Monday, February 9, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Geithner, Obama wait for Senate stimulus. Obama has postponed unveiling his financial recovery plan until tomorrow to allow Congress to give its full attention to the stimulus debate today. Obama stressed the importance of rapid passage in the Senate, and then rapid merger between the House and Senate versions of the bill. Economic adviser Lawrence Summers added "ninety percent of these bills are essentially overlapping" and urged lawmakers not to focus on "the bit of difference." Senate Democrats expressed confidence they can push for a vote on the amended $827B stimulus bill, and will likely do so today. Tomorrow, Treasury's Geithner will announce the administration's plans for the second half of TARP funds, plans that are expected to include efforts to draw private investment back into the economy, as well as help for homeowners.
  • No sun at Nissan. Hurting from slumping demand and a strengthening Yen, Nissan (NSANY) said it will cut 20,000 jobs, or 9% of its workforce, will cut production and will post its first loss in nine years. It also eliminated its H2 dividend, may shorten its work week to four days and is seeking a U.S. federal loan under a program for fuel-efficient autos. The company is forecasting a net loss of ¥265B ($2.91B) for the fiscal year ending March 31, compared with earlier forecasts for a ¥160B net income. Sales in the U.S., Nissan's biggest market, fell 31% in January, as CEO Carlos Ghosn warned "our worst assumptions on the state of the global economy have been met or exceeded." He cited declining consumer confidence and tight credit as "the most damaging factors." Shares closed -5.8% in Japan.
  • Forced bankruptcy possible for GM, Chrysler. The U.S. government has hired a law firm with bankruptcy expertise to provide advice on how to restructure General Motors (GM) and Chrysler. The two carmakers may have to be forced into bankruptcy to assure repayment of $17.4B in government loans, as U.S. taxpayers currently take a back seat to prior creditors including Citigroup (C), JPMorgan Chase (JPM) and Goldman Sachs (GS). Federal officials are working to change their place in line for repayment, but failing to do so, could make bankruptcy a requirement of any additional aid.
  • Mortgage rescues on the way? Sources say the Obama administration is creating a mortgage-rescue program that would have Fannie Mae (FNM) and Freddie Mac (FRE) ease payments for hundreds of thousands of borrowers, creating a model for Wall Street firms to replicate. Officials were working with Fannie and Freddie to agree on standards for who would be eligible for relief and how to get other companies to follow suit with similar plans. Industry sources say efforts thus far by Fannie and Freddie to rewrite home loans have been a disappointment, while officials in Obama's administration believe as many as 1.5M people could remain in their homes this year if their loans were modified.
  • Barclays beats consensus. Barclays' (BCS) H2 profit rose by more than analysts expected, buoyed by one-off gains from the purchase of Lehman assets and the sale of an insurance unit. Net income rose to £2.66B ($3.9B), up 49% from the year before, vs. analyst estimates of £2.05B. For the full year, net income declined less than 1% to £4.38B. Barclays will scrap 2008's final dividend to help the bank meet new capital requirements in the U.K. The bank reported its results more than a week ahead of schedule in an attempt to clamp down on losses speculation that has pushed down the company's share price. Shares +9.5% premarket (7:00 ET).
  • Swiss banks set for heavy losses. According to Swiss media reports, UBS (UBS) and Credit Suisse (CS) will post massive 2008 losses of 21B Swiss francs ($18B) and 8B Swiss francs ($6.9B). UBS is expected to announce the loss tomorrow, and if reports are correct it will mark the largest loss in Swiss history. UBS will also announce 5,000-8,000 new job cuts in addition to the 9,000 cuts already planned. Credit Suisse will announce its annual results on Wednesday.
  • Rio loses its director. Rio Tinto (RTP) director Jim Leng has quit and will not become chairman as previously planned after objecting to a deal with top shareholder Chinalco (ACH). Leng disagreed with how to cut Rio's heavy debt load of around $39B, after the company held talks last week with Chinalco about selling it convertible notes and stakes in some assets. Leng was named as Rio's next chairman less than a month ago. Rio shares -6.9% premarket (7:00 ET).
  • Using the D-word. The world's advanced economies are "already in depression," at least according to IMF chief Dominique Strauss-Kahn. The "worst cannot be ruled out," he said, adding that the IMF could further cut its global growth forecasts. Strauss-Kahn's remarks are markedly more pessimistic than IMF forecasts released as recently as Jan. 28.

Earnings: Monday Before Open

  • Beazer (BZH): FQ1 EPS of -$2.08 misses by $0.25. Revenue of $232.4M (-53.6%) vs. $273.1M. (PR)
  • Energy Conversion Devices (ENER): FQ2 EPS of $0.33 beats by $0.02. Revenue of $103M (+82.8%) vs. $102M. (PR)
  • Hasbro (HAS): Q4 EPS of $0.62 misses by $0.13. Revenue of $1.23B (-5.1%) vs. $1.27B. (PR)
  • NYSE Euronext (NYX): Q4 EPS of $0.52 misses by $0.03. Revenue of $1.2B (+20.8%) in-line. (PR)
  • (SOHU): Q4 EPS of $1.35 beats by $0.19. Revenue of $121.6M (+86.2%) vs. $121M. (PR)
  • Whirlpool (WHR): Q4 EPS of $0.60 misses by $0.18. Revenue of $4.3B (-19.0%) vs. $4.9B. (PR)
  • W.R. Berkley (WRB): Q4 EPS of $0.62 misses by $0.16. Revenue of $1.1B (-22.9%) vs. $1.2B. (PR)

Today's Markets

  • Asia markets closed mostly up. Nikkei -1.3% to 7,969. Hang Seng +0.8% to 13,769. Shanghai +2.0% to 2,225. BSE +3.0% to 9,584.
  • In Europe at midday, London +1.15%. Paris -0.2%. Frankfurt -0.1%.
  • U.S. futures: Dow -0.7%. S&P -0.8%. Nasdaq -0.4%. Crude +0.4% to $40.33. Gold -1.1% to $904.40.

Monday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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