman said "we’ve been very clear that we were going to rebalance our portfolio and by rebalancing our portfolio that meant both acquisitions and divestitures." In plainer English, as one newspaper analyst put it, "basically everything’s on the table except the New York Times itself."
  • IndyMac sale advances. IndyMac, one of the largest casualties of the subprime crisis, is on the verge of being sold to a private-equity group, with a deal possible as soon as today. Sources say the buyers include J.C. Flowers & Co., Dune Capital Management, and hedge fund Paulson & Co. The group would buy the bank and its 33 branches, IndyMac's reverse-mortgage unit and a $176B loan-servicing portfolio.
  • Retailers left out of holiday cheer. Despite heavy holiday season promotions, retailers are facing what could be their worst season in 40 years. Same-store sales likely declined 2% in November and December, twice as much as previously projected, while retailers as a whole were down 5.5%-8%. Firms like AnnTaylor (ANN) and Sears (SHLD) have already announced plans to shutter underperforming stores, and analysts forecast as many as 12,000 store closings in 2009, in addition to further bankruptcy filings and consolidation.
  • Online spending takes a hit. Online retailers fared slightly better than their brick-and-mortar cousins, but the season is still likely to go down as one of the worst on record for e-commerce. Down just 2% from November to Christmas Eve, the traffic was closely concentrated among key online players like Amazon (AMZN), Apple (AAPL) and Wal-Mart (WMT). Consumers were also lured by deep discounts that aren't likely to continue. In a sector where sales have historically increased 20% annually, this is the first holiday season where online sales haven't grown at all.
  • Oil bounces on geopolitics. Oil is up nearly 8% as Israel continues its third consecutive day of air strikes on the Gaza Strip. Geopolitics, which had briefly slid to the background of the oil scene, is front and center again as investors are reminded of the risk, however remote, that tensions could threaten oil supplies from the Middle East. As of 5am, U.S. light, sweet crude was trading at $40.89/barrel, down from a session high of $42.20.

Today's Markets

  • Asia markets closed lightly up. Nikkei +0.1% to 8,747. Hang Seng +1.0% to 14,328. Shanghai -0.1% to 1,850. BSE +2.2% to 9,533.
  • In Europe at midday, London +2.4%. Paris +1.2%. Frankfurt +2.0%.
  • U.S. futures: Dow +0.5%. S&P +0.3%. Nasdaq +0.6%. Crude +7.6% to $40.59. Gold +1.6% to $885.60.

Monday's Economic Calendar

  • No events scheduled

Seeking Alpha editor Eli Hoffmann contributed to this post.

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