Tuesday, January 6, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Abysmal auto sales. U.S. auto sales plummeted 36% in December, depressing industry volume in 2008 to a 16-year low. Vehicle sales for the year totaled just 13.2M, and the pain is expected to continue into 2009. Breaking U.S. December sales down for individual automakers: Ford (F) -32.4% to 138K units vs. -33% consensus, with market share of 14.6% up 0.77% from a year ago. Honda (HMC) -34.7% vs. -36% consensus, with 2008 sales of 1.28M (-8.2%). Toyota (TM) -37% to 142K units vs. -40% consensus, with 2008 sales down 16%. General Motors (GM) -31% to 222K units vs. -41% consensus, with total deliveries up 67K (+43%) from November. GM delivered 2.98M units for the year (-23%) for a market share of 22%. Nissan (NSANY) -30.7% to 62K units, and 838K for the year (-10.9%).
  • Toyota cuts production. Following dismal 2008 auto sales and rapidly growing inventory, Toyota (TM) will suspend operations at all of its Japanese factories for an additional 11 days between February and March. Toyota had already planned a three-day suspension at most of its Japanese factories for January. The rare output reduction is expected to have a ripple effect through its subcontracting firms, including auto suppliers.
  • Fed enters MBS market. The Federal Reserve began buying mortgage-backed securities issued by Fannie Mae (FNM), Freddie Mac (FRE) and Ginnie Mae yesterday, the latest in its unconventional efforts to kickstart the economy. The aim of the program is to provide an incentive for buyers to return to the housing market and to reduce monthly payments on existing loans. The $500B program has already had an effect, as mortgage rates dropped significantly in anticipation of the purchases after they were announced at the end of November. As of the end of December, the rate on 30-year fixed-rate mortgages was 5.03%; some analysts expect the Fed to try and push the rate down to around 4.50%.
  • Apple a day fails to keep doctor at bay. Addressing persistent rumors about his health, Apple (AAPL) CEO Steve Jobs released a public letter yesterday, explaining that he's in treatment for a non-life-threatening hormone imbalance and will continue as Apple CEO while he recovers. Shares rose 4.2% on the news, though not all investors were pleased with the lack of disclosure until now. (Read Jobs' letter)
  • GE offers FDIC-backed debt. General Electric's (GE) finance division launched a $10B sale of FDIC-backed debt yesterday, the largest sale under the government guarantee program since it was created in November. GE Capital's offering includes $2B in two-year notes, $5.5B of 3.5-year debt and $2.5B of 18-month securities. The sale will push total issuance under the government program to $115B.
  • Clearinghouses move forward. Nasdaq OMX Group (NDAQ) has opened a derivatives clearinghouse and has started clearing over-the-counter contracts tied to interest rates. The clearinghouse will be competing with rival platforms operated by Chicago's futures giant CME Group (CME) and European clearing company LCH.Clearnet. Separately, derivative exchange operators CME Group and InterContinentalExchange (ICE) are preparing to launch their respective CDS clearinghouses later this month once they receive final approvals from U.S. regulators.
  • Logitech cuts jobs, forecast. Logitech (LOGI) withdrew its FY 2009 financial targets (which had already been reduced in October) and announced it will cut 15% of its non-manufacturing jobs in the face of the deepening global recession. The company will also take an unspecified one-time charge in its FQ4 ending March 31. "The situation is really bad," said Chairman Guerrino De Luca. "We’re on really shaky grounds with the consumer. The situation is really unprecedented."
  • Madoff off to jail? U.S. prosecutors are trying to have Madoff jailed for violating the conditions of his bail. Currently under house arrest, Madoff mailed over $1M worth of jewelry and other items to family and friends despite a court-ordered freeze on his assets.
  • Germans eye more-generous stimulus. German lawmakers agreed on the broad outlines of a second stimulus plan worth €50B ($69B) over two years. The country's initial stimulus, worth €12B over two years, has widely been seen as inadequate to pull Europe's biggest economy out of an increasingly severe recession. Lawmakers are hoping to have full agreement on the package details by Jan. 12.
  • Construction spending wobbles down. Construction spending in November fell 0.6% from the month before, better than the expected 1.3% drop, and was down 3.3% from the previous year. Residential private construction fell a heavy 4.2%; non-residential +1.4%.

Earnings: Monday After Close

  • Mosaic (MOS): FQ2 EPS of $1.53 beats by $0.10. Revenue of $3.01B (+36.9%) in-line. Shares -1.7% after hours. (PR)

Today's Markets

  • Asia markets closed mostly higher. Nikkei +0.4% to 9,081. Hang Seng -0.35% to 15,510. Shanghai +3.0% to 1,937. BSE +0.6% to 10,336.
  • In Europe at midday, London +1.1%. Paris +1.2%. Frankfurt +1.5%.
  • U.S. futures: Dow +0.7%. S&P +0.7%. Nasdaq +1.0%. Crude +2.7% to $50.14. Gold -2.0% to $840.50.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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