Wednesday, September 9, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Cuomo continues BoA battle. New York Attorney General Andrew Cuomo moved closer to filing securities-fraud charges against Bank of America (BAC) executives, citing at least four failures to disclose key details about the Merrill Lynch takeover. Cuomo also said the bank, which 'sought guidance' before a December 2008 shareholder vote to see if it was possible to back out of the deal, can't continue to claim attorney-client privilege without revealing the substance of its lawyers' advice. Cuomo set a Sept. 14 deadline to receive the requested information before he may proceed with charging individual executives. (Read Cuomo's letter to BoA (.pdf))
  • First Solar plans China venture. First Solar (FSLR) announced a memorandum of understanding with the Chinese government to build the world's largest solar plant in China. The 2-gigawatt power plant, which will generate enough energy to power around 3M Chinese households, is the first major entry of a U.S. company into Asia's rapidly growing alternative energy sector. Shares +1.2% premarket (7:00 ET), after gaining 10.6% yesterday. (Read First Solar's press release)
  • NYSE sells Amex stakes to brokerages. NYSE Euronext (NYX) is selling a major stake in the options exchange NYSE Amex it purchased last year as part of an effort to revive the division. NYSE Euronext will remain the largest shareholder but will sell stakes to seven large brokerages, including Bank of American (BAC), Barclays (BCS), Goldman Sachs (GS) and UBS (UBS). NYSE Amex was once the country's second-largest options exchange but it has lost market share for eight years in a row, dropping to 5.8% from 28.6%. (Read NYSE Euronext's press release)
  • U.S., U.K. AAA ratings safe. Moody's said the triple-A sovereign debt ratings of the U.K. and the U.S. aren't at risk in the 'near future.' The ratings agency said only a sustained increase in government debt over several years would warrant a downgrade, but that it doesn't anticipate such an event. The comments could help lift the battered British pound.
  • So long, auto bailout funds. When it comes to the government's investment in General Motors and Chrysler, "Congress and ultimately the American taxpayer have been left in the dark," according to a new report by the Congressional Oversight Panel. The auto task force "failed to disclose to the public both the factors and criteria it used in its viability assessments, the scope of outside involvement in its evaluations, and its basis and reasoning for selecting particular benchmarks," and taxpayers are unlikely to recover their $81B investment. (Read the panel's report)
  • Mass. reaches Madoff settlement. Massachusetts reached an $8M settlement with Madoff feeder fund Fairfield Greenwich Group, the first state to reach such an agreement. Fairfield will fully repay Massachusetts investors, including interest payments, but didn't admit or deny wrongdoing.
  • Price cuts and Pixis at Palm. In an effort to gain market share, Palm (PALM) cut the price of its Pre smartphone by $50 and announced plans to start selling Pixi, a cheaper, thinner touchscreen phone that will go on sale later this year. The Pixi announcement may get overshadowed by Apple (AAPL), which is updating its iPod line today, and Motorola (MOT), which is announcing new phones tomorrow.
  • Barrick bets on rising gold. Barrick Gold (ABX) will issue $3B in stock, taking a $5.6B charge to Q3 earnings, to exit all of its fixed-price gold contracts and some of its floating hedges. Barrick's bet is that gold prices will continue to rise and the deal will therefore remove the hedging which has been a major drag on its shares.
  • CNPC gets funding more oil takeovers. State-run China National Petroleum Corp. [CNPC], the parent company of PetroChina (PTR), received a $30B loan to fund overseas expansion. The five-year loan will be provided at a discount and underscores China's increasing efforts to secure long-term energy sources for the country. Separately, CNPC dropped its $460M buyout offer for oil producer Verenex Energy after the Libyan government refused to approve the takeover.
  • Geely mulls Volvo bid. China's Geely Automobile Holdings said its parent company, Geely Holding Group, is interested in bidding for Ford's (F) Volvo unit, making it the latest in a string of Chinese carmakers to pursue a foreign brand during an industry overhaul. Though some analysts doubt Geely's ability to manage an international brand, the move would boost Geely's profile while giving it access to Volvo technology it needs to upgrade its cars.
  • CIC eyes U.S. real estate. China's $300B sovereign wealth fund is reportedly considering major investments in distressed U.S. real estate. In addition to potential purchases of commercial mortgage-backed securities, China Investment Corp. is also considering ownership stakes in buildings and an investment via the Treasury's Public-Private Investment Program.
  • Bankrupt publisher finds buyer. Sun-Times Media Group, the bankrupt owner of the Chicago Sun-Times and dozens of local newspapers, reached a deal to sell most of its assets to a group led by local businessman James C. Tyree. The deal is subject to competitive bidding by other parties and needs court approval.
  • MBA apps rise. Mortgage applications rose 17% from the previous week, MBA reported. The average interest rate on 30-year fixed-rate mortgages fell to 5.02% from 5.15%.
  • Employment trends. The Conference Board's Employment Trends Index inched down 0.1% in August from the previous month and was down 18.5% from the previous year. "The fact that the index cannot get off the ground is another sign of a weak recovery, perhaps a jobless one," said Gad Levanon, Senior Economist at The Conference Board. According to Manpower, hiring plans for Q4 are at the lowest level in the history of its Employment Outlook Survey (.pdf). However, while the outlook was bleak for job seekers, it looks good for those with jobs, with a strong 69% of employers saying they plan to keep things stable.
  • Record plunge in consumer credit. Consumer credit was down $21.5B in July to $2.47T, marking the biggest decline on record and a 10.5% annual rate. Economists had expected it to decline by $4.5B. July was the sixth month in a row, and the ninth of the past ten months, that consumers reduced their debt. Credit-card debt fell for a record 11th straight month, by $6.1B or an annualized 8.5%.
  • Consumer confidence slips. ABC's Consumer Confidence Poll registered at -48, down from -45 and breaking a streak of four weeks without a slip. The index was led down by personal-finance ratings, with only 45% of Americans feeling positive about their own finances, down from 49% two weeks ago. Only 25% felt it's a good time to buy things, while just 8% rated the national economy positively.

Earnings: Tuesday After Close

  • FuelCell Energy (FCEL): FQ3 EPS of -$0.21 beats by $0.03. Revenue of $23M (-18%) vs. $28M. (PR)
  • Pep Boys (PBY): Q2 EPS of $0.15 beats by $0.01. Revenue of $489M (-2%) vs. $503M. (PR)

Today's Markets

  • In Asia, Nikkei -0.8% to 10,312. Hang Seng -1% to 20,851. Shanghai +0.5% to 2,946. BSE +0.4% to 16,184.
  • In Europe at midday, London +0.5%. Paris +0.3%. Frankfurt +0.5%.
  • Futures: Dow -0.2%. S&P -0.1%. Nasdaq -0.2%. Crude -0.3% to $70.87. Gold -0.3% to $996.50.

Wednesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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