Must Know news For Wednesday 01/14/2012

Wall Street Breakfast: Must-Know News

March 14, 2012  |   includes: AAPL, AMZN, AXP, BBT, C, GES, GOOG, ILMN, JPM, MET, MS, QQQ, RHHBY.PK, SPY, STI, USB, WFC

Fed shares stress test results... The Federal Reserve released the results of its stress tests, showing that "despite large hypothetical declines, the post-stress test capital level ... of 15 of the 19 bank holding companies were estimated ... above all 4 of the regulatory minimum levels ... even after considering the proposed capital actions, such as dividend increases or share buybacks." Now to the actual breakdown:

...showing mostly winners... JPMorgan (JPM) kicked off the winners' parade, preempting the Fed results with its announcement of a 20% increase in its dividend payout to $0.30/share and a new $15B share repurchase program that includes $12B in buybacks that can be earmarked for 2012. U.S. Bancorp (USB) raised its annual dividend to $0.78 from $0.50 after getting the all-clear from the Fed and received board authorization to repurchase up to 100M shares of stock. BB&T (BBT) boosted its quarterly dividend 25% to $0.20. Morgan Stanley (MS) said it received no objection from the Fed to its 2012 capital plan, which includes the potential acquisition of another 14% of Smith Barney and the ongoing payment of current dividends. American Express (AXP) authorized a $4B stock repurchase program and raised its dividend payout by 11.1% to $0.20/share. Wells Fargo (WFC) hiked its dividend an additional $0.10/share, which together with the $0.12/share dividend declared in January, raises the total dividend 83% to $0.22. Other winners: State Street (STT), Bank of NY Mellon (BK), Fifth Third (FITB), Capital One (COF), PNC Financial (PNC), KeyCorp (KEY), Goldman Sachs (GS), Bank of America (BAC), Regions Financial (RF).

...and a few losers. Citigroup (C), SunTrust (STI), MetLife (MET) and Ally Financial failed to get their capital plans approved in the Fed's stress tests, which mandated a minimum tier 1 capital ratio of 5%. Citi had a projected 4.9% ratio under the tests, SunTrust a 4.8% ratio, and Ally a mere 2.5% ratio. MetLife would have had a minimum tier 1 capital ratio of 5.1% through Q4 2013 and a minimum tier 1 leverage ratio of 3.4%, levels that lead the Fed to object to MetLife's capital distribution plan. MetLife has responded by saying it's "deeply disappointed" with the Fed's conclusions. Citi, also disappointed, will submit a revised capital plan later this year.

FOMC sees some improvement. As expected, the FOMC held rates steady, putting any real action off to April's two-day meeting. The panel acknowledged improvement in the still-"elevated" jobless rate, but also "significant downside risks" and gas prices pushing up inflation "temporarily." Staying the course still means near-zero rates at least through late 2014 and reinvesting principal from agency debt and agency MBS into further agency MBS. Household spending and business fixed investment continue to advance, but housing is still "depressed."

Spare oil capacity shrinks. World oil markets face a "bumpy ride" in the months ahead, warned the IEA, as OPEC spare capacity is dwindling to the lowest level since 2008, leaving little buffer as countries like Saudi Arabia ramp up production. Crude futures show little reaction: -0.4% to $106.31 (6:30 ET).

Japan hit by quake. A magnitude 6.8 earthquake struck off the northeastern Japan coast Wednesday evening local time, and a tsunami advisory was issued.

Calpers moves to lower profit target. A panel at Calpers voted yesterday to lower its investment target to 7.5% from 7.75%, less than the 50 bps reduction recommended by a senior actuary. If its board approves the change today, it will be the first time Calpers has lowered its target return in nine years, and could lead to higher retirement-plan costs or more job cuts in California.

Germany clears ESM funding. The German cabinet approved the country's share of financing for the €500B European Stabilisation Mechanism. Germany will contribute €21.7B of paid-in capital and €168.3B of callable capital.

Signs of improvement in unemployment. State unemployment rates were mostly lower in January, as 45 states and D.C. recorded M/M decreases, New York posted an increase, and four states were unchanged, the Bureau of Labor Statistics reported. Nevada maintained the highest rate at 12.7%; California and Rhode Island each posted 10.9%. North Dakota had the lowest jobless rate, 3.2%.

Apple may face subpoena on Google. Apple (AAPL) could be subpoenaed by the FTC over its deal to make archrival Google (GOOG) the default search provider for iOS devices (and thereby contribute to Google's mobile search dominance), sources said. The move is part of the FTC's growing antitrust investigation into Google's business practices - one that covers search, Google+, and recent privacy policy changes.

Tablet market cued for growth. IDC is hiking its 2012 tablet shipment forecast to 106.1M units from a prior 87.7M - a level that translates into 54% Y/Y growth. Gartner, it should be noted, is estimating 368M PCs will be shipped this year, which suggests the ratio of PC shipments to tablet shipments may be only a little over 3:1 in 2012. IDC also estimates Amazon (AMZN) sold 4.7M Kindle Fires in Q4, good for 16.8% of the tablet market.

Busy day for SEC. The SEC charged five people with insider trading, claiming they made $1.8M in illegal profits based on confidential merger information obtained through an Alcoholics Anonymous relationship. Two of the men charged were Ameriprise Financial advisers. Separately, three former executives from bankrupt lender Thornburg Mortgage have been charged with fraud by the SEC on allegations they concealed the rapid deterioration in the lender's financial health.

More info needed on Roche's Illumina bid. Roche (RHHBY.PK) said it received a second request for information from the FTC regarding its proposed acquisition of Illumina (ILMN). The agency is seeking additional information regarding Roche's micro-array business.

Wall Street Breakfast