Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:50 AM EST
S&P 500: -1.00; 1,458.60
NASDAQ 100: -3.25; 1,827.75
Dow: -4.00; 12,783.00
NIKKEI 225: -0.12%; 17,875.65 -21.58
HANG SENG: +0.14%; 20,567.91 (+29.49)
S&P/ASX 200: -0.65%; 5,953.70 (-39.10)
BSE SENSEX 30: 14,355.55 (2/15)
FTSE 100: -0.07%; 6,428.80 (-4.50)
CAC 40: +0.04%; 5,723.07 (+2.19)
XETRA-DAX: +0.25%; 6,976.25 (+17.63)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.28%; $57.83 (-$0.16)
Gold: -0.24%; $669.80 (-$1.60)
Natural Gas: +1.28%; $7.38 (+$0.09)
Silver: -0.37%; $13.91 (-$0.052)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
PPI Report Shows Inflation Under Control; Housing Starts Decline Sharply
Two economic reports released at 8:30 AM sent mixed mixed signals on the state of the U.S. economy. Prices to U.S. producers declined 0.6% in January following an increase of 0.9% the previous month signaling inflationary pressures may indeed be "beginning to diminish" as Fed Chairman Ben Bernanke told Congress this week. The core rate, which doesn't include food and energy costs, rose 0.2% for the second straight month. Still, lower energy prices are likely to offset the likelihood producers will inflate the prices for their goods. The figures were line with average estimates gathered from economists by both Bloomberg and MarketWatch. Meanwhile, January housing starts dropped 14.3% to a seasonally adjusted annual rate of 1.408 million - their lowest rate in a decade. Housing starts were down 37.8% versus the prior year period. The drop in housing starts was much worse than expected; economists were looking for a 2% drop to 1.60 million annualized units. Home builders likely scaled back new projects as they attempt to rectify the existing high housing inventory.
• Sources: Bloomberg, MarketWatch (i), (ii)
• Commentary: Existing Home Sales Sink Across Nation • Slew of Economic Reports Reveal Mixed Economic Health • Bernanke Calms Investors
• Stocks and ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG), streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (NYSEARCA:ITB)
Goodyear Strike Punctures Net Income
Even though Goodyear Tire & Rubber reported record Q4 sales of nearly $5 billion (+2%) and eclipsed $20b (3%) for the first time in a calendar year, net income was negatively impacted by an ongoing strike. Goodyear reported a $358m Q4 loss, or $2.02/share, attributing $367m of the loss to the strike, $184m ($1.03/share) to restructuring costs and said it gained $153m ($0.86/share) from a favorable resolution of a tax contingency. Excluding certain items, Q4 net loss totaled $35m, or $0.20/share, better than analysts' average estimate of -$0.40/share. Last Q4 Goodyear had a net loss of $51m, or $0.29/share. Strength in overseas markets helped Goodyear offset some of its troubles in North America. Also, Goodyear is poised to benefit from lower materials costs. Its shares are trading 1.8% lower to $24.95 in pre-market activity on thin volume after closing at $25.41 (+2.25%) yesterday.
Sources: Press release, The Wall Street Journal
Commentary: S&P 500's Most Overbought, Oversold Stocks • Bad Blood Remains After Goodyear Strike
Stocks/ETFs to watch: Goodyear Tire & Rubber (NASDAQ:GT). Competitors: Cooper Tire and Rubber (NYSE:CTB), Bridgestone Corp. ADR (OTCPK:BRDCY), Continental AG (OTCPK:CTTAY), Michelin Group (Euronext: ML)
Vonage Tumbles on Quarterly Subscriber Drop and Disappointing Guidance
Yesterday Vonage reported its Q4 loss narrowed to $65 million, or $0.42/share, compared to -$72m last Q4, on revenue growth of 90% to $181m, which just beat the Street's estimate of $180m. Investors however, took notice of the firm's first quarter-on-quarter decline in subscribers to 166,000, versus 204,000 in Q3, and consequently sold off its shares by 9.25% to new closing ($5.30) and intra-day ($5.25) lows since its IPO last year. At year-end 2006 Vonage had 2.22 million subscribers, compared to 1.27m in '05, but an analyst with Soleil Securities says the quarterly decline in subscribers is a "huge concern" because, "The business model only works if Vonage gets to a sufficient scale. They need four or five million customers before the profits get interesting." Vonage said it expects 2007 revenue of $850m to $900m, or at least a 30% increase over last year. Analysts however, were looking for $913m to $924m.
Sources: Press release, New York Times
Commentary: Vonage Stumbles on Disappointing 2007 Outlook • Is Vonage Hopeless? • Year-End Vonage Bounce Trade Gone Awry
Stocks/ETFs to watch: Vonage Holdings (NYSE:VG). Competitors: Verizon (NYSE:VZ), AT&T (NYSE:T), deltathree (OTCPK:DDDC), Skype -- owned by eBay (NASDAQ:EBAY)
Goldman Sachs, British Airways Eye AMR Corp. -- Business Week
BusinessWeek reports in its Feb. 26 issue that AMR Corp., parent of American Airlines, is a buyout target of a group including Goldman Sachs and British Airways, according to people familiar with the matter. The proposed bid is between $46 and $52 a share ($9.8-$11.1 billion). AMR now trades at $38.57 ($8.2b). Foreign carriers may own up to a 25% stake in U.S. carriers. None of the companies would comment on the speculation. But an AMR spokesman said, "We talk to lots of people, but until discussions result in anything of substance, we simply do not comment." Update: Reuters news, quoting "sources familiar with the matter," says BAB and GS have no plans to bid for AMR Corp. The stock initially climbed 11% to a to a 6-year high. Following the no-deal report, it backed off and is up 5% to $40 in pre-market trading.
Sources: BusinessWeek, MarketWatch, Reuters I, II
Commentary: Merger Mania Grips the Airlines • Opportunity in Airlines, But Not For the Fainthearted • Someone's Going to Fly with Airline Stocks
Stocks/ETFs to watch:AMR Corp. (AMR), Goldman Sachs Group Inc. (NYSE:GS), British Airways plc (NYSEARCA:BAB)
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Drop From Record as Honda, Nissan Slide on Yen; Canon Climbs Asian stocks dropped from a record high, led by Japanese exporters as the yen headed for the biggest weekly gain against the dollar since May.
• China Restricts Bank Lending for Fifth Time Since June to Cool Inflation China ordered banks to set aside more money as reserves for the fifth time in eight months to cool inflation and investment in the world's fastest-growing major economy.
• Thailand's Sondhi Says He Wants $3.9 Billion of Assets Back From Singapore Thailand's military leader said he wants to take back control of 140 billion baht ($3.9 billion) of assets sold to Singapore's government, escalating a diplomatic spat between the Southeast Asian nations.
• Indonesia's Growth Accelerates to 6.1 Percent, Fastest Pace in Two Years Indonesia's economy grew at the fastest pace in two years in the fourth quarter on rising consumer demand and exports.
• Sapporo, Fighting Lichtenstein Bid, Posts Lower Profit as Beer Sales Fall Sapporo Holdings Ltd., which plans to introduce new anti-takeover measures to counter a bid by U.S. investor Warren Lichtenstein, said full-year profit dropped 36 percent on falling sales.
European Headlines (via Bloomberg.com)
• European Stocks Drop for Second Day, Led by Rio Tinto, Anglo American, EMI European stocks fell for a second day as concerns heighten earnings growth is slowing.
• Swisscom Fined $270 Million for Levying `Unfair' Charges on Competitors Swisscom AG (NYSE:SCM), Switzerland's largest telephone company, was fined 333.4 million Swiss francs ($270 million) by the country's competition watchdog for overcharging mobile-phone rivals including France Telecom SA's Orange unit.
• U.K. Stocks Pay Europe's Highest Dividends, Fail to Lure Income Buyers Stock investors who hunt for high yields in Europe are looking everywhere except the U.K., where companies pay the biggest dividends in the world's major markets.
• EU Raises Euro-Area Growth Forecast for 2007, Lowers Inflation Prediction The European Commission raised its forecast for economic growth this year as declining unemployment and accelerating expansion in the U.S. boosts confidence, signaling the economy may withstand tax increases and higher interest rates. It also cut its inflation prediction.