Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:51 AM EST
S&P 500: +11.80; 1,384.00
NASDAQ 100: +16.00; 1,729.75
Dow: +69.00; 12,105.00
NIKKEI 225: +1.22%; 16,844.50 (+202.25)
HANG SENG: +2.11%; 19,058.56 (+393.68)
S&P/ASX 200: +2.09%; 5,771.80 (+118.20)
BSE SENSEX 30: +2.27%; 12,697.09 (+282.05)
FTSE 100: +0.60%; 6,095.20 (+36.50)
CAC 40: +0.82%; 5,429.44 (+44.41)
XETRA-DAX: +0.62%; 6,575.17 (+40.60)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.62%; $60.44 (+$0.37)
Gold: +0.78%; $644.20 (+$5.00)
Natural Gas: +1.53%; $7.36 (+$0.11)
Silver: +1.61%; $12.955 (+$0.205)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Productivity Down, Unit Labor Costs Up
According to data released this morning by the Labor Department, U.S. Q4 2006 productivity growth was much weaker than had originally been thought, while unit labor costs were revised sharply upward. It revised productivity growth to 1.6% (annually) from its original Feb. 7 estimates of 3% -- economists were expecting a revision to 1.4% considering the previous downward revision to Q4 GDP. For all of 2006 productivity increased 1.6%, the smallest increase since 1997. Meanwhile unit labor costs, a key measure of wage inflation, was revised from a 1.7% annual growth rate to 6.6%. The sharp revision, however, was largely due to "new assumptions about bonus and stock-option earnings," according to Patrick Newport of Global Insight Inc., and "far overstates the underlying increase in labor costs." Hourly compensation for each was up 8.2% annually, revised from 4.8% and compared to 0.6% in the prior three months.
Sources: Labor Department Press Release, MarketWatch, Bloomberg
Commentary: Economic Report Summary: Quarterly Rebound in Productivity • U.S. Worker Productivity, Labor Costs Come In Ahead of Forecasts • How Will Higher Minimum Wages Impact the Market?
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)
Novartis Gets Sooner Than Expected FDA Approval for Hypertentsion Drug
Swiss drug giant Novartis AG said this morning U.S. regulators have approved its Tekturna hypertension drug, the first new treatment for high blood pressure in over ten years. The FDA had previously said it would need another three months to review the drug, which had prompted concern the FDA would either not allow the drug or limit its use. Novartis said Tekturna now has approval for use on its own or with other hypertension drugs, and should be available to U.S. consumers this month. The U.S. is the first country in the world to approve Tekturna tablets, the first in a new class of drugs called direct 'renin inhibitors' that target renin, an enzyme responsible for triggering a process that can contribute to high blood pressure. The drug complements Novartis's heart-treatment line, which includes Diovan and Lotrel. It could help shore up future sales when these medicines lose their patent protection starting in 2012. Bloomberg says the product is expected to generate sales in excess of $1 billion/year. Novartis shares are up 2.6% ($1.42) to $56.05 in pre-market trading as of 8:08 EST.
Sources: Press Release, MarketWatch, Bloomberg
Commentary: Pfizer Successfully Defends Hypertension Drug Again, This Time Against Mylan • Big Pharma's Big Decision: Diversify Or Focus? • Novartis: Strong Growth and Reasonable Valuation
Stocks/ETFs to watch: Novartis AG (NYSE:NVS). Competitors: Pfizer Inc. (NYSE:PFE), Merck & Co. Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), Mylan Laboratories Inc. (NASDAQ:MYL), GlaxoSmithKline plc (NYSE:GSK), sanofi-aventis (NYSE:SNY). ETFs: iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB), HOLDRS Biotech (NYSEARCA:BBH), PowerShares Dynamic Biotech & Genome (NYSEARCA:PBE)
UnitedHealth Revises Past Earnings Downward By $1.55 Billion; Reports Strong FY2006
UnitedHealth Group announced this morning that accounting errors resulting from its backdating of options will result in a reduction in past earnings dating back to 1995 of $1.55 billion.The company has promised to be fully up to date in all its financial reporting by March 15. For FY2006, UnitedHealth's EPS was $2.97, up 29% from 2005. Revenue rose 54% (21% excluding acquisitions) to $71.54 billion from $46.43 billion during the year earlier period; earnings from operations rose 37% to $6.98 billion. The news sent shares higher by $0.29, or 0.55%, to $53.25 in pre-market trading.
• Sources: Press Release, MarketWatch, Reuters, Wall Street Journal
• Commentary: UNH Q4 Profit Beats, But Revenue Misses • UnitedHealth Robust Despite Backdating - Barron's • UnitedHealth to Restate 12 Years' Worth of Earnings Following Options Scandal
• Stocks and ETFs to watch: UnitedHealth Group Inc. (NYSE:UNH). Competitors: Aetna (NYSE:AET), Cigna (NYSE:CI), Coventry Health Care (CVH), Humana (NYSE:HUM), WellPoint (NYSE:WLP). ETFs: iShares Dow Jones US Healthcare Provider (NYSEARCA:IHF), Vanguard Health Care ETF (NYSEARCA:VHT), Health Care Select Sector SPDR (NYSEARCA:XLV)
Brown-Forman: Earnings Slip, Anticipates Soft Demand
Brown-Forman Corp., producer of such products as Jack Daniel's, Southern Comfort, and Finlandia Vodka, said this morning 2007 FQ3 profits fell 13%, its first profit drop in six quarters, even as sales were up 20%. Net income was $105 million, down from $120.5 million in FQ3 2006, while sales rose to $755m from $627m. EPS was down to $0.85 from $0.98 a year earlier. Excluding some costs, EPS were $0.89, beating a Bloomberg analyst survey consensus of $0.83. Timothy Ramey of Davidson & Co. said the profit drop is due to dilution as a result of its January $776m purchase of Mexican tequila brands from Grupo Industrial Herradura SA and overseas counterfeiting. The company said it faces softness in Jack Daniel's demand as consumers cut back on alcohol spending or switch to cheaper brands.
Sources: Press Release, MarketWatch, Bloomberg
Commentary: Brown-Forman Should Keep Investors in Good Spirits - Barron's • Diageo Looks Good Enough to Drink
Stocks/ETFs to watch: Brown-Forman (NYSE:BF.B). Competitors: Constellation Brands Inc. (NYSE:STZ), Diageo plc (NYSE:DEO), Fortune Brands Inc. (FO). ETFs: Consumer Discretionary SPDR ETF (NYSEARCA:XLY), PowerShares Dynamic Consumer Discretionary (NYSEARCA:PEZ), Vanguard Consumer Discretionary VIPERs (NYSEARCA:VCR)
Topps Going Private for $385 Million
Topps has agreed to be taken private for $9.75/share, or a 9.4% premium over Friday's close of $8.91. Shares of Topps are currently trading up in light pre-market activity to $9.66. The Tornante Co. LLC and Madison Dearborn Partners LLC, two private equity firms, will make the $385.4 million cash acquisition. Former Disney CEO Michael Eisner is the founder of Tornante. In a statement, Topps said it expects the deal to close in Q3 pending regulatory and shareholder approval. Eisner commented, "Topps is a wonderful company with a powerful brand portfolio and a rich history. Topps' management team and employees are the best in the business, and we look forward to working with all of them to grow the company in new and exciting ways."
Sources: Press release, Associated Press
Stocks/ETFs to watch: Topps (TOPP). Competitors: William Wrigley (WWY), The Upper Deck Company -- privately held
Large Private Equity Meets With Chrysler
The Detroit News is reporting two private equity firms are in the process of meeting with Chrysler offer a potential buyout of the automaker. Parent DaimlerChrysler announced its Chrysler North American unit is for sale but has thus far had trouble attracting potential bidders. The News believes meetings with large potential bidders Cerberus Capital Management and Blackstone Group signal "the sale process for Chrysler is entering a critical phase." If Chrysler continues to have trouble attracting bidders, or those bidders value the automaker at a significant discount to what DaimlerChrysler is looking for, Daimler may be forced to hold Chrysler despite its continued losses. In addition, Reuters is reporting from two anonymous sources that a detailed sales prospectus for potential bidders will be completed soon, the first step toward a potential sale.
Sources: Detroit News, Reuters
Commentary: GM Vehicle Sales, U.S. Market Share Rise; Japan's 'Big 3' Continue to Roll • Chrysler's Future Remains Uncertain • Financial Times: Chrysler Considering An All-Equity Deal With GM
Stocks/ETFs to watch: DaimlerChrysler (DCX). Competitors: Ford (NYSE:F), DaimlerChrysler (DCX), Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)
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Asian Headlines (via Bloomberg.com)
• Yen Has Biggest Decline in 17 Months Against Euro as Asian Stocks Rebound The yen fell the most versus the euro in 17 months as global stocks rebounded from a week-long rout, suggesting investors may resume so-called carry trades where they borrow in Japan to buy higher yielding assets elsewhere.
• Indonesia Cuts Key Interest Rate After Inflation Slows More Than Expected Indonesia's central bank cut its benchmark interest rate to a 19-month low after inflation defied expectations of a flood-induced increase in February, abandoning a planned pause and saying it may reduce borrowing costs further.
• Qantas Buyout Led by Macquarie Bank Is Cleared by Australian Government The Macquarie Bank Ltd.-led buyout of Qantas Airways Ltd., Australia's biggest airline, won government approval, clearing a major obstacle for the A$11.1 billion ($8.6 billion) bid.
European Headlines (via Bloomberg.com)
• Stocks in Europe Rise, Snapping Five-Day Rout; Xstrata, Novartis Advance European stocks rose for the first time in six days, snapping a sell-off that erased more than $2.4 trillion from the value of global markets.
• Meggitt to Buy K&F Industries for $1.1 Billion to Add Plane Brakes, Wheels Meggitt Plc, a U.K. maker of drones and combat-plane practice targets, agreed to buy K&F Industries Holdings Inc. (KFI) for $1.1 billion in cash to add braking systems for new Bombardier Inc. and Embraer (NYSE:ERJ) business aircraft.
• Volkswagen's Piech to Join MAN's Board to Promote Truck Merger, People Say Volkswagen AG (OTCQX:VLKAY) Chairman Ferdinand Piech plans to join MAN AG's supervisory board as Europe's largest carmaker pushes for a three-way combination with Swedish rival Scania AB, said two people with knowledge of the matter.
• Airbus Workers in France Strike to Protest Against Plan to Cut 10,000 Jobs Airbus SAS workers across France put down their tools today to protest against a plan to cut 10,000 European jobs and sell plants to revive the world's biggest commercial aircraft maker.