Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:47 AM EST
S&P 500: -1.50; 1,432.50
NASDAQ 100: -3.75; 1,785.50
Dow: +0.00; 12,560.00
NIKKEI 225: -0.61%; 17,383.42 (-106.77)
HANG SENG: -1.73%; 20,106.42 (-354.04)
S&P/ASX 200: -0.67%; 5,773.40 (-39.10)
BSE SENSEX 30: -0.85%; 14,090.92 (-121.04)
FTSE 100: -0.25%; 6,226.20 (-15.80)
CAC 40: -0.57%; 5,613.13 (-32.46)
XETRA-DAX: -0.21%; 6,774.16 (-14.07)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.58%; $56.64 (-$0.33)
Gold: +0.08%; $650.70 (+$0.50)
Natural Gas: -0.52%; $7.70 (-0.04)
Silver: +0.07%; $13.385 (+$0.01)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
• GDP Jumps to 3.5% on Strong Consumer Spending
The U.S. economy surged forward with a surprising 3.5% (all figures are annualized) growth rate in Q4 2006, according to Commerce Department figures released this morning. GDP growth was 2% in Q3, and consensus estimates had been for 3% Q4 growth. Consumer prices fell 0.8% in the quarter -- their first drop in 45 years. Disposable income was up 5.4%, and personal savings were up to -1% from -1.2%. Consumer spending was up to 4.4% from 2.8%, and contributed 3.05% to GDP growth. Residential investments were down 19.2%, shaving 1.2% from the figure. Exports were up 10%, and imports were down 3.2%. Government spending was up 3.7% including a 11.9% rise in defense spending, the biggest jump since the war began. Initial reactions were that the strong numbers with healthy growth and temperate inflation should reassure the Fed that its current 5.25% target rate is appropriate. The Fed makes its monthly announcement at 2:15 p.m. EST.• ETFs to watch: 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)
• Sources: BEA Press Release, MarketWatch
• Commentary: "Cost Push" Inflation Is Not a Problem: Bring On The Wage Gains!
• Boeing's Earnings Fly, So Do Shares
Boeing Co., the world's #2 commercial airplane maker and #2 defense contractor, said this morning that Q4 profits more than doubled to $989 million ($1.29/share) from $460m ($0.58) in Q4 2005, on revenues of $17.5b (+26%) -- handily beating analyst estimates of $0.98 and $16b. Margins expanded to 8.7% due to higher operating leverage and productivity improvements, partially offset by planned R&D spending increases. Deliveries were up 37% to 395 commercial aircraft, the most since 2001, and overall orders of 1,044 set a company record and beat rival Airbus for the first time since 2000. Boeing forecasts as many as 445 deliveries in 2007 (vs. Airbus's 440-450), and says it will take the #1 spot in 2008. Boeing is spending $635 million to make sure its Dreamliner 787 will arrive on time (2008). Its 450-passenger 747-8 (2010) has been grabbing market share from Airbus, which has experienced numerous delays with the production of its 550-passenger A380, now slated (2 years late) for 2009. Shares were up $2.67 to $88.67 (3.1%) in pre-market trading.• Stocks and ETFs to watch: Boeing Co. (BA). Competitors: Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC). ETFs: iShares Dow Jones US Aerospace & Defense (ITA), PowerShares Aerospace & Defense (PPA) [7.9%], iShares Dow Jones US Aerospace & Defense (ITA) [9.6%]
• Sources: Press Release, Bloomberg, MarketWatch
• Commentary: Boeing Is Flying High
• Japan's Mega Banks' Profits Drop Double Digits
Japan's 3 mega banks reported 20-plus percent drops in Q3 earnings (per Bloomberg calculations), led by Mitsubishi UFJ Financial Group down 42%, as the lending interest rate environment remains unfavorable and weakness in consumer spending persists. Mizuho Financial Group, the second biggest of the three reported a 23% drop in earnings, while Sumitomo Mitsui Financial Group's net fell 26%. A Tokyo-based Fitch Ratings analyst comments, "The banking business reflects the wider economy, which isn't too healthy. The banks are suffering from low interest rates and little demand for loans." It is increasingly unlikely the Bank of Japan will raise rates next month due to weak consumption data, which could keep downward pressure on bank stocks. Mitsubishi UFJ said it was particularly hurt by a reversal in allowances for loan losses. However, it cited strength in its investment-trust business. Mizuho was actually able to grow its net interest income, but was hurt by losses in its bond portfolio. Ahead of their after-hours earnings releases, Mitsubishi UFJ and Sumitomo Mitsui closed flat at ¥1.46m ($12.02 ADR equiv. at ¥121.5/$1) and ¥1.23m ($10.12) respectively and Mizuho lost 0.91% to ¥870k ($14.32).• Stocks and ETFs to watch: Mitsubishi UFJ Fin. Grp. (MTU), Mizuho Fin. Grp. (MFG), Sumitomo Mitsui Fin. Grp. (OTC:SMFJY). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 (ITF), BLDRS Asia 50 ADR Index (ADRA), BLDRS Developed Markets 100 ADR Index (ADRD)
• Sources: Earnings releases: Mitsubishi UFJ, Mizuho [pdf], Sumitomo Mitsui [pdf], Bloomberg, Forbes-AP
• Commentary: Still No Love for Japan's Mega Banks
• Honda Q3 Net Up 9%, Helped by Weak Yen, Raises FY Guidance
Honda reported Q3 (ended Dec. 31) net income increased 8.8% to ¥144.83 billion ($1.19b), but fell short of analysts' average estimate of ¥153.6b ($1.26b) according to a survey by Reuters Estimates and ¥150.6 ($1.24b) by Bloomberg. Sales increased 12% on the quarter to ¥2.77t ($22.7b). Honda gained ¥10.6b ($87m) from the weaker yen, but said it was offset by higher materials costs and other spending. It raised its net income guidance for the fiscal year ending in March to ¥560b ($4.6b), from ¥555b ($4.55b) previously, and sales are now forecast at ¥11.1t ($91.1b) versus ¥11t ($90.3b) previously. Honda grew its U.S. market share 0.5% in '06 to 9.1% and expects sales to rise 3% in '07 to 1.56m units. Separately, Honda and XM Satellite Radio have agreed to extend their factory-installation of XM's radios in Honda's vehicles until 2016. Honda's ordinary shares closed down 1.25% to ¥4,750 ($39.09 ADR equiv. at ¥121.5/$1) ahead of its earnings release. Nissan reports on Friday and Toyota reports next Tues. Ford reported a quarterly loss of $5.8b last week. GM has delayed its earnings release due to the sale of its financing arm GMAC. It said it expects greatly improved profit and revenue. DaimlerChrylser reports Feb. 14.• Stocks and ETFs to watch: Honda (HMC). Competitors: Toyota (TM), Nissan (OTCPK:NSANY), General Motors (GM), Ford (F), DaimlerChrysler (DCX). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 (ITF), BLDRS Asia 50 ADR Index (ADRA)
• Sources: Earnings release and presentation [pdf], Bloomberg, Reuters, TheStreet.com
• Commentary: Investing In Japanese Automakers: Eye On Honda
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Asian Headlines (via Bloomberg.com)
• Asian Stocks: China Tumbles Most in 21 Months; Toyota and Canon Decline China's stocks tumbled, leading declines in Asia, after lawmaker Cheng Siwei said the nation's shares are overvalued, adding to speculation the government will step up efforts to slow fund inflows. China Vanke Co. dropped.
• India Boosts Economic Growth Forecast to 9 Percent, Raises Interest Rate India's central bank increased its economic growth forecast to 9 percent and raised a key interest rate for a fifth time in a year to curb inflation.
European Headlines (via Bloomberg.com)
• European Stocks Decline, Paced by Vivendi, DaimlerChrysler, Peugeot Shares European stocks fell for the first time in three days after Vivendi SA's sales missed analysts' estimates and a surge in oil prices in New York hurt automakers.
• Airbus Might Cut 8,000 Factory Jobs in Reorganization, German Union Says Airbus SAS's German workers fear the loss of as many as 8,000 jobs at the planemaker's German factories in a cost-cutting reorganization following the delays of the A380 superjumbo jet.
• German Unemployment Falls as Warmest January Boosts Construction Projects Germany's unemployment rate fell in January to the lowest in almost five years as accelerating economic growth encouraged companies to retain workers and the construction industry basked in the warmest January on record.
• Vodafone Adds Customers, Pledges to Avoid Overpaying for Hutchison Essar Vodafone Group Plc (VOD), the world's largest mobile-phone company, added more customers than analysts estimated last quarter because of growth in emerging markets and said it won't overpay for India's Hutchison Essar Ltd.
• European Inflation Stays Below ECB's 2 Percent Ceiling for a Fifth Month Inflation unexpectedly stayed below the European Central Bank's 2 percent limit for a fifth month in January as declining oil prices offset the effect of a German tax increase. Confidence remained near a six-year high.