Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Kraft to split into two. Kraft (KFT) is to spin off its North American grocery business to its shareholders as part of a plan to split up into two companies: the grocery operations, which have revenue of about $16B, and a global snacks business with revenue of $32B. Kraft said a review showed that the businesses would benefit from being run independently, as they differ in their priorities, growth profiles and operational focus. Kraft also released Q2 earnings results that beat forecasts and it lifted its 2011 outlook. Q2 EPS rose 3.3% to $0.62 and revenue climbed 13.3% to $13.9B. Shares +2.7% premarket.

Japan acts to halt the yen. Just as Switzerland did yesterday, Japan today moved to stem the rise of the yen, which had become a safe haven from the eurozone and U.S. but had threatened the country's economic recovery from the March earthquake. The Finance Ministry sold over ¥1T ($12.6B), while the Bank of Japan said it would increase the size of its Asset Purchase Program to ¥50T from ¥40T and keep its interest-rate target range unchanged at 0-0.1%. The actions have so far worked, with the yen -3.5% vs. the dollar and -2.9% vs. the euro.

Spain sells bonds at higher rates. Spain has passed a key test in selling €3.3B ($4.71B) of bonds but at the cost of sharply higher interest rates following the recent market turmoil. The treasury sold €2.2B of three-year bonds at a maximum yield of 4.90%, up from 4.05% in a June sale. It also sold €1.1B of four-year bonds at a yield of 5.05%, up from 2.87% in an October 2009 sale. Still, yields of 10-year bonds fell in the secondary market to 6.022% in morning trading, while those of Italy fell below the psychologically important 6%. The auction came as the ECB met to set interest-rate policy amid hopeful talk it might revive a bond-buying program to calm the turmoil.

BOE leaves rates unchanged. As expected, the Bank of England has maintained its key lending rate at a record low of 0.5% and left the size of its asset-purchase program unchanged at £200B ($327.8B).

Hitachi, Mitsubishi Heavy to merge ops, or maybe not. Hitachi (HIT) and Mitsubishi Heavy Industries (OTCPK:MHVYF) have denied they're in talks about merging some of their power and infrastructure operations despite Hitachi's president saying on TV a deal was in the works. Sources said the negotiations almost stalled after news of the discussions appeared in the media, although Nikkei has reported that the companies will soon set up a merger prepartion committee. Any agreement would mark a major step in reforming corporate Japan: a merger would help Mitsubishi and Hitachi to reduce costs, offset a soaring yen and gain competitive scale.

Rio Tinto plummets after H1 profit miss. Rio Tinto's (NYSE:RIO) shares fell 7.7% premarket after the global miner's H1 net profit jumped 35% to $8.03B but missed expectations. Not even a $2B expansion of its existing $5B share buyback program, nor a $0.09 increase in its dividend to $0.54 a share, seem to have assuaged investors. Rio remained positive for the rest of 2011 and for 2012, but said risks included credit tightening in developing economies and debt problems in the U.S. and Europe.

Unilever profit rises 10%. Uniliver's (NYSE:UL) H1 net profit rose 10% to €2.24B ($3.21B) from €2.04B last year and beat expectations as revenues increased 4.1% to €22.8B, with higher prices and increased sales in emerging markets offsetting weakness in Western Europe and North America. Underlying sales, a closely watched measure, advanced 7.1% in the second quarter, again above analyst predictions. Shares rose 6% in U.K. trading.

Dendreon plummets on weak Provenge sales. Shares in Dendreon (NASDAQ:DNDN) collapsed 62% in AH trading after its Q2 report showed weak sales of its prostate cancer drug Provenge, prompting the firm to abandon its revenue guidance and cut jobs. Annual sales of Provenge, Dendreon's only marketed product, will likely be closer to $200M than the $350M-400M previously projected. The problem is that doctors find it difficult to get reimbursed. In Q2, Dendreon's net EPS loss narrowed to $0.79 from $1.04 a year earlier, while revenue jumped to $49.6M from $2.8M but missed expectations.

Pfizer wants to sell Lipitor over the counter. Pfizer (NYSE:PFE) reportedly plans to introduce a version of its popular Lipitor pill that consumers could buy without a prescription. The move would allow Pfizer to generate new sales from the world's best-selling drug after it loses its patent protection in November. The FDA has rejected allowing OTC versions of similar cholesterol drugs, but Pfizer thinks regulators may be more open to the idea as budget-strapped governments in the U.S. and Europe look for ways to control rising healthcare costs.

Misys ends Fidelity talks. U.K. software company Misys (OTC:MUSJF) has ended talks about being bought by U.S. financial data-processing firm Fidelity National Information Services (NYSE:FIS), as the latter's revised offer "materially undervalued the company." A deal would have helped Fidelity reduce its reliance on the U.S., where it generates over 80% of revenue. Misys' shares plunged 17.6% in U.K. trading, leaving it with a £1B ($1.6B) market cap.

Pentagon preparing for $28B savings in 2012. The Pentagon expects to make savings of $28B in FY 2012 as the first stage in its role in implementing the debt deal. Over ten years, defense spending will be limited by $350B at least, although the department could be hit by an extra $500B of automatic cuts if Congress doesn't agree on a government-wide program of $1.5T in savings by December. Legislators friendly to the defense industry are vying to be appointed to the Congressional "super committee" that will formulate the plan.

Lloyds makes huge loss on insurance charge. Lloyds (NYSE:LYG) swung to an H1 pretax loss of £3.35B ($5.3B) from a profit of £1.3B a year earlier, due to a one-time charge for selling faulty payment-protection insurance and because of bad loans in Ireland and Australia. Shares fell 5.5% in London, making any profitable reduction of the U.K. government's 41% stake an increasingly distant prospect.

Today's Markets:
In Asia, Japan +0.2% to 9659. Hong Kong -0.5% to 21885. China +0.2% to 2684. India -1.4% to 17693.
In Europe, at midday, London -1.0%. Paris -1.8%. Frankfurt -2.3%.
Futures at 7:00: Dow -0.7%. S&P -0.7%. Nasdaq -0.7%. Crude -1.1% to $90.92. Gold +0.1% to $1667.50.

Thursday's economic calendar:
Chain Store Sales
6:00 Monster Employment Index
8:30 Initial Jobless Claims
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Earnings Results: Companies that beat EPS expectations last night and today include Avis, Prudential, Cigna, Insight Enterprises, PM Andersons and GT Solar. Those that missed forecasts include Timberland, Clearwire, Fortress and Western Refining. Click here for details.


Notable earnings after Thursday's close: AIG, ANV, CENX, CF, DCT, ED, EOG, FLR, FSLR, HANS, KOG, LNKD, MCHP, MRX, PBI, RAX, RMD, SAPE, SUN, WMS

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