Monday's Economic Calendar
10:00 Financial Literacy and Education Summit
10:00 Leading Indicators
3:00 PM International Economic Development Council Federal Forum
Monday, April 19, 2010
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby
More pain for Goldman Sachs. After the SEC charged Goldman Sachs (GS) with fraud on Friday, saying the firm created and sold a mortgage investment designed for failure, the U.K. said it would launch its own probe into Goldman's "morally bankrupt" actions. Germany may follow suit, and has requested information from the SEC. Meanwhile, the EU has launched an investigation into Goldman's role in providing swaps to the Greek government. As for the SEC suit, Goldman learned in July 2009 that it might face a suit but said it was blindsided by Friday's announcement; the SEC usually notifies firms in advance to allow for last-minute settlements, and the SEC's failure to do so signals the agency is trying to take a particularly aggressive stance, suggesting the move may be more about politics than financial villainy. On the other hand, though only one Goldman employee, Fabrice Tourre, was named in the suit, sources said senior bank executives, including CEO Lloyd Blankfein, played a pivotal role in overseeing the mortgage unit. John Paulson, the hedge fund investor who made billions betting against the housing market and who was short on some of the underlying securities at issue here, was not named in the SEC's complaint (which raised some eyebrows), but may face lawsuits from investors who lost more than $1B on the deal. GS -0.1% premarket (7:00 ET) after falling nearly 13% on Friday. (For more reading: the SEC's complaint (.pdf) against Goldman, Goldman's response, Goldman's pitchbook for the Abacus deal, and a blogosphere take on why the scandal is not so scandalous)
SEC looks into other soured mortgage deals. Following its civil fraud charge against Goldman Sachs (GS), the SEC is investigating whether other Wall Street firms misled investors over mortgage investments. It's not yet known which firms the SEC is looking into, but there were similarly troubled mortgage deals created at Deutsche Bank (DB), UBS (UBS) and Merrill Lynch (BAC), among others. The SEC is using this opportunity to raise its sights and send a warning to Wall Street, but by doing so it faces the risk of further damaging its reputation if it loses the Goldman case or similar cases against other Wall Street firms. Premarket: DB +0.2%, UBS -2.3%, BAC -0.6% (7:00 ET).
Toyota likely to agree to $16.4M fine. Toyota (TM) is expected to agree today to pay a record $16.4M fine for failing to alert regulators about potential safety issues related to sticky gas pedals. Though the fine is less than 2% of Toyota's projected net income for the fiscal year, the company's acquiescence could make a stronger case for plaintiffs seeking compensation from the carmaker, unless the agreement doesn't require Toyota to admit wrongdoing. To date, Toyota has recalled more than 8M vehicles worldwide because of safety issues related to sticky gas pedals and unintended acceleration.
United mulls alliance with Continental, US Airways. With Continental (CAL) and United Airlines (UAUA) reportedly in merger talks, and US Airways (LCC) and United Airlines reportedly in merger talks, sources said United is now discussing the possibility of forgoing a merger with either airline and instead deepening an existing three-way alliance. United has raised the topic with each airline, but the three have yet to sit down together. A strengthened alliance could raise antitrust concerns and face objections from labor unions.
Glaxo's Avandia under FDA scrutiny. The FDA is deciding whether to halt a safety study involving thousands of patients taking GlaxoSmithKline's (GSK) diabetes drug Avandia. Studies during the past three years have suggested a connection between the drug and an increased risk of heart attack, and a decision to halt the study could influence whether the drug stays on the U.S. market.
Citic, Agricole may create global brokerage. Citic Securities, China's largest brokerage, and France's Credit Agricole (CRARY.PK) are reportedly close to an agreement to create a global brokerage venture. The alliance would contain assets worth more than $4B, and would help Credit Agricole push past rivals like Goldman Sachs (GS) in the world's fastest-growing major economy. An announcement could come as soon as today.
Aussies reject NAB bid for Axa Asia Pacific. Australian regulators rejected National Australia Bank's A$13.3B ($12.3B) bid for Axa Asia Pacific Holdings (which belongs to parent company AXA). Analysts had expected the deal to be approved with conditions such as asset sales, and the surprise ruling may create an opportunity for rival AMP to renew its offer for Axa Asia Pacific.
Tune in for RadioShack sale? RadioShack (RSH) is reportedly drawing closer to a possible sale, with a list of potential acquirers that includes private-equity groups and rival Best Buy (BBY). Both RadioShack and Best Buy declined to comment, but sources said JPMorgan (JPM) has already been selected to lead the sale process and there are several indications that the process is moving quietly forward. Premarket: RSH +1.8% (7:00 ET).
Airlines, travelers frustrated by Iceland's volcano. Iceland's volcano continues to cause mayhem for travelers, giving hotels a boost on both sides of the Atlantic as stranded fliers look for places to stay. Airlines, which are now losing close to $300M per day, are putting pressure on authorities to ease no-fly directives, pointing to several test flights that didn't experience any problems, but forecasters suggest airports in northern and central Europe may remain closed for at least another three days, if not longer. More than 63,000 flights have been canceled so far, and an extended disruption could pose a threat to Europe's shaky economic recovery.
Countrywide case picks up steam. A federal probe into the collapse of Countrywide Financial appears to be gaining momentum, as sources said investigators have been calling witnesses before a grand jury. Though few details are available since grand jury proceedings are generally kept secret, and the calling of witnesses doesn't guarantee charges will be filed, the progress is notable; the former mortgage giant, which was bought by Bank of America (BAC) in 2008, has been the subject of a slow-moving investigation for around two years. An SEC civil trial against the company and three former top Countrywide executives is scheduled for October.
Obama pushes for financial reform. Obama is taking a hands-on approach to financial regulatory reform, and is putting pressure on Republicans to get on board. The White House has been drafting legislative language to pass on to Congress, is pushing for the bill to be brought to the Senate floor ahead of schedule and is expected to have Obama makes a high-stakes appearance on Wall Street, as both Democrats and Republicans try to leverage the Goldman Sachs (GS) scandal to their legislative advantage.
Lockheed, Sikorsky join up on helicopter bid. Lockheed Martin (LMT) and Sikorsky Aircraft (UTX) are expected to announce today that they're teaming up to bid on a new contract for a fleet of Marine One helicopters. Other bidders may include Boeing (BA), Bell Helicopters (TXT) and AgustaWestland, the European firm that teamed with Lockheed five years ago to beat out Sikorsky on the previous Marine One bid. Sikorsky, which built every presidential helicopter since 1957 except for the 2005 contract, is hoping a successful bid, even one that requires Lockheed's help, will show that the company has rebuilt itself.
Mortgage delinquencies show improvements. Mortgage delinquencies fell in March for the second month in a row, dropping 8.6%. The largest slide was among loans that were 30 days past due; these loans fell a record 342,000 to around 1.45M, a level last seen in spring 2008. Though the data is encouraging, delinquencies generally fall in February and March as borrowers get their tax refunds, so it's too soon to suggest that a turnaround has begun.
Friday's failures. Regulators shut down eight banks on Friday, bringing this year's total closures to 50. The failures in Michigan, Massachusetts, Florida, California (I, II) and Washington are estimated to cost the FDIC's insurance fund nearly $1B.
by SA Editor Rachael Granby
More pain for Goldman Sachs. After the SEC charged Goldman Sachs (GS) with fraud on Friday, saying the firm created and sold a mortgage investment designed for failure, the U.K. said it would launch its own probe into Goldman's "morally bankrupt" actions. Germany may follow suit, and has requested information from the SEC. Meanwhile, the EU has launched an investigation into Goldman's role in providing swaps to the Greek government. As for the SEC suit, Goldman learned in July 2009 that it might face a suit but said it was blindsided by Friday's announcement; the SEC usually notifies firms in advance to allow for last-minute settlements, and the SEC's failure to do so signals the agency is trying to take a particularly aggressive stance, suggesting the move may be more about politics than financial villainy. On the other hand, though only one Goldman employee, Fabrice Tourre, was named in the suit, sources said senior bank executives, including CEO Lloyd Blankfein, played a pivotal role in overseeing the mortgage unit. John Paulson, the hedge fund investor who made billions betting against the housing market and who was short on some of the underlying securities at issue here, was not named in the SEC's complaint (which raised some eyebrows), but may face lawsuits from investors who lost more than $1B on the deal. GS -0.1% premarket (7:00 ET) after falling nearly 13% on Friday. (For more reading: the SEC's complaint (.pdf) against Goldman, Goldman's response, Goldman's pitchbook for the Abacus deal, and a blogosphere take on why the scandal is not so scandalous)
SEC looks into other soured mortgage deals. Following its civil fraud charge against Goldman Sachs (GS), the SEC is investigating whether other Wall Street firms misled investors over mortgage investments. It's not yet known which firms the SEC is looking into, but there were similarly troubled mortgage deals created at Deutsche Bank (DB), UBS (UBS) and Merrill Lynch (BAC), among others. The SEC is using this opportunity to raise its sights and send a warning to Wall Street, but by doing so it faces the risk of further damaging its reputation if it loses the Goldman case or similar cases against other Wall Street firms. Premarket: DB +0.2%, UBS -2.3%, BAC -0.6% (7:00 ET).
Toyota likely to agree to $16.4M fine. Toyota (TM) is expected to agree today to pay a record $16.4M fine for failing to alert regulators about potential safety issues related to sticky gas pedals. Though the fine is less than 2% of Toyota's projected net income for the fiscal year, the company's acquiescence could make a stronger case for plaintiffs seeking compensation from the carmaker, unless the agreement doesn't require Toyota to admit wrongdoing. To date, Toyota has recalled more than 8M vehicles worldwide because of safety issues related to sticky gas pedals and unintended acceleration.
United mulls alliance with Continental, US Airways. With Continental (CAL) and United Airlines (UAUA) reportedly in merger talks, and US Airways (LCC) and United Airlines reportedly in merger talks, sources said United is now discussing the possibility of forgoing a merger with either airline and instead deepening an existing three-way alliance. United has raised the topic with each airline, but the three have yet to sit down together. A strengthened alliance could raise antitrust concerns and face objections from labor unions.
Glaxo's Avandia under FDA scrutiny. The FDA is deciding whether to halt a safety study involving thousands of patients taking GlaxoSmithKline's (GSK) diabetes drug Avandia. Studies during the past three years have suggested a connection between the drug and an increased risk of heart attack, and a decision to halt the study could influence whether the drug stays on the U.S. market.
Citic, Agricole may create global brokerage. Citic Securities, China's largest brokerage, and France's Credit Agricole (CRARY.PK) are reportedly close to an agreement to create a global brokerage venture. The alliance would contain assets worth more than $4B, and would help Credit Agricole push past rivals like Goldman Sachs (GS) in the world's fastest-growing major economy. An announcement could come as soon as today.
Aussies reject NAB bid for Axa Asia Pacific. Australian regulators rejected National Australia Bank's A$13.3B ($12.3B) bid for Axa Asia Pacific Holdings (which belongs to parent company AXA). Analysts had expected the deal to be approved with conditions such as asset sales, and the surprise ruling may create an opportunity for rival AMP to renew its offer for Axa Asia Pacific.
Tune in for RadioShack sale? RadioShack (RSH) is reportedly drawing closer to a possible sale, with a list of potential acquirers that includes private-equity groups and rival Best Buy (BBY). Both RadioShack and Best Buy declined to comment, but sources said JPMorgan (JPM) has already been selected to lead the sale process and there are several indications that the process is moving quietly forward. Premarket: RSH +1.8% (7:00 ET).
Airlines, travelers frustrated by Iceland's volcano. Iceland's volcano continues to cause mayhem for travelers, giving hotels a boost on both sides of the Atlantic as stranded fliers look for places to stay. Airlines, which are now losing close to $300M per day, are putting pressure on authorities to ease no-fly directives, pointing to several test flights that didn't experience any problems, but forecasters suggest airports in northern and central Europe may remain closed for at least another three days, if not longer. More than 63,000 flights have been canceled so far, and an extended disruption could pose a threat to Europe's shaky economic recovery.
Countrywide case picks up steam. A federal probe into the collapse of Countrywide Financial appears to be gaining momentum, as sources said investigators have been calling witnesses before a grand jury. Though few details are available since grand jury proceedings are generally kept secret, and the calling of witnesses doesn't guarantee charges will be filed, the progress is notable; the former mortgage giant, which was bought by Bank of America (BAC) in 2008, has been the subject of a slow-moving investigation for around two years. An SEC civil trial against the company and three former top Countrywide executives is scheduled for October.
Obama pushes for financial reform. Obama is taking a hands-on approach to financial regulatory reform, and is putting pressure on Republicans to get on board. The White House has been drafting legislative language to pass on to Congress, is pushing for the bill to be brought to the Senate floor ahead of schedule and is expected to have Obama makes a high-stakes appearance on Wall Street, as both Democrats and Republicans try to leverage the Goldman Sachs (GS) scandal to their legislative advantage.
Lockheed, Sikorsky join up on helicopter bid. Lockheed Martin (LMT) and Sikorsky Aircraft (UTX) are expected to announce today that they're teaming up to bid on a new contract for a fleet of Marine One helicopters. Other bidders may include Boeing (BA), Bell Helicopters (TXT) and AgustaWestland, the European firm that teamed with Lockheed five years ago to beat out Sikorsky on the previous Marine One bid. Sikorsky, which built every presidential helicopter since 1957 except for the 2005 contract, is hoping a successful bid, even one that requires Lockheed's help, will show that the company has rebuilt itself.
Mortgage delinquencies show improvements. Mortgage delinquencies fell in March for the second month in a row, dropping 8.6%. The largest slide was among loans that were 30 days past due; these loans fell a record 342,000 to around 1.45M, a level last seen in spring 2008. Though the data is encouraging, delinquencies generally fall in February and March as borrowers get their tax refunds, so it's too soon to suggest that a turnaround has begun.
Friday's failures. Regulators shut down eight banks on Friday, bringing this year's total closures to 50. The failures in Michigan, Massachusetts, Florida, California (I, II) and Washington are estimated to cost the FDIC's insurance fund nearly $1B.
Friday, April 9, 2010
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Eli Hoffmann
Banks back to same old tricks. An analysis of data released by the New York Fed shows large banks are hiding their risk levels by temporarily lowering their debt just before reporting periods. A group of 18 banks - including MS, GS, JPM, BAC and C - lowered the debt used to fund trading ventures by an average of 42% at the end of each of the past five quarters, refilling their tanks in subsequent months. While not illegal, the practice gives investors a false impression of banks' leverage - one of the factors that led to the massive panic in 2008.
Greece bankruptcy looms. Rates on 10-year Greek bonds spiked as high as 7.5% on Thursday, up from 6.5% just three days ago, delivering a clear message: Artfully worded communiqués aren't enough; to avoid bankruptcy, Greece needs an EU bailout, fast. At a press conference Thursday, ECB chief Trichet insisted the joint EU/IMF aid proposal is a "very, very serious commitment," but his assurances did little to calm nerves as investors continue to withdraw funds from Greek banks.
Retail sales rocket higher. Sales at top retail chains rose a robust 9.1% in March, the largest monthly jump in at least 10 years, and far stronger than the +6.3% Street consensus. More than 90% of all retailers beat expectations, although executives cautioned that the March rise could foretell a weaker than usual April. Economists were upbeat, saying the data indicated consumer spending was accelerating. Department stores were the strongest performers, but discounters and teen apparel chains also exceeded projections. Strong performers included TGT, TJX, M, KSS, LTS and GPS. Abercrombie & Fitch (ANF) posted weaker-than-expected comps.
iPad sales approach 500K. Apple (AAPL) has sold 450K iPads since its debut on Saturday, CEO Steve Jobs said Thursday, including more than 300K on launch day. Analysts expect sales of 1-2M units in Q2, and estimate 2010 sales of anywhere from 3M to 7M. Jobs said users have downloaded 600K digital books and 3.5M iPad apps so far. Apple also stepped up its rivalry with Google (GOOG) by revealing iAd, an in-house advertising platform that will power its gadgets. Jobs also unveiled a new version of the iPhone/iPod OS that will finally bring multitasking to the devices.
Initial jobless claims jump. The number of U.S. workers filing for unemployment benefits shot higher, up 18K from a week ago to 460K, well above economist estimates of 435K - although the Dept. of Labor warned the data may contain statistical biases due to the Easter holiday. But the number of people still receiving benefits after an initial week of aid fell to the lowest level since Dec. 2008, and the insured unemployment rate dropped to 3.5%, the lowest since Jan. 2009.
Panel pounds Prince, Rubin. Appearing before the Financial Crisis Inquiry Commission Thursday, former Citigroup (C) CEO Charles Prince apologized repeatedly for the billions of dollars investors lost as a result of soured investments. But former Chairman Robert Rubin downplayed his role in the crisis, and was met with anger and disbelief. "You were either pulling the levers or asleep at the switch," committee chair Philip Angelides told him. Bill Thomas, a former chairman of the House Ways and Means Committee, summed up the feelings of the millions who lost their savings and their homes: "To make the argument that somehow a simple apology still allows you to maintain a profile of income based upon what devastated everybody else doesn't fit the scale test," he said, "no matter how often you feel really, really sad about what happened."
Goldman denies it would profit from Greece collapse. Goldman Sachs (GS) admitted the firm "has bought some credit protection" to hedge its exposure to the Greek debt crisis, but suggested that - contrary to reports - it would lose money if Greece's credit situation worsens. On Wednesday, Rochdale's Dick Bove hinted that Goldman could profit handsomely if bad turns to worse in Greece, sending shares up 2%.
Yuan rise could come by June-Oct. China might increase interest rates as early as this month, but will probably not allow the yuan to rise until the June-Oct. period, senior government economist Zhu Baoliang said this morning. He added that another one-off revaluation was unlikely, but said the yuan peg could be shifted to a basket of currencies.
Coal-maker bidding war heats up. Macarthur Coal spurned a $3.5B bid from Australian rival New Hope, saying it would continue to move forward with a plan to take over Gloucester Coal in alliance with Noble Group (NOBGF.PK). Macarthur had already rejected an earlier $3.45B bid from New Hope, and a $3.3B bid from Peabody (BTU). Meanwhile, sources say Xstrata (XSRAF.PK) has approached ArcelorMittal (MT) and POSCO about a possible joint bid; ArcelorMittal and POSCO control a combined 25% of Macarthur. Shareholders were scheduled to vote on the Gloucester deal on Monday, but Macarthur today pushed off the vote for a week to give investors more time to consider their options. Suitors are attracted by Macarthur's specialist pulverized or PCI coal, a cleaner input for steelmakers' blast furnaces.
Tribune inks bankruptcy exit. Tribune Co. said Thursday it has agreed with creditors on a plan that would help it exit bankruptcy protection later this year. "Under the plan, the company would emerge from bankruptcy, significantly deleveraged, with its business units intact and with adequate liquidity for operating and capital needs," Tribune said. The agreement releases Sam Zell from all liability for the company's collapse following his $8.2B leveraged buyout in 2007, much to the consternation of junior bondholders who oppose the deal.
MasterCard ventures into predictive shopping. MasterCard (MA) will Monday unveil a web shopping mall that it says can pinpoint with uncanny accuracy what its cardholders are likely to purchase.
by SA Editor Eli Hoffmann
Banks back to same old tricks. An analysis of data released by the New York Fed shows large banks are hiding their risk levels by temporarily lowering their debt just before reporting periods. A group of 18 banks - including MS, GS, JPM, BAC and C - lowered the debt used to fund trading ventures by an average of 42% at the end of each of the past five quarters, refilling their tanks in subsequent months. While not illegal, the practice gives investors a false impression of banks' leverage - one of the factors that led to the massive panic in 2008.
Greece bankruptcy looms. Rates on 10-year Greek bonds spiked as high as 7.5% on Thursday, up from 6.5% just three days ago, delivering a clear message: Artfully worded communiqués aren't enough; to avoid bankruptcy, Greece needs an EU bailout, fast. At a press conference Thursday, ECB chief Trichet insisted the joint EU/IMF aid proposal is a "very, very serious commitment," but his assurances did little to calm nerves as investors continue to withdraw funds from Greek banks.
Retail sales rocket higher. Sales at top retail chains rose a robust 9.1% in March, the largest monthly jump in at least 10 years, and far stronger than the +6.3% Street consensus. More than 90% of all retailers beat expectations, although executives cautioned that the March rise could foretell a weaker than usual April. Economists were upbeat, saying the data indicated consumer spending was accelerating. Department stores were the strongest performers, but discounters and teen apparel chains also exceeded projections. Strong performers included TGT, TJX, M, KSS, LTS and GPS. Abercrombie & Fitch (ANF) posted weaker-than-expected comps.
iPad sales approach 500K. Apple (AAPL) has sold 450K iPads since its debut on Saturday, CEO Steve Jobs said Thursday, including more than 300K on launch day. Analysts expect sales of 1-2M units in Q2, and estimate 2010 sales of anywhere from 3M to 7M. Jobs said users have downloaded 600K digital books and 3.5M iPad apps so far. Apple also stepped up its rivalry with Google (GOOG) by revealing iAd, an in-house advertising platform that will power its gadgets. Jobs also unveiled a new version of the iPhone/iPod OS that will finally bring multitasking to the devices.
Initial jobless claims jump. The number of U.S. workers filing for unemployment benefits shot higher, up 18K from a week ago to 460K, well above economist estimates of 435K - although the Dept. of Labor warned the data may contain statistical biases due to the Easter holiday. But the number of people still receiving benefits after an initial week of aid fell to the lowest level since Dec. 2008, and the insured unemployment rate dropped to 3.5%, the lowest since Jan. 2009.
Panel pounds Prince, Rubin. Appearing before the Financial Crisis Inquiry Commission Thursday, former Citigroup (C) CEO Charles Prince apologized repeatedly for the billions of dollars investors lost as a result of soured investments. But former Chairman Robert Rubin downplayed his role in the crisis, and was met with anger and disbelief. "You were either pulling the levers or asleep at the switch," committee chair Philip Angelides told him. Bill Thomas, a former chairman of the House Ways and Means Committee, summed up the feelings of the millions who lost their savings and their homes: "To make the argument that somehow a simple apology still allows you to maintain a profile of income based upon what devastated everybody else doesn't fit the scale test," he said, "no matter how often you feel really, really sad about what happened."
Goldman denies it would profit from Greece collapse. Goldman Sachs (GS) admitted the firm "has bought some credit protection" to hedge its exposure to the Greek debt crisis, but suggested that - contrary to reports - it would lose money if Greece's credit situation worsens. On Wednesday, Rochdale's Dick Bove hinted that Goldman could profit handsomely if bad turns to worse in Greece, sending shares up 2%.
Yuan rise could come by June-Oct. China might increase interest rates as early as this month, but will probably not allow the yuan to rise until the June-Oct. period, senior government economist Zhu Baoliang said this morning. He added that another one-off revaluation was unlikely, but said the yuan peg could be shifted to a basket of currencies.
Coal-maker bidding war heats up. Macarthur Coal spurned a $3.5B bid from Australian rival New Hope, saying it would continue to move forward with a plan to take over Gloucester Coal in alliance with Noble Group (NOBGF.PK). Macarthur had already rejected an earlier $3.45B bid from New Hope, and a $3.3B bid from Peabody (BTU). Meanwhile, sources say Xstrata (XSRAF.PK) has approached ArcelorMittal (MT) and POSCO about a possible joint bid; ArcelorMittal and POSCO control a combined 25% of Macarthur. Shareholders were scheduled to vote on the Gloucester deal on Monday, but Macarthur today pushed off the vote for a week to give investors more time to consider their options. Suitors are attracted by Macarthur's specialist pulverized or PCI coal, a cleaner input for steelmakers' blast furnaces.
Tribune inks bankruptcy exit. Tribune Co. said Thursday it has agreed with creditors on a plan that would help it exit bankruptcy protection later this year. "Under the plan, the company would emerge from bankruptcy, significantly deleveraged, with its business units intact and with adequate liquidity for operating and capital needs," Tribune said. The agreement releases Sam Zell from all liability for the company's collapse following his $8.2B leveraged buyout in 2007, much to the consternation of junior bondholders who oppose the deal.
MasterCard ventures into predictive shopping. MasterCard (MA) will Monday unveil a web shopping mall that it says can pinpoint with uncanny accuracy what its cardholders are likely to purchase.
Wednesday, April 7, 2010
Today's Economic Calendar
Wednesday's Economic Calendar
7:00 MBA Mortgage Applications
9:00 Hearing: Subprime Lending and Securitization and the GSEs
9:30 Business Roundtable CEO Survey
10:00 SEC Meets on Asset-Backed Securities
10:30 EIA Petroleum Inventories
12:05 BoJ Rate Decision
12:15 PM Fed's Dudley: Economic Outlook
1:30 PM Fed's Bernanke: Economic Challenges
2:00 PM Fed's Hoenig: 'What About Zero?'
3:00 PM Consumer Credit
7:00 MBA Mortgage Applications
9:00 Hearing: Subprime Lending and Securitization and the GSEs
9:30 Business Roundtable CEO Survey
10:00 SEC Meets on Asset-Backed Securities
10:30 EIA Petroleum Inventories
12:05 BoJ Rate Decision
12:15 PM Fed's Dudley: Economic Outlook
1:30 PM Fed's Bernanke: Economic Challenges
2:00 PM Fed's Hoenig: 'What About Zero?'
3:00 PM Consumer Credit
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Eli Hoffmann
Fed's foot still on the brakes. Minutes from the most-recent FOMC meeting suggest the Fed could keep target interest rates near zero for even longer than investors anticipate if the outlook worsens or inflation drops. Minutes from the March 16 meeting indicated most board members were in no hurry to raise rates, and still have some concerns over the U.S. economic recovery. KC Fed's Hoenig again dissented, advocating for a more flexible commitment to keep rates low "for some time" rather than the "for an extended period" formulation that appeared in the Fed's statement.
Eurozone recovery hits a snag. Eurozone growth came to an unexpected halt in Q4 on weak consumer and investment spending. Eurostat had previously pegged Q4 growth at 0.1%, but in its final estimate said output was unchanged from Q3, while output in seven of 16 member nations actually fell. Looking forward, recent business surveys indicate that the eurozone economy grew in Q1, with private sector growth at its strongest rate in 31 months, fueled by a surge in Germany.
Macarthur snubs Peabody bid. Macarthur Coal rebuffed Peabody Energy's (BTU) second bid to acquire the company, saying the A$14/share offer was unattractive. Macarthur recommended its shareholders back an alternative plan to take over smaller rival Gloucester Coal, and give a 25% stake in Macarthur to Gloucester's main shareholder, Noble Group (NOBGF.PK). A Peabody spokesman said the company will continue to attempt to engage the Macarthur board "in what we feel is a far superior bid to the Noble bargain basement price that is under consideration right now," but would not say whether Peabody would make another offer before Monday, when shareholders meet to vote on the Gloucester plan.
Goldman: We didn't bet against clients. In its annual report released this morning, Goldman Sachs (GS) denied it bet against clients in the mortgage-derivatives market, adding that most of its successful bets against residential mortgage-related products only helped the firm lose less money in the collapse, but did not generate profits. Goldman also gave thanksgiving to world governments for stepping in and protecting the global financial system from complete collapse, "and we recognize that our firm and our shareholders benefited from it."
China appears to be preparing for yuan rise. Treasury Secretary Geithner will hold talks in Beijing tomorrow amid new signals that Beijing might be paving the way to let the yuan rise. China's top economic planner, the National Development and Reform Commission (NDRC), said China would monitor exchange rate risks facing exporters, and suggested keeping the yuan "basically stable at a balanced and reasonable level." An economist from the agency also said Beijing should edge towards a more flexible yuan.
SEC to mull ABS clampdown. An SEC open-meeting this morning will consider whether to propose new rules to force issuers of asset-backed securities to retain 5% of the credit risk, and to disclose in-depth information on every loan in a mortgage-backed security. The proposal comes as regulators try to revive a securitization market that dried up during the financial meltdown. The FDIC is expected to provide "safe harbor" protection to securitized assets for which issuers provide better disclosure and underwriting.
Comcast deals FCC Net Neutrality blow. Comcast (CMCSA) won a key verdict against the FCC after a federal appeals court ruled the government agency does not have the authority to force Comcast to refrain from withholding bandwidth from traffic-intensive downloads like movies. The court said the FCC failed to show that it had the necessary authority to impose such restrictions. The ruling is a blow to the so-called Net Neutrality initiative, which believes all internet traffic should be treated equally.
Putting HFT on a leash. Sources say the SEC may formulate a plan to improve oversight of high-frequency trading by keeping track of executed transactions through issuing firms unique identifiers that would tag every trade. Regulators are trying to get a better handle on so-called HFT, which is currently thought to account for about 40% of all U.S. futures trading.
Time to buy a house? Nearly two-thirds of Americans think the time is right to buy a house, and that prices will be the same or higher over the coming year, according to a Fannie Mae survey. The 64% of respondents that said it's a good time to buy is just shy of the 66% that said the same thing in 2003, as the housing market took flight. But most also said that it would be tougher for them to get a loan than it was for their parents. The survey notes most Americans still "strongly believe" in upholding their financial commitments, though that weakens once people know someone who is defaulting.
Chicago Fed manufacturing slips. Midwest manufacturing tapered off in February, largely due to a decline in auto production, the Chicago Fed reported Tuesday. The Midwest Manufacturing Index fell 0.8% to 82.6, paring back a 2% gain in January. Compared to a year ago, the index was -0.5% in the midwest, and +2% nationwide.
Fisher sees no price pressures. Dallas Fed President Richard Fisher - previously known as an inflation hawk - believes the global economy is burdened by such large amounts of unused industrial capacity and idle labor that consumer prices face little risk of shooting higher. "Because of the enormous slack in the system, and as you know I tend to be very vigilant about inflation, we're just not seeing price pressures right now," Fisher said in an interview yesterday. "If anything, the tail risks are on the deflationary side."
FTC may challenge Google/AdMob combo. Sources say the FTC is preparing to challenge Google's (GOOG) proposed $750M acquisition of mobile-ad provider AdMob on antitrust grounds. The FTC reportedly sent letters to AdMob's competitors asking them to testify about the potential impact of the purchase, and has assembled an internal team of litigators if it decides to block the deal. Many analysts believe mobile search will eclipse traditional search traffic in coming years. "It is therefore of vital importance to be wary of any transaction that would create undue market dominance of search- or application-based advertising on mobile devices such as smart phones," Sen. Herb Kohl, a vehement opponent of the deal, wrote in a letter to the FTC Tuesday.
by SA Editor Eli Hoffmann
Fed's foot still on the brakes. Minutes from the most-recent FOMC meeting suggest the Fed could keep target interest rates near zero for even longer than investors anticipate if the outlook worsens or inflation drops. Minutes from the March 16 meeting indicated most board members were in no hurry to raise rates, and still have some concerns over the U.S. economic recovery. KC Fed's Hoenig again dissented, advocating for a more flexible commitment to keep rates low "for some time" rather than the "for an extended period" formulation that appeared in the Fed's statement.
Eurozone recovery hits a snag. Eurozone growth came to an unexpected halt in Q4 on weak consumer and investment spending. Eurostat had previously pegged Q4 growth at 0.1%, but in its final estimate said output was unchanged from Q3, while output in seven of 16 member nations actually fell. Looking forward, recent business surveys indicate that the eurozone economy grew in Q1, with private sector growth at its strongest rate in 31 months, fueled by a surge in Germany.
Macarthur snubs Peabody bid. Macarthur Coal rebuffed Peabody Energy's (BTU) second bid to acquire the company, saying the A$14/share offer was unattractive. Macarthur recommended its shareholders back an alternative plan to take over smaller rival Gloucester Coal, and give a 25% stake in Macarthur to Gloucester's main shareholder, Noble Group (NOBGF.PK). A Peabody spokesman said the company will continue to attempt to engage the Macarthur board "in what we feel is a far superior bid to the Noble bargain basement price that is under consideration right now," but would not say whether Peabody would make another offer before Monday, when shareholders meet to vote on the Gloucester plan.
Goldman: We didn't bet against clients. In its annual report released this morning, Goldman Sachs (GS) denied it bet against clients in the mortgage-derivatives market, adding that most of its successful bets against residential mortgage-related products only helped the firm lose less money in the collapse, but did not generate profits. Goldman also gave thanksgiving to world governments for stepping in and protecting the global financial system from complete collapse, "and we recognize that our firm and our shareholders benefited from it."
China appears to be preparing for yuan rise. Treasury Secretary Geithner will hold talks in Beijing tomorrow amid new signals that Beijing might be paving the way to let the yuan rise. China's top economic planner, the National Development and Reform Commission (NDRC), said China would monitor exchange rate risks facing exporters, and suggested keeping the yuan "basically stable at a balanced and reasonable level." An economist from the agency also said Beijing should edge towards a more flexible yuan.
SEC to mull ABS clampdown. An SEC open-meeting this morning will consider whether to propose new rules to force issuers of asset-backed securities to retain 5% of the credit risk, and to disclose in-depth information on every loan in a mortgage-backed security. The proposal comes as regulators try to revive a securitization market that dried up during the financial meltdown. The FDIC is expected to provide "safe harbor" protection to securitized assets for which issuers provide better disclosure and underwriting.
Comcast deals FCC Net Neutrality blow. Comcast (CMCSA) won a key verdict against the FCC after a federal appeals court ruled the government agency does not have the authority to force Comcast to refrain from withholding bandwidth from traffic-intensive downloads like movies. The court said the FCC failed to show that it had the necessary authority to impose such restrictions. The ruling is a blow to the so-called Net Neutrality initiative, which believes all internet traffic should be treated equally.
Putting HFT on a leash. Sources say the SEC may formulate a plan to improve oversight of high-frequency trading by keeping track of executed transactions through issuing firms unique identifiers that would tag every trade. Regulators are trying to get a better handle on so-called HFT, which is currently thought to account for about 40% of all U.S. futures trading.
Time to buy a house? Nearly two-thirds of Americans think the time is right to buy a house, and that prices will be the same or higher over the coming year, according to a Fannie Mae survey. The 64% of respondents that said it's a good time to buy is just shy of the 66% that said the same thing in 2003, as the housing market took flight. But most also said that it would be tougher for them to get a loan than it was for their parents. The survey notes most Americans still "strongly believe" in upholding their financial commitments, though that weakens once people know someone who is defaulting.
Chicago Fed manufacturing slips. Midwest manufacturing tapered off in February, largely due to a decline in auto production, the Chicago Fed reported Tuesday. The Midwest Manufacturing Index fell 0.8% to 82.6, paring back a 2% gain in January. Compared to a year ago, the index was -0.5% in the midwest, and +2% nationwide.
Fisher sees no price pressures. Dallas Fed President Richard Fisher - previously known as an inflation hawk - believes the global economy is burdened by such large amounts of unused industrial capacity and idle labor that consumer prices face little risk of shooting higher. "Because of the enormous slack in the system, and as you know I tend to be very vigilant about inflation, we're just not seeing price pressures right now," Fisher said in an interview yesterday. "If anything, the tail risks are on the deflationary side."
FTC may challenge Google/AdMob combo. Sources say the FTC is preparing to challenge Google's (GOOG) proposed $750M acquisition of mobile-ad provider AdMob on antitrust grounds. The FTC reportedly sent letters to AdMob's competitors asking them to testify about the potential impact of the purchase, and has assembled an internal team of litigators if it decides to block the deal. Many analysts believe mobile search will eclipse traditional search traffic in coming years. "It is therefore of vital importance to be wary of any transaction that would create undue market dominance of search- or application-based advertising on mobile devices such as smart phones," Sen. Herb Kohl, a vehement opponent of the deal, wrote in a letter to the FTC Tuesday.
Monday, April 5, 2010
Today's Economic Calendar
Monday's Economic Calendar
10:00 ISM Non-Manufacturing Index
10:00 Existing Home Sales
10:00 Employment Trends Index
10:00 ISM Non-Manufacturing Index
10:00 Existing Home Sales
10:00 Employment Trends Index
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