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Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Honda 2nd-Quarter Profit Falls on Derivative Costs [Bloomberg]

Summary: Honda's Q2 sales grew 12%, but net income fell 4.3% to 127.9 billion yen ($1.1b), or 70.5 yen/share, on a 30.6 billion yen ($257m) loss on derivatives "mainly due to fluctuations in fair value of interest rate swaps under non- operating income and expenses." Earnings came in short of its own estimate of 131.6 billion yen, and also missed the 138.6 billion yen estimate of analysts surveyed by Bloomberg. This is the fourth time in the past two years that Honda has suffered derivatives losses that erased a 43.7 billion yen foreign exchange profit in Q2 from the weaker-than-expected yen. Honda raised its forecasts for full-year net income (+1% to 555 billion yen), operating profit (+9.3% to 820 billion yen) and sales (+2.8% to 11 trillion yen), citing the weak yen and strong sales of compact cars. To the delight of investors, Honda raised its full-year dividend by 6.7%, and said it will introduce a quarterly dividend payout system. The derivatives exposure stems from the fact it earns as much as 70% of its operating profit from North America.
Related links: Honda Investor Relations Q2 Earnings • Reuters: Honda Q2 drops on finance losses, yen lifts f'casts • AP: Honda Reports Booming 2Q SalesGM Posts Q3 Loss But Beats Street -- Shares RiseFord Bleeds $5.8 Billion in Q3; SUV's, Foreign Competition To BlameToyota Gets Knocked Off Its PerchWhy Japanese Cars Earn $2400 More Profit EachJapan's Big-3 Auto to Further Expand Fuel EfficiencyJapanese Auto Industry Struggles Continue, But Mini-cars Rule
Potentially impacted stocks and ETFs: Honda (HMC), Nissan (OTCPK:NSANY), Toyota (TM), DaimlerChrysler (DCX), Ford (F), General Motors (GM), BLDRS Asia 50 ADR Index ETF (ADRA)

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Source: Honda: Sales Surge, But Earnings Hurt By Derivatives Losses