Wednesday, February 18, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Stimulus bill becomes law. Obama signed the $787B economic stimulus package into law yesterday, less than a month after taking office. The signing was accompanied by a relatively upbeat speech in which Obama focused on a positive future and said "we have begun the essential work of keeping the American dream alive in our time." Obama also said the stimulus doesn't "constitute all of what we must do to turn our economy around," and Press Secretary Robert Gibbs added that Obama has not ruled out the possibility of a second stimulus package. (Read Obama's remarks at the signing)
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  • Next up: fighting foreclosure. Obama will outline his estimated $50B housing plan today. The centerpiece of the plan will likely be loan modifications, and bankruptcy judges will also get more power to help keep borrowers in their homes. Government subsidies to mortgage servicers and lenders will aim to encourage them to lower payments for borrowers in distress. Banks including Citigroup (C), JPMorgan Chase (JPM), PNC Financial Services (PNC) and Bank of America (BAC) have agreed to suspend foreclosure proceedings until Obama's plan is adopted.
  • Guzzling automakers ask for more. General Motors (GM) and Chrysler are seeking up to $16.6B and $5B respectively in additional federal aid, warning bankruptcy could cost the U.S. five times as much. Both companies met yesterday's deadline to report their progress in revamping operations. GM plans on cutting 47,000 more jobs, shedding brands, closing additional plants, and slashing executive pay, but said it needs additional money by next month to survive. It's also hoping to obtain $6B in foreign aid from the governments of Canada, Germany, the U.K., Sweden and Thailand. Chrysler will cut another 3,000 jobs in addition to the 32,000 shed last year. Both companies offered pessimistic outlooks for 2009 U.S. auto sales but brushed off the idea of bankruptcy as overly-prohibitive and too expensive. (Highlights of GM's restructuring plan) (Highlights of Chrysler's restructuring plan)
  • SEC charges Stanford on scam. The SEC has charged Allen Stanford and three of his companies with a 'massive' $8B fraud, alleging the financier lured investors with promises of high returns on CDs but poured the money into a 'black-box' of hard-to-trade assets. Most of the money allegedly went into real estate and private equity, with just Stanford and one other person reviewing the investments instead of the more than 20 analysts Stanford claimed were monitoring the portfolio. Stanford also said Antiguan regulators verified the assets, a claim the SEC rejects. U.S. marshals led by the SEC raided the Houston offices of his Stanford Financial Group yesterday morning; the company remained open for business, but a sign was taped to the door that read "under the management of a receiver." (Read the SEC's complaint (.pdf))
  • Recession grounds Honda's jet plans. Honda (HMC), facing its first quarterly loss in at least 15 years, plans to scale back its business jet production and may offer voluntary retirement in the U.S. for the first time. The company expects a loss of ¥243B ($2.6B) in the current quarter as plunging demand eats into sales and a stronger yen eats into overseas earnings. Jet production will be reduced to 70-80 annually from the end of 2010 instead of 100 planes a year. As a result of the scale-back in production, it will take Honda an extra year to recoup its investment.
  • SocGen posts profit. Societe Generale (SCGLY.PK) posted a Q4 profit as earnings from French consumer lending outweighed losses at the international retail banking and asset management divisions. Net income was €87M ($110M), below consensus of €122M but a strong rebound from last year's €3.35B deficit following a trading scandal. The dividend was raised by 33% to €1.2 per share. SocGen predicted 2009 will 'probably remain challenging,' but investors showed confidence, pushing the stock up as much as 7.1% in Paris trading.
  • Germany okays forced nationalization. Germany's cabinet approved a bill that would allow the forced nationalization of banks as a last resort to prevent a systemic banking crisis. The bill has a short time-frame, allowing forced nationalization only until Oct. 31, 2009, and comes as the government seeks control over troubled Hypo Real Estate.
  • NY manufacturing weakens. The Empire State Manufacturing survey showed NY manufacturing deteriorated significantly in February. Business conditions and new orders fell to record lows. Employment indexes remained deep in negative territory.
  • Treasury International Capital. Net foreign purchases of long-term securities were $34.8B in December, exceeding consensus of $20B. Breakdown: foreigners bought net $22.4B of U.S. securities, while Americans sold net $12.4B of foreign securities.
  • Homebuilders remain grim. NAHB's Housing Market Index inched up 1 point to 9 from January's record low, indicating homebuilders have seen essentially no improvement. Despite the rise, six-month expectations fell as homebuilders worry about the "continually rising number of foreclosures and short sales."

Earnings: Wednesday Before Open

  • Cimarex Energy Co (XEC): Q4 EPS of $0.32 misses by $0.13. Revenue of $299M (-31.9%) vs. $313M. (PR)
  • Constellation Energy Group (CEG): Q4 EPS of $0.03 misses by $1.21. Revenue of $4.9B (-7.9%) vs. $5.9B. (PR)
  • Deere (DE): FQ1 EPS of $0.48 misses by $0.15. Revenue of $5.15B (-1.1%) vs. $4.6B. (PR)
  • Goodyear Tire & Rubber Company (GT): Q4 EPS of -$1.22 misses by $0.19. Revenue of $4.1B (-19.9%) vs. $4.4B. (PR)
  • Host Hotels & Resorts (HST): Q4 EPS of $0.53 beats by $0.06. Revenue of $1.65B (-8.7%) vs. $1.61B. (PR)
  • Incyte (INCY): Q4 EPS of -$0.50 misses by $0.02. Revenue of $0.94M (-90.4%) vs. $0.74M. (PR)
  • OfficeMax (OMX): Q4 EPS of $0.02 misses by $0.13. Revenue of $1.9B (-14.3%) in-line. (PR)
  • Suntech Power (STP): Q4 EPS of -$0.27 misses by $0.01. Revenue of $414M (+4.3%) vs. $380M. (PR)

Earnings: Tuesday After Close

  • Agilent Technologies (A): FQ1 EPS of $0.20 misses by $0.08. Revenue of $1.17B (-16%) vs. $1.26B. "Forecasting in the current environment is almost futile, as visibility is virtually nil. Our current best guess is that second quarter revenues and operating earnings, which are normally seasonally stronger, will be roughly in line with first quarter results..." Shares -7.6% AH. (PR)
  • Chesapeake Energy (CHK): Q4 EPS of $0.73 misses by $0.01. Revenue of $2.98B vs. $2.58B. Takes $1.8B impairment on asset values. Shares -4.8% AH. (PR)
  • Ultra Petroleum (UPL): Q4 EPS of $0.43 misses by $0.05. Revenue of $207M (+28%) vs. $243M. Shares -2.8% AH. (PR)

Today's Markets

  • Asia markets closed mostly down. Nikkei -1.45% to 7,534. Hang Seng +0.55% to 13,016. Shanghai -4.7% to 2,210. BSE -0.2% to 9,015.
  • In Europe at midday, London -0.8%. Paris -0.4%. Frankfurt -0.9%.
  • U.S. futures: Dow +0.6%. S&P +0.7%. Nasdaq +0.5%. Crude +0.5% to $38.73. Gold -0.3% to $965.50.

Wednesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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