Wednesday, January 28, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • House readies to pass stimulus. Some Congressional committees have already approved certain sub-sections of Obama's stimulus plan (see stimulus factbox), but now the full House of Representatives is poised to approve the $825B stimulus, despite heavy opposition from many House Republicans. The Senate is likely to pass a slightly more expensive version of the stimulus plan, forcing the two chambers to work out their differences with the goal of presenting Obama a final bill to sign into law by mid-February. Republicans are concerned the bill won't create and maintain as many jobs as promised, and that the money would be spent over too long a period to be effective. Trying to garner broad bipartisan support, Obama signalled his willingness to yield to certain Republican priorities, including limiting the alternative minimum tax.
  • FOMC preview. The Fed wraps up two days of meetings today and will release its FOMC decision at 2:15PM. Since its traditional interest rate policy is already near zero, the key outcome of the meeting will be seeing what else the Fed has up its sleeve to spur U.S. growth. One likely option is to continue with credit-easing measures that have already doubled the Fed's balance sheet to over $2T. The Fed has also said it's weighing the possibility of major purchases or long-dated U.S. government securities. A less-likely possibility is that the Fed might choose to set an explicit and aggressive inflation target. Economists expect the Fed to hold its target interest rate at a range of 0%-0.25%.
  • NY AG asks Thain to explain bonuses. New York Attorney General Andrew Cuomo has subpoenaed former Merrill Lynch CEO John Thain and Bank of America's (BAC) Chief Administration Officer J. Steele Alphin regarding billions of dollars in bonuses paid by Merrill just days before its takeover. According to a statement released by the AG's office, the fact "that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least." Bank of America CEO Ken Lewis will likely be subpoenaed as well.
  • Bracing for a bad bank. Sources say Obama is close to finalizing plans for a bad bank, and an announcement could come as early as next week. There has been no word yet on how the government would price assets or pay for them. Sources point to the FDIC as a prime candidate for managing the bad bank. The move would come amid growing speculation that another bank bailout may be needed and in response to the increasingly popular government conclusion that preferred equity is not sufficient to make the banks healthy.
  • Santander makes amends with Madoff clients. Banco Santander (STD) will offer €1.38B ($1.82B) in preferred shares to private clients of the bank who lost money with Madoff. Santander will also close seven hedge funds run by its Optimal Investment Services unit after the Madoff scandal triggered a surge in withdrawal requests. Santander's concessions follow €2.33B of Madoff-related client losses and a lawsuit filed in a U.S. federal court accusing the bank of failing to adequately vet Madoff. The settlement could put pressure on other banks to reimburse their clients as well.
  • Yahoo rises on earnings beat. Yahoo (YHOO) gained over 5% in after-hours trading after the company posted better-than-expected Q4 earnings, due in part to job cuts and growing domestic sales (see details below). However, the company also reported its first quarterly loss since 2002. In the earnings conference call, new CEO Carol Bartz said she would consider offers to sell some of the company's assets, though she didn't come to Yahoo with the intention of doing so. The company provided a cautious Q1 sales outlook of $1.53B-$1.73B.
  • Toyota recalls. Toyota (TM) will recall over 1.35M cars worldwide to fix a defect in the seatbelt, a component in the exhaust system or both. The affected models include Vitz, Belta and Ractis cars. Toyota didn't disclose the estimated cost of the recall.
  • Canadian stimulus plan. Canada will inject C$40B ($32.6B) into its economy over the next two fiscal years through tax cuts and increased spending. "Since last fall, the global economic situation has deteriorated further, and faster, than anyone predicted," said Finance Minister Jim Flaherty. "We must do what it takes to keep our economy moving, and to protect Canadians in this extraordinary time."
  • U.K. auto aid. The U.K. will guarantee over £2B ($2.8B) in loans to support the country's auto industry. Peter Mandelson, the U.K. business minister, has also asked the government to help car companies' financing arms get access to credit, an effort that could include guaranteeing car-loan-backed securities.
  • Home prices plummet [.pdf]. S&P/Case-Shiller's home price index tumbled by a record 18.18% in November from a year ago, which was marginally better than the -18.4% economists expected. This marks the 28th straight month of declines in residential real estate.
  • Confidence at new lows. Conference Board's Consumer Confidence Index inched down to an all-time low of 37.7 from December's 38.6. Expectations dipped to 43.0 from 44.2. "Until we begin to see considerable improvements in the Expectations Index, we can't say that the worst of times are behind us."
  • Retail sales drop. Retail chain store sales fell 1.8% from a week ago, ICSC said, and dropped 2.4% Y/Y. "The presidential inauguration kept consumers home watching television coverage rather than in stores. As a result, weekly sales slipped sharply."

Earnings: Wednesday Before Open

  • Baker Hughes (BHI): Q4 EPS of $1.41 beats by $0.15. Revenue of $3.19B (+16.3%) vs. $3.05B. (PR)
  • Becton, Dickinson and Co. (BDX): FQ1 EPS of $1.26 beats by $0.11. Revenue of $1.73B (+1.6%) vs. $1.77B. (PR)
  • Dover (DOV): Q4 EPS of $0.91 beats by $0.05. Revenue of $1.73B (-7.0%) vs. $1.8B. (PR)
  • Legg Mason (LM): FQ3 EPS of -$10.55, including $6.03/share impariment charge, vs. consensus of -$4.02. Revenue of $720M (-39.3%) vs. $826M. AUM -17% to $842B due to outflows and market declines. (PR)
  • McCormick & Company (MKC): Q4 EPS of $0.84 beats by $0.02. Revenue of $907M (+5.4%) vs. $933M. Sees 2009 EPS of $2.08-2.11 vs. $2.26 and revenue of $907M vs. $933M. (PR)
  • Praxair (PX): Q4 EPS of $1.01 beats by $0.05. Revenue of $2.4B (-4.8%) in-line. (PR)
  • SAP AG (SAP): Net profit of €850M vs. consensus of €725M. Revenue of €3.49B (+8.5%) vs. €3.52B. Software and software-related service revenue +8% to €2.67B. Plans to reduce global workforce by 3,000 to 48,500. Shares +6.1% in Frankfurt. (PR)
  • Tyco Electronics (TEL): FQ1 EPS of $0.22 misses by $0.08. Revenue of $2.8B (-21.1%) vs. $2.9B. (PR)

Earnings: Tuesday After Close

  • Altera (ALTR): Q4 EPS of $0.28 beats by $0.01. Revenue of $315M (-2.7%) vs. $319M. Sees Q1 revenue down 15-25% sequentially (this quarters fell 12% sequentially). (PR)
  • Amylin Pharmaceuticals (AMLN): Q4 EPS of -$0.36 beats by $0.13. Revenue of $202.5M (-8.8%) vs. $225M. (PR)
  • C.H. Robinson Worldwide (CHRW): Q4 EPS of $0.52 in-line. Revenue of $1.96B (+0.2%) vs. $2.18B. ""Although we had solid results in Q4, gross profit per business day growth in our largest business, North American truckload transportation, deteriorated as the quarter progressed." (PR)
  • Colonial BancGroup (CNB): Q4 EPS of -$1.45 misses by $1.12. Goodwill impairment charge of $575M and $415M charge-off on sale of problems assets. (PR)
  • DeVry (DV): FQ2 EPS of $0.59 in-line. Revenue of $370M (+35%) vs. $364M. (PR)
  • E*TRADE Financial (ETFC): Q4 EPS of -$0.50 misses by $0.27. Provision for loan losses of $513M down from $518M. (PR)
  • Gilead Sciences (GILD): Q4 EPS of $0.56 beats by $0.01. Revenue of $1.43B (+30.5%) in-line. (PR)
  • Sun Microsystems (JAVA): FQ2 EPS of $0.15 beats by $0.25. Revenue of $3.22B (-10.9%) vs. $3.16B. (PR)
  • Molex (MOLX): FQ2 EPS of $0.20 beats by $0.06. Revenue of $667M (-20.8%) vs. $657M. Sees FQ3 revenue of $500-570M vs. $628M. Will close more automotive plants in Europe and Asia Pacific. (PR)
  • Norfolk Southern (NSC): Q4 EPS of $1.21 beats by $0.03. Revenue of $2.5B vs. $2.6B. "While it is unclear how long the downturn will last, long-term trends point to freight railroads as the preferred way to move goods and relieve highway congestion." (PR)
  • RF Micro Devices (RFMD): FQ3 EPS of -$0.05 misses by $0.06. Revenue of $202M (-24.7%) vs. $206M. (PR)
  • Stryker (SYK): Q4 EPS of $0.74 in-line. Revenue of $1.72B (+3.6%) in-line. Sees 2009 EPS of $3.12-3.22 vs. $3.12. (PR)
  • Yahoo (YHOO): Q4 EPS of $0.17 beats by $0.04. Revenue of $1.38B in-line. Free cash flow -34% to $219M. (PR)

Today's Markets

  • China and Hong Kong remain closed. Japan's Nikkei posted a modest gain Wednesday, +0.56% to 8,106. BSE Sensex +2.81% to 9,257.
  • In Europe, strong gains led by bank stocks. London +1.9%. Paris +2.6%. Frankfurt +2.7%. For now, overseas traders seem optimistic the $900B package being batted around in Senate will provide meaningful stimulus to the deflated U.S. economy.
  • After a range-bound Tuesday, buyers have dominated the overnight markets, with heavy gains in U.S. stock futures. Dow +2% to 8253. S&P +2.4% to 859. Nasdaq +2.4%. Crude -0.6% to $41.33. Gold -1.3% to $888.

Wednesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Anonymous said...

How long do u expect this innaguaral effect to have bearing on the market?