Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

• Bernanke defends Fed. In a PBS Town Hall forum that taped on Sunday and will be aired this week, Bernanke defended the Federal Reserve's actions of the past year, telling participants "I was not going to be the Federal Reserve chairman who presided over the second Great Depression." Bernanke said he was 'disgusted' by the circumstances leading up to the rescue of some large firms and called for new legislation to allow non-bank financial firms to fail without going into bankruptcy.
• U.S. gears up for China summit. Ahead of a U.S.-China Strategic and Economic Dialogue, Geithner and Secretary of State Clinton called for a 'new framework' for the relationship between the two countries. In a jointly-written op-ed in the Wall Street Journal, Geithner and Clinton stressed the need to keep trade and investment open and for China to continue to reform its financial sector reform and shift away from an over-reliance on exports.
• Pay Czar gets down to business. Kenneth Feinberg, the U.S. 'pay czar' in charge of overseeing pay at bailed out firms, is pushing to renegotiate contracts and reduce overall outlays. Seven firms are subject to Feinberg's authority (Citigroup (C), Bank of America (BAC), AIG (AIG), General Motors, Chrysler, Chrysler Financial and GMAC) and have been meeting with him regularly to reach a compensation structure the government feels is appropriate. The firms must submit their proposals by August 13.
• Ericsson wins Nortel auction. Ericsson (ERIC) will acquire the wireless assets of bankrupt Nortel Networks for $1.13B in cash after winning Friday night's auction. The assets include Nortel's division in the CDMA wireless technology used in North America and the division for emerging LTE high-speed wireless technology, which is expected to see significant future growth.
• Aetna shops its PBM unit. Aetna (AET) is reportedly looking to sell its pharmacy benefits management business. Potential buyers include CVS Caremark (CVS) and Medco Health Solutions (MHS). A deal could net Aetna as much as $2B.
• High-speed trading could be gone in a flash. Senator Charles Schumer is pushing the SEC to ban so-called flash orders, a move that presents the biggest threat yet to high-speed trading in the U.S. stock market. With flash orders, some exchanges hold orders to buy and sell for a fraction of a second before publishing them on competing platforms. Flash trades make up less than 4% of U.S. stock volume, but potentially give hedge funds and Wall Street firms an unfair advantage over other investors.
• Gov't eyes UBS client visits. Pushing forward in the investigation of UBS (UBS), U.S. officials are focusing on client visits by UBS bankers to help identify U.S. citizens with accounts who may have evaded taxes. The trial against UBS was postponed until August 3 to allow time for a settlement, but talks between Switzerland and the U.S. could extend beyond the deadline.
• eBay revamps its marketplace. eBay (EBAY) is set to announce a series of changes to its core marketplaces to help large merchants sell new goods in greater quantities. To help volume sellers, eBay plans to limit the direct communication between buyers and sellers. The company will also update its search algorithm to favor new products, and introduce categories to describe an item's condition.
• Apple, record labels seek album sales. Apple (AAPL) is teaming up with record labels EMI, Sony Music (SNE), Warner Music (WMG) and Universal Music Group to help boost sales of digital music albums by including an interactive booklet, sleeve notes and other features with music downloads. Consumers purchase large quantities of music online, but tend to buy individual songs rather than the higher-margin albums.
• Friday's failures. Another slew of bank failures on Friday, including Waterford Village Bank of Clarence, NY (the first New York state failure since 2004) and the six subsidiaries of Security Bank of Macon, GA. The closures bring the 2009 total to 64, and the seven failures will cost the FDIC over $812M.

Earnings: Monday Before Open

• Aetna (AET): Q2 EPS of $0.68 misses by $0.10. Revenue of $8.7B (+10.3%) vs. $8.6B. Issues downside EPS guidance for FY '09 of $2.75-2.90 vs. $3.53 consensus. Shares -5.4% premarket (6:50 ET). (PR)
• Alpha Natural Resources (ANR): Q2 EPS of $0.22 misses by $0.16. Revenue of $386M (-45%) vs. $446M. Shares -2% premarket (8:00 ET). (PR)
• Corning (GLW): Q2 EPS of $0.39 beats by $0.07. Revenue of $1.4B (-17.6%) in-line. (PR)
• Enterprise Products Partners (EPD): Q2 EPS of $0.43 beats by $0.02. Revenue of $3.5B (-44.7%) vs. $4.5B. (PR)
• Foundation Coal (FCL): Q2 EPS of $0.67 misses by $0.04. Revenue of $405M (-1.7%) vs. $445M. (PR)
• Honeywell International (HON): Q2 EPS of $0.60 in-line. Revenue of $7.6B (+22%) vs. $7.7B. "Economic conditions, however, remain challenging and we are not planning for any recovery in 2009." (PR)
• International Coal Group (ICO): Q2 EPS of $0.07 beats by $0.05. Revenue of $278M (0%) vs. $307M. (PR)
• Lorillard (LO): Q2 EPS of $1.71 beats by $0.28. Revenue of $1B (+16.6%) vs. $969M. (PR)
• RadioShack (RSH): Q2 EPS of $0.39 beats by $0.11. Revenue of $966M (-2.9%) vs. $978M. (PR)
• Sohu.com (SOHU): Q2 EPS of $0.79 beats by $0.03. Revenue of $127M (+24.6%) vs. $123M. (PR)
• Tellabs (TLAB): Q2 EPS of $0.07 beats by $0.01. Revenue of $385M (-11%) vs. $381M. (PR)
• Verizon (VZ): Q2 EPS of $0.63 in-line. Revenue of $26.9B (+11.3%) in-line. Shares -1.2% premarket (8:00 ET). (PR)

Today's Markets

Asian markets closed mostly up. European markets and U.S. futures are feeling similarly optimistic.

• In Asia, Nikkei +1.45% to 10,089. Hang Seng +1.35% to 20,252. Shanghai +1.9% to 3,435. BSE -0.03% to 15,375.
• In Europe at midday, London +0.3%. Paris +1.1%. Frankfurt +1.2%.
• Futures: Dow +0.5%. S&P +0.4%. Nasdaq +0.6%. Crude +0.85% to $68.63. Gold +0.5% to $957.90.

Monday's Economic Calendar

• 10:00 New Home Sales
  10:30 Texas Manufacturing Outlook Survey
  12:00 PM Chicago Fed's Manufacturing Index
• Notable earnings before Monday's open: AET, ANR, EPD, FCL, GLW, HON, ICO, LO, RSH, SOHU, TLAB, VZ
• Notable earnings after Monday's close: ACE, AMGN, CF, FNF, HMA, HXL, KRC, MAS, MTW, OLN, PCL, SLG, TMK, WRB

Seeking Alpha editor Eli Hoffmann contributed to this post.

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