• Wyeth, Pfizer reach deal. Wyeth (WYE) has agreed to be acquired by rival Pfizer (PFE) for $68B. Wyeth shareholders will get $50.19 per share in a stock-cash combo, a 29% premium to Wyeth’s trading price before talks became public. The largest pharmaceutical deal in almost ten years, Pfizer will borrow $22.5B to finance the acquisition and will cut its quarterly dividend to $0.16/share. Pfizer CEO Jeffrey Kindler will lead the combined behemoth of a company which will have 130,000 employees and annual revenue 55% higher than GlaxoSmithKline (GSK), the world’s second-largest drugmaker. Premarket: WYE +6.2%, PFE -4.2% (7:00 ET). (See below for Pfizer and Wyeth earnings, released today)
• Barclays balances writedowns with growth. Barclays (BCS) wrote down around £8B ($11B) of credit assets in 2008, and said ‘record revenue’ will cover writedowns and the bank won’t raise additional capital. Barclays pointed to its investment bank and Lehman Brothers Holdings North American assets acquired last year as strong profit drivers. The bank has £17B more than regulators’ capital requirement. Trying to calm investor concerns after a sharp drop in stock price this month, Barclays has advanced its earning release to Feb. 9 from Feb. 17. Shares +51.5% premarket (7:00 ET).
• Pressures rise for auto dealers, parts suppliers. Chrysler is pressuring dealers to accept cost cuts, reduce profit margins and refrain from slashing orders for new vehicles despite a forecasted slump in sales. "Dealers understand the need for all parties to put some skin in the game," said Chrysler Vice Chairman Jim Press, as the car companies rush to meet a March 31 deadline to prove their viability. Meanwhile, several auto parts suppliers are preparing for possible bankruptcy, including Visteon Corp. (VC), one of Ford’s (F) largest parts suppliers. Some analysts worry the industry may be headed for mass liquidations as auto companies scale back production, and lobbying efforts are growing for the industry to secure at least $10B of TARP aid.
• Skipping out on Skype? Speculation is growing that eBay (EBAY) is getting ready to sell its Skype internet telephone division if it gets a substantial bid. Industry insiders point to comments by CEO John Donahue who called Skype a ‘great stand-alone business’ and admitted ‘the synergies between Skype and the other parts of our portfolio are minimal.’ eBay bought Skype in 2005 for $2.6B but has since admitted that it vastly overpaid for the business. Potential buyers could include Google (GOOG), AT&T (T) or Verizon (VZ).
• Losses sting at ING. ING Group (ING) will post a €3.3B ($4.27B) underlying loss for Q4, including €2B in losses from its structured credit portfolio, after what it called the worst quarter for equity and credit markets in over half a century. This is its second consecutive quarterly loss. The Dutch financial group will tap into €22B of Dutch state loan guarantees for its ailing portfolio, and will cut 7,000 jobs to save €1B of costs in 2009. CEO Michel Tilmant will step down, to be replaced by Board Chairman Jan Hommen, former CFO of Philips Electronics (PHG). Shares +19.0% premarket (7:00 ET).
• Tax case widens as UBS looks for settlement. Sources say U.S. prosecutors are expanding their tax case against UBS (UBS), and that the number of U.S. clients that UBS helped to avoid taxes is potentially much higher than the previously disclosed estimate of 17,000. Investigators are also looking into assisted tax evasion in other parts of the bank besides for the wealth-management unit. UBS is said to be in talks with the Justice Department to avoid a possible felony indictment by admitting to criminal conduct and paying a $1.2B penalty. UBS has publicly denied any wrongdoing.
• Tighter lending with TARP. Lending at major banks has fallen in recent months, despite large influxes of taxpayer money. Ten of 13 major TARP beneficiaries saw their outstanding loan balances decline by a total of around $46B from Q3 to Q4 2008, a 1.4% decline. Just three of the banks reported growth in their loan portfolios, namely U.S. Bancorp (USB), SunTrust Banks (STI) and BB&T (BBT). If TARP was meant to stimulate lending, ‘it has failed,’ says finance professor Campbell Harvey. "Basically we have dropped a huge amount of money… and we have nothing to show for what we actually wanted to happen."
• French banks create mega fund firm. French banks Societe Generale (SCGLY.PK) and Credit Agricole will announce plans today to combine major sections of their asset-management operations to cut costs. The joint venture will have around €700B ($909B) in assets under management, with a 70% interest going to Credit Agricole and the rest to Societe Generale. The JV would rank among the world’s ten biggest asset-management companies.
• Business climate reaches new lows. The U.S. business climate is the worst in almost three decades. The National Association of Business Economics’ [NABE] quarterly industry survey "depicts the worst business conditions since the survey began in 1982," with the majority of respondents expecting GDP to contract at a faster pace in 2009. 47% of respondents reported a fall in demand for goods and services, an all-time high. Job losses are expected to continue in the first half of 2009, notably so in sectors such as goods-producing, finance, real estate, transport, utilities and communications.

Earnings: Monday Before Open

• Covidien Ltd. (COV): FQ1 EPS of $0.76 beats by $0.06. Revenue of $2.46B (+6.1%) vs. $2.43B. (PR)
• Danaher (DHR): Q4 EPS of $1.11 beats by $0.07. Revenue of $3.18B (+1.1%) vs. $3.08B. (PR)
• Eaton (ETN): Q4 EPS of $0.98 misses by $0.06. Revenue of $3.49B (+3.3%) vs. $3.72B. (PR)
• Halliburton (HAL): Q4 EPS of $0.87 beats by $0.14. Revenue of $4.91B (+17.5%) vs. $4.82B. (PR)
• Pfizer (PFE): Q4 EPS of $0.65 beats by $0.06. Revenue of $12.35B (-4.1%) vs. $12.54B. (PR)
• Quest Diagnostics (DGX): Q4 EPS of $0.87 beats by $0.07. Revenue of $1.80B vs. $1.82B. (PR)
• Weatherford International (WFT): Q4 EPS of $0.53 beats by $0.01. Revenue of $2.63B (+20.2%) vs. $2.61B. (PR)
• Wyeth (WYE): Q4 EPS of $0.78 misses by $0.01. Revenue of $5.35B (-7.2%) vs. $5.79B. (PR)

Today’s Markets

• Several Asia markets were closed today for local holidays. The Nikkei dipped down slightly (-0.8%) to 7,682.
• In Europe at midday, London +1.2%. Paris +1.3%. Frankfurt +1.2%.
• U.S. futures: Dow +0.6%. S&P +0.5%. Nasdaq +0.5%. Crude -0.1% to $46.43. Gold +1.4% to $908.

Monday’s Economic Calendar

• 10:00 Existing Home Sales
  10:00 Leading Indicators
• Notable earnings before Monday’s open: CAT, COV, DGX, DHR, ETN, FCX, GWW, HAL, KMB, MCD, SEE, TSN, WFT
• Notable earnings after Monday’s close: AMGN, AXP, CNW, JEC, MCK, NFLX, OLN, PRXL, PTV, QLGC, SLG, STLD, TXN, VMW, ZION

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• Jilted Rohm files suit. Rohm & Haas (ROH) have filed a lawsuit against Dow Chemical (DOW) to force Dow to complete its $15.3B purchase of the specialty-chemicals company. Dow had announced on Sunday that it doesn’t plan to complete the pending acquisition on or before the Jan. 27 deadline, sending Rohm shares down over 13% yesterday. Dow blamed ‘the continued crisis in global financial and credit markets’ and the collapse of a JV agreement with Kuwait that would have helped Dow finance the deal for making the closing ‘untenable at this time.’ Rohm’s lawsuit blasts Dow for creating ‘intolerable uncertainty’ for shareholders, customers and suppliers.
• Job loss avalanche. The global payroll lost over 76,000 jobs yesterday as major firms in the U.S. and Europe took additional steps to survive the worsening economic downturn. Leading the retreat were U.S. companies including Caterpillar (CAT) (20,000 job cuts), General Motors (GM) (2,000), Sprint Nextel (S) (8,000), Texas Instruments (TXN) (3,400) and Home Depot (HD) (7,000), while Pfizer (PFE) said around 19,500 jobs would be lost as a result of its mega-merger with Wyeth (WYE). If there’s any silver lining to be found, strategists point out that major layoffs are often a late-cycle indicator.
• Fannie/Freddie need more cash. Fannie Mae (FNM) and Freddie Mac (FRE) could tap up to $51B from the government in the coming weeks to continue operating, exceeding Wall Street estimates of how much the two entities would need. Rising delinquencies and falling securities values have accelerated, and both mortgage giants are facing Q4 losses. Fannie will likely ask the government to draw $11B-$16B under its $100B senior preferred purchase agreement, while Freddie could seek $30B-$35B. "Their losses are going to be much higher than anyone anticipated," analyst Paul Miller says, noting the GSEs were in the habit of classifying subprime and Alt-A loans as prime.
• FDIC looks for new approach. The FDIC will meet today and is bringing some new proposals to the table, according to industry consultant Bert Ely. With banks failing at the fastest pace in 17 years, Ely says the FDIC will consider limiting the interest rates being offered by banks with less-than-adequate capital to prevent banks from paying too much to raise revenue. The FDIC may also limit certain banks on higher-cost sources of funding, including brokered deposits. With three banks closed in January so far, the FDIC must replenish its reserves, and is preparing to do so by doubling premiums.
• AmEx hit by loan losses. Q4 earnings fell 72% at American Express (AXP) on higher loan losses, lower customer spending and a stronger U.S. dollar. The company said it will "remain cautious about the economic outlook through 2009, and expect cardmember spending to remain soft with past-due loans and write-offs rising from current levels," while CEO Kenneth Chenault called this "one of the most difficult operating environments we have seen in decades." Analysts expressed concern about whether the company was setting enough money aside to cover losses. (see earnings details below)
• Siemens gets energy lift. Siemens (SI) reported an 81% drop in FQ1 profit after last year’s sale of its automotive electronics division, but had an otherwise solid quarter on strong growth from its energy division. Profit dropped to €1.23B ($1.6B) from €6.48B after the asset sale, but ‘total sectors profit’ (measuring profit at the main industry, energy and healthcare divisions) rose 20% to €2B while revenue rose 7% to €19.63B. The company expects fiscal year total sectors profit to reach €8B-€8.5B. Shares +5.2% premarket (7:00 ET).
• Geithner confirmation. As expected, Tim Geithner was confirmed as the new Treasury Secretary in a 60-34 Senate vote. Geithner promised quick action to help the economy. Sources say William Dudley will take over as president of the New York Fed.
• Home sales jump. Existing home sales rose unexpectedly in December, jumping 6.5% to a seasonally adjusted 4.74M units vs. consensus of 4.4M. "The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions."
• Bump in leading indicators. Conference Board’s Leading Indicators rose a surprising +0.3% in December, while economists expected -0.2%. Weakness in employment, building permits etc. were somewhat offset by "the continued and very large positive contribution from real money supply" and an improving yield spread.

Earnings: Tuesday Before Open

• Ashland (ASH): FQ1 EPS of $0.11 misses by $0.04. Revenue of $2.2B (-8.7%) vs. $2.1B. (PR)
• BJ Services (BJS): FQ1 EPS of $0.56 beats by $0.10. Revenue of $1.43B (+11.4%) in-line. (PR)
• Bristol-Myers (BMY): Q4 EPS of $0.46 beats by $0.05. Revenue of $5.25B (+155.1%) vs. $5.42B. Shares +3.4% premarket. (PR)
• Canadian Pacific Railway (CP): Q4 EPS of $1.15 beats by $0.06. Revenue of $1.26B (+5.8%) vs. $1.22B. (PR)
• Cooper Industries (CBE): Q4 EPS of $0.84 beats by $0.12. Revenue of $1.5B (-1.4%) in-line. (PR)
• Corning (GLW): Q4 EPS of $0.16 misses by $0.04. Revenue of $1.1B (-30.4%) in-line. Announces 3,500 job cuts, including 1,400 temporaries. Will take a restructuring chare of $115-165M in Q1. Sees breakeven EPS in Q1, vs. consensus of $0.19. Shares -6% premarket. (PR)
• Delta Air Lines (DAL): Q4 EPS of -$0.50 misses by $0.16. Revenue of $7.8B (-0.3%) vs. $8.0B. (PR)
• DuPont (DD): Q4 EPS of -$0.28 misses by $0.04. Revenue of $5.8B (-16.7%) vs. $6.2B. (PR)
• EMC (EMC): Q4 EPS of $0.24 beats by $0.01. Revenue of $4.0B (+4.9%) in-line. Shares -6.9% premarket. (PR)
• Energizer (ENR): FQ1 EPS of $1.93 beats by $0.20. Revenue of $1.04B (-12.4%) vs. $1.08B. Shares +7.8% premarket. (PR)
• Hershey Foods (HSY): Q4 EPS of $0.59 beats by $0.05. Revenue of $1.37B (+2.6%) in-line. (PR)
• Kinetic Concepts (KCI): Q4 EPS of $0.98 beats by $0.13. Revenue of $492.5M (+63.0%) vs. $505.7M. (PR)
• Lexmark (LXK): Q4 EPS of $0.75 in-line. Revenue of $1.08B (-17.3%) vs. $1.1B. (PR)
• McGraw-Hill Companies (MHP): Q4 EPS of $0.42 beats by $0.04. Revenue of $1.415B (-9.8%) vs. $1.49B. (PR)
• Steris (STE): FQ3 EPS of $0.53 beats by $0.18. Revenue of $319.5M (+1.8%) vs. $317.3M. (PR)
• St. Jude Medical (STJ): Q4 EPS of $0.60 beats by $0.02. Revenue of $1.13B (+11.2%) vs. $1.10B. (PR)
• Tellabs (TLAB): Q4 EPS of $0.09 beats by $0.04. Revenue of $408M (-13.0%) vs. $410M. (PR)
• Travellers (TRV): Q4 EPS of $1.58 beats by $0.12. Revenue of $5.8B (-10.6%) vs. $6.4B. (PR)
• Valero (VLO): Q4 EPS of $1.41 beats by $0.52. Revenue of $18.6B (-35.2%) vs. $18.9B. Shares +2.5% premarket. (PR)
• Verizon (VZ): Q4 EPS of $0.61 in-line. Revenue of $24.6B (+3.4%) vs. $24.7B. (PR)
• Waddell & Reed Financial (WDR): Q4 EPS of $0.21 misses by $0.04. Revenue of $191M (-19.1%) vs. $195M. (PR)
• Waters (WAT): Q4 EPS of $1.07 beats by $0.11. Revenue of $418.3M (-4.3%) vs. $416.8M. (PR)

Earnings: Monday After Close

• American Express (AXP): Q4 EPS of $0.21 misses by $0.01. Revenue of $6.5B vs. $7.22B. Loss provisions: $1.4B. RoE of 21.7% vs. 37.3% a year ago. (PR, earnings call transcript)
• Amgen (AMGN): Q4 EPS of $1.06 misses by $0.01. Revenue of $3.75B vs. $3.79B. Sees 2009 EPS in line, revenue of $14.8-15.2B vs. $15.4B. (PR, earnings call transcript)
• CON-WAY (CNW): Q4 EPS of $0.10 beats by $0.13. Revenue of $1.13B (-6.2%) vs. $1.17B. Suspends annual guidance due to the uncertainty of the global economy and lack of visibility into future business volumes and market trends. (PR)
• McKesson (MCK): FQ3 EPS of $1.05 beats by $0.19. Revenue of $27.1B vs. $27.2B. Sees 2009 EPS of $4.15-4.30 vs. $4.03. (PR, earnings call transcript)
• Netflix (NFLX): Q4 EPS of $0.41 beats by $0.07. Revenue of $360M vs. $354M. Initiates $175M share buyback. Sees 2009 EPS of $1.43-1.59 vs. $1.49 and revenue of $1.58-1.63B vs. $1.54B. (PR, earnings call transcript)
• PAREXEL International (PRXL): FQ2 EPS of $0.23 beats by $0.04. Revenue of $276M (+15.5%) vs. $270M. (PR)
• QLogic (QLGC): FQ3 EPS of $0.34 beats by $0.05. Revenue of $164M (+3.6%) in-line. (PR, earnings call transcript)
• Texas Instruments (TXN): Q4 EPS of $0.21 beats by $0.09. Revenue of $2.49B (-30%) vs. $2.37B. Sees Q1 EPS of -$0.11 to -$.0.03 vs. $0.04 and revenue of $1.62-2.12B vs. $2.1B. Will reduce workforce by 12% (about 2,800 jobs). "We are not counting on a near-term economic rebound for improvement. The actions we are taking to reduce expenses and inventory will position TI to deliver solid financial results, even in a period of prolonged economic weakness."(PR, earnings call transcript)
• VMware (VMW): Q4 EPS of $0.36 beats by $0.10. Revenue of $515M vs. $512M. Sees Q1 revenue of $475M vs. $497M. "Current uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that VMware’s actual results could differ materially from expectations. Because of this uncertainty, VMware is not providing revenue guidance for the full year 2009." (PR)
• Zions Bancorp (ZION): Q4 EPS of -$0.32 misses by $0.02. Revenue of $508M (+6.2%) vs. $559M. (PR)

• Today’s Markets

• Asia markets that traded today closed solidly up. Nikkei +4.9% to 8,061. BSE +3.8% to 9,004. Hang Seng closed. Shanghai closed.
• In Europe at midday, London -1.5%. Paris -1.2%. Frankfurt -1.0%.
• U.S. futures: Dow +0.6%. S&P +0.5%. Nasdaq -0.1%. Crude +1.3% to $46.33. Gold -1.7% to $893.60.

Tuesday’s Economic Calendar

• FOMC meeting begins
  7:45 ICSC Retail Store Sales
  8:55 Redbook
  9:00 S&P/Case-Shiller Home Price Index
  10:00 Consumer Confidence
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday’s open: AKS, ASH, AVY, BJS, BMS, BMY, BTU, CBE, CHKP, CP, CVG, DAL, DD, EMC, ENR, FMER, FPL, HSY, KCI, LXK, MHP, NUE, NYB, RYN, SI, STE, STJ, TIN, TLAB, TRV, VLO, VZ, WAT, WDR, X
• Notable earnings after Tuesday’s close: ALTR, AMLN, CHRW, CNB, DV, ETFC, GILD, JAVA, MOLX, NSC, PMTC, RFMD, STM, STSA, SYK, TSS, YHOO

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• Morgan Stanley Smith Barney. Citigroup (C) and Morgan Stanley (MS) confirmed they’re merging their wealth management units into Morgan Stanley Smith Barney. Morgan will pay $2.7B for a 51% stake with the option of taking full control after five years. Citi will book a pre-tax gain of $9.5B, and an after-tax gain of $5.8B. The joint venture will employ 20,390 brokers in over 1,000 firms, surpassing the 16,000-strong ‘thundering herd’ of brokers that Bank of America (BAC) acquired in Merrill Lynch. However, some question the timing of the deal, wondering if creating the largest group of financial advisers is prudent when many investors and brokers are shying away from Wall Street giants and analysts expect a resurgence of ’boutique’ brokerage firms.
• Citi keeps shrinking. Citigroup’s (C) deal with Morgan Stanley (MS) is just one part of its radical restructuring operation. Abandoning the much-touted ‘financial supermarket,’ sources say Citi is preparing to break the mega-bank into investment and commercial units, essentially dismantling the 1998 merger between Citicorp and Travelers that created Citigroup. It will jettison several business units and scale down its proprietary trading, shrinking itself by about a third and focusing on large corporations and wealthy individuals instead of less-affluent customers. Sources say the changes will be unveiled when Citi released Q4 earnings next week. Citigroup declined to comment.
• Bernanke backs new efforts for toxic assets. In a speech at the London School of Economics yesterday, the Fed’s Bernanke threw his support behind a big U.S. stimulus plan, saying "a substantial fiscal package… could provide a significant boost to economic activity." However, he also said that Obama’s plan is ‘unlikely’ to revive growth on its own without ‘a comprehensive plan to stabilize the financial system and restore normal flows of credit.’ To that end, he raised three options for Obama’s Treasury in the event that it actually decides to address troubled assets with TARP money: 1) public purchases of troubled assets, as previously proposed by Paulson, 2) government provision of asset guarantees in return for warrants, or 3) creating and capitalizing ‘bad banks’ that would purchase assets from financial institutions in exchange for cash and equity in them. (Read the full text of Bernanke’s speech)
• HSBC at risk. Shares of HSBC (HBC) fell 7.3% in London after analysts at Morgan Stanley said Europe’s largest bank may be forced to raise up to $30B and cut its dividend in half. Unlike most rivals, HSBC has not had to raise capital during the financial crisis, but the analysts warned its capital position has eroded: "Historically, HSBC has carried about 120 basis points of surplus capital at the group level – this has now all but gone at a time when we think it better for the buffer to have increased," they said, adding it now has "one of the weaker capital ratios in Europe and the second weakest in Asia."
• Yahoo turns to Bartz for rescue. Yahoo (YHOO) named Carol Bartz its new CEO, as expected, and announced that President Sue Decker is resigning. Talking up Bartz, chairman Roy Bostock said "she is the exact combination of seasoned technology executive and savvy leader that the board was looking for." Not everyone agrees. Bartz’s appointment is largely viewed by Wall Street as safe but unspectacular, and some worry about her lack of professional experience with internet companies and online advertising. Known as a tough-talking straight-shooter, Bartz will be under immediate pressure from investors who have watched Yahoo’s share price erode over the last year. Bartz was previously executive chairwoman of Autodesk (ADSK) and had served as its CEO for 14 years.
• Deutsche’s major Q4 loss. Deutsche Bank (DB) warned of a loss of roughly €4.8B ($6.4B) in Q4 vs. profits of around €1B a year earlier. Germany’s biggest bank, Deutsche lost around $1B on bad bets involving CDS-hedged bonds, and another $500M trading equities. CEO Josef Ackermann released a statement Deutsche Bank has "scaled back or exited trading strategies most affected by market turbulence." The bank cited ‘exceptional market conditions’ for its poor performance, notably in credit trading, equity derivatives and equities proprietary trading. Its official Q4 FY ‘08 earnings report is due Feb. 5. Shares -11% premarket (7:00 ET).
• Quotables. "I’ve never quite been in this situation before of getting a massive pay cut, no bonus, no longer allowed to stay in decent hotels, no corporate airplane," complained Bob Lutz, General Motor’s (GM) Vice Chairman. "I have to stand in line at the Northwest counter. I’ve never quite experienced this before." Poor guy.
• Barclays lays off workers, again. Barclays (BCS) is cutting around 2,100 jobs globally in its investment banking and money management units. The bank had built these units aggressively over the last five years but now says it wants to be ‘appropriately sized, given the current market conditions.’ The move will likely raise speculation about further cost-cutting in Barclays’ retail and corporate banking division. Shares -14% premarket (7:00 ET).
• RBS sells China stake. In line with yesterday’s whispers from unnamed sources, Royal Bank of Scotland (RBS) confirmed it has sold its 4.26% equity stake in Bank of China for around $2.3B. "The decision to sell the stake forms part of the ongoing strategic review of the group’s businesses announced in October," RBS said in a statement.
• U.S. keeps its Triple-A. S&P affirmed its AAA rating for the U.S., but said risks to the country’s top sovereign rating have increased "noticeably" since September. S&P’s "reasonable worst-case scenario" sees net general government debt rising from its 2008 level of 42% of GDP to as much as 75% by 2011. On the plus side, S&P said U.S. strengths include one of the most flexible economies of any nation and the fact the U.S. dollar is one of the world’s most used currencies.
• Retail sales drop. Retail chain store sales fell 2.3% from a week ago, ICSC reported, and fell 2.2% Y/Y. "A seasonal weakening in traffic, less gift-card redemption and adverse weather all came together to weaken demand sharply for the first full week of 2009." Redbook reported a 2.3% decline in the first week of January vs. the previous month, while sales were down 1.9% Y/Y.
• Budget deficit balloons. The U.S. Budget Deficit swelled to a record $485B in FQ1, compared to a deficit of $455B for all of fiscal 2008. December’s budget shortfall was $83.6B, vs. a $48.3B surplus a year ago. Congressional estimators project an unparalleled deficit of $1.2T for 2009, not including any Obama stimulus.
• Consumer confidence? What’s that? A whopping 65% of Americans now rate the economy as ‘poor,’ a record in 23 years of weekly polls, according to ABC News. Another 29% say it’s ‘not so good’ for a net negative rating of 94% – matching the all-time high. ABC’s Consumer Comfort Index remains at a dismal -49.
• Trade balance. November’s Trade Balance of -$40.4B, down from October’s -$56.7B, was less than economists’ $51B forecast. Exports: $142B (-$8.7B); imports: $183B (-$26B). For now, the global slowdown is crimping U.S. demand for exports more than it is foreign demand for U.S. products.

Today’s Markets

• Asia markets closed in the green. Nikkei +0.3% to 8,438. Hang Seng +0.3% to 13,705. Shanghai +3.5% to 1,929. BSE +3.3% to 9,370.
• In Europe at midday, London -2.3%. Paris -1.3%. Frankfurt -1.95%.
• U.S. futures: Dow -0.7%. S&P -0.8%. Nasdaq -0.85%. Crude +3.1% to $38.94. Gold +0.7% to $826.30.

Wednesday’s Economic Calendar

7:00 MBA Mortgage Applications
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:30 EIA Petroleum Status
1:00 PM Fed’s Stern speaks on macroeconomic policy
2:00 PM Fed’s Beige Book
Notable earnings after Wednesday’s close: XLNX

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• BoA gets another handout. Bank of America (BAC) is close to finalizing a deal in which the government will provide billions of dollars in aid to help the bank close its Merrill Lynch acquisition. BoA approached the Treasury in mid-December, sources say, warning that Merrill’s larger-than-expected Q4 losses posed a problem in the acquisition process. Concerned the deal’s failure would further hurt shaky financial markets, the Treasury agreed to help create a plan including additional funds from TARP. (BoA has already received $25B in federal rescue funds.) Details are still being finalized, and an announcement is expected on Tuesday when BoA reports quarterly earnings.
• Apple’s Jobs loss. Apple (AAPL) shares plunged over 7% in after hours trading yesterday on the surprise announcement that CEO Steve Jobs will take a medical leave until June. Only nine days ago, Jobs reluctantly released a public letter saying he had a non-life-threatening hormone imbalance and would continue in his role as CEO as he recovered. In a new, cryptic letter, Jobs called his health problems ‘more complex than I originally thought.’ COO Tim Cook, respected in the company for his expertise, will take over day-to-day operations. This is his second time at the helm of the company, having taken over when Jobs underwent cancer treatment in 2004. Many investors and analysts are worried Jobs’ absence will hurt the company at a time when it’s struggling to find the next big thing, though others believe Apple is sufficiently innovative and well-placed in the market to continue without its famed leader. The company will likely face several lawsuits from investors angered over Jobs’ failure to fully disclose his health problems.
• Fund custodians under fire for Madoff losses. HSBC (HBC) and UBS (UBS) are potentially facing liabilities of up to $3.2B as the financial custodians of funds in Luxembourg and Ireland with Madoff-related losses. As custodians, the two banks were charged with overseeing the funds and managing cash inflows and payments to investors. A lawyer representing 10 French retail investors and two institutions that face Madoff-related losses at Luxembourg funds said "UBS didn’t do its job of knowing at all times where the assets were, and the same with HSBC," a failure of duty lawyers will have to prove to recoup investor money. The legal firm representing both HSBC and UBS said the funds were created by investors specifically looking to place money with Madoff, and as such the custodian had only ‘a very, very, very small role to play.’
• Lilly reaches drug settlement. Eli Lilly (LLY) agreed to a $1.42B settlement over criminal and civil charges that it illegally marketed Zyprexa, its blockbuster antipsychotic drug, for unauthorized patient use. Lilly was accused of pressing doctors for years to prescribe Zyprexa for children and the elderly, two groups for whom the drug is not federally approved and poses extra risks. Anticipating a settlement last fall, the company set aside $1.4B for that purpose. Lilly will also plead guilty to one misdemeanor violation of the Food, Drug, and Cosmetic Act.
• Black report from Beige Book. Overall economic activity has continued to weaken across nearly all of the Federal Reserve districts, according to the Fed’s Beige Book. Retail sales were generally negative, manufacturing decreased, construction weakened, lending remained tight and the labor market continued to soften. As if the report weren’t already sufficiently depressing, the Fed noted that a ’substantial number of job reductions in the financial sector have yet to show up in payroll statistics.’ (Read the full report)
• Bartz searches for right MSFT approach. With Bartz as its new CEO, Yahoo (YHOO) is several steps closer to a search deal with Microsoft (MSFT), though sources from both companies said a deal is unlikely to be imminent. In a company-wide meeting, Bartz said she plans to spend considerable time researching whether to sell Yahoo’s search business, but added that her ‘gut’ feeling was to hold on to the business. Although Bartz’s appointment is seen as a fresh start for the company, Microsoft is busy dealing with other problems, including cost cutting, that could get in the way of a sale or partnership.
• Mortgage apps surge. Mortgage applications jumped 15.8% last week, MBA reported, as record-low interest rates spurred a 25.6% increase in refinances from the previous week. Refinances now account for 85.3% of all applications, up from 79.8%. The Average 30-year mortgage rate dropped to 4.89% from 5.07%.
• Despite mortgage mods, foreclosures soar. Foreclosure filings jumped 81% in 2008 to 3.2M, RealtyTrac says, with one in every 54 U.S. households getting at least one foreclosure notice. "Clearly the foreclosure prevention programs implemented to date have not had any real success in slowing down this foreclosure tsunami," RealtyTrac’s CEO James Saccacio said. Activity did slow by 4% in Q4, but jumped 17% in December from November – another signal mortgage moderations helped to temporarily slow, but not stop, foreclosures. On Wednesday, Foreclosures.com reported a 63.5% jump in foreclosures.
• Retail sales fall. Retail sales fell 2.7% from November to $343.2B, according to the Census Bureau, and were 9.8% lower than a year ago. Consensus was for -1.2% M/M. Excluding auto sales, December was -3.1% M/M vs. estimates of -1.3%. "We finally saw confirmation of our original expectations that holiday retail spending would prove acutely weak, though even we underestimated the degree of weakness," one economist says of the larger than expected drop in retail sales. "Bad ugly and worse," says another.
• Import/export prices. Import prices declined 4.2% in December from a month earlier, the fifth straight down month, vs. consensus of -5.3%. Export prices also fell for the fifth consecutive month, declining 2.3%. Import prices -9.3% on the year (fueled by a 47% drop in petroleum); exports -3.2%.

Earnings: Thursday Before Open

• ASML Holding (ASML): Q4 net loss of €88M ($115.9M), slightly better than consensus of -€104M but a far cry from profit of €193M in the year earlier period. Sales of €494M (-48%). 2009 outlook is grim, as "the severity of the global economic downturn has caused semiconductor manufacturers to delay their investment plans." (PR)
• JPMorgan (JPM): FQ4 EPS of $0.07 beats by $0.07. Revenue of $17.2B (-0.9%) vs. $18.8B. (PR)

Earnings: Wednesday After Close

• Xilinx (XLNX): FQ3 EPS of $0.32 in-line. Revenue of $458M (-3.5%) vs. $444M. (PR)

Today’s Markets

• Asia markets closed heavily down following Wall Street losses. Nikkei -4.9% to 8,023. Hang Seng -3.4% to 13,243. Shanghai -0.45% to 1,920. BSE -3.45% to 9,047.
• In Europe at midday, London -0.1%. Paris -0.4%. Frankfurt -0.05%.
• U.S. futures: Dow +0.1%. S&P -0.3%. Nasdaq -1.4%. Crude +0.8% to $37.59. Gold +0.5% to $813.10.

Thursday’s Economic Calendar

• 7:45 ECB Announcement
  8:30 Producer Price Index
  8:30 Empire State Mfg Survey
  8:30 Jobless Claims
  9:00 RBC CASH Index
  10:00 Senate confirmation hearings for SEC nominee Schapiro
  10:00 Philadelphia Fed Survey
  10:30 EIA Natural Gas Report
  12:30 PM Fed’s Yellen speaks on economic outlook
  1:40 PM Fed’s Lockhart speaks on economic outlook
  1:55 PM Fed’s Evans speaks on economic outlook
  4:30 PM Money Supply
• Notable earnings before Thursday’s open: APH, ASML, JPM, MI
• Notable earnings after Thursday’s close: DNA, INTC

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• Dems showcase stimulus package. House Democrats unveiled an unprecedented $825B stimulus plan yesterday, divided into two-thirds spending and one-third tax cuts. Virtually everyone in the country would be affected by the package: 95% of workers would get a $500 tax cut or $1,000 cut for working couples; first-time home buyers between Jan. 1 and June 30 would get a $7,500 tax credit; local school districts would get $120B as local government budgets collapse; and states would get $87B for their Medicaid budgets. Among other sectors that would get stimulus money: food stamps, infrastructure, renewable energy, and state and local law enforcement. For all the targeted spending, however, there’s still some pork attached to the bill, including funds to put fresh sod on the National Mall and millions of $40 coupons to help Americans adapt old their old TVs for digital signals.
• Mixed responses on stimulus. Obama praised the House Democrats’ stimulus package for its ability to help "make America strong and competitive in the 21st century." Republicans were less than thrilled, and House Republican leader John Boehner was appalled that "my Democratic colleagues think they can borrow and spend their way back to prosperity." Economists were largely mixed on the issue. Despite the unprecedented size of the proposed stimulus plan, some economists worry it’s still not large enough. Others believe the package is large enough but disagree on how the money should be spent. Still others suggest the stimulus will be effective in supporting an eventual recovery, but not necessarily at halting the current decline, because most of the plan’s measures won’t come into effect until late 2009 and into 2010.
• Obama escapes TARP trap. Obama won a key legislative test yesterday when the Senate voted to release the second half of TARP funds, voting 52-42 against a resolution that would have prevented access to the $350B. Obama acknowledged the ‘frustration’ felt over how the first half of TARP funds were used, and promised to set tougher restrictions on the money, including capping executive pay, requiring banks to lend more and ensuring transparency and accountability. He also pledged to spend $50B-$100B on a ’sweeping’ foreclosure-prevention effort.
• Tank of America. Bank of America (BAC) secured an extra $20B from the government, bringing the total to $45B, and $118B of its assets will be backstopped by the Treasury and FDIC. Most of the assets guaranteed by the government are from Merrill Lynch. In exchange, taxpayers will get $4B in preferred stock with a 8% yield and warrants, BoA will cut its dividend to $0.01, and the bank agreed to a mortgage modification program. Meanwhile, shareholders are livid that CEO Ken Lewis didn’t know how bad things were with Merrill prior to their Sept. 15 merger deal, and didn’t disclose the problems prior to their Dec. 5 vote on the deal, or before its Jan. 1 closing. (Read the official statement and term sheet (.pdf))
• Citigroup to reorganize into two units after $8B loss. Citigroup (C) posted a Q4 net loss of $8.29B, compared with a prior-year loss of $9.83B. Revenue fell 13% to $5.6B (see more numbers below). Citigroup said it will reorganize into Citicorp and Citi Holdings: The former will focus on Citi’s global universal bank in more than 100 countries, while the latter will be made up of brokerage and retail asset management, local consumer finance and a special asset pool – with its management focused on "tightly managing risks and losses." Citi said it will make the transition to two companies as quickly as possible, and is already looking for someone to head up Citi Holdings (Paulson?). Shares are up 15% premarket, but have shed 43% this month alone.
• BofA swings to loss, exacerbated by Merrill. Bank of America (BAC) swung to a Q4 loss of $1.79B – its first in 17 years – compared with a profit of $268M a year ago. Revenue increased 19% to $15.98B (more numbers below). Credit-loss provisions nearly tripled to $8.54B. BofA disclosed a preliminary Q4 loss at Merrill Lynch of $15.31B, demonstrating why it was so desperate for more government assistance (see above). For the first time, BofA revealed how much credit it extended – $155B in Q4, with $49B for commercial non-real estate and $45B for mortgages – and said it’s beefing up its mortgage operations to meet surging demand as lending rates fall to historic lows.
• Chrysler Financial wants money too. With government money pouring out right and left, Chrysler is back in the news. The company’s credit arm, Chrysler Financial, wants $1.5B from the bank bailout fund to increase loans to car buyers and help prop up dismal sales. Chrysler Financial has stepped up its appeals since GMAC (GKM), jointly owned by General Motors (GM) and Cerberus, became a bank holding company and received $6B in government aid. A spokeswoman said Chrysler Financial’s application "is still pending, but we are optimistic we will receive the necessary support from the Treasury."
• Cuomo gets in on Madoff inquiry. New York Attorney General Andrew Cuomo has opened an investigation into the Madoff scam and has issued subpoenas to determine if financier Ezra Merkin defrauded universities and charities when he invested their money with Madoff. Cuomo is seeking information from Merkin, three investment funds he operated and 15 non-profits that gave him money to manage. Cuomo’s involvement is seen as a welcome development by many investors, as New York law gives the AG broad subpoena powers and has a very broad definition of fraud.
• Freddie evictions during foreclosure halt. Freddie Mac (FRE) is moving forward with legal action to evict tenants from foreclosed properties, raising ire amongst tenants and legal groups who say the moves violate the spirit of the moratorium that Freddie agreed to in November. A spokesman for the mortgage lender said that Freddie has suspended sales of foreclosed properties and isn’t locking people out of their homes, but is still pursuing existing court cases and initiating new ones against homeowners. Freddie is also still filing eviction proceedings against renters. The mixed messages of a simultaneously calling a halt to foreclosures while proceeding with some cases is creating ‘immense fear, stress and instability’ among homeowners and renters.
• ECB rate cut. The ECB cut its key rate by 50 basis points to 2%, as expected. The next important ECB meeting will be in March, said Trichet, downplaying the chance of a February cut. Trichet said inflation could pick up after mid-year.
• PPI falls. Producer Price Index -1.9% in December from a month ago, vs. consensus of -2%. Core PPI +0.2% vs. 0.1% consensus. Year-over-year Core PPI +4.3% vs. +4.1% consensus. Takeaway: producer prices fell less than expected, but not radically so.
• NY survey near record lows. The Empire State Manufacturing survey showed NY manufacturing deteriorated in January. Business conditions, new orders and shipments stayed near record lows. Forward-looking indicators fell below zero for the first time in the survey’s history.
• Mixed report from Philly Fed. Philly Fed’s Business Outlook ticked up to -24.3 from December’s -36.1 and -35 consensus. New orders and shipments inched up, but unfilled orders and delivery times edged lower. Employment losses were substantial. In short, the report was better than expected, but hardly encouraging.
• Jobless claims tick up. Initial Jobless Claims rose to 524,000 last week, up 54K from last week’s 470K (revised), and worse than the 500K economists predicted. The 4-week moving average of 518,500 is down 8K. "If there’s any silver lining, it’s that while the employment situation is sluggish, nothing points to intensification," said strategist Craig Peckham.
• Consumers see bleak present, hopeful future. RBC showed consumer sentiment at a six-year low, with its CASH index dropping to 13.3 from 15.3 in December. Despite the gloom, expectations ticked higher, suggesting "hope for the future under the new administration, although the outlook is clearly cautious." The RBC CASH poll (.pdf) asked "Would you say things in this country are heading in the right direction, or are they off on the wrong track?" 32% say right; 59% say wrong. But only 11% see the economy "much weaker" six months out.

Earnings: Friday Before Open

• Bank of America (BAC): Q4 EPS of -$0.48 misses by $0.56. Revenue of $15.98B vs. $20.72B. Merrill Lynch Q4 net loss of $15.31B ($9.62/share). Shares +11.8%. (PR)
• Citigroup (C): Q4 EPS of -$1.72 misses by $0.53. Revenue of $5.59B vs. $14.16B. Shares +7.3%. (PR)
• First Horizon (FHN): Q4 EPS of -$0.27 beats by $0.07. Revenue of $543M (+2.8%) vs. $456M. (PR)
• Johnson Controls (JCI): FQ1 EPS of -$0.14 misses by $0.15. Revenue of $7.34B (-22.6%) vs. $8.48B. Sees a FQ2 loss similar to that of FQ1, vs. consensus of $0.18. (PR)
• Sony Ericsson (SNE, ERIC) swings to a Q4 loss of €187M from +€373M last year. Shipped 24.2M phones, down from 30.8M. Net sales of €2.91B, down from €3.77B. Sees continued deterioration in the marketplace in 2009, particularly in the first half. (PR)

Earnings: Thursday After Close

• Genentech (DNA): Q4 EPS of $0.95 misses by $0.01. Revenue of $3.7B (+24.8%) vs. $3.66B. Sees 2009 EPS of $3.55-3.90 vs. $3.92. (PR)
• Intel (INTC): Q4 EPS of $0.04 in-line. Revenue of $8.2B in-line. Gross margins 53.1%. Recent guidance was at the bottom of previous expectations of 55% plus or minus a couple points. Sees Q1 gross margins of low 40s vs. 51% consensus. Declines to give Q1 revenue guidance due to economic uncertainty and limited visibility.(PR)

Today’s Markets

• Strong gains in Asia Friday following Thursday’s late-day U.S. comeback and more government rescue money. Nikkei +2.58% to 8,230. Hang Seng +0.09% to 13,256. Shanghai +1.78% to 1,954. BSE Sensex +3.06% to 9,324.
• Stocks are starkly higher in Europe at midday. London +2.4%. Paris +3.6%. Frankfurt +2.7%.
• U.S. futures post healthy gains in the overnight session. Dow +1.95% to 8324. S&P +2.1%. Nasdaq +1.95%. Crude +1.5% to $35.92. Gold +2.9% to $830.40.
• Treasurys are struggling as markets digest the prospect of more U.S. government debt. 30-year -1.49%. 10-year -1.11%. 5-year -0.56%. 2-year -0.09%.

Friday’s Economic Calendar

• 8:30 Consumer Price Index
  9:00 Treasury International Capital
  9:15 Industrial Production
  12:15 PM Fed’s Lacker speaks on economic outlook
• Notable earnings before Fridays’s open: BAC, C, FHN, JCI, PPG

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• U.K. bulks up bank bailout. The U.K.’s initial £500B ($740B) rescue plan failed to prevent the economic downturn from worsening and bank stocks have continued to face heavy losses. So British Prime Minister Gordon Brown, refusing to ’sit idly by and let people and businesses go to the wall,’ has expanded the bailout by insuring banks against loan defaults in exchange for them promising to lend more money and paying a fee. Called the Asset Protection Scheme, the government will commit an extra £100B ($142B) to the industry. Royal Bank of Scotland (RBS) is one of the bailout’s primary beneficiaries (read more below).
• RBS in royal trouble. The U.K. government will increase its holdings in Royal Bank of Scotland (RBS) to almost 70% from 58% after agreeing to swap its preference shares for ordinary ones, while RBS has promised to make £6B ($8.7B) in loans available to U.K. borrowers and will sign a binding agreement about how much it will lend and under what terms. The government’s added intervention comes as the bank forecasts a 2008 loss of £22B-£28B ($31.8B-$40.5B), primarily from goodwill charges associated with its ‘disastrous’ acquisition of ABN Amro and from trading losses. RBS CEO Stephen Hester explained the losses (sort of) by saying ‘we doubled up at the wrong time,’ while PM Brown expressed anger at the bank for taking ‘irresponsible risks.’ Hester didn’t rule out the possibility of complete nationalization, but said it’s a move that both RBS and the government want to avoid. Shares -66.8% premarket.
• Slim’s fat profits on NYT. New York Times Co. (NYT) will pay a steep 14.1% for a much-needed $250M investment from Mexican billionaire Carlos Slim. Slim will receive warrants that can be converted into 15.9M common shares at a strike price of $6.36, a slight discount to where the shares closed on Friday, and the 14.1% notes are due in 2015. Considering NYT’s pressing need for cash, its dwindling options for raising money and the deteriorating advertising market, $250M may not be enough to allow the company to survive as an independent firm. It’s not clear whether Slim is interested in acquiring full control of the company but the Ochs-Sulzberger family, which holds about 19% of NYT’s equity and controls the publisher through super-voting shares, said it’s not interested in selling. If he exercises the warrants, Slim will control around 18% of the company.
• Satyam’s forged bank letters and inflated workforce. Sources close to the Satyam (SAY) investigation say the disgraced Indian outsourcer used forged documents from at least four major banks when it claimed to have a cash balance over $1B. Satyam had forged letters confirming its account balance at HSBC (HBC), Citigroup (C), HDFC Bank (HDB) and ICICI Bank (IBN). According to the Economic Times, Satyam also managed to siphon off money by reporting a staff headcount 15-20% higher than it actually was and paying the fictitious workers ’salary payments.’ The investigation into Satyam’s fraud has been expanded to include two firms connected to the company’s jailed founder, and one of Satyam’s biggest clients has canceled its contract. Other clients are likely to follow suit.
• Treasury toughens TARP oversight. Under pressure to increase lending and to tighten oversight of the government’s rescue program, the Treasury is demanding monthly reports from the banks that received the most capital under TARP. Kashkari sent letters to Citigroup (C), Bank of America (BAC) and 18 other banks asking for data on business and consumer loans, as well as details on purchases of mortgage-backed and asset-backed securities. The first reports, due at the end of January, will cover transactions from October-December, while subsequent reports will be monthly. The results will be made public. (The other 18 banks that received letters: JPM, WFC, GS, MS, PNC, USB, STI, COF, RF, FITB, BBT, BK, KEY, CIT, CMA, STT, MI and NTRS.)
• Chrysler-Fiat deal. Fiat will take a 35% equity stake in Chrysler in a tentative agreement that needs U.S. Treasury approval. The no-cash deal will give Chrysler access to Fiat technology, helping Chrysler make vehicles with fewer harmful emissions. The move would provide both companies with greater economies of scale and geographical reach. Daimler, meanwhile, says it’s still looking to sell its 19.9% stake in Chrysler.
• More gloom and doom from Roubini. Nouriel Roubini sees financial losses in the U.S. from the credit crisis reaching as much as $3.6T, suggesting the banking system is ‘effectively insolvent.’ The system is ‘bankrupt’ in Europe too, says Roubini. He expects commodities to fall another 15%-20%.
• French automakers get a lift. The French government plans to provide ‘massive’ aid to its automobile industry, in the amount of €5B-€6B ($6.6B-$7.9B). Prime Minister Francois Fillon said the industry is facing its worst crisis in decades and aid recipients will have to guarantee they will maintain their industrial operations in France.

Earnings: Tuesday Before Open

• Logitech (LOGI): FQ3 EPS of $0.22 misses by $0.21. Revenue of $627.5M (-15.7%) vs. $699.3M. (PR)
• Suncor Energy (SU): Q4 EPS of $0.46 beats by $0.14. "We’ve had a challenging 2008," said CEO Rick George, and the company is working at "achieving higher, more stable production rates in 2009 and beyond."(PR)

Today’s Markets

• Asia markets closed mostly down. Nikkei -2.3% to 8,066. Hang Seng -2.85% to 12,960. Shanghai +0.4% to 1,994. BSE -2.45% to 9,101.
• In Europe at midday, London -0.5%. Paris -0.2%. Frankfurt -0.45%.
• U.S. futures: Dow -1.0%. S&P -1.1%. Nasdaq -1.2%. Crude -6.8% to $34.01. Gold +1.6% to $853.20.

Tuesday’s Economic Calendar

• 9:00 Bank of Canada Announcement
  10:00 State Street Investor Confidence Index
  11:30 Inauguration Day
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday’s open: AMTD, FAST, FRX, JEF, JNJ, LOGI, PCP, PH, RF, STT, SU
• Notable earnings after Tuesday’s close: CREE, CSX, FULT, IBM, PKG

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• New prez, new banking plan. President Obama’s economic team is rushing to complete a bank-rescue plan that can be twinned with the $825B stimulus package working its way through Congress. Details are still sketchy, but the plan will likely include $50B+ to stem foreclosures, new capital injections for banks and efforts to deal with toxic assets, possibly through the combination of a ‘bad bank’ and government guarantees. In his inaugural speech, Obama called for ‘bold and swift’ action to resolve the crisis that cost the U.S. nearly 2.6M jobs last year. Shares of U.S. banks fell around 20% as some investors feared the government might ultimately need to nationalize the hardest hit financial institutions.
• Geithner grill. Tim Geithner, Obama’s pick for Treasury, will be grilled in Congress today on issues ranging from his past tax troubles to his solutions for fixing ailing financial markets. Still, despite Geithner’s late payment of almost $50,000 in federal taxes and penalties, even critics concede his experience and ability. In prepared remarks, Geithner calls for ‘reform’ of TARP to help small businesses and families that are losing their homes and jobs, and says "the ultimate costs of this crisis will be greater if we do not act with sufficient strength now. In a crisis of this magnitude, the most prudent course is the most forceful course." The Finance Committee will vote on his nomination tomorrow.
• Fiat deal needs federal aid. Fiat announced plans yesterday to take a 35% equity stake in Chrysler in exchange for access to Fiat technology. The deal is not yet final, however, because it’s contingent on Chrysler getting an extra $3B from the government. A Chrysler spokeswoman said the $3B in loans is necessary for the company’s viability. Assuming the government coughs up the extra money, the deal still presents several challenges. The linkup between the two companies is likely to be loose, without the full synergies of a merger, and Fiat’s side of the deal may be cash-free but certainly isn’t risk-free. A continued Chrysler slump could cost Fiat money, time and energy it can’t afford to waste.
• BHP closes mine, cuts jobs. Mining giant BHP Billiton (BHP) will cut 6,000 jobs and close a major nickel mine in Australia with a write-off of $1.6B. BHP had set itself apart from other miners recently by maintaining its production levels but a continued slide in commodity prices has forced the company’s hand on job cuts and mine closures. CFO Alex Vanselow warned more mines could be closed and open mines could reduce output.
• IBM sees sunny ‘09. IBM (IBM) posted better-than-expected Q4 earnings (more details below) and, unlike many of its high-tech rivals, forecasts a rosy 2009. Acknowledging the ‘extremely difficult economic environment,’ IBM expects continued benefits from growing profitability on its software and services businesses. IBM said customers are continuing to sign up for outsourcing and other services contracts despite the global slowdown. According to CEO Samuel J. Palmisano, the company is ‘ahead of pace on our roadmap for $10 to $11 per share’ in 2010.
• Sony’s Stringer battles ‘old guard.’ Tensions are rising at Sony (SNE) over a sweeping restructuring plan announced in December, with details of the plan expected to be announced today or tomorrow. Chairman and CEO Sir Howard Stringer is at odds with an ‘old guard’ of managers in the company’s electronics division. Sources say Stringer wants to cut 16,000 jobs and undergo massive restructuring but has met with resistance. Much of the dispute centers on where the job cuts will fall and in which areas Sony should cut its production costs and rely more on sales of software built into its gadgets.
• SEC wants its Apple a day. Sources say the SEC has opened a review of Apple (AAPL) over its (non)disclosures of CEO Steve Jobs’ health. A review doesn’t necessarily mean the commission sees evidence of wrongdoing, and to bring a case the SEC would probably have to show the company tried to benefit by withholding information about an unambiguous diagnosis. An Apple spokesman declined to comment.
• Citi’s penny payments. Citigroup (C) cut its common stock dividend to $0.01 from $0.16 as required by the government bailout it received in November. The dividend cut will save the company around $817.5M per quarter.
• French bank aid. The French government will provide another €10.5B ($13.6B) in aid to the country’s biggest lenders. In exchange, top execs will have to forgo bonuses.

Earnings: Wednesday Before Open

• Air Products and Chemicals (APD): FQ1 EPS of $0.97 in-line. Revenue of $2.195B (-8.8%) vs. $2.192B. (PR)
• Coach (COH): FQ2 EPS of $0.67 in-line. Revenue of $960.3M (-1.8%) vs. $959M. (PR)
• United Technologies (UTX): Q4 EPS of $1.23 beats by $0.01. Revenue of $14.5B vs. $14.8B. (PR)

Earnings: Tuesday After Close

• Bank of New York Mellon (BK): Q4 EPS of $0.65 misses by $0.04. Assets under custody fall 13% to $20.2T, down 10% from Q3. Securities losses of $1.24B vs. $191M last year and $162M last quarter. Unrealized loss on securities portfolio of $4.1B vs. $2.8B last quarter. (PR)
• Cree (CREE): FQ2 EPS of $0.20 beats by $0.11. Revenue of $147.6M vs. $141.4M. Sees FQ3 EPS of $0.10-0.13 vs. $0.09 and revenue of $128-135M vs. $139M. (PR)
• CSX (CSX): Q4 EPS of $0.90 misses by $0.01. Revenue of $2.7B in-line. (PR)
• Fulton Financial (FULT): Q4 EPS of -$0.58 misses by $0.04. Revenue of $102.3M vs. $150.3M. (PR)
• IBM (IBM): Q4 EPS of $3.28 beats by $0.25. Revenue of $27B vs. $28.15B. Sees 2009 EPS of at least $9.20 vs. $8.75. (PR)
• Packaging Corp. of America (PKG): Q4 EPS of $0.30 beats by $0.05. Revenue of $546M (-5.9%) vs. $568M. (PR)

Today’s Markets

• Asia markets closed broadly down. Nikkei -2.0% to 7,902. Hang Seng -2.9% to 12,584. Shanghai -0.5% to 1,985. BSE -3.5% to 8,779.
• In Europe at midday, London -1.6%. Paris -1.7%. Frankfurt -0.3%.
• U.S. futures: Dow +1.1%. S&P +1.0%. Nasdaq +0.4%. Crude +1.4% to $41.40. Gold +0.4% to $858.70.

Wednesday’s Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  10:00 Senate hearings for Treasury nominee Geithner
  10:30 EIA Petroleum Status
  1:00 PM NAHB Housing Market Index
• Notable earnings before Wednesday’s open: ABT, AMR, APD, ATI, BPOP, COH, HCBK, NTRS, UAUA, USB, UTX
• Notable earnings after Wednesday’s close: AAPL, BNI, DOX, EBAY, FFIV, KMP, NE, PLCM, RJF, SANM, SLM, STX

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• Shareholder sues BoA. A Bank of America (BAC) shareholder has filed a legal suit against the company, seeking class action status on behalf of all shareholders eligible to vote on the acquisition of Merrill Lynch. The suit names Kenneth Lewis and John Thain as defendants and faults the two for failing to disclose the full extent of Merrill’s losses; the Dec. 5 vote to approve the merger was based on an Oct. 31 proxy statement that hadn’t been revised to reflect Merrill’s poor Q4 performance.
• Sony slips. Sony (SNE) warned it will post a ¥260B ($2.9B) annual operating loss on falling demand, a strengthening yen and restructuring costs. The forecast is down from an earlier projection of a ¥200B profit, and far worse than earlier consensus estimates of a ¥100B loss. It will be Sony’s first operating loss in 14 years, and its biggest loss ever, as the company has fallen behind Apple (AAPL) in portable music, Nintendo (NTDOY.PK) in video games and is losing money on its flat screen TVs. As part of the restructuring plan, Sony said it may consolidate TV production in Japan into one plant, but analysts call for more drastic steps to turn the company around. Shares -2.8% in Japan (7:00 ET).
• Rescue buyout for Satyam? Media reports say Indian firm Larsen & Toubro, which holds around a 4% stake in Satyam (SAY), is considering presenting a rescue plan to Satyam’s board. Investment banking and government sources said L&T would put a price on its bid once KPMG and Deloitte, Satyam’s new auditors, release updated audit results. L&T denied the reports. Satyam’s board will begin a two-day meeting today to discuss how to secure emergency funding.
• AIG selling prized business. AIG (AIG) has begun the sale of its prized Asian life insurance unit, and hopes to pull in as much as $20B on the unit to help repay its government loans. The unit boasts 20M policyholders across 13 countries, employs 200,000 tied agents and last year made an aggregate operating profit of around $2B. AIG has expressed an interest in selling 49% of the unit, but would consider a complete sale, and could be willing to accept shares as acquisition currency. Potential bidders include HSBC (HBC), Prudential Financial (PRU) and China Life (LFC).
• Apple regains some shine. Apple (AAPL) posted better-than-expected quarterly earnings yesterday (more details below), giving depressed shares a healthy boost with gains of over 8% after hours. Overseas demand for iPods, Mac computers and iPhones offset a slowdown in U.S. sales, pushing quarterly sales past $10B for the first time vs. consensus estimates of the first profit drop in five years. The company posted a cautious outlook for FQ2, forecasting EPS of $0.90-1.00 vs. $1.13 consensus and revenue of $7.6-8B vs. $8.2B.
• Germany’s ‘Bad Bank Lite.’ The German government is working on a new ‘Bad Bank Lite’ rescue plan that could help the industry get hundreds of billions of euros of bad assets off its books. According to media reports, the government would take on the bad assets of banks and absorb associated losses, and would also get a claim on future gains. A similar model was successfully used with East German banks after reunification in 1990. The government could take as much as €300B-€400B in bad assets, though the banks themselves would choose which assets to divest.
• BoJ forecasts deflation. Bank of Japan voted unanimously to maintain interest rates at 0.1%, and lowered its assessment of the economy. BoJ now sees a longer contraction until recovery starts to kick in by the second half of fiscal 2010. Japan will slip back into deflation during the contraction.
• Retail sales. Retail chain store sales rose 1.1% from a week ago, ICSC reported, and fell 1.8% Y/Y. "Being a low volume month with little incentive to spend will continue to make January a tough month for retailers." According to Redbook, national chain store sales fell 2.5% in the first two weeks of January, worse than the expected -2.2%, noting retailers don’t tend to read too much into January. Shops are building very cautious inventories for the spring season.
• Housing index drops. NAHB’s Housing Market Index came in at a record low of 8 vs. 9 consensus. However its index of prospective buyers rose to 8 vs. 7 in December, while its index of home sales for the next six months inched up to 17 from 16. "Clearly, conditions in the nation’s housing market aren’t getting any better," said NAHB chairman Sandy Dunn, "and they aren’t going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market."

Earnings: Thursday Before Open

• AmerisourceBergen (ABC): FQ1 EPS of $0.73 beats by $0.04. Revenue of $16.9B (+4.6%) vs. $17.2B. (PR)
• AU Optronics (AUO): Q4 EPS of -$0.95 misses by $0.42. Revenue of $1.80B (-62.5%) vs. $1.81B. (PR)
• Baxter International (BAX): Q4 EPS of $0.91 beats by $0.02. Revenue of $3.13B (+4.1%) vs. $3.15B. (PR)
• Fifth Third Bancorp (FITB): Q4 EPS of -$3.82 misses by $3.83. Tier 1 capital ratio of 10.59%. Net loss of $2.2B from goodwill impairment, credit actions, higher credit costs and market valuation adjustments. (PR)
• KeyCorp (KEY): Q4 EPS of -$1.13 misses by $1.11. Revenue of $1.045B (-15.6%) vs. $1.176B. (PR)
• Knight Capital Group (NITE): Q4 EPS of $0.56 beats by $0.18. Revenue of $330.2M (+28.2%) vs. $261.8M. (PR)
• Lockheed Martin (LMT): Q4 EPS of $2.05 beats by $0.13. Revenue of $11.1B (+2.7%) in-line. (PR)
• Nokia (NOK): Q4 EPS of $0.26 misses by $0.02. Revenue of $12.7B (-19.2%) vs. $13.1B. Shares -10.4% premarket.(PR)
• Potash (POT): Q4 EPS of $2.56 beats by $0.28. Revenue of $1.87B (+30.7%) vs. $1.85B. (PR)
• SunTrust Banks (STI): Q4 EPS of -$1.08 misses by $1.15. Revenue of $1.93B (+8.8%) vs. $2.16B. (PR)
• Taiwan Semi (TSM): Q4 EPS of $0.07 in-line. Revenue of $1.96B (-32.1%) vs. $1.95B. (PR)
• UnitedHealth (UNH): Q4 EPS of $0.78 in-line. Revenue of $20.45B (+9,4%) vs. $20.35B. (PR)

Earnings: Wednesday After Close

• Amdocs (DOX): FQ1 EPS of $0.55 in-line. Revenue of $754M (+1.6%) vs. $792M. Sees FQ2 EPS of $0.47-0.51 vs. $0.57 and revenue of $700-720M vs. $793M. (PR)
• Apple (AAPL): FQ1 EPS of $1.78 beats by $0.39. Revenue of $10.17B vs. $9.75B. Gross margins 34.7% vs. 31.9% consensus. Macs 2.52M in line. iPhones 4.36M vs. 4.6M. (8-K)
• Burlington Northern Santa Fe (BNI): Q4 EPS of $1.79 beats by $0.05. Revenue of $4.37B (+3%) in-line. Commits $2.7B in capital expenses for 2009, $150M lower than 2008. (PR)
• eBay (EBAY): Q4 EPS of $0.41 beats by $0.02. Revenue of $2.04B (-6.5%) vs. $2.12B. Sees Q1 EPS of $0.32-0.34 vs. $0.40, and revenue of $1.8-2.05B vs. $2.1B. Skype growth 26% to $145M. Active users +1% to 86.3M. Gross merchandise volume +1% to $11.47B. (PR)
• F5 Networks (FFIV): FQ1 EPS of $0.40 in-line. Revenue of $166M (+7.4%) in-line. While some sales are being pushed into later quarters, others are postponed indefinitely. (PR)
• Kinder Morgan Energy Partners L.P. (KMP): Q4 EPS of $0.24 misses by $0.29. Revenue of $2.29B (-6.4%) vs. $3.41B. (PR)
• Polycom (PLCM): Q4 EPS of $0.42 beats by $0.02. Revenue of $263M (-0.1%) in-line. (PR)
• Seagate Technology (STX): FQ2 EPS of -$0.23 misses by $0.18. Revenue of $2.27B (-33.6%) vs. $2.46B. Sees FQ3 revenue of $1.6-2B vs. $2.19B. (PR)

Today’s Markets

• Asia markets closed lightly up. Nikkei +1.9% to 8,052. Hang Seng +0.6% to 12,658. Shanghai +1.0% to 2,005. BSE +0.4% to 8,814.
• In Europe at midday, London +1.2%. Paris +0.8%. Frankfurt +1.0%.
• U.S. futures: Dow -0.6%. S&P -0.6%. Nasdaq +0.3%. Crude +1.4% to $44.18. Gold +0.01% to $850.20.

Thursday’s Economic Calendar

• 7:00 MBA Mortgage Applications
  8:30 Housing Starts
  8:30 Jobless Claims
  4:30 PM Money Supply
• Notable earnings before Thursday’s open: ABC, AUO, AVT, BAX, BBT, BEN, CIT, CMA, CY, EAT, ESI, EXC, FITB, HBAN, IGT, JNS, KEY, LMT, LUV, MTB, NITE, NOC, NOK, ORI, POT, SHW, STI, TCB, TSM, UNH, UNP, UST
• Notable earnings after Thursday’s close: AMD, CBST, CNI, COF, ED, FII, GOOG, ISRG, MSCC, MSFT, PBCT, SNV, SYNA, TPX, WERN, WFR

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• Pfizer-Wyeth goliath? Pfizer (PFE) is in talks to acquire rival Wyeth (WYE) in a deal that could be worth more than $60B. An acquisition of this size would redraw the boundaries of the global pharma industry, creating a drug giant with combined revenue of around $75B and a strong line of blockbuster drugs. However, the move is a potentially risky one for Pfizer which has been hurt by pricey acquisitions in the past. Sources say the talks have been going on for several months and a deal isn’t imminent, but an acquisition would be in line with an industry-wide consolidation trend.
• GE says goodbye to a brutal year. General Electric’s (GE) profit fell for a fourth straight quarter as the global credit crisis reduced profits at GE Capital. Profits fell 44%, led by a 67% drop at GE Capital and an 86% decline at its lighting and appliance unit. NBC Universal profits fell a moderate 6% (more numbers below). Shares of GE have tumbled about 60% over the past year, bidding farewell to some $200B market cap. Shares +4% premarket.
• Lewis sends Thain packing. John Thain, former CEO of Merrill Lynch, has been shown the door by Bank of America (BAC) CEO Kenneth Lewis. Thain was supposed to take a top spot in the new, combined bank that shareholders approved three weeks ago. However, Lewis began to lose faith in Thain in December, when Lewis learned of Merrill’s unexpectedly large Q4 loss from members of his own merger-integration team rather than from Thain himself, and when Merrill moved up large bonus payments to execs to go through before the deal was completed. Thain’s departure adds to concerns about employee retention and company integration, while some analysts believe the deal could ultimately cost Lewis his job as well.
• GM settles accounting probe. General Motors (GM) has agreed to settle with the SEC over a probe concerning accounting violations, including disclosures related to pensions, derivatives and precious metals. GM agreed to settle the claims ‘without admitting or denying’ them, has promised not to violate certain securities rules again and will not have to pay any fines or penalties. The SEC had been investigating GM’s accounting practices since 2004.
• FDA gives stem cell approval. Geron Corp. (GERN) has received FDA approval to perform the world’s first ever human clinical trial of embryonic stem cell therapy. Geron will begin a trial for patients with acute spinal cord injury. Tests could begin by the summer and while the primary purpose of the trial is to ascertain whether injecting these cells into patients is safe, scientists will also monitor patients for improvements in their injuries. Shares +54% premarket. (Watch a video of how the therapy works.)
• Google earnings beat. Google (GOOG) released better-than-expected Q4 earnings, posting EPS of $5.10 vs. consensus of $4.95 (more details below). Despite an overall gloomy tech sector, the search giant saw strong advertising sales. Aggregate paid clicks increased 18% Y/Y and rose 10% from the previous quarter. CEO Eric Schmidt struck a note of caution, however, warning that Q4 got a boost from the holiday season when many users were searching online for retail bargains. The company also took a $1B writedown on the value of its stakes in AOL and Clearwire.
• Microsoft miss. Microsoft missed earnings expectations (more details below), and said it can’t offer quantitative EPS and revenue guidance for the rest of the year. The announcement sent shares down almost 12% to $17.11, close to decade-long lows. In an effort to save $1.5B annually, the company will cut 5,000 jobs over the next 18 months, though it will continue hiring in key areas. CEO Steve Ballmer explained ‘we’re not used to down markets,’ but many analysts think that’s an insufficient excuse for not taking tougher action.
• Buyers, board mull Satyam fate. U.S.-listed IT and outsourcing firm iGATE Corp. (IGTE) has expressed an interest in taking over some of Satyam’s (SAY) businesses. Other bidders are reportedly interested as well, drawn by Satyam’s diversified client roster, including Nestle (NSRGY.PK) and General Electric (GE). Satyam’s new government-appointed board has been meeting to discuss how to secure emergency funding to tide the company over, and may announce a new leadership team soon.
• Smooth sailing on Geithner confirmation. Tim Geithner won Senate Finance Committee backing on Thursday, with an 18-5 vote in his favor despite an embarrassing past episode of tax underpayments. Senate Majority Leader Harry Reid said he expected the full Senate to confirm Geithner as Treasury Secretary and hopes to hold a vote on Monday. Geithner got an early start on the job, saying ‘a strong dollar is in America’s national interest,’ and warned China against manipulation of its currency.
• New SEC head. The Senate confirmed Mary Schapiro to the SEC yesterday by a unanimous vote. Schapiro promised to take the ‘handcuffs off’ the SEC’s enforcement division and go full force against anyone who violates investors’ trust.
• Mortgage apps drop. Mortgage applications fell 9.8% from a week ago, MBA reported, on a seasonally adjusted basis. The average interest rate on 30-year fixed-rate mortgages increased to 5.24% from 4.89%.
• Housing starts [.pdf]. Housing Starts fell 15.5% in December from a month ago to 550K/year. Permits dropped 10.7% from November to 549K. Completions declined 5.2% to 1.015M/year. From a year ago, the trio are down 45%, 36.2% and 25.7% respectively.
• Jobless claims spike. Initial Jobless Claims soared 62,000 to 589,000, exceeding consensus of 543,000. Continuing claims +97K to 4.607M.

Earnings: Friday Before Open

• GE (GE): Q4 EPS of $0.37 in-line. Revenue of $46.21B vs. $50.07B. Dividend stays. Expects 2009 to be "extremely difficult." (PR)
• Harley-Davidson (HOG): Q4 EPS of $0.34 misses by $0.23. Revenue of $1.29B (-6.8%) in-line. (PR)
• Schlumberger (SLB): Q4 EPS of $1.03 misses by $0.02. Revenue of $6.87B (+9.9%) vs. $6.99B. (PR)
• Xerox (XRX): Q4 EPS of $0.30 misses by $0.04. Revenue of $4.37B (-10.5%) vs. $4.71B. (PR)

Earnings: Thursday After Close

• Advanced Micro Devices (AMD): Q4 EPS of -$0.68 misses by $0.14. Revenue of $1.16B (-33.1%) vs. $1.23B. Gross margin 23%. Sees Q1 revenue down amid very limited visibility and continued corrections in the supply chain. (PR)
• Canadian National Railway Company (CNI): Q4 EPS of $1.21 beats by $0.20. Revenue of $2.2B (+13.3%) vs. $2.04B. Announces 10% dividend hike. (PR) (all figures $Cdn)
• Capital One (COF): Q4 EPS of -$1.59 misses by $19.2. Revenue of $3.17B vs. $4.24B. (PR)
• Consolidated Edison (ED): Q4 EPS of $0.72 beats by $0.04. Revenue of $2.99B vs. $3.27B. (PR)
• Federated Investors (FII): Q4 EPS of $0.51 beats by $0.01. Revenue of $302M (+0.5%) in-line. (PR)
• Google (GOOG): Q4 EPS of $5.10 beats by $0.15. Revenue of $4.22B vs. $4.12B. (PR)
• Intuitive Surgical (ISRG): Q4 EPS of $1.27 in-line. Revenue of $232M (+22.2%) in-line. (PR)
• Microsemi (MSCC): FQ1 EPS of $0.36 in-line by $0.011. Revenue of $131M (+5.7%) in-line. Sees FQ2 EPS of $0.15-0.20 vs. $0.32 and revenue of $104-109M vs $128M. (PR)
• Synaptics (SYNA): FQ2 EPS of $0.84 beats by $0.22. Revenue of $141.5M (+43.5%) vs. $131M. (PR)
• Tempur-Pedic International (TPX): Q4 EPS of $0.17 beats by $0.02. Revenue of $189M (-34.6%) vs. $198M. (PR)
• Werner (WERN): Q4 EPS of $0.26 in-line. Revenue of $491M (-6.7%) vs. $530M. (PR)
• MEMC Electronic Materials (WFR): Q4 EPS of $0.65 beats by $0.04. Revenue of $426M vs. $408M. "The fourth quarter of 2008 saw deteriorating semiconductor and solar market conditions, amid the rapidly weakening global macroeconomic environment." Q1 revenue could decline by as much as 50% from Q4 (Q4 sales=$426M, Q1 consensus=$383M), and gross margin could drop to 20% range. (PR)

Today’s Markets

• Asia markets struggled Friday, led by Japan. Nikkei -3.81% to 7,745. Hang Seng -0.63% to 12,579. Shanghai -0.71% to 1,991. BSE Sensex -1.58% to 8,674.
• Europe opened mixed but moved swiftly to the downside, where stocks remain at midday. London -1.2%. Paris -2.2%. Frankfurt -2.3%.
• U.S. futures fell in tandem with Europe’s weakness. Dow -2% to 7932. S&P -2.1% to 808.50. Nasdaq -1.9%. Crude -2.6% to $42.55. Gold +1.7% to $873.40. Treasurys are higher: 30-year +0.38%. 10-year +0.47%. 5-year +0.23%. 2-year +0.03%.

Friday’s Economic Calendar

• 10:30 EIA Natural Gas Report
• Notable earnings before Friday’s open: GE, HOG, SLB, XRX

Seeking Alpha editor Eli Hoffmann contributed to this post.

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• Tax breaks on the horizon. Obama wants tax cuts to make up 40% of his much-heralded stimulus package, a move that could help garner Republican support for the plan. As much as $300B or more could go to tax breaks for businesses and individuals by altering tax-withholding rules, rather than through a rebate check. Obama and his aides hope that individuals will be more inclined to spend if they get their money faster and in installments along with their pay checks. Several Federal Reserve officials have called a big stimulus plan ‘appropriate’ to help revive the economy. Though they didn’t specify their recommendations for the size of the package, one official made clear that "it’s worth pulling out all the stops."
• Pfizer open to mega-merger. Pfizer (PFE) CEO Jeff Kindler says his company is open to opportunities to increase revenue, including the possibility of acquiring a large rival. The comments from Pfizer, the world’s largest pharmaceutical, stand in contrast to those of its peers who have increasingly focused on small deals and partnerships rather than the mega-mergers that created the current industry giants. Pressured by a forecasted sharp drop in sales, a major Pfizer acquisition could drive a new wave of industry consolidation.
• Fighting deflation any way they can. The Federal Reserve and European Central Bank committed to fighting the effects of possible deflation, just months after inflation was the primary worry. The Fed’s Janet Yellen warned it’s "increasingly likely that inflation will fall to undesirably low levels," and said the Fed will continue with its unconventional monetary policies now that the rate cut cycle has hit rock bottom. Lucas Papademos, vice president of the ECB, said more ECB rate cuts are likely to support the European economy and stave off deflation. The ECB already cut its benchmark rate by 1.75% in the last two months to 2.5%; markets expect another 0.5% cut at the bank’s next meeting in mid-January.
• Sony’s ’sacred cow-slaying.’ According to reports in the Times of London, Sony (SNE) is preparing for drastic cuts, including closures of Japanese factories and major divisions early next month. Sony is facing faltering sales and growing inventory while a strong yen eats into profits. The moves would come in addition to a $1.1B savings plan announced last month. Sony says it has no plans to announce additional restructuring.
• SEC in the spotlight on Madoff fraud. A Congressional hearing opens today as to how Madoff’s $50B fraud managed to escape detection by the SEC and other regulatory bodies. Madoff’s investment firm was examined at least eight times in 16 years by the SEC and other regulators, often armed with reasons to be suspicious. The SEC received emails from a hedge fund calling Madoff’s business practices ‘highly unusual,’ while an industry-run watchdog reported in 2007 that parts of Madoff’s business appeared to have no clients. Madoff himself was interviewed by the SEC at least twice, yet no one caught on to the $50B Ponzi scheme he was operating.
• Instant movies on LG sets. Netflix (NFLX) and LG Electronics announced a new TV set that LG will introduce soon which allows Netflix movies to be streamed directly from the internet without an external box. Netflix, which is looking to provide instant movie-viewing capability to all home-entertainment screens, also announced other partnerships, including one with Microsoft’s (MSFT) Xbox 360. Around 12,000 movies and television episodes are available for instant viewing from the company’s library of over 100,000 titles.
• Rogue goes Relative. Universal Pictures (GE) has sold Rogue Pictures, a film label that produces lower-budget films, to Relativity Media LLC. The deal’s price tag was not disclosed, though sources say around $150M traded hands. This is the latest in the trend of major Hollywood studios shifting away from the specialty movie business.
• U.K. banks may get more help. With the Bank of England expected to cut its benchmark rate to the lowest in its history this week, Governor Mervyn King may be forced to follow the Fed and find other ways to inject money into a recessionary economy. His first step will likely be to expand the £200B ($290B) program allowing banks to swap illiquid securities for government debt, suggesting King will start acting more aggressively to help banks amid criticism that he is too focused on the dangers of reckless lending. "King has made a big deal in the past about not being too generous," said one economist, "and it would be quite a big U-turn for him."

Today’s Markets

• Asia markets closed solidly up. Nikkei +2.1% to 9,043. Hang Seng +3.5% to 15,563. Shanghai +3.3% to 1,881. BSE +3.2% to 10,276.
• In Europe at midday, London +0.3%. Paris +0.1%. Frankfurt +0.5%.
• U.S. futures: Dow -0.07%. S&P -0.03%. Nasdaq +0.1%. Crude +1.5% to $47. Gold -1.8% to $864.

Monday’s Economic Calendar

• Motor Vehicle Sales
  10:00 Construction Spending
• Notable earnings after Monday’s close: MOS

Seeking Alpha editor Eli Hoffmann contributed to this post.

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