Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:52 AM EST
S&P 500: +9.80; 1,405.10
NASDAQ 100: +13.75; 1,764.25
Dow: +69.00; 12,249.00
NIKKEI 225: -2.85%; 17,604.12 (-515.80)
HANG SENG: -2.46%; 19,651.51 (-496.36)
S&P/ASX 200: -2.69%; 5,832.50 (-161.30)
BSE SENSEX 30: -4.01%; 12,938.09 (-540.74)
FTSE 100: -1.10%; 6,217.10 (-69.00)
CAC 40: -0.96%; 5,535.02 (-53.37)
XETRA-DAX: -1.16%; 6,740.28 (-79.37)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.93%; $60.89 (-$0.57)
Gold: -1.53%; $676.70 (-$10.50)
Natural Gas: -2.28%; $7.36 (-$0.17)
Silver: -2.01%; $14.395 (-$0.295)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Fourth Quarter GDP, Core Inflation Revised Downward
The Commerce Department reported this morning that U.S. GDP grew by 2.2% in the fourth quarter - not the 3.5% estimated last month. Economists surveyed by MarketWatch were expecting GDP to be revised downward to 2%. For the entire year 2006, GDP grew at an annual rate of 3.3% versus the previous year. The revised GDP figures mean the economy has posted under 3% growth for three straight quarters. Part of the reason for the slower growth is companies working off excess inventory. The Commerce Department also revised core inflation downwards in the fourth quarter from a previously stated rate of 2.1% to 1.9%. The Fed has indicated it would like to see core inflation within a 1%-2% 'comfort zone.'
• Sources: MarketWatch, Bloomberg
• Commentary: Durable Goods Orders Decline Most in 18 Months, Sending Futures Lower • Greenspan: Recession Possible by End of 2007
• Stocks and ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)
Sprint Reports Q4 Profit Rise, Revenue Beats
Sprint Nextel reports Q4 net income rose 32% to $261 million, or $0.09/share, on revenue growth of 7% to $10.44 billion. Adjusted EPS totaled $0.29, beating analysts' average estimate of $0.28 (Thomson), but in-line with a Bloomberg poll. Analysts expected revenue between $10.3 to $10.39 billion. Sprint said last month it will lay off 5,000 employees and estimated full year 2007 revenue of $41 billion, short of analysts' consensus estimate of $42b, along with reporting a loss of 306,000 monthly post-pay subscribers, all of which put downward pressure on its shares. Still, Sprint says it added 742,000 net subscribers in Q4. Its shares are trading to the upside by about 3.5% to $19.10 in light pre-market activity, following a 5.5% drop yesterday.
Sources: Press release, Bloomberg, MarketWatch, TheStreet.com
Commentary: Sprint Nextel: The Bad News Is More Than Baked In • Sprint Nextel's A 2007 Turnaround Story - JPM • Sprint Shares Tumble On Spate of Bad News • Sprint Nextel Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Sprint Nextel (S). Competitors: Verizon (VZ), AT&T (T), Vodafone (VOD), BellSouth (BLS). ETFs: Wireless HOLDRS (WMH), Telecom HOLDRs (TTH), iShares Dow Jones US Telecom (IYZ)
Home Depot Warns Investors of Earnings Miss
Home Depot Inc., the world's #1 home-improvement retailer, warned investors this morning that its 2007 earnings would not meet Street expectations as it struggles with a housing and home-improvement slowdown. Home Depot said it expects EPS to drop 4%-9% ($2.56-2.68 a share), short of consensus estimates of $2.88/share. The company said it didn't expected residential housing construction to improve until late 2007 or 2008, and that sales would increase only 0-2%, down from this year's 11%; analysts had expected a 5.3% sales increase. It said its supply division will contribute 15% of total sales, vs. 13% last year (there has been speculation that Home Depot was planning to spin off the unit, and some analysts took the forecast as an indication to the contrary). New stores will be limited to 115 for the year, while capital expenditures on existing stores will be upped to $4.5b. The company, which has been criticized for reducing its specialist store associates, said it was committed to recruiting new "master trade specialists," and will invest over $2.2b this year to help improve customer experience. Gary Balter of Credit Suisse: "Home Depot put out one of the most realistic press releases this morning, effectively saying they had moved in the wrong direction for the last five years, but that they will turn the ship towards investments and customer service in a massive way to regain share." Shares were down 1% ($0.42) this morning to $39.40.
Sources: Press Release, MarketWatch, Bloomberg
Commentary: I May Owe Robert Blake An Apology • Lowe's: Expect Superior Growth vs. Home Depot
Stocks/ETFs to watch: The Home Depot Inc. (HD). Competitors: Lowe's Companies Inc. (LOW). ETFs: Retail HOLDRs (RTH), Consumer Discretionary SPDR (XLY), SPDR S&P Homebuilders (XHB)
Conference call transcript: The Home Depot F4Q06
Sony America CEO: 'PS3 Shortage Will Be Eliminated By May'
Jack Tretton, CEO of Sony Computer Entertainment America, says the Playstation 3 [PS3] shortage will be eliminated by April or May, with another two million units on their way to the U.S. Asked about claims on gaming websites that there are already many electronics shops with stacks of unsold PS3s, Tretton replied there were also many places where the world's most expensive game console had been sold out since it first shelves in November. "Our goal is to fill shelves across the United States... If we have empty shelves, that's one less consumer who could have bought a PlayStation 3," said Tretton. PS3s generally run for $500-$600 depending on what features they include; the console faces stiff competition from Microsofts XBox 360 and Nintendo's Wii.
Sources: Kotaku.com, Reuters
Commentary: Nikkei 225 Falls Nearly 3% on Broad Selling • PlayStation 3 Losses Might Hit Sony Q3 Profit by 50% • Nintendo's Wii Leaves Sony's PS3 In the Dust
Stocks/ETFs to watch: Sony (SNE). Competitors: Microsoft (MSFT), Nintendo (OTCPK:NTDOY). ETFs: BLDRS Asia 50 ADR Index (ADRA)
Seeking Alpha's news summaries are combined into a pre-market briefing called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only a few seconds to sign up.
Asian Headlines (via Bloomberg.com)
• Asian Shares, Led by Sony, BHP Billiton, Add to Global Rout; China Rebound Asian stocks fell the most in eight months, extending a rout in global equities that started in China and triggered a slump in the U.S. compounded by signs the world's largest economy is slowing.
• India's Budget Cuts Tariffs, Increases Spending as Economic Growth Slows India's government slashed import tariffs to curb inflation and increased spending on ports, roads and farms to sustain economic growth that slowed last quarter.
• Thai Central Bank Cuts Benchmark Interest Rate for Second Time This Year Thailand's central bank cut its benchmark interest rate for a second time this year to spur the economy after terrorist attacks, stricter investment rules and a slow down in exports shook confidence.
• Sharp Names LCD Television Chief Katayama as President, Replacing Machida Sharp Corp. (OTCPK:SHCAY), Japan's largest maker of liquid-crystal display televisions, named Mikio Katayama, head of its audio-visual and LCD business, as president as the company seeks to gain market share overseas.
European Headlines (via Bloomberg.com)
• Confidence in Europe's Economy Grows, Jobless Rate Falls, Inflation Slows Confidence in the European economy unexpectedly rose in February for the first time in four months as unemployment fell to a record low and inflation slowed.
• Stocks Fall in Europe for Second Day on Global Slump; BHP, Rio Tinto Drop European stocks headed for the biggest two-day drop in almost four years, extending a slump that has wiped almost $1 trillion off the value of global equities.
• EQT Partners to Acquire Danish Cancer Diagnostic Company for $1.3 Billion EQT AB, the buyout firm partly owned by the Swedish billionaire Wallenberg family, agreed to buy Dako Denmark A/S for 7.25 billion Danish kroner ($1.3 billion) to gain medical tests used to diagnose cancer.
• Enel May Increase Endesa Stake to 25 Percent, Hampering E.ON Takeover Bid Enel SpA (EN), Italy's biggest power company, may increase its stake in Endesa SA (ELE) to almost 25 percent, threatening to end a yearlong takeover bid for the Spanish power company by E.ON AG (EON).
• HBOS Says Lending Margins May Fall; Shares Drop Most in Almost Four Years HBOS Plc, Britain's biggest mortgage lender, said profitability may decline in 2007, driving the shares to their biggest drop in almost four years.