Five Things You Need to Know for Wednesday
What you need to know (and what it means).
Five things you need to know to stay ahead of the pack on Wall Street.
1. G-Mac? Sure, he's money. Today, so is GMAC.
A group of investors led by private equity firm Kohlberg Kravis Roberts & co. have submitted a nonbinding bid of $12.5 billion to $13 billion to buy a majority stake in GM financing arm GMAC.
- The Wall Street Journal today reports that KKR is interested in purchasing a majority stake in the financing arm of GM, called GMAC.
- KKR has brought in financing from, among others, Wachovia Corp., Merrill Lynch & Co., General Electric Co. and Bank of Nova Scotia.
- The proposal would provide an alternative to a bid by Cerberus Capital Management.
- GM Chief Executive Officer Rich Wagoner wants to sell the financing arm to regain an investment-grade rating for the unit.
- GMAC debt was cut to ``junk'' along with its parent last year, thereby increasing borrowing costs for the company and making auto loans more expensive.
- According to the WSJ, among the options GM is said to be considering, the company could decide to seek bids for GMAC's residential mortgage and insurance units while keeping the auto-financing arm, especially if it appears the company might not be able to obtain an investment-grade rating.
The S&P 500 Index seems intent on making 1300 a destination. The move above 1300, a technical breakout by most measures, would certainly generate some conversation.
- Below is a point and figure chart of the SPX. A move to 1300 intra-day would add an X to the chart and form a triple top breakout.
(Chart courtesy StockCharts.com)
- The Dow Jones Industrial Average too is approaching a potential break above 11,150.
- Meanwhile, the Nasdaq-100 remains by comparison uninspired, still well below its January high at around 1760.
- Also, the Russell 2000 (RUT) is finding trouble gathering the same head of steam as the SPX.
- Meanwhile, for the second straight day strong earnings from a major broker-dealer are adding some fuel to the fire.
- Lehman Brothers (LEH) said strong results from fixed-income trading and near-record merger activity around the globe helped lift first-quarter earnings 24%.
- The report echoes similar results from Goldman Sachs (GS) reported yesterday.
3. Maybe the kids will actually play OUTside this summer
As reported on the Buzz yesterday, Sony (SNE) problems finalizing its Blu-ray DVD technology have caused a delay in the launch of PlayStation 3.
- SNE dropped nearly 2% on the Nikkei.
- November 2006 launch date now gives Microsoft's (MSFT) Xbox 360 a 1-year advantage to build share - assuming anyone can find one.
- Not just about games: the delay stresses the importance of Sony's use of the PS3 as a vehicle for solidifying its brand and Blu-ray standard through a complete media platform
- CIBC expects Electronic Arts (ERTS) to have the greatest exposure at the launch, but expect relatively little impact to their numbers. The firm thinks other publishers like Take Two (TTWO), Activision (ATVI) and THQ Inc (THQI) have less exposure.
- The delay now serves as an opportunity to simultaneously launch the console in Asia, N. America and Europe
- Sony has sold over 200 million PlayStation units worldwide and holds nearly 60% share of global gaming market
4. Currency Events Chatter
We've noted previously in Five Things... that China faces being labeled a "currency manipulator" when the Treasury Department reviews currency data in April. The chess match between the U.S. and China regarding currency has only just begun...
- Yesterday, U.S. Commerce Secretary Carlos Gutierrez said China risks a showdown with protectionists in Congress unless it gets serious about tackling copyright thefts.
- The comments were more aggressive than usual and part of a recent campaign to ratchet up pressure on China to make trade adjustments.
- Meanwhile, in the overnight it was reported that Premier Wen Jiabao said the market will play a greater role in setting the exchange rate, according to Bloomberg.
- The yuan has gained less than 1 percent against the dollar since China ended a decade-old peg to the dollar on July 21 and revalued the currency by 2.1 percent.
- The yuan, a denomination of China's currency, the renminbi, strengthened 0.12 percent to 8.0375 against the dollar as of 10:17 a.m. in Shanghai, according to data compiled by Bloomberg.
5. Oil Supply Data
U.S. crude stocks, already at seven-year highs, are expected to rise another 2.7 million barrels in the week to last Friday, but gasoline is seen falling 1.3 million barrels after a 4.2 million-barrel drop ended a 10-week stock build last week, according to a Reuters poll.
- Stocks are falling as producers complete a more comprehensive maintenance program than most years to phase out the gasoline additive MTBE, banned in several states for polluting water.
- Yesterday, Hovensa LLC said it shut a gasoline-making unit at its refinery in St. Croix, U.S. Virgin Islands, a major source of U.S. East Coast gasoline.
- Meanwhile, in Nigeria, militant attacks have forced the OPEC member to shut in 556,000 barrels per day (bpd) of crude, an upward adjustment of nearly 100,000 barrels since violence flared last month, the country's top oil official, Edmund Daukoru, said.
- OPEC President Edmund Daukoru said yesterday the cartel wanted to keep U.S. crude between the upper $50s to lower $60s, after its decision to keep pumping flat-out saw prices slide nearly $4 last week.
- The U.S. Energy Department said last week that crude inventories jumped 6.8 million barrels for the week ended March 3 to total 335.1 million. That's 10% above the year-ago level.
- That was the highest supply level since the end of May 1999, the data showed.
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