Wall Street Breakfast: Must-Know News
by: SA Editor Rachael Granby June 16, 2010 | about: AAPL / BP / DIA / DVN / GLD / LEHMQ.PK / MYL / QQQQ / SPY / T / USO / WMT
* Lightning-struck BP faces higher spill estimate. BP (BP) restarted its oil-capture system yesterday after lightning struck a crude-collecting ship earlier in the morning, causing a small fire. In more bad news for the company, scientists once again raised their estimate of how much oil is flowing into the Gulf of Mexico, this time forecasting 35,000-60,000 barrels per day, up from last week's revision of 20,000-40,000 bpd. BP Chairman Carl-Henric Svanberg and CEO Tony Hayward will meet with Obama at the White House today, following a speech by Obama last night in which he said BP will be forced to pay for its "recklessness." Meanwhile, sources say discussions on an escrow account to cover spill-related costs have stalled following disagreements on the size of the fund and how it would be administered. Premarket: BP -2.5% (7:00 ET).
* BP's Devon deal under regulatory review. In light of the Gulf of Mexico spill, Brazilian regulators are taking another look at BP's (BP) $7B deal with Devon Energy (DVN) to buy Brazilian assets. Officials from Brazil's oil industry regulator plan to fly to BP's Houston headquarters next week to discuss the April 20 explosion and the subsequent spill. A BP spokeswoman dismissed concerns, saying "as far as we're concerned the deal is going ahead."
* Mylan probed over earnings disclosures. The SEC is reportedly investigating whether generic-drug maker Mylan (MYL) improperly disclosed confidential earnings data to select investors. Last September, Mylan hosted a meeting with several investment bank analysts and investors, and reportedly shared information about its upcoming earnings release. Shares of Mylan rose 7% the next day on three times as much volume as usual. Mylan said it's "confident the communications made during the conference were entirely appropriate."
* Rumored EU/IMF credit line for Spain. Rumors continue about a possible rescue package for Spain, with a Spanish newspaper reporting that the EU, IMF and U.S. Treasury are drawing up a liquidity plan involving a €250B ($335B) credit line. The IMF and the Spanish government both deny that any rescue package is in the offing. The persistent rumors are further hurting Spanish banks, which are borrowing record amounts from the ECB as they find themselves increasingly shut out of international capital markets.
* Russia to diversify reserves. Russia is considering diversifying its international reserves, following fluctuations in the U.S. dollar and the euro, which represent 47% and 41% respectively of Russia's holdings. Alexei Ulyukayev, first deputy chairman of Russia's central bank, said the addition of the Australian dollar is being discussed, and suggested the Canadian dollar has already been added to the list of approved currencies. Russia has the world's third largest stockpile of international reserves at $458.2B.
* EU debt crisis may dent U.S. growth. Federal Reserve officials may trim their growth forecasts next week as Europe's developing debt crisis lowers demand for U.S. goods and keeps financial markets uneasy. The Fed could potentially lower its 2011 growth forecast by as much as 0.75%, while the debt crisis will likely reinforce the Fed's decision to keep interest rates very low for an "extended period."
* Wal-Mart extends financial links. Wal-Mart (WMT) bought a small minority stake in Green Dot, a prepaid debit card seller, giving the retail giant indirect access to the U.S. financial market. Wal-Mart had previously tried to open its own bank but abandoned the attempt in 2007 following intense lobbying pressure from the banking sector.
* Credit raters get a break on reform. Lawmakers crafting a combined House and Senate version of the financial reform bill scrapped a controversial measure to have the government match rating agencies with debt issuers. The move was designed to reduce the conflict of interest created when debt issuers pay their raters. Instead, lawmakers want the SEC to further study the issue. Rating agencies rose in yesterday's trading: MCO +6.6%, MHP +5.7%.
* New protection for credit card holders. The Federal Reserve unveiled new credit card rules that cap most late fines at $25; ban inactivity fees; prevent cascading penalties; and require issuers to consider a roll back of recent rate hikes. Analysts suggested that issuers, in classic form, may boost minimum payments in order to capture more penalties and make up for the loss of the typical $39 late fee.
* Corporate defaults may start to climb. In a newly released report, S&P expressed growing concern that many U.S. companies may find it difficult to refinance their heavy debt loads in coming years, leading to a possible surge in corporate bankruptcies. Around $300B of debt comes due in 2011, of which 41% is considered speculative; by 2014, the debt will climb to $550B, of which 72% is speculative.
* Lehman to expedite return of assets. Lehman Brothers' (LEHMQ.PK) European administrators plan to unveil a proposal today for the expedited return of $22B in assets to the failed bank's unsecured creditors. The "consensual approach" being taken would see most claims agreed by the end of the year and cash distributed in 2011, shaving years off the timeline of a traditional bilateral approach.
* AT&T privacy blunder, part II. In AT&T's (T) second privacy lapse in the space of a week, several customers logged into AT&T's website as themselves ended up in other users' accounts yesterday, as the site struggled to keep up with heavy demand for Apple's (AAPL) new iPhone. The website also had difficulty processing orders, with AT&T calling it the busiest day for online sales in the company's history.
Today's Markets
* In Asia, Japan +1.8% to 10067. Hong Kong +0.1% to 20062. China +0.3% to 2570. India +0.3% to 17463.
* In Europe, at midday, London +0.3%. Paris +0.2%. Frankfurt +0.3%.
* Futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.2%. Crude -0.4% to $76.66. Gold +0.2% to $1236.60.
Wednesday's Economic Calendar
* 7:00 MBA Mortgage Applications
8:30 Housing Starts
8:30 Producer Price Index
9:15 Industrial Production
10:30 EIA Petroleum Inventories
2:15 PM Fed's Plosser: 'Improved Resolution of Financial Firms'
5:45 PM Bernanke: 'Financial Reform'
* Notable earnings before Wednesday's open: FDX
Seeking Alpha's Market Currents team contributed to this post.
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