Late-Night Headlines
Bloomberg:
- Amazon.com Inc.(AMZN), the world’s biggest Internet retailer, reported first-quarter sales and profit that beat analysts’ estimates, bolstered by free shipping offers and demand for the Kindle electronic-book reader. Amazon.com rose 2.69 percent to $82.78 in extended trading after closing at $80.61 today on the Nasdaq Stock Market. The shares have soared 57 percent this year.
- American Express Co., the biggest U.S. credit-card company by purchases, beat analysts’ profit estimates and said that it intends to repay the government’s rescue-fund investment. The bank rose 6.6% in late New York trading.
- Microsoft Corp.(MSFT) rose as much as 5.9 percent in extended trading after reporting a smaller drop in third-quarter profit than some investors anticipated and predicting bigger cost savings this year.
- A group of Democrats on the House Energy and Commerce Committee want alterations to climate-change legislation to benefit the coal, oil and gas industries. Among recommendations to revamp a draft measure offered by the committee’s Democratic chairman will be slowing the pace of cuts in greenhouse-gas emissions and distributing free some emission credits that large polluters may otherwise have to acquire under a proposed cap-and-trade system, members of the group said today.
- Ford Motor Co.(F), the only major U.S. automaker surviving without federal aid, has more than doubled in the past seven weeks even as it prepares to announce its largest first-quarter loss in 17 years. The company may say tomorrow it lost $3.2 billion, or $1.33 a share, the average estimate of four analysts surveyed by Bloomberg about the quarter. Investors pushed Ford up to $4.49 today in New York Stock Exchange composite trading from $1.87 on March 4 on expectations it will be a strong survivor when the U.S. industry emerges from the worst sales in 27 years. “Ford is a completely different animal” than General Motors Corp. and Chrysler LLC, said Jeffrey Spotts, a New York- based portfolio manager at the $250 million Prophecy Fund which has been accumulating Ford shares since February. “Consumers don’t want to buy a car from a company that took money from the government or that might go bankrupt.”
- The pound and the euro fell against the US dollar after the Daily Telegraph said Moody’s Investors Service and Standard & Poor’s are reviewing the U.K.’s AAA credit rating on concern about the nation’s rising debt burden.
- Samsung Electronics Co. reported first-quarter profit that beat analyst estimates, led by higher- than-expected earnings at the mobile-phone division.
- The Markit iTraxx Japan Index fell 5 basis points to 330 as of 9:40 am in Tokyo , according to Barclays Plc, while the Markit iTraxx Australia
Wall Street Journal:
- The U.S. government may end up acquiring a significant ownership stake in banks as it works to stabilize the financial system, according to a draft report from top regulators -- the starkest acknowledgment yet of the extent to which the government could become intertwined with the financial system. The draft report from the Financial Stability Oversight Board, which consists of officials from the Federal Reserve and the Treasury Department, among others, says U.S. ownership of individual firms "is not an objective," and that any such occurrence would be temporary. Such an outcome would nonetheless raise a host of thorny questions about government control over private companies, including how deeply officials would delve into daily management decisions and whether the U.S. would exercise stock voting rights.
- Leading nations have already agreed to commit more than $340 billion to boosting the International Monetary Fund's resources, a Treasury Department official said Thursday. The Treasury official was speaking to reporters ahead of key meetings in Washington this week of international finance ministers and central bankers. During the Group of 20 London summit earlier this month, leaders agreed to dramatically boost IMF resources by $500 billion to boost its capability to help developing countries grapple with economic turmoil. So far, concrete commitments by individual nations total more than $340 billion.
- Weak demand is likely to lead to increased losses in the world steel industry next quarter, which could prompt consolidation, the shakeout of marginal players and lower prices, much of the industry now predicts. "The demand for steel is virtually nonexistent," says Dan DiMicco, CEO of steelmaker Nucor Corp., which reported a $189.6 million loss and said it expected a wider loss in the second quarter.
- Congressman Henry Waxman played to the crowds this week with high-profile hearings designed to boost his climate legislation. To listen to the Energy and Commerce committee chair, a House global warming bill is all but in the recyclable bag. To listen to Congressman Jim Matheson is something else. During opening statements, the Utah Democrat detailed 14 big problems he had with the bill, and told me later that if he hadn't been limited to five minutes, "I might have had more." Mr. Matheson is one of about 10 moderate committee Democrats who are less than thrilled with the Waxman climate extravaganza, and who may yet stymie one of Barack Obama's signature issues. If so, the president can thank Democratic liberals, who are engaging in one of their first big cases of overreach. Not that you couldn't see this coming even last year, when Speaker Nancy Pelosi engineered her coup against former Energy chairman John Dingell. House greens had been boiling over the Michigan veteran's cautious approach to climate-legislation. Mr. Dingell's mistake was understanding that when it comes to energy legislation, the divides aren't among parties, but among regions. Design a bill that socks it to all those manufacturing, oil-producing, coal-producing, coal-using states, and say goodbye to the very Democrats necessary to pass that bill.
- President Obama's global warming agenda has been losing support in Congress, but why let an irritant like democratic consent interfere with saving the world? So last Friday the Environmental Protection Agency decided to put a gun to the head of Congress and play cap-and-trade roulette with the U.S. economy. The pistol comes in the form of a ruling that carbon dioxide is a dangerous pollutant that threatens the public and therefore must be regulated under the 1970 Clean Air Act. This so-called "endangerment finding" sets the clock ticking on a vast array of taxes and regulation that EPA will have the power to impose across the economy, and all with little or no political debate.
NY Times:
- Alarm Grows Over Pakistan’s Failure to Halt Militant Gains.
Business Week: Sales of existing homes declined 3% in March, reversing February's surprising gain, the National Association of Realtors said on Apr. 23. But the market continues to show signs of stabilizing as first-time home buyers and investors jump in to scoop up bargains, analysts said.
CNNMoney:
- 24 Top-performing Stocks
- The Cash Bubble Hasn’t Burst Yet. With the S&P 500 up 25% since early March, some investors -- particularly professional money managers -- may feel the need to chase the market's performance or face questions from customers about why they sat out the rally. Still, a lot of cash continues to sit on the sidelines. According to figures from ISI Group, the amount of money invested in money market funds and small certificates of deposit (CDs) make up more than 60% of the market's total valuation, as measured by the Wilshire 5000 index. The last time this measure of cash reserves was so high was in 1985. What's more, 28.5% of all U.S. stock mutual funds have more than 5% of their assets in cash, according to fund tracker Morningstar. Typically, any fund with more than 5% in cash is considered to be not fully invested in the market. In addition, more than 100 mutual funds are being ultra-conservative: they have more than 25% of their assets in cash.
Investors.com:
- Except for companies that have nowhere to go but up, MasterCard's (MA) business seems a lot like many others these days: It's apt to slow a bit before picking up speed. But MasterCard is doing a lot better than most.
Reuters:
- US officials testing the health of the nation's top banks must walk a tightrope when they disclose the exams' results: The scrutiny must be tough enough to be credible, but not so harsh as to rattle an already shaken system. "The challenging thing here is presumably they're going to be talking about some information that is not going to be at all flattering for some institutions," said Kevin Petrasic, a banking lawyer at Paul, Hastings, Janofsky & Walker in Washington.
- Chrysler's first-lien lenders are preparing another counter-offer to the U.S. Treasury that involves reducing the automaker's debt, sources familiar with the matter said on Thursday.
- Honda Motor Co expects to see some recovery in U.S. auto sales by summer and expects its own inventory levels to normalize by June, the company's president and chief executive said on Thursday. "I don't know the industry-wide sales trend in April, but by summertime we expect some recovery," Honda's Takeo Fukui told reporters on the sideline of an auto industry event sponsored by the automaker in Detroit.
- The global economic downturn has shown signs of easing in recent weeks, although significant risks remain, U.S. Treasury Secretary Timothy Geithner said before a meeting of G20 officials in Washington on Friday. Writing in the Financial Times newspaper, Geithner said the decline in world trade may be abating and conditions in some financial markets have improved.
Financial Times:
Bankers’ bonuses and golden parachutes would be capped in all European Union countries under a draft policy circulating in Brussels that amounts to one of the broadest responses yet to concerns about executive pay. Under the European Commission recommendations, a copy of which has been seen by the Financial Times, the 27 EU countries would be asked to bring in tougher remuneration rules for financial institutions with an office within their borders, covering all staff whose activities affect the firm’s risk profile. The rules would also apply to subsidiaries of EU-based parents, including those in offshore centers. Directors’ termination payments would be limited to no more than two years of their fixed remuneration and they would also face a minimum three-year vesting period for share options. Financial companies would be able to withhold bonuses entirely or partly when performance criteria were not met and a major part of bonuses should be deferred, the policy says.
- Alistair Darling was warned on Thursday his new 50p income tax rate would drive talent from the City and discourage entrepreneurs, but early polls suggest that the chancellor’s Budget tax rises have tapped into rising popular hostility towards the rich. Mr Darling’s tax raid on higher earners was widely criticized in the press as a populist gesture to divert attention from spiraling government borrowing and a political tactic to wrongfoot the Conservatives. “There’s a definite sensation of ‘what’s next?’ The message is that high earners are not welcome here,” said Anna Chapman, a director of Ernst & Young’s private client services team. The head of one City institution with a strong private client business fumed, “What are they trying to do, drive all the high-earners out of London?”
- US banks could be forced to hold more equity than initially expected after it emerged that “stress tests” organized by regulators take into account risks not commonly understood to be included in the assessment. In addition to looking at potential losses on loans and securities, bank examiners are looking at so-called “counterparty risk” on derivative contracts – the chance that the party on the other end of a derivatives deal might default, depriving the bank of a payment that is due
- The Obama administration will on Friday get the first indication of investor interest in its $1,000bn toxic assets plan amid fears that the threat of government intervention and banks’ reluctance to sell will deter fund managers from participating. Applications to become one of the five asset managers charged with raising funds to buy mortgage-backed securities from banks are due today and groups including BlackRock , Pimco and Bank of New York Mellon are set to apply. However, financial executives warn that the plan is in danger of missing its goal of quickly shifting billions of dollars in troubled assets off banks’ balance sheets unless the government dispels investors’ concerns. Potential buyers of assets complain that, a month after Tim Geithner, US Treasury secretary, unveiled the public-private investment program, the authorities have yet to reassure them they would not be subjected to draconian Congressional scrutiny. The Treasury did say that, aside from the small group of asset managers, investors who receive the generous loans available under the PPIP will not have to abide by restrictions on employees’ pay imposed on the banks that got funds from the troubled assets relief program. Yet some fund managers fear Congress and the government may change the rules mid-course, as they did with Tarp.
- Chesapeake(CHK), the largest independent producer of natural gas in the US, paid its chief executive more than $100m in total last year, bought millions of dollars worth of his art, sponsored his basketball team and approved a $75m bonus at least one institutional investor believes was paid to bail him out of personal financial difficulties. Chesapeake revealed in its SEC filings that it spent $12.1m on antique maps of the American Southwest, watercolours and books owned by Mr McClendon, spent $177,000 at Deep Fork Catering, of which he owns 50 per cent, and supported - to the tune of $4.6m in 2008 and 2009 - the Oklahoma City Thunder, a basketball team of which he holds just less than 20 per cent. The company is also a major donor to Oklahoma State University of which Burns Hargis, one of its independent directors, is president. At least one analyst is now advising other shareholders to put pressure on Chesapeake to change its ways, citing concerns the board appeared to lack independence. Benjamin Dell, analyst at Sanford Bernstein, yesterday advised shareholders to vote against allowing the company to increase the number of authorized common shares, warning that its board structure, corporate governance and dilution of ownership stakes created a material overhang for the stock.
Late Buy/Sell Recommendations
Citigroup:
- Upgraded (RIMM) to Buy, target $100.
JPMorgan:
- Downgraded (PTR) to Underweight.
Night Trading
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
Conference Calendar
Who’s Speaking? Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/EPS Estimate
- (AEP)/.85
- (ACI)/.24
- (F)/-1.24
- (HON)/.54
- (ITT)/.58
- (SLB)/.73
Economic Releases
8:30 am EST
- Durable Goods Orders for March are estimated to fall 1.5% versus a 3.4% gain in February.
- Durables Ex Transports for March are estimated to fall 1.2% versus a 3.9% increase in February.
10:00 am EST
- New Home Sales for March are estimated at 337K versus 337K in February.
Upcoming Splits
Other Potential Market Movers
Geithner meeting with G7 Finance Ministers, (ABT) shareholders meeting, (T) shareholders meeting, (PGR) annual meeting, (XL) shareholders meeting, and the (K) shareholders meeting
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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