Monday, August 3, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • New GM board to meet, discuss Opel. General Motors' new 13-member board convenes today for the first time, with an agenda that reportedly includes a discussion of asset sales, company goals and, most importantly, a review of the bids received for GM's Opel unit. Ahead of the meeting, Germany's Economy Minister Karl-Theodor zu Guttenberg said both bids for Opel must be improved in order to win government backing. GM's new chairman, Edward E. Whitacre Jr., will be firmly in the spotlight as he tries to simultaneously negotiate political pressure from Washington and help CEO Fritz Henderson turn the company around.
  • UBS said to reach tax settlement. Swiss newspapers report UBS (UBS) has reached a tax probe settlement with the U.S. government. As part of the deal, UBS will not have to pay a fine but will release data on 5,000 of its American clients to U.S. authorities. Final details of the settlement are still being worked out, but discussions should be complete by the end of the week. Swiss officials declined to comment. Shares +5% premarket (7:00 ET).
  • White House weighs taxes, more jobless aid. White House officials said jobless benefits may need to be extended as an economic recovery likely won't create new jobs until next year. As many as 1.5M Americans will exhaust their unemployment benefits in the coming months, contributing to more foreclosures and hurting already-weak consumer spending. Officials are also unwilling to rule out possible tax increases, including a middle-class tax hike, as a way to address massive budget deficits.
  • Surprise profit at HSBC. HSBC (HBC) posted a surprise H1 profit as earnings from its securities unit more than doubled. Net income fell 57% to $3.35B, vs. an expected $600M loss. Though loan impairments and other credit risk provisions rose to $13.9B from $3.9B the year before, HSBC Chairman Stephen Green expressed optimism that "it may be that we have passed, or are about to pass the bottom of the cycle in the financial markets." Shares +7% premarket (7:00 ET).
  • Car rebate program clunks along. After the government's 'Cash for Clunkers' ran through its entire $1B budget in just six days, the House of Representatives quickly approved another $2B for the car rebate program on Friday. The Senate is set to take up the funding appropriation today, with the White House expressing optimism that the program will be extended, despite some signs of resistance from concerned lawmakers and the possibility of a Republican attempt to block the funding extension outright. Government and industry officials said nearly 250,000 cars have already been sold on clunker trade-ins, but some economists aren't convinced the program is providing as many benefits as it claims.
  • Nissan goes electric in leafs and bounds. Nissan (NSANY) gained 5.4% in Tokyo trading, reaching a 10-month high, after unveiling the Leaf, an electric car which gets 100 miles on a full charge. Nissan spent 17 years developing Leaf's lithium-ion battery, and hopes the technology will help it become the biggest supplier of electric cars. CEO Carlos Ghosn said aggressive estimates that electric cars will make up 10% of all sales by 2020 are very reasonable.
  • Friday's failures. Regulators closed another round of banks on Friday, in Oklahoma, Florida, Ohio, Illinois and New Jersey, bringing this year's total to 69 failures and raising questions about the recovery of the banking sector. The closures are expected to cost the FDIC around $912M. (Read the FDIC's press releases: I, II, III, IV, V)

Earnings: Monday Before Open

  • Humana (HUM): Q2 EPS of $1.67 beats by $0.03. Revenue of $7.6B (+7.5%) vs. $7.8B. (PR)
  • James River Coal Company (JRCC): Q2 EPS of $0.59 misses by $0.19. Revenue of $172M (+25%) vs. $189M. Issues downside FY '09 EPS guidance of $2.25-2.60 vs. prior $3.30-3.80. (PR)
  • Loews (L): Q2 EPS of $0.78 misses by $0.20. Revenue of $3.5B (-10%) vs. $3.4B. (PR)

Today's Markets

Asian markets closed mostly up. European markets and U.S. futures are off to a strong start.

  • In Asia, Nikkei -0.04% to 10,352. Hang Seng +1.1% to 20,807. Shanghai +1.5% to 3,463. BSE +1.6% to 15,924.
  • In Europe at midday, London +1.8%. Paris +1.5%. Frankfurt +1.8%.
  • Futures: Dow +1%. S&P +1.1%. Nasdaq +1.4%. Crude +1.9% to $70.74. Gold +0.3% to $956.60.

Monday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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