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Wall Street Breakfast: Must-Know News

July 6, 2012


Smartphones drive Samsung profit to new record. Samsung (SSNLF.PK) today estimated that operating profit hit a fresh record of between 6.5T won ($5.7B) and 6.9T won in Q2 vs. 3.75T won a year earlier, while revenue rose to 46T-48T won from 39.44T won. Earnings were boosted by soaring Galaxy sales, although, as one executive says, "that's distorting the overall trading outlook." Samsung's main concerns include Europe, and weak prices for chips and consumer electronics.

Unemployment seen holding steady. Employment figures are due out this morning, with economists expecting that nonfarm payrolls increased by 100,000 in June. That would be higher than the 69,000 in May but would still round off the weakest quarter in over two years. The jobless rate is estimated to have held at 8.2%. What the figures don't tell you is how participation has fallen to a three-decade low.

Card giants poised to settle lawsuit over fees. Visa (V) and MasterCard (MA) are close to settling a seven-year lawsuit brought by retailers over allegations that the credit-card giants fixed swipe fees, Bloomberg reports. While there's no word on the size of the agreement, Visa has set aside $4.28B to cover litigation, while MasterCard took a $495M charge in Q4.

Seagate falls after earings warning. Seagate (STX) yesterday warned that it expects FQ4 revenue of $4.5B, below a consensus of $4.9B, and gross margin of 33.6%, below prior guidance of at least 34.5%. The company also failed to increase its market share, which it blamed on a faster-than-expected industry recovery from Thai flooding, and a "supplier quality issue" that affected enterprise hard drive shipments by 1.5M. Shares were -3.4% premarket.

Yahoo narrowing down CEO search, or maybe not. Speculation is swirling about how far along Yahoo (YHOO) is in its CEO search. All Things D reports that the short list is down to interim chief Ross Levinsohn and Hulu boss Jason Kilar, although Reuters reckons News Corp. (NWS) digital media chief Jonathan Miller is also in the mix.

Duke cut Johnson over fears about suitability. Bill Johnson didn't become the CEO of the merged Duke-Progress Energy (DUK) - as originally planned - after the board decided at the last minute that he wasn't right for the job, the WSJ reports, although it was clear to some for a while that the arrangement wouldn't work. "Different personalities, different cultures," a source says.

Investors wait for Navistar update. Shares of Navistar (NAV) could be in for a wild ride today, as an operational update from the company is planned for this morning. Analysts don't have a firm handle on what Navistar will say, although there has been speculation recently that the firm will abandon plans to develop pollution-reducing engines following repeated problems.

Strauss Auto nearing the end after entering "Chapter 55." Strauss Auto looks set to be finally put out of its misery after probably becoming the first company ever to enter "Chapter 55" - i.e. to file for bankruptcy protection five times. The parts retailer first went into Chapter 11 in 1979; the latest filing was last month, but despite recovering from near death previously, Strauss now intends to sell its assets and file for liquidation.

How Countrywide tried to win friends and influence people. Countrywide Financial (BAC) used a VIP loan program from 1996-2008 to try to prevent legislation that would have hampered its sale of sub-prime mortgages, a report from a House panel said yesterday. The lender offered or gave discounts to members of Congress and their staffers, government officials and executives at Fannie Mae (FNMA.OB).

Central-bank triple play leaves markets unconvinced. The German 2-year Schatz yield has fallen into negative territory for the first time since the panicky days of early June, as Spanish and Italian yields surge higher following rate cuts from the ECB and People's Bank of China yesterday, as well as pledges of further money printing in the U.K. Markets either wanted more from the ECB or are worried that the central banks know something that we don't. Spanish 2-years were +38 bps to 4.99%, Italy +12 bps to 3.84%.

Bankruptcies fall but student debt burden gets heavier. The number of U.S. businesses and consumers filing for bankruptcy fell by 14% to 632,130 in H1, and the figure could end 2012 at the lowest level since before the 2008 financial crisis, according to the American Bankruptcy Institute's Samuel Gerdano. He attributes the decline to rock-bottom interest rates. However, student loan delinquencies are rising in what frighteningly looks to be a structural, not cyclical phenomenon.

Iranian oil exports likely to halve as sanctions kick in. Iran's July oil exports will probably be half those of last year, analysts forecast, as new sanctions stifle flows and cost the country more than $3B a month in lost revenue. Iranian exports have declined steadily from an average of 2.2M barrels a day in 2011; July exports could fall to 1.1M or less amid complications with shipping insurance and disputes with China over freight costs.

Today's Markets:
* In Asia, Japan -0.7%. Hong Kong flat. China +1.0%. India -0.1%.
* In Europe, at midday, London -0.1%. Paris -0.5%. Frankfurt -0.4%.
* Futures at 7:00: Dow -0.05%. S&P -0.1%. Nasdaq -0.1%. Crude -1.65% to $85.78. Gold -1% to $1592.80.

Today's economic calendar:
Monster Employment Index
8:30 Nonfarm Payrolls
10:30 EIA Natural Gas Inventory
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ECB Rate Announcement

Said Mario Draghi: "Please heed me:
Our 'zone isn't going agreeably;
The better to serve you
In line with our purview,
We'll pay you to borrow if need be."

-Dr Goose
http://tinyurl.com/7j7hewu