Ballmer plans Microsoft reorganization. Microsoft (MSFT) CEO Steve Ballmer is reportedly planning to reorganize the company as he looks to foster better co-operation between product teams. Under one possible plan, Microsoft would put more focus on devices and services, and cut the number of divisions from eight to four. The groupings would be enterprise business, hardware, applications and services, and operating-systems. The speculation follows news that CIO Tony Scott has left the company.
AIG, Prudential, GE Cap to be labeled systemically important. As expected, the Financial Stability Oversight Council has proposed to designate AIG (AIG), Prudential Financial (PRU) and GE Capital (GE) as systemically important. Prudential is evaluating whether to appeal the proposed determination, although AIG won't. The Fed has yet to finalize its requirements for systemically important non-bank financial companies, but they're expected to include stress tests and higher capital holdings.
Top Stock News
Nikkei, European shares rise. The Nikkei continued with its volatile ways today, jumping 2.05% after its sharp fall yesterday and as the yen weakened against the dollar. The moves follow soft U.S. manufacturing data, which eased fears about the Fed's QE program and also helped to boost European stocks. Time was when bad economic numbers sent shares lower and vice versa. Chinese shares dropped noticeably, partly due to investors taking profits on small-caps.
Dollar General profit rises 3.3% but warns on outlook. Dollar General's (DG) Q1 net profit edged up 3.3% to $220M as the discount retailer's earnings pretty much hit expectations, with EPS coming in at $0.71 and revenue climbing 8.5% to $4.23B. Same-store sales rose 2.6% as consumables showed strength, but gross profit dropped 89 bps to 30.6% due to an increase in markdowns and a less favorable mix. Dollar General expects growth to moderate and profit to be squeezed.
GM to rejoin S&P 500. GM (GM) is finally returning to the S&P 500 after an absence of four years, with the auto giant set to replace Heinz (HNZ) in the index and in the S&P 100 as of the close of trading on Thursday. The move follows Heinz's acquisition by Berkshire Hathaway (BRK.A) and 3G Capital. Meanwhile, AIG (AIG) will replace Baker Hughes (BHI) in the S&P 100. GM's shares rose 3.2% in post-market trading.
U.K. discusses idea of splitting up RBS. A British parliamentary report could raise the idea of breaking RBS (RBS) up into a good bank that can be privatized and a state-run bad bank that would hold the company's toxic assets. However, the report is unlikely to wholeheartedly endorse the idea. One problem is that Chancellor George Osborne has said that splitting RBS would require the government to totally nationalize the bank first at a cost of up to £10B.
Huntington Ingalls wins $3.33B navy order. Huntington Ingalls (HII) has obtained a $3.33B booking from the U.S. navy to build five DDG 51 destroyers. General Dynamics (GD) has received a $2.84B deal for four of the warships plus an option for an additional vessel. Meanwhile, Huntington Ingalls CEO Mike Petters has said that the company is on course to increase its profit margins and keep distributing dividends over the coming years despite what are expected to be flat revenues.
AstraZeneca freezes development of arthritis pill. AstraZeneca (AZN) is ending the development of rheumatoid arthritis pill Fostamatinib following mixed results in Phase II and III trials. It's the latest blow to AstraZeneca as it looks to overcome its patent cliff, with the firm also having suffered setbacks with depression and diabetes treatments. AstraZeneca will take a charge of $140M and return the rights to Fostamatinib to Rigel Pharmaceuticals (RIGL), whose shares were -6.8% premarket.
STMicro rises on upbeat CEO outlook. STMicroelectronics' (STM) shares were +4.4% at lunchtime in Paris after CEO Carlo Bozotti told Le Figaro that he is targeting order growth of 5-10% this year following an increase of 5% in Q1. The plan is to eventually achieve annual turnover of $9B (the figure was $8.49B in 2012).
Top Economic & Other News
Japan PM to push funds to boost stock focus. Japanese Prime Minister Shinzo Abe is reportedly poised to push his country's public pension funds, which manage $2T, to boost their equity allocations and consider alternative investments. The Government Pension Investment Fund has already been reported to be considering more of a focus on stocks. The problem is that the subsequent reduction in the funds' domestic bond holdings could boost interest rates, a consequence the government needs to be wary of given its massive debt.
Spain enjoys more good economic news. Things seem to be looking up in Spain, where the number of people filing for jobless benefits fell for the second consecutive month in May, dropping by 98,265, or 2%, to 4.89M. The fall was the largest ever for the month, although the seasonally adjusted decline was a mere 265. Still, the overall drop came in tandem with a sharp improvement in Spain's manufacturing PMI.
Bankruptcy an option as Detroit finalizes overhaul. Detroit emergency manager Kevyn Orr intends to ask the city's unions and creditors for concessions as part of a restructuring plan for its $17B of liabilities. It's unclear whether the plan would avert bankruptcy or be used as a basis for a court supervised reorganization. Detroit has a $30M+ debt payment due on June 15, but Orr could reportedly decide not to make it.
Crazy as it seems, Latvia could join euro. The eurozone may be experiencing the region's deepest crisis since World War II, but there are still countries that are considering joining it. Tomorrow, the European Commission is expected to recommend that Latvia become the bloc's 18th member at the start of 2014 after it was deemed to have met all the requirements such as low inflation and debt. Latvia's leadership is apparently keen on euro entry, the populace less so.
RBA holds key rate at 2.75%. As expected, the Reserve Bank of Australia has held its key interest rate unchanged at 2.75%, but indicated that it could lower rates further after surprising markets in May with a cut. "The inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand," the RBA said. The Aussie (FXA) was -0.9% vs the U.S. dollar at the time of writing.
Alpha-Rich Stock Movers and Great Calls
1) Activision Blizzard drifted lower Friday, closing -3.7% after hedge fund analyst Josh Burwick warned that the legs of ATVI's "three-legged stool" (Call of Duty, Skylanders, and World of Warcraft) are starting to wobble.
2) Hydrogenics Corp. (HYGS) is now +47.2% since May 23, when Joe Springer called it "one of the most undervalued stocks in the market."
Alpha-Rich Stocks To Watch
1) M/I Homes (MHO). Low-risk growth and exposure to stable markets means MHO might not be undervalued for long. Housing sector expert Money Investor sees a compelling stand-alone or takeout target play.
2) American Realty Capital Properties (ARCP). With its latest accretive acquisitions and a share price drop, ARCP has become attractive again, writes REIT expert Dane Bowler.
3) Alaska Communications (ALSK). Hedge fund trader Harry Long finds gold in ALSK's cash flow and valuation after the telecom's dividend cut. The combination and ALSK's size put it in the acquisition sweet spot.
Alpha-Rich articles are the best long and short ideas on Seeking Alpha. SA Pro subscribers receive early access to these Alpha-Rich articles, which often move markets. For more information about SA Pro and becoming a subscriber, click here.
In Asia, Japan +2.05% to 13534. Hong Kong flat at 22286. China -1.2% to 2272. India -0.3% to 19546.
In Europe, at midday, London +0.6%. Paris +0.2%. Frankfurt +0.2%.
Futures at 7:00: Dow -0.1%. S&P -0.1%. Nasdaq flat. Crude -0.5% to $92.95. Gold -0.8% to $1400.00.
Notable earnings before today's open: DG
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