Wednesday, September 23, 2009

Today's Headlines


- The Federal Reserve said it will slow its purchases of mortgage-backed securities and housing- agency bonds while noting that the U.S. economy has strengthened. “The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010,” the Federal Open Market Committee said in a statement today after meeting in Washington. The $1.45 trillion program was scheduled to cease by the end of this year. Officials left the benchmark interest-rate target between zero and 0.25 percent, and said it will stay “exceptionally low” for an “extended period.” The Fed said the economy has “picked up following its severe downturn.”

- Xilinx Inc.(XLNX), the world’s largest maker of programmable semiconductors, raised its sales forecast for this quarter as demand picked up in “nearly all end markets and geographies.” The stock jumped. Sales in the period ending this month will rise 10 percent sequentially, the San Jose, California-based company said today in a statement. In July, the company projected a gain of as much as 6 percent.

- Ford Motor Co.(F), the only major U.S. automaker to avoid bankruptcy, expects domestic demand to pick up from next year as the biggest financial crisis in more than six decades eases. Industrywide sales may be about 11 million this year and rise to 12.5 million next year, Chief Executive Officer Alan Mulally told reporters in New Delhi today at an event marking the unveiling of a new car. Sales may further rise to 14.5 million in 2011, he said. Ford is sticking to its breakeven target for 2011, Mulally said.

- Mortgage applications in the U.S. jumped last week to the highest level since May as lower borrowing costs spurred refinancing and purchases. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 13 percent to 668.5 in the week ended Sept. 18 from 592.8 in the prior week. The group’s gauge of refinancing surged 17 percent and its measure of purchases climbed 5.6 percent.

- Apple Inc., Palm Inc. and other technology companies may get an earnings boost after the Financial Accounting Standards Board approved a change in rules. FASB, the U.S. accounting rulemaker, voted 5-0 today to let companies record revenue earlier from products that combine software and hardware, such as Apple’s iPhone and Palm’s Pre. Companies have been booking revenue in several quarters, usually for two years. The rule takes effect in 2011, though companies can adopt it earlier, the Norwalk, Connecticut-based body said.

- The cost of protecting European corporate bonds from default fell as investors reduced bets the global economic recovery may falter. Credit-default swaps on the Markit iTraxx Crossover Index Series 12 of 50 companies with mostly high-yield credit ratings declined 14 basis points to 557, according to JPMorgan Chase & Co. prices at 11:25 a.m. in London. “The price action is indicating some short positions are being taken out,” said Puneet Sharma, head of European credit strategy at Barclays Capital in London. “Spreads are coming in, so there is some selling pressure.” Contracts on the Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 0.5 basis point to 80, JPMorgan prices show. The cost of protecting bank bonds from default also fell, with the Markit iTraxx Financial Index of 25 banks and insurers down 3.5 at 72.5 and the subordinated index 8 lower at 128.

Wall Street Journal:

- After giving small-business owners the cold shoulder, some banks are starting to warm up to them again. On Wednesday, J.P. Morgan Chase & Co.'s(JPM) Chase Card Services plans to formally launch four cards aimed at small-business owners, including a charge card that would require customers to pay in full every month. It's a sign that credit conditions may be starting to thaw. Small-business owners have been among the most severely hurt by the credit crisis, as banks, faced with rising losses, have pulled back from offering them credit.

- President Barack Obama, speaking to the United Nations General Assembly for the first time, sought to distance his country from the era of his White House predecessor, vowing that "America will live by its values" on human rights even as he said he would take to task the abuses and failures of allies and foes alike. In a half-hour speech that was greeted warmly by world leaders, the U.S. president outlined "four pillars" that he called "fundamental to the future that we want for our children" -- nuclear disarmament, Middle East peace, environmental restoration and economic growth.


- DuPont Co.(DD), the third-biggest US chemical maker, and Caterpillar Inc.(CAT) said the global economic contraction has ended and growth has begun. The US and global economies stabilized in the third quarter and have begun to grow, Caterpillar CEO Jim Owens said. “We have found the floor and it is beginning to move up,” Owens said.

- It's 12 months later and Warren Buffett's Berkshire Hathaway is $3 billion richer. One year ago today, on September 23, 2008, with the financial world still reeling from the collapse of Lehman Brothers just days before, Buffett stunned Wall Street with a massive vote of confidence for Goldman Sachs. In a late-day news release, Goldman announced a private deal to sell Berkshire $5 billion of perpetual preferred stock. In effect, Berkshire was giving Goldman a massive loan. And you don't loan that kind of money to a firm you think could follow Lehman down the drain. The next day, in an interview on CNBC Buffett said, "The price was right, the terms were right, and the people were right." In what Buffett later described as a "bonus," Goldman also gave Berkshire the right to buy $5 billion of common stock at $115 a share. Berkshire could exercise that right any time in the next five years.


- Gartner this morning asserted that “the worst may be over for the PC industry.” The research firm now sees 2009 unit shipments off just 2% from 2008, revising their previous forecast of down 6%. Gartner research director George Shiffler said in a statement that demand is running “much stronger than expected” than when the firm gave its previous forecast in June. He reports that mobile PC shipments “have regained substantial momentum, especially in emerging markets,” while the slide in desktop PCs is slowing. Gartner expects the industry to show year-over-year unit growth in the fourth quarter. Gartner now sees mini-notebook sales of 25 million units this year, up from a previous forecast of 21 million units, with 37 million units in 2010. For 2010, Gartner sees units up 12.6%, on momentum in mobile PCs and a return to growth in desktop PCs; but with pricing continuing to fall, spending on PCs is expected to be about flat in 2010 with 2009.

NY Times:

- President Obama is exploring alternatives to a major troop increase in Afghanistan, including a plan advocated by Vice President Joseph R. Biden Jr. to scale back American forces and focus more on rooting out Al Qaeda there and in Pakistan, officials said Tuesday.

- The White House on Tuesday instructed government agencies to keep politics away from the awarding of federal grants, a step taken as the administration sought to minimize the fallout after an official at the National Endowment for the Arts urged artists to advance President Obama’s agenda. The new guidelines were issued at a meeting between White House officials and chiefs of staff across the executive branch, following the disclosure of a conference call last month in which artists were asked to work with the Corporation for Public Service to promote Mr. Obama’s health care, education and environmental proposals. On the Aug. 10 call, the N.E.A. official encouraged people to promote the administration’s United We Serve campaign, and asked them to create artwork that promoted Mr. Obama’s agenda. On the call, the N.E.A. communications director Yosi Sergant said, “I would encourage you to pick something, whether it’s health care, education, the environment — you know, there’s four key areas that the corporation has identified as the areas of service.” He resigned after the call became public.

Washington Post:

- The Obama administration will announce a new policy Wednesday making it much more difficult for the government to claim that it is protecting state secrets when it hides details of sensitive national security strategies such as rendition and warrantless eavesdropping, according to two senior Justice Department officials. The new policy requires agencies, including the intelligence community and the military, to convince the attorney general and a team of Justice Department lawyers that the release of sensitive information would present significant harm to "national defense or foreign relations."

- Takeover rumors are swirling around video game maker Electronic Arts(ERTS), driving the company's stock up more than 5% Wednesday.

LA Times:

- On Sept. 30, Kohl's(KSS) bold move will be put to the test when it opens 35 stores in former Mervyns locations, 30 of them in California.

Vanity Fair:

- 100 to Blame: Ralph Nader, Ninja Loans, and More.


- President Barack Obama got a warm and surely unwelcome tribute Wednesday from Libyan leader Moammar Qadhafi, who told the United Nations General Assembly that he would pleased to see the new U.S. president remain in office for life — and even longer. “I’m happy that the new president, a son of Africa, governs the United States of America. This is a historic event,” Qadhafi said during a long and rambling address. “This is a great thing.”

- Google Inc(GOOG) Chief Executive Eric Schmidt said acquisitions are "turned on again" at the Internet company and expects to do one small deal a month instead of hiring new staff. Schmidt also reiterated his view that the worst of the global recession is over, seeing improvement both inside and outside the United States. "It's clear that the worst is behind us," Schmidt told Reuters Television in an interview on Wednesday. "What we see at Google is some level of improvement and what is more important is we see it not just in the United States but outside the United States," he said. "Acquisitions are turned on again at Google and we are doing our normal maneuvers, which is small companies. My estimate would be one-a-month acquisitions and these are largely in lieu of hiring," Schmidt said. "There may be larger acquisitions but they really are unpredictable."

- Given that U.S. stocks have rallied nearly 60 percent in just six months, you'd expect valuations were getting a bit prohibitive. But the resiliency of the latest rally shows that investors are unfazed by the market's current multiples, regarding stocks as still relatively cheap. With interest rates close to zero, earnings expected to improve in the third quarter, and inflation subdued, stock market bulls have much working in their favor, making it likely that the market will rise further in the next six months.

- Oil dropped 4 percent to below $69 a barrel on Wednesday after U.S. government data showed a big jump in crude and products stockpiles, stirring concerns about demand in the world's top energy consumer. The U.S. Energy Information Administration reported commercial stockpiles of crude rose 2.8 million barrels in the week to September 18, while analysts had expected them to fall by 1.5 million barrels. Gasoline inventories increased by 5.4 million barrels to 213.1 million, and distillates gained 3.0 million to hit a fresh 26-year high of 170.8 million, according to the EIA.

Globe and Mail:

- In the interest of ensuring supplies from a politically stable country, Americans prepared to leave strategy to reduce emissions in Canada's hands. American environmentalists are campaigning for Barack Obama to spurn Alberta's “dirty oil.” But the United States sees it as key to its national security – and will leave it up to Canada to figure out how the expansion of the oil sands can be squared with targets to reduce greenhouse-gas emissions. While U.S. environmental lobbies such as the Sierra Club were protesting against Prime Minister Stephen Harper's mission to Washington last week – accusing him of “dirty-oil salesmanship” – the U.S. President's new special envoy on energy, David Goldwyn, was in Ottawa telling officials that Canada is a “pillar of U.S. energy security.” “Part of my message here is that we recognize and value the centrality of Canada's contribution to U.S. energy security,” Mr. Goldwyn, the U.S. State Department's newly appointed co-ordinator for international energy affairs, said after the meetings. It will be up to Canada, he said, to figure out how it can expand the high-emissions oil sands without exceeding targets in greenhouse-gas reductions, either by reducing emissions in other sectors or developing new technology. “We have to have a system where we can rely on Canada for supply, and rely on Canada's own commitment to be a steward of its climate-change targets.”

No comments: