Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editors

• Morgan Stanley bond losses higher. Reports that, thanks to good ol' accounting methods, Morgan Stanley (MS) will post larger than expected losses on certain bonds, though it is described as a "relatively high-quality problem to have." The bonds have rallied recently and are marked to market, making them a more expensive liability on the firm's balance sheets. MS is expected to post its second consecutive down quarter when it reports Q109 on April 20.
• Inside the stress tests: NYT is reporting that the almost 200 bank examiners conducting the Federal 'stress tests' find most banks are healthier than people think - but that the largest banks will need more bailing out.
• Short-selling rules up for comment. The SEC announced it will put 5 variations on short-selling rules up for public comment for 60 days. Two are versions of the uptick rule; three are ways to introduce circuitbreakers. One of the circuitbreakers would kick in with a 'bid test' if a stock dropped by a set percentage; another, once triggered, would ban short selling of a stock for the rest of the day; the third would trigger the uptick rule for the rest of the day.
  
• Japan announced a record $154 billion stimulus plan. The stimulus will focus on the jobs, credit to businesses, energy-efficient technology, regional support and public welfare. Included in the plan are about 1.6 trillion yen in incentives to consumers to buy energy-efficient appliances and automobiles, and solar panels.It's the largest one-year stimulus in Japan's history; the government will issue as much as 11 trillion yen of debt to fund the plan.
• Moody's cuts Berkshire Hathaway from Aaa to Aa2, its third-highest grade, leaving only 4 U.S. companies rated Aaa. Moody's also cut Berkshire's bond insurance arm, Berkshire Hathaway Assurance, to Aa1; it had been the last of the bond insurers to hang onto the Aaa rating.
• Costco sales drop. Costco Wholesale (COST), the largest 'warehouse club' in the U.S., reported a 3% drop in net sales for March, to $6.39B from $6.57B in the year-ago month. Same-store sales were down 5% and revenue dropped 9% (2% in the U.S., 13% international), attributed primarily to lower gas prices and the stronger U.S. dollar. Shopper numbers rose by half a percent, but spend per customer dropped 10%.
• Microsoft loses patent suit. In Federal court, a Rhode Island jury has ordered Microsoft (MSFT) to pay $388 million in damages for infringing on an anti-piracy patent owned by Uniloc. Uniloc's patent was confirmed in the case, which dates back 5-1/2 years. Not surprisingly, Microsoft will appeal.
• Bank of America raises credit card rates. Bank of America (BAC) joins the list of banks raising rates for customers who carry balances over from month to month, regardless of their payment history. As of June, BofA credit card customers who currently carry a rate lower than 10% will jump into double digits. Citigroup (C), JPMorgan Chase (JPM) and American Express (AXP) have already enacted similar rate changes. BofA claims that fewer than 10% of its U.S. customers will be affected.
• Oil supplies near multi-year highs. The weekly EIA petroleum status report issued Wednesday [.pdf] showed another build in oil inventories - less than expected, but enough to put a damper on crude oil futures prices that had risen more than 3% earlier in the day.
• FOMC minutes were released for March. Fed officials saw downside risk predominating. The Federal Open Market Committee voted unanimously to buy an additional $1.15 trillion in bonds on the open market due to substantial concerns that the U.S. faced a cycle of rising unemployment and lower consumer spending that would further tighten credit.
  

Earnings: Wednesday After Close

• Pep Boys (PBY) Q4 EPS of -63 cents misses by 37 cents. Revenue of $465.54M beats by $2.01M. [PR]

Today's Markets

Asian markets rallied on the Japanese stimulus proposal and some positive manufacturing data. FTSE has so far shrugged off the BoE's decision to hold interest rates steady.

• Asia: Nikkei +3.7% to 8,916. Hang Seng +2.95% to 14,901. Shanghai +1.4% to 2,379. BSE +0.57% to 10,803.
• Europe at midday: London +1.22%. Paris +1.22%. Frankfurt +1.97%.
• Futures: Dow +1.5% to 7721. S&P +1.8% to 811. Nasdaq +1.3%. Crude +3.2% to $50.95. Gold -0.6% to $880.6.

Thursday's Economic Calendar

• Thursday's economic calendar:
  6:00 Chain Store Sales
  8:30 International Trade
  8:30 Jobless Claims
  8:30 Import/Export Prices
  9:00 RBC CASH Index
  10:30 EIA Natural Gas Report
  12:00 PM Lawrence Summers speaks to the Economic Club of Washington
  4:30 PM Money Supply

• Notable earnings after Thursday's close: FDO, RPM, SGR, STZ
• Notable earnings before Friday's close: none.

Seeking Alpha editor Mary Hunt contributed to this post.

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