~~>Wall Street Breakfast: Must-Know Newsby: SA Editor Rachael Granby May 14, 2010 | about: ALKS / BAC / BBI / BCS / BP / C / CA / CAR / CEO / DIA / DTG / GE / GLD / GS / HTZ / JPM / JWN / MCO / MHP / MS / NVDA / QQQQ / SPY / USO
* Newest Wall St. probe focuses on muni bets. The latest in a string of Wall Street inquiries is focused on municipal bonds. The SEC has reportedly opened a preliminary investigation into possible conflicts of interest among firms that sold municipal bonds and then set themselves up to profit if the bonds failed. The probe also seeks to determine whether firms used their own money to bet against the bonds and, if so, whether that fact was properly disclosed to investors. Several states are investigating the issue as well, including California, the country's largest bond issuer. California's inquiry is focused on Bank of America (BAC), Barclays (BCS), Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM) and Morgan Stanley (MS). Premarket: BAC -1.9%, BCS -4.2%, C -1.7%, GS -0.8%, MS -0.8% (7:00 ET).
* Lawmakers curb rating agencies. By a 64-35 margin, the Senate approved the creation of a clearinghouse intermediary to select credit rating agencies for financial institutions on a semi-random basis. The Credit Rating Agency Board will be set up by the SEC and composed of both investors and independent regulators, with the goal of ending the practice of "ratings shopping." In a 61-38 vote, lawmakers approved a measure that would require federal regulators to develop their own metrics for measuring credit-worthiness rather than relying exclusively on rating agencies. The news sent rating agencies S&P (MHP) and Moody's (MCO) down as much as 3.6% and 5%, respectively, in trading yesterday, before the firms pared some of the losses. At yesterday's close: MHP -2.4%, MCO -2.65%
* Senate presses forward on reforms. In addition to curbing rating agencies, the Senate unanimously adopted a measure yesterday that would require large financial firms to raise their capital levels as the firms grow larger or employ riskier lending practices. Lawmakers also voted to limit fees charged on credit and debit card transactions. Though there are several major issues still pending, final approval of the Senate bill is expected next week, and will mark the most significant overhaul of financial regulation since the Great Depression.
* BP leak worse than thought. The U.S. Coast Guard has estimated that 5,000 barrels of oil per day are pouring out of the Gulf of Mexico leak, but scientists and environmentalists believe the actual spillage could be as much as 20 times higher. Analysis of a video of the leak suggests the rate is closer to 70,000 barrels per day, and potentially as high as 100,000 bpd, which would mean this spill is already worse than the Exxon Valdez spill. Under mounting pressure, BP CEO Tony Hayward admitted the firm could have done more to prepare for a deepwater oil leak. Meanwhile, Minerals Management Service, the industry regulator, apparently gave dozens of oil companies (including BP (BP)) permission to drill in the Gulf of Mexico before getting approval from another agency that assesses threats to wildlife, and routinely pressured its internal staff to change their report findings if a study predicted an accident was likely to occur. Premarket: BP -3.5% (7:00 ET).
* Risks weigh heavy as eurozone tightens its belt. Following a similar announcement from Spain earlier in the week, Portugal announced new austerity measures, including higher taxes and a wage cut for government employees. However, the eurozone's stability plan still faces challenges: A lack of growth is making it difficult for many countries, particularly Italy, to escape their huge debts; the possibility of rising inflation rates could become a problem; many industry players still doubt that Greece will be able to repay its debt; and, former Fed Chairman Paul Volcker said yesterday that the current fiscal crisis carries the risk of a "potential disintegration of the euro." Euro -0.5% vs. the dollar (7:00 ET).
* CNOOC, GE may set up P-E fund. China's CNOOC (CEO) and GE (GE) are reportedly in talks to set up a 3B yuan ($439M) private equity fund which will be used for investments in several sectors, including domestic and global energy projects. The move would help raise CNOOC's asset management and investment capabilities, and give it more credibility as it tries to transition into an integrated energy company. Premarket: GE -1.1% (7:00 ET).
* Carlyle, TPG go after Healthscope. Australian hospital operator Healthscope announced it has received a $1.6B takeover offer from a group of buyout firms, and has advised shareholders to take no action. Sources said the unnamed consortium consists of private-equity firms Carlyle Group and TPG Capital. The A$5.50/share offer marks the return of major private-equity deals to the Australian market after a two-year hiatus. Healthscope closed +17.3% to A$5.28 in Australian trading.
* Avis Budget still intent on Dollar Thrifty buy. Avis Budget Group (CAR) has filed with antitrust regulators for approval of a potential acquisition of Dollar Thrifty (DTG). Avis, which expressed its interest in Dollar Thrifty after Hertz Global (HTZ) made a $41/share offer for DTG, insisted that the antitrust clearance timetable for an Avis purchase would be the same as that of a Hertz purchase. However, neither company is likely to have an easy time getting regulatory approval and, if anything, Hertz appears to have a slight upper hand in this case.
Earnings: Thursday After Close
* Alkermes (ALKS): Q4 EPS of -$0.15 in-line. Revenue of $39M (-12.3%) vs. $42M. (PR)
* Blockbuster (BBI): Q1 EPS of -$0.33 misses by $0.19. Revenue of $939M (-13.5%) vs. $933M. Shares -24% premarket (4:17 AM). (PR)
* CA Inc. (CA): Q4 EPS of $0.34 misses by $0.02. Revenue of $1.1B (+6.6%) in-line. Shares -6.5% AH. (PR)
* Nordstrom (JWN): Q1 EPS of $0.52 misses by $0.03. Revenue of $2B (+16.6%) in-line. Shares -2.6% AH. (PR)
* Nvidia (NVDA): Q1 EPS of $0.23 beats by $0.02. Revenue of $1B (+2%) in-line. Shares -3.8% AH. (PR)
Today's Markets
* In Asia, Japan -1.5% to 10463. Hong Kong -1.4% to 20145. China -0.5% to 2697. India -1.6% to 16995.
* In Europe, at midday, London -1.8%. Paris -2.6%. Frankfurt -1.4%.
* Futures: Dow -0.7%. S&P -0.7%. Nasdaq -0.6%. Crude -1.8% to $73.07. Gold +1.3% to $1245.70.
Friday's Economic Calendar
* 8:30 Retail Sales
9:15 Industrial Production
9:55 Consumer Sentiment
10:00 Business Inventories
1:40 PM Fed's Evans speaks at Illinois Wesleyan University
* Notable earnings before Friday's open: DDS, JCP
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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