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Friday, March 27, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • Geithner's New Deal. Telling lawmakers the American financial system "will require comprehensive reform. Not modest repairs at the margin, but new rules of the game," Geithner pushed for a broad regulatory overhaul yesterday before the House Financial Services Committee. Geithner's proposal, which offered limited details, would mark the most comprehensive changes to financial-market regulation since the New Deal. It could take months for the changes to clear Congress and the reforms face several hurdles, including opposition from lawmakers concerned the administration is seeking too much power and from hedge funds and their investors anxious about the loss of autonomy. However, most hedge fund managers, investors, lawyers and lobbyists have accepted the fact that some reform is inevitable and are aiming to limit overly-invasive provisions rather than fight the proposal outright. (more: expanded SEC oversight) (Read Geithner's prepared remarks)
  • Obama meets bank execs. Obama will m eet with bank executives today to try and secure their support for his financial stabilization plan, as well as to encourage increased lending and reduced foreclosures. As many as 15 executives will attend the White House meeting, including Citigroup's (C) Pandit, JPMorgan Chase's (JPM) Dimon and Goldman Sachs' (GS) Blankfein. Lawrence Summers said the meeting is a reflection of the fact that "the country’s major financial institutions have a major role to play" in supporting "a robust and sustained economic expansion."
  • AIG subpoenaed on CDS. New York Attorney General Andrew Cuomo subpoenaed AIG (AIG) yesterday for information on its credit default swaps contracts. At issue are contracts going back seven months and involving billions of dollars, some of which have subsequently been wound down by AIG's Financial Products unit. Cuomo said "CDS contracts were at the heart of AIG's meltdown. The question is whether the contracts are being wound down properly and efficiently or whether they have become a vehicle for funneling billions in taxpayer dollars to capitalize banks all over the world."
  • Obama to help auto firms. Obama said his administration will soon unveil the next part of its plan to help the auto industry, assuming the companies continue to move forward with sweeping restructuring plans. The comments reinforced expectations that the administration would demand tough conces sions but not force General Motors (GM) and Chrysler into bankruptcy. The signal of additional federal support helped GM shares close up 14% yesterday and came as GM announced that 12% of its U.S. hourly workers had accepted buyouts. Though GM may miss the March 31 deadline for securing concessions from its main union and bondholders, auto task force officials appear willing to extend the deadline by 30 days.
  • Swiss bank execs face travel ban. Several private banks in Switzerland have started to ban their top executives from travelling abroad on fears the executives will be detained as part of a global crackdown on banking secrecy. The travel bans have primarily focused on those visiting the U.S., following the detention there last year of a senior private banker from UBS (UBS) as part of a federal tax investigation. However, some banks have issued a complete travel ban, including to neighboring countries in Europe. None of the banks with travel bans were willing to discuss the issue publicly.
  • Newspapers cut back. In response to dramatic declines in advertising revenue, the Washington Post Co. (WPO) and the New York Times Co. (NYT) are both embarking on cost-cutting missions. The Times laid off 100 workers, or around 5% of its workforce, and is cutting non-union salaries at the New York Times and the Boston Globe. Last year its management said n o newsroom cuts were expected in 2009, but it now says this year's numbers have been worse than expected. The Washington Post is offering a new round of buyouts to newsroom, production and circulation employees and said it can't rule out firing staff.
  • Google shrinks sales/marketing unit. Google (GOOG) announced plans to cut its sales and marketing team by around 200 employees, saying it had over-invested in certain parts of the company. This is the latest in a series of cost-cutting moves, including 100 recruiters that were laid off in January and up to 40 February layoffs when Google closed its radio advertising unit.
  • Amazon closes some distribution sites. Amazon (AMZN) will close distribution centers in three states, and either lay off or transfer around 210 employees to other nearby facilities. Though its sales have continued to rise despite the recession, an Amazon spokesman said the closures were part of a continuing evaluation to "make sure we are positioning ourselves for future growth."
  • GDP shrinkage smaller than expected. Fourth quarter GDP fell 6.3% from Q3, vs. -6.6% consensus, a preliminary figure of -6.2%, and +0.5% growth in Q3. Weak exports, personal consumption, and residential construction all contributed to the big drop. For the year, GDP rose 1.1% after growing 2% in 2007. Prices fell 3.9% in Q4, vs. -4.1% preliminary. Personal consumption expenditures dropped 4.3% vs. -3.8% in Q3. Exports were down a whopping 23.6% in contrast to a 3% increase in Q3. Imports fell 17.5%.

Earnings: Thursday After Close

  • Accenture (ACN): FQ2 EPS of $0.63 beats by $0.01. Revenue of $5.3B (-6.1%) vs. $5.5B. (PR)
  • Embraer-Empresa Brasileira de Aeronautica (ERJ): Q4 EPS of $0.72 misses by $0.37. Revenue of $1.8B (-3.0%) vs. $1.9B. (PR)
  • Tibco Software (TIBX): Q4 EPS of $0.09 beats by $0.01. Revenue of $133M (-9.3%) vs. $142M. (PR)

Today's Markets

  • Asia: Nikkei -0.11% to 8,627. Hang Seng +0.07% to 14,119. Shanghai +0.54% to 2,374. BSE +0.45% to 10,048.
  • Europe: London -0.1%. Paris -0.8%. Frankfurt -0.7%.
  • Futures: Dow -0.7%. S&P -0.8%. Nasdaq -0.7%. Crude -1.7% to $53.44. Gold -1.3% to $928.

Friday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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