Bernanke in the Spotlight
Federal Reserve Chairman Ben Bernanke is back on the hot seat today and Wall Street, meanwhile is sifting through some big earnings reports.
What look to be strong earnings from Goldman Sachs improved early sentiment. Goldman Sachs, as expected, handily beat earnings estimates with profits of $2.85 billion, or $6.13 per share, compared to an estimated $4.37 per share. The numbers included $1.71 billion in losses related to leverage loans, which in part was offset by a gain from the sale of wind power company Horizon Energy.
Goldman talks to investors at 11 a.m.
Bear Stearns , meanwhile, reported worse-than-expected results, burned by exposure to the subprime mortgage mess. Also not a surprise, but the stock is moving lower. Bear Stearns reported a 61% decline in net to $171.3 million or $1.16 per share. Analysts had expected $1.78 per share. It had a 10 a.m. call.
Two days after Bernanke got a vote of confidence from the markets for the Fed's half point rate cut, he and Treasury Secretary Henry Paulson appear on Capital Hill for a hearing on the mortgage mess. The House Financial Services Committee hearing started at 10 a.m. and Bernanke will take questions.
Bernanke so far has told the committee more mortgage delinquencies and foreclosures are expected. He said the market for mortgages has adjusted and that markets tend to "self-correct." Bernanke repeated the Fed's view that financial markets turmoil increased the risk of uncertainty for the economy.
Oil is firmer this morning and the dollar trades near record lows. Gold continues to rise, meanwhile, jumping $11 this morning to $740 an ounce.
Interesting to see some high profile Middle East investments being made in the financial world today in a petrodollar buying spree.
Borse Dubai joined Nasdaq to buy the Nordic exchange OMX. As part of the deal, Borse Dubai gets a 20% stake in Nasdaq and Nasdaq gets to run OMX. The Nasdaq then sells Borse Dubai its 20% stake in the London Stock Exchange. The Qatar Investment Authority, meanwhile, is angling to scuttle the OMX deal and builds its own position in LSE.
"The most significant things here are clearly Nasdaq getting control of the OMX and getting rid of its London Stock Exchange stake. Secondly, you have a state-owned exchange in the Middle East for the first time ever investing in a major stake in a U.S. exchange. Some in Congress are already voicing opposition, bringing back memories of the failed Dubai ports deal," said CNBC's Scott Wapner.
In another deal, Carlyle Group said it is selling a 7.5% stake in its general partnership to Mubadala Development Co, an Abu Dhabi government investment arm.
FedEx , meanwhile, threw a word of caution into its earnings report and reduced its full year forecast. The company reported a three percent increase in profits with net income of $494 million but the company trimmed its expectations for full year profits by four percent because of the weaker economic environment.
The company is viewed as a bellwether for economic activity. Its chief financial officer Alan Graf said the economy is growing at a moderate pace but financial market volatility and high energy costs increased uncertainty and the weakness in housing continues.
The National Retail Federation forecasts today the smallest gain in holiday retail sales since 2002. In its annual forecast for the holiday season, the trade group predicts a 4% increase in sales to $474.5 billion in November and December. That compares to last year's 4.6% increase. The 10-year average had been a gain of 4.8%,
As we've said in the past, everybody, but everybody has a view on the Fed.
Here's one that could be important as we listen to today's testimony. In a statement that praised the Fed's half point rate cut, Rep. Barney Frank, chairman of that House Financial Services Committee, took this stand:
"I am surprised, however, that their continued concern about inflationary risk outweighs what I believe to be growing risks to sustained growth. I hope that, in this instance, markets and consumers will pay more attention to what the FOMC did than to what it said."
It could be an interesting morning. The topic of the hearing is legislative and regulatory options for minimizing mortgage foreclosures. Consumer advocates and industry representatives will also be there to discuss ways to help homeowners avoid foreclosure.
We've had a great deal of access to former Fed Chairman Alan Greenspan at CNBC and have been able to take an incredibly personal look at a man who maintained his privacy and often withheld his opinion as chairman of the Federal Reserve.
After watching Greenspan testify for years, it was interesting to hear his thoughts on the Congressmen he was speaking before. The statement below was made about taxes and spending and aired during "Squawk Box" Monday. Bernanke may already find it feels familiar.
"On the issue of fiscal policy, people were just not listening to what I was saying. I'm not saying anything different from what I said back then. Indeed, I went through testimony after testimony with glassy-eyed congressmen and senators out there. As I said, 'we're running into a fiscal train wreck,' did they respond? No," said Greenspan, in a simulcast interview with the "Today Show's" Matt Lauer.
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