- Derivatives divide threatens regulatory overhaul. Regulators appear more divided than ever on how to increase oversight into the opaque $600B OTC derivatives market. In a rare show of solidarity yesterday, both the SEC and the CFTC urged Congress to force all OTC trades to be cleared in public exchanges, which they say would dampen the risk of another Lehman debacle, and make it harder for the bad guys to hide. But House Financial Services Committee chairman Rep. Barney Frank said he didn’t see lawmakers successfully forcing OTC trades through monitored clearinghouses, noting substantial opposition from both bipartisan lawmakers and Wall Street.
- Google sounds the all-clear. “I would hope we’re a leading indicator,” Google (GOOG) CEO Eric Schmidt told reporters yesterday after surprisingly revealing the internet giant quietly restarted its noted investment and hiring programs two months ago (“We’re increasing our investment and hiring rate in anticipation of a recovery”). “The worst is behind us, and we’re seeing aspects of recovery,” he said, noting the mood within Google’s sales team is “very, very positive.” Shares gained 3.8% Wednesday to $517.54.
- Alcoa serves up a winner. Alcoa (AA) kicked off the Q3 earnings season with a strong beat, posting a profit of $0.08/share compared to the $0.09 loss expected by analysts (see below for more data). Alcoa said it sold more aluminum in Q3 compared with a year ago, citing rising shipments and declining inventories. Most of its important markets, including carmakers and other industrial sectors, began to stabilize, it said. On Alcoa’s earnings call, CEO Klaus Kleinfeld said strong China demand helped neutralize weak demand from Western buyers, bringing aluminum prices up about 20% over the quarter.
- DoJ challenges IBM’s mainframe dominance. The Justice Department has initiated an investigation into whether IBM (IBM) is abusing its monopoly of the mainframe computer market following a complaint by trade group the Computer and Communications Industry Association, which is backed by IBM rivals like Microsoft (MSFT) and Oracle (ORCL). The organization contends IBM stymied competition in the mainframe market, and blocked competitors and potential partners from licensing its software. A similar complaint by mainframe reseller T3 was dismissed last week, but more companies appear ready to take up the cause. About 25% of IBM’s $104B in annual revenue still comes from mainframe related sales.
- U.K. opposes Ticketmaster merger. Britain’s Competition Commission provisionally ruled against the proposed merger of Ticketmaster (TKTM) and Live Nation (LYV), saying it would lead to higher prices and less competition. In response, Ticketmaster stressed that live music is now the industry’s driving force, and said it believes the merger “achieves an important and much needed public interest, and remain optimistic that it will ultimately be approved.” Earlier this week, a ticket broker filed suit against Ticketmaster, alleging it paid him extra to sell choice tickets at a premium.
- Shamu swims on Wall Street. Anheuser-Busch InBev (BUD) confirmed it will sell its theme parks, including the three SeaWorlds and two Busch Gardens, to the Blackstone Group (BX) for as much as $2.7B. Together with the sale of its U.S. packaging operations and beer units in Korea, China, Scotland and Ireland, BUD will have raised about $6.4B of its $7B target for debt reduction related to last year’s $52B merger.
- Year’s biggest IPOs: separated at birth. The two biggest IPOs of 2009 debuted Wednesday, taking off in opposing directions from the get go. Shares of Banco Santander Brasil (BSBR) priced well below market chatter (but in the middle of its proposed range) and proceeded to fall about 2.5% on the NYSE. Meanwhile Insurance risk specialist Verisk Analytics (VRSK) priced its IPO at $22/share, exceeding expectations of $19-21, and never looked back – closing up 24% on the Nasdaq to $27.22.
- SEC isn’t done with Mark Cuban. The SEC appealed Wednesday a federal judge’s dismissal of its case accusing Dallas Mavericks’ owner Mark Cuban of selling his 6% stake in internet search company Mamma.com based on insider information. The case was thrown out in July, saying Cuban would be liable for insider trading only if he specifically promised not to trade shares – which he didn’t. “We believe the District Court erred in dismissing our complaint and we look forward to presenting our position to the Fifth Circuit Court of Appeals,” SEC said in a statement. To which Cuban’s lawyers responded, “This appeal is nothing more than the SEC’s desperate attempt to shock a heartbeat into a case that was dead on arrival.”
- Credit dry-up intensifies. Consumer credit fell for the seventh month in a row, contracting $11.98B in August to $2.46T – translating to a -5.8% annual growth rate. Economists had expected a $12.5B decline. Credit-card debt fell for a record 11th straight month, down $9.91B (an annualized shrinkage of 13.1%) to $899.41B (consumer credit release). The drop highlights how lenders are scaling back after being hit with huge debt writeoffs, but it also reflects a reluctance by consumers to hold substantial amid concerns over their jobs and home values.
- BoE holds steady. Bank of England maintained its commercial bank rate at 0.5%, and left its bond-buying program unchanged at £175B. The bank said it expects the program to complete within a month.
Earnings: Thur. Before Open
- Marriott International (MAR): Q3 EPS of $0.15 beats by $0.02. Revenue of $2.47B (-16.6%) vs. $2.39B. Company says aggressive promotions led to lower than expected loss on revenue per available room. (PR)
- PepsiCo (PEP): Q3 EPS of $1.08 beats by $0.05. Revenue of $11.08B (-1.5%) vs. $11.25B. Shares (PR)
Earnings: Wed. After Close
- Alcoa (AA): Q3 EPS ex-items of $0.04 beats by $0.13. Revenue of $4.6B (-34%) in-line. First-half measures making “strong positive impact on our cash position and profitability.” Shares +7.9% premarket. (PR)
- Ruby Tuesday (RT): FQ1 EPS of $0.11 beats by $0.02. Revenue of $301M (-7%) vs. $297M. Shares +0.1% AH. (PR)
- Richardson Electronics (RELL): FQ1 EPS of $0.11 beats by $0.07. Revenue of $109.5M (-21%) vs. $111M. (PR)
Despite a lackluster U.S. session Wednesday, overseas stocks have moved higher Thursday, augmented by significant gains in U.S. futures.
- Asia: Nikkei +0.34% to 9,832. Hang Seng +1.18% to 21,493. BSE +0.22% to 16,844. Shanghai was closed again.
- Europe at midday: London +0.6%. Paris +1.2%. Frankfurt +1.2%.
- Futures: Dow +0.8% to 9750. S&P +0.9% to 1063. Nasdaq +0.8%. Crude +0.9% to $70.22. Gold +1% to $1,054.50. 30-year bonds -0.13%. Euro +0.7% vs. dollar. Yen +0.2%.
Thursday’s Economic Calendar
- 5:00-9:00 Retail same-store sales
8:30 Initial Jobless Claims
8:30 Fed conference on Key Developments in Monetary Economics, Day 1
9:00 RBC CASH Index
9:30 Senate Banking Committee: Future of the Mortgage Market
10:00 House Financial Services Committee: Credit Card Regulation
10:30 EIA Natural Gas Inventory
1:00 PM Results of $12B, 30-Year bond auction
1:30 PM Fed’s Lacker speaks on economic education
2:00 PM House Financial Services Committee: Future of the FHA’s Capital Reserves
3:35 PM Fed’s Tarullo: In the Wake of the Crisis
4:30 PM Money Supply
7:00 PM Fed’s Bernanke updates on the Fed’s balance sheet
8:45 PM Fed’s Hoenig speaks