Wall Street Breakfast: Must-Know News
posted on: March 20, 2008 | about stocks: BGP / BSC / C / CAL / CS / DAL / DELL / F / FDX / FNM / FRE / GFIG / GFLS / GM / MF / NKE / NWA / PBG / PEP / TM / UAUA / UBS / VLY / WMT
seekingalpha.com
# Trader errors hit Credit Suisse. Credit Suisse (CS) says it expects to post a Q1 loss (its first since 2003), and revised down its 2007 net profit by CHF 789 million ($799 million) to CHF 7.76B. CS said a probe into the valuation of some asset-backed securities (announced in February) resulted in writedowns of CHF 2.86B, about 200M less than originally anticipated, of which CHF 1.18B is related to Q4 2007, and CHF 1.68B to the current quarter. The CDOs were intentionally mispriced by traders who have since been terminated or suspended. Swiss banks were down hard in early trading: CS -6.1%; UBS (UBS) -5.9%.
money.cnn.com
# Oil, gold plummet. Oil fell $2.80 to below $100/barrel overnight (after falling $5 on Wednesday), and gold dropped more than 3%, falling at one point to $904. A massive commodity selloff is being blamed on concerns a U.S. downturn will undermine global demand. Late-to-the-party investors who were caught by surprise have likely contributed to its acceleration.
ca.reuters.com
# Leading indicators to signal recession. The Conference Board's leading indicators are expected to decline by about 0.3% this morning, their fifth straight drop -- usually a sign of recession. "A losing streak of five months is usually reserved for recessionary periods," Credit Suisse economist Jonathan Basile says. "Once the labor market cracks, like it did last month, it shows the cycle is starting to turn down."
bloomberg.com
# Bank woes, real and imaginary. Following Bear Stearns' (BSC) collapse, the financial sector is awash with rumors that various and sundry banks may be the "next shoe to drop," giving fits to the firms, investors and regulators. Yesterday rumors HBOS -- the UK's biggest mortgage lender -- was in trouble sent its shares (-7.1%) down 18%. The BoE denounced the rumors as "utter rubbish." On Monday, GFI Group (GFIG) plummeted as much as 50% on rumors of a crisis, although the firm says it only collects commissions and doesn't take any trading risks. Likewise with MF Global (MF), whose shares remain down 46% since last week.
online.wsj.com
# Regulator unmuzzles Fannie and Freddie. Ofheo, Fannie Mae's (FNM) and Freddie Mac's (FRE) regulator, said Wednesday it will lower the amount of capital they're required to hold as a cushion against losses to 20% from 30% -- a move that could bring another $200B of immediate liquidity to the mortgage-backed securities market. FNM and FRE also agreed to raise "significant" new capital. "This is what the GSEs were put in place for, to deal with situations like this, and we will deliver," Freddie CEO Richard Syron said. Both rose sharply: FNM +8.8%; FRE +15%.
bloomberg.com
# Mortgage markets settle down. The Fed's efforts, including another 75 BP interest-rate cut, a $200B credit line to more-than-just-banks, and yesterday's unmuzzling of Fannie and Freddie (see above) seem to be bearing fruits. Yields on Fannie- and Freddie-backed bonds are down nearly 1% since Carlyle Capital's collapse on March 6. The spread between 30-year mortgage-bonds and U.S. Treasurys fell to 2.74% Wednesday from 2.87%, down from 3.7% on March 6. Bringing calm back to the mortgage-bond market translates into lower borrowing costs for would-be home buyers, and homeowners looking to refinance.
online.wsj.com
# More cuts at Citi. Citigroup (C) will lay off another 2,000 investment bankers and traders, mostly in New York and London, before the end of the month, sources say. The move will bring cuts at Citi's investment baking unit to 6,000, or about 10%.
nytimes.com
# PepsiCo and Pepsi Bottling swallow Russian juicer. PepsiCo (PEP) and Pepsi Bottling Group (PBG) agreed to jointly acquire a 75.5% stake in Russia's leading branded juice company, JSC Lebedyansky, excluding the company's baby food and mineral water business, for $1.4B. Annual revenue from the business is about $800M. "Russia represents our biggest growth market, and we are making smart investments that further enhance our business there," PBG CEO Eric Foss said.
biz.yahoo.com
# Borders looks to sell itself after frustrating quarter. Borders Group (BGP) posted lower-than-expected Q4 income of $1.10/share ($64.7M), vs. estimates of $1.41. Revenue of $1.35B was in line. The bookseller suspended its dividend, and said it may sell itself due to "uncertainty in the economic environment" and higher costs; it has lost market share to Wal-Mart (WMT) and other online retailers and shares are down 66% over the past year. Borders' largest shareholder, Pershing Square, will lend it $42.5M and will make an offer for some of its international businesses. "Right now, you probably wouldn't want to touch [U.S.] consumer-related stocks" analyst Castor Pang said. "Consumer markets in the U.S. and Europe are highly correlated to their economies."
bloomberg.com
# Nike posts runaway quarter. Nike (NKE) posted FQ3 EPS of $0.92, exceeding consensus estimates of $0.81. Revenue of $4.5B bettered consensus estimates of $4.36B. Nike says worldwide future orders from March-July 2008, totaling $6.9B, are up 11% from last year. Nike says it's going "on the offense" into Beijing with a "whole arsenal" of products and promotions. "Basically we are executing the biggest campaign we have ever done, twice," President Charlie Denson said.
seekingalpha.com
# New Jersey banks join hands. New Jersey's Greater Community Bancorp (GFLS) agreed to be acquired by fellow banker Valley National Bancorp (VLY) for $167 million in stock; Greater Community's mid-November deal to be acquired by Oritani Financial was terminated by mutual agreement. Based on Valley's Wednesday close, the 0.95 share GFLS shareholders will receive, worth $18.96, is a 24% premium to its close of $15.25. The deal should close in Q3.
marketwatch.com
# Airline recovery may stall. WSJ says the long-awaited comeback of U.S. airlines may be halted by a weak economy and soaring fuel prices. Continental Airlines (CAL) thinks it will pay an additional $1.5B for fuel in 2008, and UAL's (UAUA) CEO says economic uncertainty is putting "significant pressure" on U.S. carriers. A much-rumored merger of Delta Air Lines (DAL) and Northwest Airlines (NWA), which was supposed to jump-start cost-saving consolidation, has been held up by pilot negotiations.
online.wsj.com
# Disney deals for Disney. Walt Disney Co. (DIS) said it is in advanced discussions with The Children's Place Retail Stores (PLCE) to buy a portion of the Disney Store chain. PLCE posted weaker-than-expected earnings of $0.70/share (estimates: $0.89) this morning, and said it plans to exit the Disney Store chain. It will also lay off about 80 workers, and not fill another 50, for a combined reduction in size of 30%.
reuters.com
# Earnings preview: Can FedEx deliver?
cnbc.com
# Carmakers prepare for slump
online.wsj.com
# Three banks end federal loans to students
online.wsj.com
# Dell to buy $23 billion in components from China in 2008
reuters.com
# The affluent, too, couldn’t resist adjustable rates
nytimes.com
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