Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -1.80; 1,390.10
NASDAQ 100: -3.00; 1,741.25
Dow: -24.00; 12,165.00
NIKKEI 225: -2.92%; 16,676.89 (-501.95)
HANG SENG: -2.57%; 18,836.93 (-496.21)
S&P/ASX 200: -2.10%; 5,741.90 (-123.10)
BSE SENSEX 30: -3.49%; 12,529.62 (-453.36)
FTSE 100: -1.86%; 6,046.80 (-114.40)
CAC 40: -1.67%; 5,341.98 (-90.96)
XETRA-DAX: -1.81%; 6,504.04 (-119.95)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.17%; $58.03 (+$0.10)
Gold: -1.22%; $641.50 (-$7.90)
Natural Gas: +0.89%; $6.95 (+$0.06)
Silver: -1.89%; $12.715 (-$0.245)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
GM's First Profit in Two Years is Well Short of Estimates
General Motors reported its first quarterly profit in two years Wednesday morning, posting a gain of nearly $1 billion for the fourth quarter of 2006. But there was a gray cloud in GM's silver lining as the results came in well below expectations.By the numbers, the world's largest automaker earned $950 million including $770 million in special items, largely resulting from its sale of a majority stake in its financing arm GMAC. Without those one-time proceeds, the company still would have earned $180 million in the quarter, good for EPS of $0.32, versus a loss of $6.6 billion, or a loss of $11.63 per share in the year earlier period. Revenue fell slightly to $51.2 billion compared with $51.7 billion a year earlier. Analysts were expecting profit of between $1.19 (First Call) and $1.20 (Reuters) per share. CEO Rick Wagoner said that despite turning a profit, "there is still a lot more work to do." CFO Fritz Henderson refused to provide specific guidance saying only that GM's year-over-year performance will continue to improve in 2007. Shares were down $0.32, or 1.05%, to $30.19 in pre-market action.
• Sources: Press Release, AP, Reuters, TheStreet.com, CNN Money
• Commentary: The Rise of Toyota and the Demise of the American Auto Industry • February Light Vehicle Sales: It's All Relative, Or Is It?
• Stocks and ETFs to watch: General Motors (NYSE:GM). Competitors: DaimlerChrysler (DCX), Ford (NYSE:F), Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)
Lehman Bros. Reports Q1 Gain, Trails Goldman
Lehman Brothers, the #4 U.S. investment bank, said this morning its Q1 2007 net income rose 5% to $1.15 billion from $1.09 billion in Q1 2006, driven by strong performance in fixed income and equities capital markets. Revenues were up 12% to $5.05 billion. EPS gained 7% going to $1.96 from $1.83, in-line with analyst estimates. Strong profits from fixed-income derivatives like bonds, combined with strong performance in real estate, offset declines stemming from weakness in the mortgage sector, the firm said. The company earned 37% of its 2006 revenue outside the U.S., making it #2 in non-U.S. markets to Goldman Sachs. Its profit growth trailed Goldman's, who said yesterday its Q1 2007 earnings rose 29%. Lehman stock fell 5.9% yesterday (its biggest drop in almost five years) to $72 on concerns over mortgage delinquencies. Its shares are last in performance among the big-five U.S. securities firms. Shares are down another 2% to $70.58 in pre-market trading.
Sources: Press Release, MarketWatch, Bloomberg
Commentary: As Lehman Brothers FSB Goes, So Go Mortgage Assets • Merrill Likes How Fellow Brokers LookLehman Bros. Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Lehman Brothers Holdings Inc. (LEH). Competitors: Goldman Sachs Group Inc. (NYSE:GS), Merrill Lynch & Co. Inc. (MER), Morgan Stanley (NYSE:MS), Bear Stearns Companies Inc. (NYSE:BSC). ETFs: streetTRACKS KBW Capital markets (NYSEARCA:KCE)
Subprime Mortgage Woes Hit H&R Block Again, Shares on the Chopping Block
H&R Block's shares lost 3.8% to $20.05 at yesterday's market close, but tumbled 11.2% to $17.80 in after-hours trading on volume of 115,300, following news it will report a higher Q3 loss than initially reported, and it will delay its quarterly filing with the SEC until Mar. 19. In today's pre-market it last traded at $18.07 on volume of only 2,000. H&R Block has an additional Q3 loss of $29 million (pre-tax) related to its Option One Mortgage Corp., a sub-prime mortgage lender, on top of the $44.7m loss (-$0.14/share) it announced on Feb. 22, for the quarter ended Jan. 31. According to its SEC filing, H&R Block has "undertaken a rigorous review process this period to address the potential ramifications" of recent developments in the sub-prime mortgage market." H&R Block's shares are now trading at their lowest level in more than three years.
Sources: H&R Block SEC filings, Bloomberg
Commentary: H&R Block Swings to Q3 Loss on Subprime Mortgage Business • H&R Block: As Attractive as Death and Taxes • Berkshire Hathaway: Notable 13F Changes
Stocks/ETFs to watch: H&R Block (NYSE:HRB). Competitors: New Century Financial (NEW), Financial Corp (CFC), Pacific Premier Bancorp (NASDAQ:PPBI), Novastar Financial (NFI), Fremont General (FMT), Intuit (NASDAQ:INTU), Jackson Hewitt Tax Service (JTX)
Lenovo to Pre-load Microsoft Live Tools
Microsoft said Tuesday it has reached an agreement with Lenovo Group to pre-load Microsoft Windows Live online services, including Microsoft Web Search toolbar, on Lenovo computers. The deal replaces a similar deal Lenovo had previously with Google to pre-load its toolbar on its desktop and notebook computers. Live.com, Microsoft's news, information, and search site, will be the default home page for Lenovo users. Microsoft hopes the pre-load, which many users tend to leave in place, will increase traffic to its web services. Windows Live search currently ranks third behind Google and Yahoo, with 11% of the online search market. Lenovo is the first computer maker to ink a deal with Microsoft.
Sources: Press Release, New York Times
Commentary: Report: Microsoft Might Buy Tellme Networks • Will Vista Reignite Microsoft 's Internet Search Presence? • Why Hasn't Microsoft Captured its Share of the SME Market?
Stocks/ETFs to watch: Microsoft Corp. (NASDAQ:MSFT), Lenovo (OTCPK:LNVGY). Competitors: Google Inc. (NASDAQ:GOOG), Yahoo! Inc. (NASDAQ:YHOO), Baidu.com Inc. (NASDAQ:BIDU), Time Warner Inc. (NYSE:TWX), LookSmart Ltd. (LOOK), Answers Corp. (NASDAQ:ANSW). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Related: Microsoft Live Search
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Tumble on Concern Over U.S. Growth; Samsung, Toyota Decline Asian stocks fell, resuming a sell- off that halted last week, as climbing U.S. home-loan delinquencies suggest the world's biggest economy is slowing.
• Daimaru to Buy Matsuzakaya to Form Japan's Biggest Department Store Group Daimaru Inc. agreed to buy Matsuzakaya Holdings Co. for 183 billion yen ($1.58 billion) in stock, creating Japan's largest department store chain.
• Citigroup Says It Won't Raise Nikko Takeover Offer, `Confident' of Success Citigroup Inc. (NYSE:C), the biggest U.S. bank, said it won't raise its $13.4 billion takeover bid for Japan's Nikko Cordial Corp. (OTC:NIKOY) further and expressed confidence the offer will succeed.
• Mitsubishi Heavy Wins TXU Order for Two Nuclear Power Stations in U.S. Mitsubishi Heavy Industries Ltd., the builder of Japan's first nuclear station, won a $5.1 billion order to build two reactors for TXU Corp. (TXU) in Texas, the first time a Japanese company will lead an overseas nuclear contract.
• Lone Star Rejects Findings of South Korean Auditors on Korea Exchange Sale Lone Star Funds Chairman John Grayken rejected accusations by South Korea's audit agency that a gauge of the financial strength of Korea Exchange Bank was manipulated to pave the way for its sale to the U.S. buyout firm.
European Headlines (via Bloomberg.com)
• European Stocks Slide on U.S. Growth Concern; UBS, Legal & General Decline European stocks slumped following a slide in global markets sparked by concern loan delinquencies will hurt growth in the U.S., the world's largest economy.
• Smurfit Kappa Raises $1.7 Billion in Ireland's Biggest IPO in Eight Years Smurfit Kappa Group, the world's largest maker of cardboard boxes, raised 1.3 billion euros ($1.7 billion) in Ireland's biggest initial public offering for almost eight years.
• Legal & General Net Doubles on Pension Plan Sales; Profitability May Drop Legal & General Group Plc, a U.K. life insurer with $450 billion under management, said profit margins are likely to narrow after second-half earnings doubled.
• Fresenius Is Looking for Acquisitions to Boost Sales, Chief Schneider Says Fresenius AG, owner of the world's biggest provider of kidney dialysis, will use acquisitions to meet its goal for annual revenue of 15 billion euros ($19.8 billion) in 2010, Chief Executive Officer Ulf Schneider said.
• U.K. Jobless Claims Fall to Lowest in a Year, Add to Case for Higher Rates U.K. unemployment fell to the lowest in more than a year in February after economic growth quickened, adding to the case for a further interest-rate increase from the Bank of England.