Tuesday, August 25, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Helicopter Ben gets second term. Federal Reserve Chairman Ben Bernanke will be renominated for a second four-year term. Obama will make the announcement this morning and the nomination must then be approved by the Senate. Bernanke's current four-year term ends January 31, 2010.
  • Fed must release lending records. The Federal Reserve lost a key court battle and must release private records of its emergency lending to financial firms. The Fed, which has refused to reveal the names of the borrowers, the amount of the loans or the assets presented as collateral, argued disclosing that information would harm the borrowers' competitive positions. However, a federal judge was unconvinced and ruled the Fed must make its records public within five days under the Freedom of Information Act.
  • BoA, SEC try for court approval of settlement. Bank of America (BAC) and the SEC tried once again to convince a judge to approve a $33M settlement over bonuses paid at Merrill Lynch. In a court filing yesterday, Bank of America said it didn't mislead shareholders as it was "widely understood" that billions of dollars would be paid out in Merrill bonuses. The SEC said Bank of America was wrong to withhold information from shareholders, but called the $33M settlement a fair balance between deterrence and not punishing shareholders any further. BAC +0.9% premarket (7:00 ET).
  • SEC casts an eye on Goldman's huddles. After reports surfaced about Goldman Sachs' (GS) "trading huddles," weekly meetings in which preferred clients sometimes received short-term stock tips different from the long-term recommendations given to regular clients, sources say regulators are preparing to investigate the matter. Officials at the SEC and the Financial Industry Regulatory Authority [FINRA] want to examine several aspects of the huddles, including whether they violated securities laws that require Goldman to engage in "fair dealing with customers" and that prevent analysts from issuing opinions at odds with their true beliefs about a stock.
  • Chinese exports edging Germany's. China's exports in H1 narrowly surpassed Germany's during the same period, underscoring China's rapid ascendance during the recent crisis and putting Germany's position as world's largest exporter at risk. China exported $521.7B worth of goods in the first half of the year vs. $521.6B from Germany.
  • Opel still hanging in the balance. As German officials wait impatiently for an Opel bidder to be declared winner, General Motors' board is reportedly considering keeping the unit. Union leaders in Germany are increasing pressure on GM to make a choice, while Obama has promised to stay out of GM's decisions on the matter.
  • Fannie, Freddie soar on no news. Fannie Mae (FNM) climbed nearly 42% in trading yesterday and Freddie Mac (FRE) gained 18.5%, adding to the rally both stocks have seen this month. No major news was released yesterday to warrant the gains, which may (or may not) have been connected to Friday's report that the Federal Reserve bought a record $5.6B in housing-agency debt to help push mortgage rates down. Trading in the two companies accounted for nearly 20% of the trading on the New York Stock Exchange yesterday. FNM +2.9%, FRE +5.8% premarket (7:00 ET).
  • Santander ready to buy back MBS. Banco Santander (STD) offered to buy back €16.5B ($23.65B) in mortgage-backed and asset-backed securities at discounts of 4.5-39%, marking the largest repurchase offer of its kind in Europe. Analysts said the move could help get the secondary market going again after a nearly two-year freeze. (Read Santander's offer (.pdf))
  • Charlotte Russe to go private. Mall retailer Charlotte Russe (CHIC), which has been exploring a possible sale since January, agreed to be acquired by Advent International for $17.50/share in cash, or around $380M. The valuation is significantly higher than the unsolicited $9.00-9.50 per share offer the company received, and rejected, last November from KarpReilly and H.I.G. Capital. (Read Charlotte Russe's press release)
  • Taylor Bean succumbs to bankruptcy. Mortgage lender Taylor, Bean & Whitaker formally filed for bankruptcy protection. The move comes as no surprise, coming less than three weeks after it was suspended from making FHA loans and its warning that bankruptcy is imminent. The company has over $1B in both assets and liabilities, and 1,000-5,000 creditors.
  • Israel leads the way with rate hike. The Bank of Israel became the first central bank during the current crisis to raise its interest rate, and results of the hike will potentially impact the timing of rate increases elsewhere. The bank raised its key rate to 0.75% from 0.5% on signs the global economy may be recovering.
  • Yahoo upgrades online offerings. Yahoo (YHOO) unveiled a series of changes to its email, instant messaging and search services, aiming to make its web offerings more attractive to users and boost falling ad sales. The company is also trying to better integrate social networking tools in light of the growing popularity of sites like Facebook. Shares +1% premarket (7:00 ET).
  • Data mixed on consumer credit woes. The rate at which consumers fell behind on their credit card payments was worse in Q2 2009 (at 1.17%) than in Q2 2008 (1.04%), but there was a marked improvement from the high delinquency levels seen in Q1 2009 (1.32%), indicating consumers are handling their credit better despite mounting job losses. On the other hand, homeowners who fall behind on their mortgage payments are becoming increasingly less likely to catch up again.
  • Chicago Fed index improves. The Chicago Federal Reserve's National Activity Index improved in July, climbing to -0.74 from -1.82 in June. All four indicators improved, though three remained in negative territory.

Earnings: Tuesday Before Open

  • Big Lots (BIG): Q2 EPS of $0.35 beats by $0.05. Revenue of $1.1B (-2%) in-line. (PR)
  • Burger King (BKC): FQ4 EPS of $0.43 beats by $0.10. Revenue of $630M (-2%) vs. $632M. (Burger King's SEC filing (.pdf))
  • Staples (SPLS): Q2 EPS of $0.16 in-line. Revenue of $5.5B (+9%) in-line. (PR)

Today's Markets

Asian markets drifted lower, and European markets are following a similar pattern. U.S. futures are in positive territory, but just barely.

  • In Asia, Nikkei -0.8% to 10,497. Hang Seng -0.5% to 20,435. Shanghai -2.6% to 2,916. BSE +0.4% to 15,688.
  • In Europe at midday, London -0.3%. Paris -0.15%. Frankfurt -0.1%.
  • Futures: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude -0.5% to $74. Gold +0.4% to $947.90.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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