Tuesday, July 7, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • DoJ probes telecoms. The Justice Department is investigating whether large U.S. telecommunications companies have abused their market power. The probe isn't a formal investigation of any specific company, but firms like AT&T (T) and Verizon (VZ) may have reason to worry nonetheless; the Obama administration is taking a tougher approach to antitrust enforcement, and the probe may focus in part on whether large wireless carriers are hurting competition through exclusivity agreements with handset makers.
  • CFTC considers position limits. The Commodity Futures Trading Commission will hold hearings this summer to consider imposing position limits for "all commodities of finite supply," including oil, natural gas and possibly other commodities. The CFTC will also review whether or not swap dealers, index traders and ETF managers should be allowed to bypass those limits through special hedge exemptions. Any limits on energy and other commodities would mark a major change from the CFTC's relatively hands-off approach.
  • Goldman's stolen codes. No damages were caused at Goldman Sachs (GS), a source said, after a computer programmer who quit the firm last month was arrested and charged with stealing proprietary trading codes. The programmer, Sergey Aleynikov, was arrested on Friday but the story didn't break right away, nor did the authorities or Goldman move on Aleynikov right away, even though they were aware of the breach weeks ago. Goldman could lose millions of dollars if the software ends up in the wrong hands, a distinct possibility since the codes were transferred to a computer server in Germany where others may have had access to them. Separately, the New York Stock Exchange said there was no connection between the security breach at Goldman and an error that dropped the investment bank from a trading report the exchange issued last week.
  • EMC ups its DDUP offer. EMC (EMC) raised its offer for Data Domain (DDUP) by 11% to $2.2B, or $33.50/share, the fourth offer in a bidding war between EMC and NetApp (NTAP). EMC's previous all-cash offer, for $1.9B, was rejected by Data Domain, which cited its binding agreement with NetApp, and the uncertainty of an EMC acquisition. NetApp, whose current offer stands at $30/share in cash and stock, plans to review its options in light of the new bid.
  • More chatter about stimulus II. Economists and lawmakers are starting to weigh in on calls for a second stimulus, after Vice President Joe Biden said earlier this week a second stimulus isn't out of the question. Obama adviser Laura Tyson called the $787B package approved in February 'a bit too small' and suggested lawmakers should consider drafting a second stimulus bill, though she stressed that she was speaking for herself and not the White House. However, some economists fear public impatience will "lead to the adoption of policies that will not only fail to reduce unemployment this year, but could stoke inflation in the not-too-distant future."
  • California's rating cut, again. California was dealt another blow yesterday as Fitch Ratings further cut the state's rating on its long term bonds to BBB, just two notches above junk status. Fitch kept the debt on watch, suggesting California, which last week began paying some bills with IOU notes (creating the possibility of a secondary market for the notes, and push-back from banks), could see additional downgrades. S&P and Moody's may soon issue downgrades as well, a move that could potentially raise California's borrowing costs at a time when it's already facing a $26.3B budget shortfall.
  • Telefonica wins Pre deal. Telefonica's (TEF) O2 and Movistar won exclusive rights to sell Palm's (PALM) Pre smartphone in Britain, Ireland, Germany and Spain. Palm said the Pre will be available in the specified European countries in time for the Christmas shopping season.
  • Nokia looks to Android. Nokia (NOK) is reportedly developing a smartphone based on Google's (GOOG) Android operating platform. The decision to use Android's open source software is a reversal of Nokia's previous smartphone strategy, but the company has seen its market share slip over the last two years and is trying to create new growth. A Nokia spokesman disputed the report, but insiders say the new touchscreen phone will be unveiled in September.
  • ISM service index inches up. The ISM Non-Manufacturing Survey rose 3% in June to 47% vs. consensus of 46%. The index remained below 50%, indicating contraction, but respondents said they're seeing signs of stabilization.

Today's Markets

Asia closed mostly down, but Europe gets off to a strong start and U.S. futures inch into positive territory.

  • In Asia, Nikkei -0.3% to 9,648. Hang Seng -0.65% to 17,862. Shanghai -1.1% to 3,089. BSE +0.9% to 14,170.
  • In Europe at midday, London +0.8%. Paris +0.7%. Frankfurt +1%.
  • U.S. futures: Dow +0.1%. S&P +0.2%. Nasdaq +0.4%. Crude +1.1% to $64.74. Gold +0.2% to $926.50.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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