Updated from 8:29 a.m. EDT
(At 4:01 p.m. EDT)
Moving to Wednesday
swine flu outbreak
choice to leave the Republican party and join the Democrats garnered the most attention Tuesday, and in likelihood both headlines will continue to be the topic of conversation for days to come.
I know I should probably be more concerned than I am about the swine flu, but at this point I'm really sick of hearing about it and would rather focus on something else. Thankfully, there will be plenty of earnings reports coming on Wednesday that may receive more attention and knock swine flu out of the spotlight, if only temporarily.
, among many others, will be reporting quarterly results before the start of trading Wednesday.
Before that, investors will have to sift through earnings releases scheduled after Tuesday's closing bell, including
, among several others.
Honestly, it's not the same list of heavyweight companies we saw reporting last week. But there are so many different sectors of the market represented in the reports set for release this week that investors, once they manage to get past the swine flu hysteria and stress test rumors, can get a solid idea of how things are playing out.
The economic calendar will also be closely watched Wednesday, especially with the
set to deliver their latest rate decision. With a target rate of 0% to 0.25%, there won't be much for the Federal Open Market Committee to do with rates, but the central bank's policy-making arm may offer comments on quantitative easing and other plans the Fed has.
In addition to the FOMC statement, investors will see the advanced read on first-quarter gross domestic product, which is expected to be revised to a decline of 4.7% from a prior read of decrease of 6.3%. It may also be interesting to watch a $26-billion auction of 7-year Treasury notes.
Other Events to Watch
In addition to earnings and economic news, traders should watch for headlines from a Barclays Capital conference on retail and restaurant companies, with presentations expected from
, among others.
is one of several companies holding its annual shareholder meeting tomorrow.
Of course, news from the financial sector won't go away either, given the
Bank of America
now coming under scrutiny from the government's stress test, I have to believe we'll be hearing a lot more about the financial sector and stress tests leading up the important May 4 release.
Swine Flu Hogging the Headlines
As I said before, the swine flu headlines aren't going away any time soon, unless some sort of miracle containment happens (and that seems highly unlikely, especially as the World Health Organization's Director-General considers that containment of the outbreak "is not feasible").
A lot of media outlets have been examining the move higher by biopharmaceutical stocks like
, which have rallied following news of the outbreak. Plenty of attention has also been paid to travel and leisure stocks, like the airlines, hotels and cruise companies, all of which have been negatively impacted by the news.
While doing research for an article on the swine flu today, I spoke with Paul Nolte, director of investments with Hinsdale Associates, who offered a few Mexico-related stocks worth keeping tabs on. Some of the names with exposure to the so-called ground zero of the swine flu outbreak include
Wal-Mart de Mexico
Nolte does warn that trading different stocks in an environment like this, where the outbreak could become a pandemic, is akin to gambling. However, I'd have to agree that many of these names could come under more pressure if swine flu cases balloon in Mexico, or they could rebound considerably if the outbreak is contained and handled quickly. We may not know the outcome for a considerable amount of time, though.
(At 7:52 a.m. EDT)
More Capital Needed
think that U.S. banks have adequate capital on hand? Did anyone
believe the stress tests would show something different?
It has been the story of the financial sector for more than a year, so it should really come as no surprise that
Bank of America
have been told by regulators
they may need to raise more capital
based on early results of the government's stress tests, according to a report in
The Wall Street Journal
Bank of America's capital shortfall amounts to billions of dollars, people familiar with the bank said, according to the
. But again, was anything but this scenario expected? Both have required nearly $100 billion in capital from the federal government, so it really shouldn't be shocking that both banks are in need of more money.
Yet, both Bank of America and Citigroup shares were dropping in the premarket session. BofA was lately down 8% and Citi was losing 5%, pressuring
futures in early trading.
Could the news get worse for banks? You bet!
reported late Monday that Elizabeth Warren, head of the Congressional Oversight Panel for the Troubled Asset Relief Program, believes the government's stress test uses an economic scenario that is "disturbingly close" to current conditions. Warren argues that a second round of stress tests would need to be performed if the economy worsens.
More Automaker News
After rallying sharply higher Monday,
were set to open nearly 7% lower Tuesday after the GM Bondholder Committee released a statement that blasted the automaker's proposal, arguing that the auto task force would "rather discount the thousands of individual investors and retirees who own GM bonds than undergo earnest negotiations."
Do GM bondholders have a right to be upset? The automaker's survival plan debt-exchange offer to bondholders would give them 10% ownership of the restructured automaker, compared to the nearly 40% ownership given to the United Auto Workers union. If bondholders remain adamant in their position and no alterations are made to GM's plan, analysts expect the company will have no choice but to file for bankruptcy protection come June 1.
The Wall Street Journal
reported that the UAW will eventually own 55% of the stock in a restructured
under a deal reached by the union and the automaker.
Securities and Exchange Commission
froze the assets of California financier
and two of his firms. The SEC has accused Pang of defrauding investors of hundreds of millions of dollars.
Earnings and Economic Roundup
by a nickel, although revenue came in below expectations. The company also offered full-year earnings guidance that was mostly in line with the Thomson Reuters average estimate, although the revenue guidance of $44 billion to $46 billion was slightly below the $46.1 billion Wall Street expects. Still, the stock was 1.5% higher in premarket trading.
Several other companies beat earnings expectations early Tuesday, including
, among several others.
The economic docket is pretty slim Tuesday, with the February report on the S&P/Case-Shiller home price index and the April read on consumer confidence coming later in the day.