Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures as of 8:47 AM EST
S&P 500: +1.20; 1,440.00
NASDAQ 100: -5.00; 1,836.25
Dow: +6.00; 12,645.00
NIKKEI 225: +0.63%; 17,370.93 (+109.58)
HANG SENG: +1.06%; 20,277.51 (+212.94)
S&P/ASX 200: +0.47%; 5,672.40 (+26.30)
BSE SENSEX 30: +0.61%; 14,217.75 (+86.41)
FTSE 100: +0.43%; 6,231.10 (+26.60)
CAC 40: +0.72%; 5,601.73 (+39.95)
XETRA-DAX: +0.27%; 6,719.81 (+18.11)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.02%; $52.25 (+$0.01)
Gold: +0%; $633.30
Natural Gas: +0.98%; $6.30 (+$0.06)
Silver: +0%; $12.89
Breaking U.S. News - see today's Wall Street Breakfast for earlier news
Housing starts rose 4.5% in December, according to figures released this morning by the Commerce Department; Wall Street had forecasted a decrease. Permits were up 5.5% -- their biggest jump in 4 years -- and the first monthly increase since January. On the year, starts were down 13%, their biggest yearly decline since 1991. Northeast starts led the way with a 26% jump; the West was up 12%, while starts in the South were down 2%. Economists said unseasonably warm weather may have contributed to the strength in starts. Consumer prices [CPI] were up 0.54% in December according to the Labor Department, with core prices up just under 0.2% -- exactly in line with forecaster estimates. Energy prices were up 4.6%: gasoline swelled 8%, and NG prices were up 3.9%. Food and electricity were unchanged. Housing was up 0.4% and rents were up 0.5%. The Labor Department also reported this morning that the number of workers filing new claims for unemployment benefits fell 8,000 to 290,000 -- an 11-month low; anything below 300,000 is considered a "very tight" labor market by economists. New claims were well below Wall Street expectations, which had seen claims rising by 16,000. Unemployment sits at 4.5%.
• Sources: Housing Starts Release, CPI Release, Labor Release, Bloomberg, Wall Street Journal
• Related commentary: A Long-Term Look at Market Sentiment: 2001 and On, Housing Bubble and Real Estate Market Tracker, The Sordid Truth About Inflation: Still Considerably Higher than Reported
• Potentially impacted stocks and ETFs: S&P 500 Index (SPY), NASDAQ 100 Trust Shares ETF (QQQQ), Diamonds Trust Series 1 ETF (DIA), iShares Russell 2000 Index ETF (IWM), iShares Lehman 1-3 Year Treasury Bond ETF (SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (IEF), iShares Lehman 20+ Year Treasury Bond ETF (TLT)
UnitedHealth reports Q4 net income of $1.2 billion or $0.86/share, beating estimates compiled by Thomson by a penny. Revenue of $18.16b is a 47% y-o-y increase, but missed analysts' average estimate of $18.23b. For calendar year 2006, UNH achieved net income of $4.174b on revenue of $71.7b (+54% y-o-y). Operating margin in Q4 was 11%, compared to a full year margin of 9.7%. UNH reports cash flow from operations totaled $1.6b in Q4 and $6.5b for the year. UNH expects Q1 net income of $980m to $1b and full year '07 net income of $4.7b to $4.75b. It warned these figures are "subject to potential adjustments for non-cash and cash expenses related to stock options matters." UNH also said it "does not yet have an estimated timeline for resolution of these matters." The SEC's investigation of its stock-options practices could cost it more than $600m, according to MarketWatch.
• Sources: Earnings news release [pdf], MarketWatch
• Related commentary: UnitedHealth Reaffirms '07 Outlook, SEC Not Acting Forcefully Enough On United Health Options Probe, UnitedHealth to Restate 12 Years' Worth of Earnings Following Options Scandal
• Potentially impacted stocks and ETFs: UnitedHealth Group (UNH). Competitors: Aetna (AET), Cigna (CI), Coventry Health Care (CVH), Humana (HUM), WellPoint (WLP). ETFs: iShares Dow Jones US Healthcare Provider (IHF), Vanguard Health Care ETF (VHT), Health Care Select Sector SPDR (XLV)
Continental Airlines narrowed its loss in 4Q06 from $43 million, or $0.53 a share to just $26 million, or $0.29 a share. Minus a $22 million ($0.25 a share), one-time charge related to pilots pension plans, the airline reported a loss of just $0.04 a share. Revenue came in at $3.16 billion, an increase of 11% from the earlier year period; Thomson Financial average estimates called for a loss $0.15 cents a share on revenue of $3.16 billion. The loss contrasts with competitors AMR Corp. and Southwest Airlines who both reported profitable fourth quarters. Load factor (percentage of available seats filled) increased 2.1% in the quarter to 80.2%; Continental raised prices 10 times during 2006, another factor contributing to a narrower loss from the previous year quarter.
• Sources: Press Release, Wall Street Journal, Bloomberg, Reuters
• Related commentary: AMR Posts Q4 Upside Surprise; Southwest Air's Profit Drops on Fuel Costs, There's a Reason There Is No Airline ETF, Why I'm Bullish On Airline Stocks,
• Potentially impacted stocks and ETFs: Continental Airlines (CAL), Competitors: AMR Corporation (AMR), Southwest Airlines Co. (LUV), Delta Air Lines Inc. (DALRQ.PK), Northwest Airlines Corp. (NWACQ.PK), UAL Corp. (UAUA), JetBlue Airways Corp. (JBLU)
Merrill Lynch said Q4 profits were up 68% ($2.35 billion or $2.41/share), handily outdoing Street forecasts of $1.93. Total revenues were up 27% to $8.61b. CEO/Chairman Stan O'Neal called 2006 "the most successful year in company history." Broken down, net revenues from global markets/investment banking were up 41% to $1.3 billion, trading revenues from bonds, currencies and commodities climbed 70% to $2.3b, and stock-trading revenues were up 49% to $1.8b. IPO counselling was up 89% -- a sign of the times as the rising market saw many companies going public, resulting in the best year for IPOs since 2000. In pre-market trading, shares traded up $1 to $97.81.
• Sources: Press release, Wall Street Journal, Bloomberg
• Related commentary: Merrill's Buyout Muscle [WSJ], Wall Street I-Banks Show Outstanding 2006 Results, Brokerage Stocks - Have They Topped?
• Potentially impacted stocks and ETFs: Merrill Lynch & Co. Inc. (MER), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), JPMorgan & Chase Co. (JPM), iShares Dow Jones US Financial (IYF), iShares Dow Jones US Financial Services (IYG), Regional Bank HOLDRS (RKH), Vanguard Financials ETF (VFH)
Asian Headlines (via Bloomberg.com)
• Asian Stocks Climb to Two-Week High; Takeda Pharmaceutical, Woodside Gain Asian stocks rose to a two-week high. Takeda Pharmaceutical Co. led gains among Japanese drugmakers as two companies said they are in merger talks, boosting speculation there will be more industry takeovers.
• Jim Rogers Says Crude Oil Will Climb to $100 a Barrel After `Correction' Oil will resume its march toward $100 a barrel after a ``correction,'' said Jim Rogers, who predicted the start of the commodities rally in 1999.
• Lehman Brothers to Buy Grange Securities After Australian Mergers Surge Lehman Brothers Holdings Inc. (LEH) agreed to buy Grange Securities Ltd., Australia's biggest arranger of credit-linked note offerings, to help narrow the gap to competitors in the Asia Pacific region.
• Intel Considers Building First Asian Semiconductor Plant in China's Dalian Intel Corp. (INTC), the world's largest chipmaker, is considering building its first semiconductor factory in Asia in the northeastern Chinese city of Dalian.
European Headlines (via Bloomberg.com)
• European Stocks Gain for First Day in Three, Paced by BP, Xstrata, Accor European stocks rose for the first time in three days after gains in metals and energy prices pushed commodity producers higher and Alstom SA said sales increased on demand for railcars from Asia.
• Novartis, Merck Fourth-Quarter Profits Rise on Sales of Older Cancer Drugs Novartis AG (NVS), Switzerland's biggest drugmaker, and German competitor Merck KGaA said fourth-quarter profit climbed on sales of cancer treatments.
• Allianz to Buy Rest of Assurances Generales de France for $12.7 Billion Allianz SE (AZ), Europe's biggest insurer, agreed to buy the rest of Assurances Generales de France for 9.8 billion euros ($12.7 billion), seeking to boost profit by taking full control of units across Europe.
• Alstom Orders Rise 9 Percent on European, Emerging Market Turbines Demand Alstom SA, the world's third-biggest maker of power stations, said fiscal third-quarter orders jumped 9 percent on power-turbine demand in markets ranging from Germany and the U.S. to Poland and Vietnam.
• Euro-Area Economic Growth to Come Close to Last Year's Pace, Almunia Says European Union Monetary Affairs Commissioner Joaquin Almunia said growth in the euro region this year will come close to 2006's pace, suggesting the economy can withstand further European Central Bank interest-rate increases.
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