Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:51 AM EST
S&P 500: +5.70; 1,467.00
NASDAQ 100: +7.25; 1,839.00
Dow: +41.00; 12,714.00
NIKKEI 225: +1.52%; 17,628.30 (+264.35)
HANG SENG: +2.05%; 20,757.53 (+416.56)
S&P/ASX 200: +1.01%; 6,197.70 (+61.90)
BSE SENSEX 30: +2.33%; 13,695.58 (+311.50)
FTSE 100: +0.56%; 6,498.80 (+36.40)
CAC 40: +0.75%; 5,832.86 (+43.52)
XETRA-DAX: +1.06%; 7,288.69 (+76.62)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.46%; $63.92 (+$0.29)
Gold: +0.28%; $691.80 (+$1.90)
Natural Gas: -1.08%; $7.72 (-$0.08)
Silver: +0.21%; $14.12 (+$0.03)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
March Retail Sales Eclipse Expectations; Empire State Index Rebounds Slightly
U.S. retail sales jumped by 0.7% on rising income in March, according to the Commerce Department - the best performance in three months. In addition, February retail sales were revised upwards to a gain of 0.5%, also better than expected. Excluding auto sales, retail sales jumped an even better 0.8% in March; economists were predicting an overall gain of just 0.6%. MarketWatch cautioned that the gains were largely "due to higher prices, not higher volumes." Excluding gas pump sales, retail sales gained just 0.4%. In other economic news, the New York Federal Reserve Bank reported this morning that manufacturing activity in New York will rebound only slightly in April, to a reading of 3.8, up from 1.9 the previous month when it hit its lowest level in two years. Economists were expecting the index to rebound to 7.6.
Citigroup Profits Plunge 11% on Job-Cut Costs
Citigroup reported this morning its Q1 profits fell for the third straight quarter, shedding 11% on charges related to the major restructuring plan it announced last week. Profits slipped to $5.01 billion ($1.01/share) from $5.64 billion ($1.12) in Q1 2006. Excluding charges, net income was $5.88 billion ($1.18/share), ahead of analyst estimates of $1.09. Revenue was up 15% to $25.4 billion -- markets and banking revenue jumped 23%, while its customer unit gained 6.2%. Citigroup's recently announced restructuring plan will see the bank shed 17,000 jobs and save an estimated $1.7 billion this year. Shares and profits have lagged behind other banks, and some analysts surmise that CEO Charles Prince will do or die based on the success of his recent plans. Shares are up 0.8% to $52.00 in pre-market trading.
Sources: MarketWatch, Bloomberg
Commentary: Citigroup Needs Un-Grouping • Citigroup Unlike Other Big U.S. Banks • Citigroup To Lay Off 5% of Its Global Workforce
Stocks/ETFs to watch: Citigroup Inc. (NYSE:C). Competitors: Deutsche Bank AG (NYSE:DB), Legg Mason Inc. (NYSE:LM), UBS AG (NYSE:UBS), ING Group N.V. (NYSE:ING), Credit Suisse Group (NYSE:CS). ETFs: PowerShares Dynamic Banking (NYSEARCA:PJB), streetTRACKS KBW Bank (NYSEARCA:KBE)
Quest Diagnostics to Acquire AmeriPath for $2B
Quest Diagnostics, a medical diagnostics testing, information and services provider, has signed a definitive agreement to acquire privately held AmeriPath, a national diagnostic testing company, in an all cash deal valued at $2 billion (which includes about $770m in debt). AmeriPath had over $800m in revenues last year. EPS impact is expected be minimal in '07 and modestly accretive in '08. The deal is expected to close in Q2 subject to regulatory approval. In a press release, Quest said it plans to use debt financing from Morgan Stanley to pay for the transaction and refinance debt from both the AmeriPath and earlier HemoCue transactions. AmeriPath was taken private in 2003 for $658.8m, by Welsh, Carson, Anderson & Stowe. Quest reports Q1 earnings on Thursday before the market opens. Its shares are trading down about 2.2% to $53.10 in pre-market trading on light volume of about 6,500 shares. Quest closed Friday +2.9% to $54.31 and has traded between $48.07 - $64.69 over the past year.
Sources: Press release, The Wall Street Journal
Commentary: Jim Cramer's take on Quest Diagnostics • Top Six Socially Responsible Healthcare and Pharmaceutical Firms • Quest Diagnostics Gets Much Cheaper - But is It Now Cheap? [Oct. '06]
Stocks/ETFs to watch: Quest Diagnostics (NYSE:DGX). Competitors: Laboratory Corporation of America Holdings (NYSE:LH), Bio-Reference Laboratories (BLRI). ETFs: iShares Dow Jones US Healthcare Provider (NYSEARCA:IHF)
Eli Lilly's Beat and Raise Quarter Sends Shares Higher
Eli Lilly & Co. reported its first-quarter net earnings fell 39% on one-time costs mainly stemming from its purchase of Icos Corp. Still, with charges excluded, the world's top psychiatric drug manufacturer surpassed analyst expectations, sending its shares higher by $1.40, or 2.46%, to $58.28 in pre-hours trading. By the numbers, net income was $509 million after one-time items, good for EPS of $0.47, versus $0.77 a share in the year earlier period. Lilly's first-quarter sales increased to $4.23 billion from $3.71 billion. Excluding one-time charges charges from the Icos acquisition, as well as licensing and a plant closing, EPS was $0.84 cents a share, well ahead of the $0.79 per share and $4.12 billion in sales Thomson analysts were estimating. Looking ahead, the company now expects full-year sales growth in the low double digits, up from its previous view of high single to low double digits. Lilly upped its guidance range by $0.05, to EPS of $3.30-$3.40 for the year, in-line with the $3.33-a-share Thomson consensus estimate.
Sources: Press Release, Wall Street Journal, Bloomberg, MarketWatch, TheStreet.com, Reuters
Commentary: HealthShares Founder: Buy Biotech Stocks and ETFs, Avoid Big Pharma • Eli Lilly Settles Bulk of Zyprexa Claims • Cramer's Take on LLY
Stocks/ETFs to watch: Eli Lilly & Co. (NYSE:LLY). Competitors: Merck & Co. (NYSE:MRK), Pfizer Inc. (NYSE:PFE), Wyeth (WYE), Schering-Plough Corp. (SGP), Novartis AG (NYSE:NVS), Teva (NASDAQ:TEVA), AstraZeneca plc (NYSE:AZN), GlaxoSmithKline plc (NYSE:GSK), Sanofi-Aventis (NYSE:SNY), Abbott Laboratories (NYSE:ABT), Amgen (NASDAQ:AMGN). ETFs: iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE), Pharmaceutical HOLDRs (NYSEARCA:PPH)
Wachovia's Earnings Jump 33% on Golden West Integration
Wachovia Corp., the #4 U.S. bank, said this morning its Q1 earnings jumped 33% on cost control and risk management, and the successful integration of its Golden West acquisition. Net income rose to $2.3 billion for the quarter ($1.20/share), vs. $1.73 billion ($1.09) in Q1 2006. Excluding one-time expenses, EPS were $1.20, ahead of analyst consensus estimates of $1.16. Revenue gained 17% to $8.24 billion; net interest income was up 27%. Wachovia inherited $120 billion in adjustable rate mortgages from Golden West; it said that selling fixed-rate mortgages and offering free checking accounts to new customers led to a 27% average increase in deposits and helped the lender overcome the recent slowdown in mortgage initiations. About 3% of Wachovia's portfolio is subprime; the company has put aside $177 to account for potential losses. Wachovia shares are down about 5% since the Golden West deal was announced on concerns it was overextending itself during a lending slowdown. CEO Kennedy Thompson recently said, "Investors are slowly realizing that this was a contrarian deal, but one that's going to pay off." Shares are up 2% to $55.05 in pre-market trading.
Sources: Press release, MarketWatch, Bloomberg
Commentary: Wachovia's Imprudent Takeover of Golden West • Oversold Large Stocks - An Investment Opportunity? • Financial Sector: Sometimes Bad Gets Worse
Stocks/ETFs to watch: Wachovia Corp. (NASDAQ:WB). Competitors: Bank of America Corp. (NYSE:BAC), Wells Fargo & Company (NYSE:WFC), JPMorgan & Chase Co. (NYSE:JPM), Mellon Financial Corp. (MEL), SunTrust Banks Inc. (NYSE:STI). ETFs: PowerShares Dynamic Banking (PJB), streetTRACKS KBW Bank (KBE)
Mattel's Q1 Profit Drops, but Beats Street as Sales Increase 18.5%
Mattel says Q1 net profit was down 60% to $12 million, or $0.03/share, negatively impacted by a tax benefit in the same period last year. Still, Mattel topped street estimates of -$0.05/share. Its revenues of $940.3m nearly beat analysts' average estimate of $848m by $100m. CEO Robert Eckert commented that he's, "pleased with the performance of our strong portfolio of brands, including nice increases in the Fisher-Price and Wheels businesses and continued strength of the Disney/Pixar 'Cars' entertainment property." Mattel is trading up about 1.4% to $28.75 in pre-market activity on thin volume of only 1,000 shares. It lost 1.5% to $28.34 on Friday and has a 52-week trading range of $15.81 - $29.71.
Sources: Press release, MarketWatch
Commentary: Barron's Baby Boomer Stocks • Jim Cramer's Take on Mattel • Mattel's Q4 Earnings Worse Than They Appear
Stocks/ETFs to watch: Mattel (NASDAQ:MAT). Competitors: Hasbro (NASDAQ:HAS). ETFs: PowerShares Dynamic Consumer Discr (NYSEARCA:PEZ)
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise, Led by Canon, as Yen Falls Against Euro; BHP Climbs Asian stocks rose to a seven-week high, led by Canon Inc. (NYSE:CAJ) and Honda Motor Co. (NYSE:HMC) after a decline in the yen boosted the value of their exports.
• China Construction Bank Second-Half Profit Rises 23 Percent on Loan Demand China Construction Bank Corp., the nation's third largest, posted a 23 percent gain in second-half profit on more lucrative lending in the world's fastest-growing major economy.
• Essar Steel Shares Rise As Parent Agrees to Buy Algoma for $1.63 Billion Shares of Essar Steel Ltd., India's third-biggest steelmaker, rose after its parent agreed to buy Algoma Steel Inc. (ALGOF) for $1.63 billion to gain sheet mills that supply carmakers in North America.
• China's Stocks Rise to Record Led by Wuhan Iron & Steel, Yangtze Power China's stocks rose to a record. Wuhan Iron & Steel Co. led steelmakers higher after the company said it expects first-quarter profit to surge more than fivefold.
European Headlines (via Bloomberg.com)
• European Stocks Advance on Merger Speculation; ABN, Philips, Alitalia Rise European stocks rose for a second day after ABN Amro Holding NV (ABN) said banks including Royal Bank of Scotland Group Plc (NYSE:RBS) may offer to buy the company and Royal Philips Electronics NV (NYSE:PHG) reported profit that beat analysts' estimates.
• Euro Rises to Record Versus Yen as Group of Seven Refrains From Criticism The euro rose to a record against the yen after the Group of Seven finance ministers refrained from saying Japan's currency is too weak and European officials said exchange rates aren't holding back their economies.
• ABN Amro, Takeover Target, Has 31 Percent Rise in Profit on One-Time Gains ABN Amro Holding NV (ABN), the target of the largest-ever takeover battle in the financial-services industry, said first-quarter profit rose 31 percent, helped by a gain from the sale of its U.S. mortgage business.
• Philips Profit Jumps to $1.2 Billion on Sale of Taiwan Semiconductor Stake Royal Philips Electronics NV (PHG), Europe's largest maker of consumer electronics, said first- quarter profit jumped on increased sales of shavers and lamps and the disposal of a stake in Taiwan Semiconductor Manufacturing Co (NYSE:TSM).
• Hennes & Mauritz Sales Climb as Shoppers Snap Up Madonna Branded Clothing Hennes & Mauritz AB, Europe's second-largest clothes retailer, said sales in March rose at the fastest pace in at least 15 months, beating analysts' estimates, as designs by Madonna lured shoppers in London and Berlin.