Japanese economy grows, but capex is weak. The Japanese economy grew 3.5% (annualized) in Q1 as rising stock prices made consumers more willing to spend, a partial confirmation of the effectiveness of Prime Minister Shinzo Abe's economic policies. On the other hand, capex fell 0.7% Q/Q on expectations of a 0.7% increase, proof the corporate sector is still skeptical regarding fiscal and monetary authorities' ability to wrest the country from the grip of deflation. The weak read on business investment weighed on Japanese stocks as the Nikkei fell 0.39% — the index did hold the 15,000 level.
IRS chief's resignation demanded, received, accepted. Acting IRS chief Steven Miller resigned Wednesday in the wake of the agency's admission it unfairly screened Tea Party groups seeking tax exempt status from 2010 onward. President Obama called the screening "inexcusable" and emphasized that the IRS was the very last place where he would "tolerate [that] kind of behavior." The White House also released the letter from Treasury Secretary Jack Lew in which Miller's resignation was demanded.
Top Stock News
Tesla back in the news with stock offering, Musk purchase. No sooner had the post-earnings news flow and attendant blanket coverage dried-up than Tesla (TSLA) stole the show anew. The company said Wednesday evening it will offer 2.7M new shares and $450M in convertible notes with an option for the underwriters to purchase an additional 405.5K shares and $67.5M in notes. The real kicker however, was CEO Elon Musk's reported intention to purchase $45M in stock from the public offering and another $55M directly from TSLA in a private placement. Apparently, Musk has $100M worth of faith in his company's prospects. Ultimately, TSLA plans to raise $830M from the offering — the stock rose 7% AH on the news.
Wal-Mart misses estimates. Wal-Mart (WMT) reported Q1 earnings of $1.14 per share on revenue of $114.19B Thursday morning, missing analysts' expectations. Comps fell 1.4% as delayed income tax refunds and challenging weather conspired with lower grocery inflation to weigh on same-store sales. The company said it sees Q2 EPS of $1.22-1.27 versus consensus of $1.29. Shares of WMT were 2% lower in premarket trading.
Cisco surprises to the upside. Cisco (CSCO) defied a generally downbeat analyst community by beating on both the top and bottom line Wednesday evening. The company's report, which "surprised" JMP's Erik Suppiger, "encouraged" RBC Capital's Mark Sue, and "impressed" Evercore's Mark McKechnie, showed 5% growth in U.S. public sector revenues and a gross margin that was 100-200 basis points wider than the company projected. On the call, the company guided for FQ4 EPS of $0.50-$0.52 and revenue growth of 4%-7%, which compares with a consensus of $0.51 and 6.9%. CSCO shares rose 8% AH.
Actavis at center of consolidation push. Actavis (ACT), which has rebuffed overtures from both Valeant Pharmaceuticals (VRX) and more recently Mylan (MYL), may soon receive a bid from Novartis (NVS), the WSJ said. "Intense price competition and fewer opportunities to cash in on patent expirations," are fueling a consolidation scramble in the generic-drug industry, the Journal noted, and ACT — which is also playing the role of acquirer in negotiations with Warner Chilcott (WCRX) — is at the center of the deal-making rumor mill.
13F filings reveal Buffett/Berkshire moves. Berkshire Hathaway's (BRK.A) 13F filing shows Warren Buffett's conglomerate upped its equity holdings by nearly $10B Q/Q in the January-March period. Notable moves include a new 6.5M share position in Chicago Bridge & Iron (CBI) worth ~$400M, divestitures of stakes in Archer Daniels Midland (ADM) and General Dynamics (GD), and additions to existing stakes in Wells Fargo (WFC), IBM, Davita Health Care (DVA), and DirecTV (DTV).
J.C. Penney ushers in post-Johnson era with earnings. Maligned retailer J.C. Penney (JCP) is set to report earnings for the first time since Ron Johnson was relieved of his CEO duties early last month. On May 7, the company said preliminary Q1 results showed revenue coming in at $2.635B, a shade short of estimates as same-store sales fell 16.6% (an improvement from Q4's 31.7% drop). Consensus estimates have fallen since that announcement and the Street is now looking for a loss of $1.14 per share — results are due after the closing bell.
Hedge funds shuffle Apple holdings. Some of the biggest names in the hedge fund industry apparently disagree as to Apple's (AAPL) prospects. Regulatory filings showed David Tepper's Appaloosa Management reduced its stake in the iPhone maker by 40% during Q1 while Julian Robertson's Tiger Management sold-off its entire position. Meanwhile, David Einhorn's Greenlight Capital boosted its stake by 84% after a rather public spat concerning preferred shares in February.
BP calls for intervention in spill claims. BP is calling in the big guns for help mitigating claims tied to the 2010 Gulf oil spill. The company wants British Prime Minister David Cameron to talk with U.S. officials regarding escalating payment claims, some of which BP says are "fictitious" and increasingly "absurd." The company has set aside more than $8B to cover so-called business economic losses.
Top Economic & Other News
Plosser warns on QE. Philadelphia Fed Chief Charles Plosser reiterated calls for a "nuanced" wind down of the Fed's balance sheet at a speech in Milan Thursday. While inflation may be tame for the time being, Plosser said an acceleration in the velocity of money could change the calculus quickly and leave monetary policy struggling to keep pace. Additionally, Plosser noted that although negative Treasury remittances (i.e. capital losses at the Fed) wouldn't likely impede the FOMC's ability to conduct monetary policy, they could indeed tip political sentiment in an undesirable direction just as the country tries to cut the budget deficit.
Demand for physical gold solid in Q1. Prior to April's sharp sell-off in gold futures and the SPDR Gold Trust (GLD), demand for physical gold was robust, as Q1 witnessed the first increase in U.S. demand for gold jewelry in seven years. Overall, jewelry demand rose 12% worldwide in Q1 and demand from China rose 19% to a record 185 metric tons. In terms of bar and coin sales, demand was even stronger, rising 22% in China, 52% in India, and 43% in the U.S. Meanwhile, gold held by ETFs fell 177 metric tons, showing outflows were apparent even before the sell-off. Ultimately, the data show the fundamentals of the gold market are intact, despite moves in the "non-physical market," the World Gold Council said.
Icahn has good quarter. Based on his latest 13F filing with the SEC, Carl Icahn put in a solid Q1 as the value of his holdings rose from $12.9B at the end of Q4 to $16.9B as of March. New additions include loudly trumpeted stakes in Herbalife (HLF) and Dell (DELL) as well as a 3.7M share stake in Nuance Communications (NUAN). Icahn's Netflix (NFLX) stake remains on the books and is now worth more than $1B.
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Mid-Con Energy Update - Volumes And Distributions Set To Flow Higher
In Asia, Japan -0.39% to 15037. Hong Kong +0.17% to 23082. China +1.21% to 2251. India +0.17% to 20247.
In Europe, at midday, London +0.14%. Paris -0.21%. Frankfurt -0.05%.
Futures at 7:00: Dow +0.03%. S&P -0.05%. Nasdaq +0.03%. Crude -0.64% to $93.70. Gold -1.73% to $1371.00.
Today's economic calendar:
3:45 Fed's Plosser: Monetary Policy and Economic Outlook
7:45 Fed's Rosengren: Monetary Policy
8:30 Consumer Price Index
8:30 Initial Jobless Claims
8:30 Housing Starts
9:00 Fed's Fisher: Monetary Policy
9:45 Bloomberg Consumer Comfort Index
10:00 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
12:30 PM Sarah Bloom Raskin: 'Prospects for a Stronger Recovery'
2:30 PM Fed's Williams: Economic and Monetary Policy
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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