- Fed stays put, stretches mortgage support. As expected, the central bank left its interest-rate unchanged at 0-0.25%, saying the fed funds target would remain low “for an extended period,” and noting consumer spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.” The Fed also extended its $1.25T program to buy mortgage-backed securities, a move applauded by homebuilders for its potential to keep mortgage rates at record lows. (read the FOMC statement)
- World leaders stuck between a rock and a hard place. G-20 leaders begin their two-day Pittsburgh summit today, having already warned that the recovery is still too fragile to ponder pulling back on governments’ massive liquidity injections. The challenge will be when to start pulling back, and how to do so without sending the global economy into a double-dip tailspin. Economists say soaring sovereign debt is the world’s number-one economic vulnerability emerging from the recession, and could very likely trigger the next crisis.
- Citi mulls shrinking retail footprint. Sources say Citigroup (C) may sell or shutter some of its 1,001 North American branches in an effort to downsize and focus on areas with the highest branch concentrations – New York, Washington, Miami, Chicago, San Francisco and Los Angeles. “The smaller-but-smarter approach is the latest attempt by Citi to mend a business dogged by underinvestment, strategic miscues and management turnover.” In January, when CEO Vikram Pandit said Citi would sell or shut some non-core businesses, retail banking was among the ones he wanted to keep.
- Tech cos. catch a break. The FASB approved a tweak to accounting regulations that could benefit some high-tech companies, allowing them to recognize more revenue when products are sold. Previously, devices such as smartphones that combine hardware and software, were governed by accounting rules that applied to software which requires the revenue to be recognized over a product’s expected life cycle, typically years. Analysts say the accounting change could be impactful for Apple (AAPL), which hasn’t fully reflected iPhone sales in its quarterly results. (FASB statement)
- White House pares financial reform plan. In an effort to find a middle ground between proponents and opponents of a proposed consumer financial protection agency, Rep. Barney Frank announced a modified plan Wednesday that would see the new regulator focus on protecting consumers from deceptive or abusive credit cards, mortgages and other loans, while abandoning President Obama’s proposal to force banks and other financial services companies to offer ‘plain vanilla’ products, like 30-year fixed mortgages and low-interest, low-fee credit cards. Speaking at a House hearing, Tim Geithner praised Frank’s initiative, saying it provided “a better balance of choice and protection.”
- U.K. almost had two Lehmans. On one day in early October, 2008, two major British banks – Royal Bank of Scotland (RBS) and HBOS – were within hours of collapsing, Bank of England Governor Mervyn King told the BBC, explaining the government’s emergency pledge of about £50B to stave off disaster. “Individuals would not have had access to the money in that bank. Their deposits would have been frozen. The accounts would have not been there for salaries to be paid in to so many people would not have been paid their salary. In turn they wouldn’t have been able to pay bills to businesses so the businesses would have found that their flow of payments would have come to an end.”
- Germany cuts Q4 debt sales. Germany lowered its planned Q4 debt issuance by 22% to €59B, citing improved funding conditions and reduced borrowing requirements. After the revision, Germany is set to issue €329B in 2009, still an all-time high. (BDF statement)
- Wii little price. Nintendo (NTDOY.PK) said it will cut the price of its popular Wii game console by 20%, a response to similar cuts by rivals Sony (SNE) and Microsoft (MSFT). In the U.S., a Wii will now set you back $199.99, $50 less than before. PS3 and Xbox each cost about $300. Nintendo has so far outsold its rivals in this generation of consoles, but sales have tailed off in recent months.
- Mass layoffs jump. The Labor Department reported 2,690 layoff events (at least 50 workers) in August that affected 259,000 workers. That’s 533 more layoff actions than July, and 803 more than August 2008.
Earnings: Before Open
Earnings: Wednesday After Close
- Bed Bath & Beyond (BBBY): Q2 EPS of $0.52 beats by $0.04. Revenue of $1.92B (+3%) vs. $1.9B. Shares -2.3% AH. (PR)
- Copart (CPRT): FQ4 EPS of $0.41 misses by $0.02. Revenue of $184M (-11%) vs. $185M. Shares -7.2% AH. (PR)
- Cintas (CTAS): FQ1 EPS of $0.43 beats by $0.04. Revenue of $892M (-11%) vs. $880M. Shares +2.6% AH. (PR)
- Paychex (PAYX): FQ1 EPS of $0.34 in-line. Revenue of $500M (-6%) vs. $503M. Sees full-year revenue down between 2% and 5% Y/Y. Shares -2.7% AH. (PR)
- Red Hat (RHT): Q2 EPS of $0.20 beats by $0.05. Revenue of $184M (+12%) vs. $179M. Tax benefit added $0.04 to EPS. Shares +4.7% AH. (PR)
Asia markets were mixed, with Tokyo rising strongly after a three-day hiatus. Europe has recovered most of its early losses, and U.S. futures are hovering around breakeven.
- Asia: Nikkei +1.67% to 10,544. Hang Seng -2.52% to 21,051. Shanghai +0.38% to 2,854. BSE +0.37% at 16,781.
- Europe at midday: London -0.1%. Paris -0.3%. Frankfurt -0.3%.
- U.S. futures: Dow -0.2% to 9698. S&P -0.2% to 1057. Nasdaq flat. Crude -0.8% to $68.44. Gold flat at $1,015. Treasurys are marginally higher. Euro +0.2% vs. dollar. Yen +1%. Pound -0.9%.
Thursday’s Economic Calendar
- 8:00 G-20 Pittsburgh Summit
8:30 Jobless Claims
9:00 Paul Volcker Speaks on Systemic Risk
9:30 Senate Banking Committee, Emergency Economic Stabilization Act: One Year Later
10:00 Existing Home Sales
10:30 EIA Natural Gas Inventory
10:30 Chicago Fed Conference: Have the Rules of Finance Changed?
11:00 KC Fed Mfg. Survey
1:00 PM $29B 7-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet