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Wall Street Breakfast: Must-Know News

Nov 06, 2009 - 7:19 AM EST

• House dissects the bailout. The government's guarantee of $300B in corporate bonds saved a handful of giant companies up to $25B in borrowing costs, and put taxpayers at great risk, the Congressional panel charged with overseeing TARP says. In one of the first systematic efforts to analyze TARP, the panel, headed by Elizabeth Warren, found seven companies (GE, GS, C, BAC, JPM, MS, WFC) received 82% of the benefits of lower borrowing costs. The good news for taxpayers is that the bet has worked out: feds so far have collected a total of $17B in fees for all its emergency guarantees, while losing a paltry $2M.
Attention Wall Street Breakfast readers: We're looking for a freelance financial journalist to produce WSB and help with our Market Currents blog in Rachael's absence. More details here.
• Insider probe grows tentacles. Authorities filed criminal charges against 14 people, including lawyers and an ex-Moody's (MCO) analyst, widening their crackdown on insider trading. At the center of yesterday's arrests, Zvi Goffer, a trader nicknamed "Octopussy" because his tentacles gripped so many confidential sources. Unlike the Galleon scheme, which was built on corporate insiders passing on early earnings estimates to fund operators, the newer ploy involves investors obtaining advanced information about pending deals - including Bain Capital's 2007 attempt to buy 3Com (COMS) - from people involved in them. Dow Jones has details of the 14 people arrested so far.
• Fannie wants another $15B. Fannie Mae (FNM) plans to tap emergency funds for a fourth time this year, bringing its draws of taxpayer money to $60B. According to an SEC filing late yesterday, Fannie Mae will seek $15B in Treasury financing after posting an $18.9B Q3 net loss. Analysts say the government-sponsored lender will likely tap its entire $200B lifeline, and may still need more.
• FHFA approves tax credit sale. Also buried in Fannie Mae's (FNM) SEC filing yesterday was that it agreed to sell $2.6B in unused tax credits to unnamed buyers, and received approval for the deal from its regulator, the FHFA. But the Treasury is thought to be leery of signing off on the sale, reportedly to Goldman Sachs (GS) and Berkshire Hathaway (BRK.A). In a statement (.pdf) Thursday, the FHFA said the sale "is consistent with FHFA's ongoing efforts to conserve Enterprise assets and with the Enterprise's multifamily housing mission."
• Bursting the next bubble. U.K. Chancellor of the Exchequer Alistair Darling set the agenda ahead of the G20 meetings in St. Andrews today, saying leaders needed to develop a technique to deflate asset bubbles before they explode: "We have got to make sure we don't get ourselves into a situation where some pressure starts to rise and then it becomes bigger and bigger and when the whole thing comes to an end it has catastrophic consequences," he said in an interview. Russian Finance Minister Alexei Kudrin noted Darling's concerns weren't out in the ether: "We need to be very careful with this huge amount of injected liquidity." A recent survey of investment managers by Goldman Sachs found 75% think low rates are already triggering "too-strong" climbs in assets.
• OECD registers global uptick. Signs of improvement have emerged in most major economies, with a marked recovery in the U.S. and Japan, and strong indications of growth in several European economies and China, the OECD said Friday. However the OECD warned that signals of expansion should be interpreted with caution, because it's still unclear how much of the measured increase of economic activity is due to a true improvement, and how much is due to a drop in long-term expectations, against which current activity is measured.
• Moynihan to address Congress on Merrill merger. Sources say Brian Moynihan, head of Bank of America's (BAC) consumer banking unit and a contender to succeed CEO Ken Lewis, has agreed to testify before Congress about his role in the Merrill Lynch takeover. He’ll be joined by Timothy Mayopoulos, whom Moynihan replaced as general counsel in December as the Merrill deal almost unraveled. Mayopoulos, who is now is general counsel at Fannie Mae (see above), has said he was given no reason for his dismissal. Moynihan's testimony could center on why Mayopolous was given the boot, and what legal advice Moynihan gave to Ken Lewis prior to his meeting with the board.
• Retail sales climb for second month. U.S. retailers had their best month in more than a year, with major chains reporting a combined 1.8% year-on-year gain. In a promising note, upscale chains Nordstrom (JWN) and Saks (SKS) beat expectations, the first signs of recovery in among high-end shoppers. The big question is whether shoppers - many who are in the throes of joblessness - will turn out in force for the holidays.
• New rule cripples injured banks. A new rule that will cap the interest rates paid to depositors by banks deemed "not well capitalized" will likely accelerate the rate of bank failures. The cap - 0.75% above the U.S. average - is meant to prevent weaker banks from driving up costs for the rest of the industry.

Earnings: Fri. Before Open

• AIG (AIG): Q3 EPS of $2.85 beats by $0.87. (PR)
• Fortress Investment Group LLC (FIG): Q3 EPS of $0.11 beats by $0.02. Revenue of $144M (-22.4%) vs. $123M. (PR)
• Suncor Energy (SU): Q3 EPS of C$0.23 misses by C$0.06. (PR)

Earnings: Thur. After Close

• Activision Blizzard (ATVI): Q3 EPS of $0.04 in-line. Revenue of $755M vs. $724M. Sees Q4 EPS of $0.43 vs. $0.44, on revenues of $2.22B vs. $2.3B. Sees full-year EPS of $0.63 vs. $0.64. Shares +2.8% AH. (PR)
• Atmel (ATML): Q3 EPS of -$0.01 beats by $0.01. Revenue of $318M (-21%) vs. $304M. Sees Q4 revenue up 3-7%. Shares -0.3% AH. (PR)
• CBS (CBS): Q3 EPS of $0.39 beats by $0.17. Revenue of $3.35B (flat) vs. $3.19B. Operating income before depreciation and amortization of $566M compared with year-ago loss of $13.48B. Sees full-year OIBDA of $1.725B-1.925B. Shares -1.4% AH. (PR)
• Crocs (CROX): Q3 EPS of $0.01 beats by $0.09. Revenue of $177M (+2%) vs. $156M. Shares -6.3% AH. (PR)
• EOG Resources (EOG): Q3 EPS of $0.81 beats by $0.15. Revenue of $1B (-69%) vs. $1.1B. Raises full-year production growth targets to 6% from 5.5%. Shares +0.1% AH. (PR)
• Hansen Natural (HANS): Q3 EPS of $0.60 misses by $0.03. Revenue of $308M (+8%) vs. $309M. Shares -8.2% AH. (PR)
• International Game Technology (IGT): FQ4 EPS of -$0.07 may not be comparable to estimate of $0.17. Revenue of $231M (-23%) vs. $498M. Unfavorable items affecting comparability reduce income by $0.30/share. Shares -0.3% AH. (PR)
• Intrepid Potash (IPI): Q3 EPS of $0.13 misses by $0.01. Revenue of $66M (-55%) vs. $64M. Shares -1.3% AH. (PR)
• JDS Uniphase (JDSU): FQ1 EPS of $0.04 beats by $0.02. Revenue of $298M (-21%) vs. $292M. Sees Q2 sales of $320M-345M vs. $306M. Shares +4.9% AH. (PR)
• Leap Wireless International (LEAP): Q3 EPS of -$0.85 misses by $0.33. Revenue of $600M (+21%) vs. $620M. Shares +0.5% AH. (PR)
• Nvidia (NVDA): Q3 EPS of $0.19 beats by $0.09. Revenue of $903M (+1%) vs. $838M. Sees Q4 sales up 2%. Shares +5.9% AH. (PR)
• Public Storage (PSA): Q3 FFO of $1.44 beats by $0.19. Revenue of $352M (-5%) vs. $405M. Shares -0.9% AH.(PR)
• SandRidge Energy (SD): Q3 EPS of $0.16 in-line. Operating cash flow of $85.6M (-38%). Shares -5.8% AH. (PR)
• Skyworks Solutions (SWKS): FQ4 EPS of $0.24 beats by $0.02. Revenue of $228M (-2%) vs. $222M. Shares +3.5% AH. (PR)
• Sotheby's (BID): Q3 EPS of -$0.89 misses by $0.58. Revenue of $45M (-41%) vs. $60M. Shares -3.8% AH. (PR)
• Starbucks (SBUX): FQ4 EPS of $0.24 beats by $0.03. Revenue of $2.4B (-4%) in-line. Expects full-year EPS growth of 15-20% from $0.80, and sees little net impact from commodities, with favorable coffee prices offsetting higher dairy prices. Expected capex of $500M-$550M. Shares +3.9% AH. (PR)
• Sunoco (SUN): Q3 EPS of -$0.29 misses by $0.19. Revenue of $8.7B (-43%) vs. $7.8B. Shares -0.6% AH. (PR)
• Tenaris (TS): Q3 EPS of $0.19 misses by $0.18. Revenue of $1.8B (-42%) vs. $1.9B. Shares -1.1% AH. (PR)
• VeriSign (VRSN): Q3 EPS of $0.33 beats by $0.01. Revenue of $258M (+5%) vs. $259M. Shares -4.8% AH. (PR)

Today's Markets

Asia markets headed higher Friday. Europe stocks are flat at midday, and futures are flat heading into the nonfarm payroll data on deck at 8:30.

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Source: Seeking Alpha (Nov 06, 2009 - 7:19 AM EST)