Wednesday's Headlines: Stress Tests Ahead
Updated from 7:32 a.m. EDT
(At 4:19 p.m. EDT)
Thanks for the Leaks
At the start of the week, Thursday was circled in red on my calendar as the most important of these five trading sessions, thanks to the expected release of the government's stress test results. Little did I know that the leaked reports could very well make today the busiest trading day of the week.
Even if the surprise was ruined today, there is still plenty to look forward to Thursday. For one, we're going to get the absolute, definitive word straight from the government's mouth. There will be no more "people familiar with the matter" used in stories. There will be no more questions and approximate numbers. We'll get the complete report on all 19 major U.S. banks, and that might finally end this ridiculous streak of reports we've seen leading up to the release.
Of course, as my fellow writer Lauren LaCapra writes,
will likely not tell investors anything they didn't already know. But still, it'll be interesting to see what the banks say in planned conference calls after the official results are released.
Of course, there are a handful of earnings reports that investors will have to comb through.
General Motors
(GM) - Get Report
,
Sirius XM
(SIRI) - Get Report
,
American International Group
(AIG) - Get Report
,
Wendy's
(WEN) - Get Report
and several other companies will report quarterly results ahead of the opening bell.
In addition, investors will have to review reports that hit after the closing bell, including
Cisco Systems'
(CSCO) - Get Report
fiscal third-quarter beat earnings
and
News Corp.'s
(NWS) - Get Report
own third-quarter report.
The flow of economic releases picks up Thursday, with separate reports on first-quarter productivity and unit labor costs, weekly jobless claims, and consumer credit for March coming due.
Additionally,
Federal Reserve
Chairman Ben Bernanke will deliver a speech on banking supervision at the Chicago Fed at 9:30 a.m. EDT.
(At 7:32 a.m. EDT)
So How Much Is It?
As we get closer to the release of the results of the government's stress tests (expected Thursday afternoon), the flurry of news about the financial sector gets more intense.
Over the weekend, billionaire investor Warren Buffett criticized the stress tests and argued that
Wells Fargo
(WFC) - Get Report
,
U.S. Bancorp
(USB) - Get Report
and
M&T Bank
(MTB) - Get Report
do not need additional capital.
Then on Monday, reports surfaced that both
Bank of America
(BAC) - Get Report
and
Citigroup
(C) - Get Report
would need
$10 billion each in new capital
. Those reports were followed by word that the government told Wells Fargo it would need to shore up its own balance sheet.
A report on Tuesday said that 10 of the 19 major U.S. banks undergoing the
need to boost capital levels.
Today, we have separate reports in
The Wall Street Journal
and
Reuters
that U.S. officials are set to
reveal guidelines for how banks can repay funds
from the Troubled Asset Relief Program, or TARP.
Several banks that are undergoing stress tests conducted by the U.S. have said they quickly want to repay funds under the TARP program, in part to prove their financial health, but also to escape from tough rules governing executive pay, dividend payments and stock repurchases, according to the reports.
Bank of America might not be one of the first to repay those TARP funds, though, following reports that regulators have told the bank it needs
about $34 billion in capital
based on the stress test results.
Who knows what the
actual
stress test results will say when they're released tomorrow? Either way, let's be glad we're almost there.
Earnings and Economic Roundup
Wednesday will be another busy day for earnings, with reports from
Garmin
(GRMN) - Get Report
,
Transocean
(RIG) - Get Report
,
Marsh McLennan
(MMC) - Get Report
and
Devon Energy
(DVN) - Get Report
, among others, due before the opening bell.
It will also be another quiet day on the economic front. At 8:15 a.m. EDT,
ADP
(ADP) - Get Report
will release its employment data for April, with economists expecting the report to show a decline of 643,000 jobs, down from
.
ADP, which bills itself as the top source for the widest range of human resources information, payroll processing, and tax and benefits administration, compiles anonymous payroll data for its report, but does not include government jobs data. Instead, the government's nonfarm payrolls data report, due Friday, will include that information. Economists expect that report to show that the economy lost 620,000 last month.
Aside from the ADP employment report, the only other report traders will have to watch is the weekly inventory data from the Energy Department.
