Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

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• Approval for TARP repayment expected. The Treasury is expected to announce today the banks that have been approved to repay TARP, and sources say there are nine or ten names on that list. Approved banks likely include JPMorgan Chase (JPM), Goldman Sachs (GS), American Express (AXP), Bank of New York Mellon (BK), Capital One Financial (COF) and State Street Corp. (STT). Even after paying back the preferred shares, banks will still have to retire warrants given to the government.
• Fed okays capital-raising plans. The ten stress-tested banks that were told to raise more capital "have all submitted capital plans that, if implemented, would provide sufficient capital to meet the required buffer under the assessment's more-adverse scenario," the Federal Reserve said yesterday. The banks, including Citigroup (C), Bank of America (BAC) and Morgan Stanley (MS), have until November 9 to follow through on their capital-raising plans.
• Chrysler creditors win Supreme Court stay. The sale of Chrysler's best assets to Fiat was temporarily blocked late yesterday afternoon by Supreme Court Justice Ruth Bader Ginsburg, and will remain blocked 'pending further order' from Ginsburg or the Court. The decision will give the top court more time to weigh its response, as Chrysler and the White House warn a long delay could kill the deal and force Chrysler into liquidation.

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• Obama scales down financial reforms. The White House is reportedly backing away from plans to seek a major reduction in the number of agencies overseeing financial markets. Instead, the administration will likely call for most existing agencies to have broader powers to limit risk-taking by financial firms.
• Panel calls for more stress tests. The Congressional Oversight Panel issued a report calling for regulators to continue running stress tests on banks for as long as they keep large amounts of illiquid mortgage securities on their books, and suggested running new stress tests if unemployment rises beyond the level assumed by regulators. The report also recommended that the Federal Reserve release more information about the exams, including non-public results and more details about the methodology used. Separately, the Obama administration wants Europe to puts its banks through more rigorous public stress tests, an issue Geithner will likely raise later this week at a meeting of G-8 finance ministers.
• Suppliers want new federal aid. Auto-parts suppliers plan to ask Obama's auto task force for $8-10B in loan guarantees to help lessen risk and increase lending. The industry already negotiated federal loans earlier this year.
• Banks pay to settle claims. In separate agreements on Monday, Wells Fargo (WFC) and Bank of America (BAC) reached settlements over claims that employees misled investors about the value and safety of certain securities. Wells Fargo's mutual fund Evergreen Investment Management will pay $40M to end civil state and federal securities-fraud allegations. Bank of America agreed to 'facilitate' the return of more than $3B to California clients who purchased auction rate securities.
• Globe cuts pay after union rejection. The Boston Globe's (NYT) largest union narrowly rejected a deal that would have substantially cut wages and benefits. The Globe will instead unilaterally cut union pay by 23% to get the savings it needs, saying it has been left with 'no financially viable alternative.' Union leaders plan to challenge the move before the National Labor Relations Board, while parent company New York Times Co. has threatened to close the paper if it can't get $10M in savings from the union.
• Pepsi Bottling extends buying spree. Pepsi Bottling Group (PBG) plans to buy Ab-Tex Beverage, its fifth acquisition since the beginning of 2008. Pepsi Bottling has signaled it wants to grow on its own terms, and that the $4B takeover offer from PepsiCo (PEP) undervalues the bottling company.
• Quest for bidders halted. Qwest (Q) called off the auction for its nationwide long-haul data and telephone network, saying the network is more valuable to the company than the amount of money a sale would generate. Though Qwest didn't specify the size of the bids it received, media reports put some of the bids below $1B, a far cry from the $2-3B Qwest wanted.
• BoA loses more directors. Two more Bank of America (BAC) directors resigned from the board, bringing the tally to five who have left since late April. The departures could increase scrutiny of CEO Ken Lewis amid a broader plan to overhaul the board.
• Cheaper iPhone, no Steve. Apple (AAPL) rolled out a next-generation iPhone and a $99 entry-level model at its annual conference for software developers. Company executives said the $99 price could boost iPhone demand by as much as 50%, allowing the company to 'enhance it's first-mover advantage.' Apple also announced several new lower-priced notebook computers. Fans were disappointed, however, when a rumored surprise appearance by Steve Jobs didn't materialize.

Earnings: Monday After Close

• Pall (PLL): FQ3 EPS of $0.42 in-line. Revenue of $556M (-16%) vs. $564M. (PR)
• Quiksilver (ZQK): FQ2 EPS of $0.05 beats by $0.01. Revenue of $494M (-17.1%) vs. $502M. (PR)

Today's Markets

Asian markets closed mixed, while European markets and U.S. futures are slightly in the red.

• In Asia, Nikkei -0.8% to 9,787. Hang Seng -1.1% to 18,058. Shanghai +0.7% to 2,788. BSE +3.1% to 15,127.
• In Europe at midday, London -0.3%. Paris +0.1%. Frankfurt -0.2%.
• U.S. futures: Dow -0.2%. S&P -0.2%. Nasdaq -0.1%. Crude +1.3% to $68.97. Gold -0.2% to $950.80.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  10:00 Wholesale Inventories
  10:30 Geithner testifies before a Senate subcommittee
  5:00 PM ABC Consumer Confidence Index
• Notable earnings after Tuesday's close: NCS, SINA

Seeking Alpha editor Eli Hoffmann contributed to this post.

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