Prospect of Fed tapering hits global stocks. Japanese shares (DXJ) slumped 4% after two Fed policy makers, including the dovish Charles Evans, said the U.S. central bank could start tapering as early as next month. The remarks sent the dollar lower against the yen, which in turn helped drag down the Nikkei. The USD-JPY (FXY) was -0.6% at ¥97.08 at the time of writing. Fear of tapering hit other bourses around the world as well, with U.S. stock futures solidly in the red (see below for details).
Wal-Mart eyes $4B Hong Kong supermarket chain. Wal-Mart (WMT) is reportedly considering participating in an auction for Hong Kong supermarket chain ParknShop, which is valued at up to $4B by owner Hutchison Whampoa (OTCPK:HUWHF). The deadline for initial offers is August 16, with KKR (KKR) among those invited to bid. Wal-Mart has over 380 stores in China and could use ParknShop as a platform to expand in the country. The latter operates 345 outlets in Hong Kong, mainland China and Macau.
"Lone Ranger" flop hits Disney's earnings. Disney's (DIS) FQ3 net profit rose 1% to $1.85B and revenue climbed 4% to $11.58B as heavy losses from "The Lone Ranger" offset growth at the company's other businesses. The revenue figure missed expectations, although EPS of $1.03 beat consensus. Despite taking a writedown of up to $190M on "The Lone Ranger," Disney CEO Robert Iger said the company still believes in making big-budget movies, also known as the "tent-pole" strategy. "You still have to make really strong films," Iger said.
Top Stock News
Blackstone explores exit from $4.5B La Quinta. Blackstone (BX) is reportedly exploring a possible sale or IPO of its La Quinta Inns & Suites portfolio company, a budget hotel chain that the private-equity firm values at $4.5B including debt. The valuation compares with the $3.4B that Blackstone paid in 2006 to take La Quinta private. With the P-E firm looking to divest other hotel and real-estate assets, investors speculate that the firm could believe the commercial-property market may be reaching a peak.
BHP CEO unperturbed by end of potash cartel. BHP Billiton (BHP) CEO Andrew Mackenzie has shrugged off the exit of Uralkali (OTC:URALL) from one of world's two main potash cartels, saying the action was a short-term event while his company takes a long-term view. "We've always said that potash is a business which will lose some of its cartel-like structure and become in time globally traded like everything else," Mackenzie said. There were rumors yesterday that Uralkali could re-form the cartel.
Loeb wants Sony to set financial targets for content ops. Daniel Loeb will reportedly give Sony (SNE) breathing room to show how its content and hardware operations benefit each other, but he wants the company to provide detailed plans and set financial targets for the entertainment division. Loeb, whose Third Point owns a 6.9% stake in Sony, expects significant progress by May 2014. The speculation comes after Sony's board rejected Loeb's call to partially spin off the entertainment business.
China punishes six foreign firms over baby formula pricing. China has fined six foreign companies a combined $110M for price fixing and anti-competitive practices in the market for baby formulas. The firms punished include Mead Johnson Nutrition (MJN), which will pay 203.8M yuan ($33.29), and Abbott Labs (ABT), whose penalty is 77M yuan. Analysts reckon that despite the fines, foreign companies could increase their market share in China, because they cut prices after authorities started a probe into their business practices.
Chesapeake gives up New York drilling leases. Chesapeake (CHK) has dropped a legal battle to extend leases to drill for natural gas in New York State. Chesapeake, which obtained the licenses prior to the shale revolution, wanted to retain the leases on the original terms, arguing that NY's five-year moratorium on fracking allowed it to do so. Landowners argued otherwise and wanted to negotiate new terms. Chesapeake's move possibly reflects frustration at NY's policy.
Top Economic & Other News
BOE provides Fed-style forward guidance. As expected, the Bank of England has provided explicit forward guidance for the first time, saying its key lending rate will stay at a record low of 0.5% until the U.K.'s unemployment rate drops to 7% from 7.8% in March-May. The BOE also doesn't intend to "reduce the stock of asset purchases financed by the issuance of central bank reserves" until the unemployment threshold is met. The bank could add to its QE if necessary.
Mexico plans to liberalize energy sector. Mexican President Enrique Pena Nieto is expected to present a plan to Congress today that would overhaul his country's energy sector as part of a wider economic revamp. Nieto wants to allow private companies - especially foreign majors - to produce oil and gas via profit-sharing deals and joint ventures with state-owned Pemex. The reforms would also open power generation to more private participation.
Alpha-Rich Stock Movers and Great Calls
1) On July 24, Mike Williams explained why FreightCar America's (RAIL) shares could double by 2015 as it returned to historic profitability. Shares are +16.3% to date after a strong earnings report this week. Read article »
2) Vince Martin said on June 17 that Cray's (CRAY) sell-off after Q1 earnings was way overdone, offering investors a great deal. Following a strong earnings report last week, shares are +45% from where they were before the article. Read article »
Alpha-Rich Stocks To Watch
1) Rock Tenn Company (RKT). A beat and raise story, Rock Tenn still has plenty of room to run. A recent pullback gives investors a chance to get in for 30% upside in the manufacturer. Read article »
2) Omega Healthcare Investors (OHI). Omega Healthcare continues to outperform, and recent fears over rising interest rates and a Medicare cut have been greatly overdone. REIT expert Dane Bowler sees 30% upside. Read article »
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In Asia, Japan -4% to 13825. Hong Kong -1.5% to 21589. China -0.7% to 2047. India -0.4%.
In Europe, at midday, London -0.9%. Paris -0.2%. Frankfurt -0.7%.
Futures at 6:20: Dow -0.45%. S&P -0.45%. Nasdaq -0.3%. Crude +0.15% to $105.46. Gold -0.5% to $1275.40.
Notable earnings before today's open: AME, AMSC, AOL, ARIA, AVA, AVT, CLH, CRZO, CWH, DUK, DVN, EZCH, FXCM, GEO, GOLD, HFC, HII, KCG, LXP, MITT, MMC, MOLX, MPEL, NAVB, NCT, NICE, NWN, POM, RL, SBGI, SCLN, SMP, SUNE, TTI, TWX, VOYA, VRX, WCG, WRES, XEC, YRCW
Notable earnings after today's close: AGU, ARRS, ARRY, ASIA, AWK, BIOL, BIOS, BKD, BPZ, BWC, CECO, CLR, CODI, CTL, CXO, CXW, DEPO, DK, DMD, DRYS, DVR, DXCM, EDMC, EGLE, ENS, ETE, ETP, EXP, FIO, FTEK, FTK, FTR, GMCR, GNMK, GRPN, GTY, HALO, HNSN, IO, JACK, JCOM, LLNW, MBI, MDLZ, MKL, MNTX, MRIN, MWE, NGVC, NRP, NVTL, OILT, OSUR, PKT, PODD, POWR, PPO, PRU, PRXL, PVA, RBCN, RGP, RIG, RLD, RST, RWT, SCTY, SGI, SN, SSRI, STEC, SXL, SZYM, TCAP, TNGO, TSLA, TTEK, TWTC, UHAL, WGL, WR, WTI
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