- MSFT, Yahoo reach search deal. At long last, sources say Microsoft (MSFT) and Yahoo (YHOO) have reached a search deal and will announce it within the next 24 hours. Yahoo will use Microsoft's Bing search-engine technology on its own sites, including the Bing brand, and will supply search text ads on its sites and some of Microsoft's. The deal appears to be structured as a revenue share with no upfront fee, with Yahoo taking 110% the first two years and 90% in the third. The deal is on a smaller scale than previously envisioned, but both Microsoft and Yahoo are hoping that a combined attack will be more effective against Google (GOOG). UPDATE: Microsoft, Yahoo officially announce the deal. Premarket: MSFT +0.8%, YHOO -5.8% (8:30 ET).
- Say-on-pay makes headway. A congressional committee approved a bill that would put new restrictions on executive pay, giving shareholders the right to cast non-binding annual votes on executive compensation and special pay packages, and enabling regulators to ban pay structures that incentivize inappropriate risk-taking. The House of Representatives is expected to vote on the measure on Friday.
- Santander plans bank IPO. Banco Santander (STD) will spin off its Brazilian unit in an initial public offering that could raise at least $3B, creating one of the biggest publicly listed banks in Latin America. The listing will likely occur in the next three months.
- Nasdaq backs flash trading ban. As the debate on flash trading heats up, Sen. Charles Schumer said the Nasdaq Stock Market supports a ban on the trading practice and only 'reluctantly' started offering flashes early last month. Meanwhile, the SEC was apparently investigating the practice even before Schumer's letter calling for action, and may move to ban flash trading 'within the next couple of weeks.'
- Sprint buys Virgin Mobile. Sprint (S) agreed to buy Virgin Mobile USA (VM) for $5.50/share ($483M) in an all-stock deal, and will retire $205M of Virgin's debt. Sprint already owns 13.1% of Virgin, which offers cheap prepaid wireless plans. Sprint is hoping the cheaper, non-contract service will help stem a tide of customer defections.
- IBM buys software maker. IBM (IBM) will buy SPSS for $1.2B, a 42% premium on SPSS' closing price on Monday. The deal, the latest in a series of IBM acquisitions, expands IBM's software portfolio and is a further sign of improvement in the technology sector deal market. The deal should be completed by year-end.
- NJ sues Merrill. New Jersey is suing Merrill Lynch, alleging the firm sold the state's investment division $300M in preferred stock based on misleading information. New Jersey officials said if the state's investment unit "had known Merrill’s true financial condition, it would not have participated in the January 2008 offering and would not have agreed to a conversion in July 2008."
- GM returns to car loans. After a year-long hiatus, General Motors plans to get back into the car-leasing business and is said to be eyeing August 1 as its re-entry date. GM has said credit availability is still hurting auto sales, and that its exit from the leasing business forced many customers to defect to other automakers. Rivals including Ford (F) and Toyota (TM) have scaled back their leasing but haven't pulled out of the business entirely.
- Apple bars Google Voice app. Apple (AAPL) banned two iPhone applications based on Google Voice (GOOG) as the rivalry between the two tech giants grows. An Apple representative said some of the applications offered functions too close to what the iPhone already provides.
- American Air expects alliance approval. American Airlines (AMR) said it expects to win approval by October to form an alliance with British Airways (OTC:BAIRY) and Iberia. The airline is betting on intra-alliance competition and global partnerships to help it survive.
- KKR preps Dollar General IPO. Kohlberg Kravis Roberts is reportedly in advanced preparations for an initial public offering of Dollar General and will also serve as one of the lead underwriters of the deal. It marks the first time KKR will underwrite one of its own IPOs as it tries to strengthen its reputation ahead of its own planned listing.
- SEC files fraud charges. The SEC filed suit against four individuals, accusing them of fraud in connection to over $197M raised from at least 900 investors nationwide which was funnelled to a commercial real estate venture. The SEC contends the defendants made "material misrepresentations to investors," including false claims about the use of the funds and the safety of investments.
- Home prices improve (.pdf). The S&P/Case-Shiller 20-City Home Price Index was -17.1% in May vs. last year, narrower than last month's 18.1% drop, and the fourth monthly improvement in a row as "the pace of descent in home price values appears to be slowing." The 0.5% month-on-month increase was the first uptick in three years.
- Consumer confidence. Conference Board's July Consumer Confidence came in at 46.6 vs 49.0 consensus, down from 49.3 in June. The decline was aggravated by a worsening job market, as the percentage of consumers claiming jobs are hard to get rose sharply. According to ABC's poll, consumer confidence registered at -47, up from last week's -50 and breaking the -50 threshold for the first time since mid-June. Twenty-six percent of Americans say it's a good time to buy things, up from 22% last week, while 44% rate their personal finances positively.
- Retail sales. Chain store sales fell 1.6% in the first three weeks of July, Redbook said, worse than the -0.9% expected. According to ICSC, weekly sales were up 1%, but July sales will be off around 5.5% Y/Y with "leaner clearance than last year hurting the reported sales pace."
Earnings: Wednesday Before Open
- American Tower (AMT): Q2 EPS of $0.14 misses by $0.03. Revenue of $423M (+7.5%) vs. $414M. (PR)
- ArcelorMittal (MT): Q2 net loss of $792M ($0.57/share) vs. +$5.84B a year ago and vs. consensus of +$336M. Sales of $15.2B (-60%). Sees Q3 Ebitda of $1.4-1.8B. Says it achieved annualized fixed-cost cuts of $8.4B by the end of Q2. Shares -4.2% in Amsterdam. (Bloomberg)
- Arrow Electronics (ARW): Q2 EPS of $0.31 beats by $0.02. Revenue of $3.4B (-22%) in-line. (PR)
- Brookfield Properties (BPO): Q2 FFO of $0.38 beats by $0.03. Revenue of $619M (-13.5%) vs. $527M. (PR)
- Coca-Cola Enterprises (CCE): Q2 EPS of $0.67 beats by $0.16. Revenue of $5.9B (-0.4%) vs. $6B. Issues upside EPS guidance for FY '09 of $1.44-1.49 vs. $1.33 consensus. Shares +5.9% premarket (8:00 ET). (PR)
- EQT Corp. (EQT): Q2 EPS of $0.20 misses by $0.03. Revenue of $238M (-29%) vs. $236M. (PR)
- General Dynamics (GD): Q2 EPS of $1.61 beats by $0.04. Revenue of $8.1B (+11%) in-line. Shares +2% premarket (8:00 ET). (PR)
- Hecla Mining (HL): Q2 EPS of $0.00 beats by $0.02. Revenue of $75M (+10.5%) vs. $53M. Shares +2% premarket (8:20 ET). (PR)
- Hess (HES): Q2 EPS of $0.31 beats by $0.30. Revenue of $6.8B (-42%) vs. $7.4B. Shares +1.6% premarket (8:00 ET).(PR)
- Honda (HMC): FQ1 net profit fell 96% to ¥7.56B ($79.9M), vs. consensus of -¥56.4B, and vs. a FQ4 net loss of ¥186.1B. Sees full-year earnings of ¥55B, down 60% from last year, but 38% higher than its previous outlook of ¥40B. Revenue of ¥2T (-30%). (WSJ)
- Hospira (HSP): Q2 EPS of $0.73 beats by $0.13. Revenue of $957M (+6.1%) vs. $878M. (PR)
- IAC/InterActiveCorp (IACI): Q2 EPS of $0.02 misses by $0.07. Revenue of $340M (-4%) vs. $335M. Shares +0.5% premarket (8:10 ET). (PR)
- Jones Apparel Group (JNY): Q2 EPS of $0.29 beats by $0.22. Revenue of $804M (-3%) vs. $777M. Shares +9.5% premarket (8:10 ET). (PR)
- MeadWestvaco (MWV): Q2 EPS of $0.22 vs. consensus of $0.01 (may not be comparable). Revenue of $1.4B (-16%) vs. $1.5B. (PR)
- Medco Health Solutions (MHS): Q2 EPS of $0.69 beats by $0.04. Revenue of $14.9B (+17%) vs. $14.5B. (PR)
- Moody's (MCO): Q2 EPS of $0.43 beats by $0.03. Revenue of $451M (-7.6%) vs. $427M. (PR)
- New York Community Bancorp (NYB): Q2 EPS of $0.16 vs. consensus of $0.25 (may not be comparable). Non-performing assets of $341.6M at the end of June, representing 1.04% of total assets, vs. $176.8M, or 0.55% of total assets, at the end of March. (PR)
- Nissan (OTCPK:NSANY): FQ1 net loss of ¥16.5B vs. a net profit of ¥52.8B a year ago, and vs. consensus of -¥108.5B. Last quarter Nissan posted a ¥276.9B loss. Sales of ¥1.51T (-36%). Still sees full-year loss of ¥170B. Sources say Nissan will announce today a new China plant capable of producing 240,000 vehicles/year. (WSJ)
- Penske Automotive Group (PAG): Q2 EPS of $0.22 beats by $0.07. Revenue of $2.3B (-30%) vs. $2.4B. (PR)
- Praxair (PX): Q2 EPS of $0.96 misses by $0.03. Revenue of $2.3B (-26%) vs. $2.1B. (PR)
- Qwest Communications International (Q): Q2 EPS of $0.13 beats by $0.03. Revenue of $3.1B (-9%) in-line. (PR)
- SAP AG (SAP): Q2 net profit of €423M vs. €408M a year ago and consensus of €385M. Revenue of €2.58B (-10%) vs. €2.64B. Software revenue of €543M (-40%) vs. consensus of €556M. Operating margin 27.7%. Sees full-year operating margin of 25.5-27%, up from previous guidance of 24.5-25.5%. Shares +1.8% in Frankfurt. (DJ)
- Sealed Air (SEE): Q2 EPS of $0.34 in-line. Revenue of $1B (-20%) vs. $1.1B. (PR)
- Scotts Miracle-Gro Company (SMG): FQ3 EPS of $2.32 beats by $0.07. Revenue of $1.3B (+9%) in-line. (PR)
- Sprint Nextel (S): Q2 EPS of -$0.13 misses by $0.11. Revenue of $8.1B (-10%) in-line. (PR)
- Wyndham (WYN): Q2 EPS of $0.41 beats by $0.04. Revenue of $920M (-19%) vs. $917M. Issues downside Q3 EPS guidance of $0.53-0.57 vs. $0.58 consensus. Issues in-line guidance for FY '09, sees FY '09 revenue of $3.5-3.9B vs. $3.6B consensus.
Earnings: Tuesday After Close
- American Financial Group (AFG): Q2 EPS of $1.09 beats by $0.16. Revenue of $1.1B (+8%) vs. $815M. (PR)
- Brandywine Realty Trust (BDN): Q2 FFO of $0.56 beats by $0.10. Revenue of $146M (-3%) in-line. Raises full-year FFO to $1.75-1.80 from $1.60-$1.74, vs. $1.71. (PR)
- Carter's (CRI): Q2 EPS of $0.23 beats by $0.17. Revenue of $318M (+5%) vs. $300M. Sees Q3 EPS growth in mid to high single digits. (PR)
- Chicago Bridge & Iron (CBI): Q2 EPS of $0.45 beats by $0.05. Revenue of $1.2B (-14%) in-line. (PR)
- Dreamworks Animation SKG (DWA): Q2 EPS of $0.30 beats by $0.14. Revenue of $132M (-7%) vs. $117M. (PR)
- Fidelity National Information Services (FIS): Q2 EPS of $0.42 beats by $0.06. Revenue of $835M (-4%) vs. $832M. Raises full-year EPS view to $1.71-1.75 vs. $1.62. (PR)
- FMC Technologies (FTI): Q2 EPS of $0.84 beats by $0.23. Revenue of $1.1B (-6%) in-line. Sees full-year EPS of $2.55-2.65 vs. $2.36. (PR)
- Hertz Global Holdings (HTZ): Q2 EPS of $0.12 beats by $0.06. Revenue of $1.8B (-23%) in-line. (PR)
- Integrated Device Technology (IDTI): FQ1 EPS of $0.02 beats by $0.02. Revenue of $116M (-38%) vs. $113M. (PR)
- Life Technologies (LIFE): Q2 EPS of $0.79 beats by $0.13. Revenue of $833M (+126%) vs. $803M. Sees full-year EPS of $2.70-2.80 vs. $2.63. (PR)
- Massey Energy Company (MEE): Q2 EPS of $0.24 beats by $0.08. Revenue of $698M (-16%) vs. $661M. (PR)
- McKesson (MCK): FQ1 EPS of $1.06 beats by $0.20. Revenue of $27B (flat) in-line. (PR)
- Nalco Company (NLC): Q2 EPS of $0.11 misses by $0.13. Revenue of $913M (-14%) vs. $950M. (PR)
- Norfolk Southern (NSC): Q2 EPS of $0.66 beats by $0.02. Revenue of $1.9B (-33%) vs. $2.1B. (PR)
- Panera Bread Company (PNRA): Q2 EPS of $0.65 beats by $0.01. Revenue of $331M (+3%) in-line. Company targets 15-20 new unit openings in Q3. (PR)
- Parametric Technology (PMTC): FQ3 EPS of $0.03 misses by $0.13. Revenue of $226M (-17%) vs. $223M. Sees Q4 EPS of $0.25-0.30 vs. $0.31. (PR)
- Psychiatric Solutions (OTCPK:PSYS): Q2 EPS of $0.63 beats by $0.07. Revenue of $471M (+6%) vs. $469M. Reaffirms full-year EPS of $2.24-$2.32 vs. $2.23. (PR)
- Questar (STR): Q2 EPS of $0.54 in-line. Revenue of $613M (-26%) vs. $525M. (PR)
- SBA Communications (SBAC): Q2 EPS of $0.25 beats by $0.42. Revenue of $136M (+22%) vs. $137M. (PR)
- STMicroelectronics (STM): Q2 EPS of -$0.36 misses by $0.04. Revenue of $2B (-16%) vs. $1.8B. Sees Q3 revenue of $2.07B-2.27B vs. $2.02B. (PR)
- Superior Energy Services (SPN): Q2 EPS of $0.35 misses by $0.09. Revenue of $361M (-21%) vs. $392M. (PR)
- TECO Energy (TE): Q2 EPS of $0.29 beats by $0.04. Revenue of $825M (-7%) vs. $864M. (PR)
- THQ (THQI): FQ1 EPS of $0.10 beats by $0.18. Revenue of $244M (+77%) vs. $203M. Sees Q2 revenue of $85M-95M vs. $123M. (PR)
- Total System Services (TSS): Q2 EPS of $0.27 in-line. Revenue of $415M (-4%) vs. $401M. Sees full-year decline in revenues of 3-5% and in net income of 11-13%. (PR)
- Trimble Navigation (TRMB): Q2 EPS of $0.31 misses by $0.01. Revenue of $290M (-23%) vs. $300M. Sees Q3 EPS of $0.25 vs. $0.27. (PR)
- Western Digital (WDC): FQ4 EPS of $0.76 beats by $0.48. Revenue of $1.9B (-5%) vs. $1.6B. (PR)
- XL Capital (XL): Q2 EPS of $0.96 beats by $0.34. Revenue of $1.73B (-19%) vs. $1.71B. (PR)
Asian markets were broadly down, but Europe is off to a strong start. U.S. futures have dipped into negative territory.
- In Asia, Nikkei +0.3% to 10,113. Hang Seng -2.4% to 20,135. Shanghai -5% to 3,266. BSE -1% to 15,173.
- In Europe at midday, London +1%. Paris +1.75%. Frankfurt +2%.
- Futures: Dow -0.2%. S&P -0.2%. Nasdaq -0.1%. Crude -2.1% to $65.83. Gold -0.2% to $937.10.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
8:30 Durable Goods Orders
8:30 Fed's Dudley speaks on economic growth
10:30 EIA Petroleum Status
2:00 PM Fed's Beige Book
- Notable earnings before Wednesday's open: AMT, ARW, BPO, BWA, CCE, COP, EQT, GD, HES, HL, HSP, IACI, JNY, MCO, MDCO, MHS, MT, MWV, NYB, PAG, PX, Q, RCL, S, SAP, SEE, SLAB, SMG, SO, SPIL, TEL, TLM, TWC, TWX, UMC, VPHM, WLP, WPI, WYN
- Notable earnings after Wednesday's close: AEM, AFL, AIZ, AKAM, AMKR, AVB, BARE, BMR, CBG, CCI, CDNS, CERN, CLF, CTV, DRE, ELY, EQR, ESRX, FISV, FLEX, FLS, FMC, GG, GMCR, GNK, HBI, HIG, HIW, HLX, LNC, LRCX, LSI, MTZ, O, OI, ORLY, RYL, SYMC, TER, TRN, TSO, URI, V, VAR, WLL, XRAY
Seeking Alpha editor Eli Hoffmann contributed to this post.
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