Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -3.20; 1,452.50
NASDAQ 100: -5.75; 1,817.25
Dow: -23.00; 12,687.00
NIKKEI 225: +0.00%; 17,292.48 (+0.16)
HANG SENG: +0.27%; 20,735.05 (+55.36)
S&P/ASX 200: -0.01%; 5,899.50 (-0.30)
BSE SENSEX 30: +0.06%; 14,652.09 (+8.96)
FTSE 100: -0.37%; 6,345.90 (-23.60)
CAC 40: -0.68%; 5,664.05 (-38.95)
XETRA-DAX: -0.63%; 6,871.93 (-43.63)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.31%; $57.53 (-$0.18)
Gold: -0.56%; $653.60 (-$3.70)
Natural Gas: +0.64%; $7.76 (+$0.05)
Silver: -1.24%; $13.54 (-$0.17)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Retailers Post January Same Store Sales
Most retailers' January sales numbers are out this morning:
Sources: Wall Street Journal, MarketWatch I, II, III, IV, V, VI
- Wal-Mart had a 2.2% rise in sales at stores open at least one year; forecasts had been for 2%. WMT forecasts February U.S. sales growth of 1-2%.
- Costco had a 2% jump in same-store sales, missing estimates of 3%. The last time COST had such low growth was in late 2002; the company blames the weakness on a calendar shift.
- Limited Brands posted an 11% jump, higher than its estimates of high-single digits. It forecasts high-single digit growth for Feb.
- Nordstrom had an 11.1% rise in same-store sales, almost double the consensus estimate of 5.9% -- the second month in a row it has doubled expectations.
- J.C. Penney said January sales at stores open at least a year were up 3.6%, in line with estimates. Total department store sales were up 5.5%.
- Federated Department Stores saw January same-store sales climb 8.6%, almost twice the consensus estimate of 4.6%. It gave revised Q4 2006 EPS guidance of $1.55-1.60, up from $1.40-1.50.
- Abercrombie & Fitch said its January sales at stores open at least one year dropped 6%, far worse than the forecast 1.9%. 2006 sales were up 19% to $3.32b from $2.79b.
- Gap Inc. had flat same-store sales in January, beating estimates of -7.7%. The company gave EPS guidance of $0.89-0.91 for fiscal 2006.
- BJs Wholesale Club said January same-store sales rose 3.5%; estimates were for 1.5%.
- Kohl's posted 8.7% sales gains at stores open at least one year, beating estimates of 5.5%.
- Retailers whose numbers came out previously: American Eagle Outfitters (+17%), Pacific Sunwear of California (-7.7%), Pier 1 Imports (-13%), Sharper Image (-25%)
Commentary: Are Retail Sales Good For the Economy? • Retail Sector Closes the Year on (Mostly) Down Note • An Optimistic Outlook On Consumer Spending
Stocks/ETFs to watch: Wal-Mart Stores Inc. (NYSE:WMT), Costco Wholesale Corp. (NASDAQ:COST), Limited Brands Inc. (LTD), Nordstrom Inc. (NYSE:JWN), J.C. Penney Company Inc. (NYSE:JCP), Federated Department Stores Inc. (FD), Abercrombie & Fitch Co. (NYSE:ANF), Gap Inc. (NYSE:GPS), BJ's Wholesale Club Inc. (NYSE:BJ), American Eagle Outfitters Inc. (AEOS), Pacific Sunwear of California Inc. (NASDAQ:PSUN), Pier 1 Imports Inc. (NYSE:PIR), Sharper Image Corp. (SHRP). ETFs: Retail HOLDRs (NYSEARCA:RTH), Consumer Discretionary SPDR (NYSEARCA:XLY)
ECB Holds at 3.5%, March Hike Signal Expected
The ECB voted to maintain its key interest rate for its 13-member countries at 3.5%. However, ECB President Jean-Claude Trichet is expected to hint at a March rate hike, saying the ECB is watching monetary developments with "vigilance" or "strong vigilance." The current inflation rate is less than the ECB's goal of "just below 2%" despite German economic strength. Also, money supply is said to be growing twice as fast as the ECB's comfort level. One issue possibly keeping the ECB from hiking in the near-term is political pressure in regard to the weak Japanese yen.
Sources: Bloomberg, MarketWatch
Stocks/ETFs to watch: iShares Lehman Aggregate Bond (NYSEARCA:AGG), iShares Lehman 1-3 YR Treasury Bond (NYSEARCA:SHY), iShares Lehman 7-10 YR Treasury Bond (NYSEARCA:IEF), iShares Lehman 20+ YR Treasury Bond (NYSEARCA:TLT), iShares Lehman TIPS Bond (NYSEARCA:TIP)
Glaxo's Q4 Earnings Mostly In-line, Shares Up on '07 Prospects
GlaxoSmithKline's shares are up 1.7% in London following its Q4 and full-year earnings release which were in-line with analyst expectations. The stock is moving on '07 guidance that was higher than some analysts' forecasts and on news it plans to launch five major new pharmaceutical products this year. Q4 net income rose 5.3% to £1.18 billion ($2.32b) on a 0.9% increase in revenues to £5.96b (note: at constant exchange rates sales were up 9%). Full year earnings for 2007 are seen growing between 8% - 10% at constant exchange rates. Glaxo said it plans to begin patient trials of a proposed bird-flu vaccine in N. America during Q2. Its NYSE listed shares lost 0.4% yesterday to $55.35, but are trading up about 1.5% to $56.17 in pre-market activity.
Sources: GlaxoSmithKline IR website, The Wall Street Journal
Commentary: 'Bird Flu' Remains as Serious a Threat as Ever • Betting Big on Anti-Smoking Trend • Searching for Value Investments in the Drug Stock Universe
Stocks/ETFs to watch: GlaxoSmithKline (NYSE:GSK). Competitors: Pfizer (NYSE:PFE), Novartis (NYSE:NVS), Sanofi-Aventis (NYSE:SNY). ETFs: iShares S&P Global Healthcare (NYSEARCA:IXJ), Europe 2001 HOLDRs (NASDAQ:EKH), BLDRS Europe 100 ADR Index (NASDAQ:ADRU), iShares S&P Europe 350 Index (NYSEARCA:IEV), iShares MSCI United Kingdom Index (NYSEARCA:EWU)
PepsiCo's Net Rises 61%, Shares Rise
PepsiCo reported 4Q06 net earnings this morning and they were impressive, with growth of 61% versus the previous year period. By the numbers, Pepsi recorded a profit of $1.78 billion, good for EPS of $1.06, up from a profit $1.11 billion (EPS of $0.65) in the year-ago period. Excluding one-time benefits and charges, the company's EPS was $0.72 on revenue of $10.38 billion, up from $10.01 billion a year earlier. Both Thomson and Reuters consensus estimates were for EPS of $0.72. Pepsi earnings were especially powered by strong international growth withPepsiCo International reporting 9% growth in beverages and 7% growth in snacks by volume. Looking ahead, Pepsi expects mid-single-digit volume and revenue growth, leading to EPS of at least $3.30 per share, versus the Street's current expectation of $3.31. Shares are higher by $0.70, or 1.09%, to $65.20 in pre-market trading.
• Sources: Press Release, TheStreet.com, MarketWatch, Reuters
• Commentary: Super Fizzy Soda Stocks, Coke's New Drink & Pepsi's Updated Outlook, Cramer's Take on PEP
• Stocks and ETFs to watch: PepsiCo (NYSE:PEP). Competitors: The Coca-Cola Company (NYSE:KO), Cadbury Schweppes (NYSE:CSG). ETFs: Consumer Staples Select Sect. SPDR (NYSEARCA:XLP), Vanguard Consumer Staples (NYSEARCA:VDC)
Circuit City Undertakes Major Restructuring
Circuit City announced this morning a series of changes that it hopes will better "align the company to meet the changing nature of the consumer electronics retail marketplace as well as improve financial performance." Tumbling gross margins from the flat-panel TV sector forced the company to accelerate its planned initiatives in the hope of improving sales, margins and efficiency. Circuit City will overhaul its operations, close stores and a distribution center, and shake up its merchandising team. It plans to take a $30 million pretax expense for store closings, another $40-60m on goodwill losses, and $15m in restructuring expenses -- most of which will appear in FQ4 2007.
Sources: Press Release, MarketWatch
Commentary: Don't Expect LCD Prices To Recover Anytime Soon • Best Buy, Circuit City Surprise Analysts with Strong December Sales • Circuit City F3Q07 (Qtr End 11/30/06) Earnings
Stocks/ETFs to watch: Circuit City Stores Inc. (NYSE:CC). Competitors: Best Buy Co. Inc. (NYSE:BBY), RadioShack Corp. (NYSE:RSH), Tweeter Home Entertainment Group Inc. (NYSE:TWTR), GameStop Corp. (NYSE:GME), Dell Inc. (NASDAQ:DELL), Wal-Mart Stores Inc. (WMT). ETFs: PowerShares Dynamic Retail (NYSEARCA:PMR), SPDR Retail (NYSEARCA:XRT), PowerShares Dynamic Hardware & Consumer Electronics (PHW), Consumer Discretionary SPDR ETF (XLY)
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Asian Headlines (via Bloomberg.com)
• Bank of Japan Doesn't Need to Hastily Raise Rates, Board Member Haru Says The Bank of Japan doesn't need to be hasty about raising interest rates as there's no threat that rising prices will cripple economic growth, policy board member Hidehiko Haru said.
• Singapore Telecom's Net Income Rises 13 Percent, Misses Estimates on Optus Singapore Telecommunications Ltd., Southeast Asia's largest phone company, reported third-quarter profit rose less than analysts estimated as competition in Australia hurt earnings at its Optus unit.
• Hang Lung Properties Profit Rises 42 Percent on Higher China Rental Income Hang Lung Properties Ltd., Hong Kong's fourth-largest developer by market value, said first-half profit rose 42 percent, as rising demand in China boosted property values and allowed it to charge higher rents.
• Asian Stocks Slide, Led by Kepco, Tokyo Electric; BHP Falls, Esprit Gains Asian stocks declined the most in almost two weeks, led by utility companies, after Korea Electric Power Corp. (NYSE:KEP) posted an unexpected loss and investors considered Tokyo Electric Power Co.'s recent gain to be excessive.
European Headlines (via Bloomberg.com)
• ECB's Trichet Pledges Vigilance, Signals Rate Further Increase European Central Bank President Jean- Claude Trichet signaled the ECB will raise interest rates next month as the pace of economic growth threatens to fuel inflation.
• Imperial Tobacco to Buy Commonwealth Brands From Houchens for $1.9 Billion Imperial Tobacco Group Plc (ITY), the U.K. maker of Lambert & Butler, agreed to buy Commonwealth Brands for $1.9 billion, the first European cigarette company to enter the U.S. in more than a decade.
• European Stocks End Five Days of Gains; Shares of HSBC, Buhrmann Pace Drop European stocks snapped five days of gains on speculation earnings growth is slowing in the financial services, industrial goods and food industries.