Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:51 AM EST
S&P 500: +5.90; 1,494.40
NASDAQ 100: +8.25; 1,878.50
Dow: +38.00; 13,045.00
NIKKEI 225: -1.24%; 17,236.16 (-215.61)
HANG SENG: -0.18%; 20,536.78 (-36.02)
S&P/ASX 200: -0.34%; 6,188.20 (-21.00)
BSE SENSEX 30: +0.57%; 14,217.77 (+81.05)
FTSE 100: +0.60%; 6,467.90 (+38.40)
CAC 40: +1.18%; 5,955.44 (+69.41)
XETRA-DAX: +0.88%; 7,334.13 (+63.81)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.39%; $64.83 (+$0.25)
Gold: +0.04%; $688.00 (+$0.30)
Natural Gas: +0.79%; $7.66 (+$0.06)
Silver: +0.10%; $13.93 (+$0.014)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Durable Goods Orders Up 3.4%, More Than Forecast
The Commerce Department reported Wednesday that durable goods sales jumped 3.4%, well ahead of economist consensus forecasts of a 2.5% gain. It also revised February's increase up from 1.7% to 2.4%. Boeing booked orders for 119 new planes in March, helping civilian aircraft orders jump 38%. Excluding transportation, durable goods orders were up a tamer 1.5%. Demand for core capital equipment went up 4.7% after dropping 8.5% over January and February combined -- representing the key gauge's biggest gain in 2.5 years. Defense orders dropped 22.4%; excluding defense, durable-goods orders were up 4.5%. Orders for computers fell 4.2%. Economists say companies have been avoiding capital outlays despite record profits, but that spending on durable goods should begin to increase in 2H 2007.
Sources: Press release, MarketWatch, Bloomberg
Commentary: Anticipated GDP Slowdown: Blame it on the Weather? • Where is Capital Expenditure Spending? • Options Trader: Tuesday Wrapup
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)
Boeing: Net Rises 23%, Beats Street and Reaffirms Guidance
Boeing announced Q1 net income increased 23% to $877 million, or $1.13/share, beating analysts' average estimate of $1.02 (Thomson) to $1.06 (Bloomberg). Sales growth of 7.7%, to $15.37b, also came in higher than Street estimates of $15b. Boeing reaffirmed full-year '07 guidance for EPS of $4.55 - $4.75, on sales of $64.5b - $65b, and for '08 at $5.55 - $5.75 on $71b - $72b. Revenue at its Commercial Airplane division rose 7% to $7.6b, with deliveries up 8% to 106 planes. The 787 is expected to be delivered on time with entry into service scheduled for next May. Commercial airplane delivery estimates range between 440 - 445 for '07 and 515 - 520 for '08. Revenue at its Defense division also increased 7%, to $7.7b. Boeing said backlog expanded to a record $262b. It spent $360m during Q1 to repurchase 4m shares. Boeing gained 0.03% to $93.67 yesterday, renewing all-time intraday and closing highs: $94.96 and $93.67, respectively. In pre-market trading, Boeing is up 0.25% to $93.90 (range: $92.00 - $95.58) on volume of nearly 118,000.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Boeing's Conflicted Future: Why Are Insider Executives Selling? • Heavy Executive Stock Sales At Boeing • Boeing and Airbus Elevate WTO Subsidies Dispute • Boeing Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Boeing (NYSE:BA). Competitors: EADS (Paris: 005730), Lockheed Martin Corp. (NYSE:LMT), Northrop Grumman Corp. (NYSE:NOC), General Dynamics Corp. (NYSE:GD). ETFs: iShares Dow Jones US Aerospace & Defense (NYSEARCA:ITA), PowerShares Aerospace & Defense (NYSEARCA:PPA)
Related: Boeing financial presentation [pdf]
Pepsi's Net Up 16%, Beats Street; Guidance Reaffirmed, but Short of Estimates
PepsiCo reported a 16% increase in Q1 net income to $1.1 billion, or $0.65/share, beating the Street by four cents. Revenue grew 9.4% to $7.35b, also coming in higher than analysts' estimates of $7.18b (Thomson) to $7.25b (Bloomberg). Pepsi reaffirmed full-year EPS guidance of $3.30, which is short of analysts' expectations of $3.32 (Thomson) - $3.33 (Bloomberg). Total sales volumes rose 7% at its snacks division and 3.5% for beverages. Snacks sales volume at PepsiCo Int'l was the fastest growing division, +13% (led regionally by Asia Pacific, +19%), while beverage sales volumes in N. America rose only 1%. PepsiCo's CEO said she anticipates spending around $500m annually on acquisitions. MarketWatch reports Pepsi's ongoing share repurchase program reduced Q1 weighted average shares outstanding by 1.3%. Shares of Pepsi lost 0.27% to $66.41 during normal trading yesterday and are currently trading near an all-time high: $66.96 intra-day yesterday and closing at $66.65 last Friday.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Coke, Pepsi Losing Market Share • Super Fizzy Soda Stocks • PepsiCo Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: PepsiCo Inc. (NYSE:PEP). Competitors: The Coca-Cola Company (NYSE:KO), Cadbury Schweppes (NYSE:CSG), Kraft Foods (KFT). ETFs: Consumer Staples Select Sect. SPDR (NYSEARCA:XLP), Vanguard Consumer Staples (NYSEARCA:VDC)
Glaxo's Sales Drop as Patents Expire, Guides Upbeat
British drugmaker GlaxoSmithKline posted earnings little changed from last year on stunted sales growth of its asthma and diabetes treatments. Net income was €1.51 billion, vs. €1.5 billion in Q1 2006 -- slightly higher than analyst estimates of €1.44 billion. Sales of its Advair asthma medicine were down as warmer weather cut asthma cases, and new diabetes drugs from Eli Lilly and Merck detracted from its sales of Avandia. The company also lost patent protection on antidepressant Wellbutrin XL, anti-allergy drug Flonase, and anti-nausea drug Zofran -- which had combined sales of €554 million/year. Revenue fell 3% to €5.59 billion, hurt by a 12% drop in the U.S. dollar; 47% of all its sales are from the U.S. Glaxo reiterated its February forecast of a 10% earnings increase on the year, aided by the introduction of new products like breast cancer drug Tykerb and skin ointment Altabak, both of which were approved in March by the FDA. Analyst Andrew Fellows: "The company will pick up toward the end of the year." Shares are up $0.03 to $58.84 in pre-market trading.
Sources: Bloomberg, MarketWatch
Commentary: Farewell Fully Valued Abbott Labs, Hello GlaxoSmithKline • GlaxoSmithKline, Like Other Pharmas, Ignored in Good Drug Press • Global Guru David Herro's Eight International Heavyweights
Stocks/ETFs to watch: GlaxoSmithKline plc (NYSE:GSK). Competitors: Merck & Co. Inc. (NYSE:MRK), sanofi-aventis (NYSE:SNY), Bristol-Myers Squibb Co. (NYSE:BMY), Novartis AG (NYSE:NVS), Pfizer Inc. (NYSE:PFE). ETFs: Pharmaceutical HOLDRs (NYSEARCA:PPH), iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE)
UPS Misses on Sales as Domestic Shipments Lag
UPS posted in-line adjusted earnings of $0.96/share as rising U.S. exports helped boost its Q1 profits 5.3%. Net income was $1.03 billion on a 3.3% sales increase of $11.9 billion -- slightly below analyst estimates of $12.13 billion. U.S. export volume was up 10%, which helped compensate for flat domestic volume as the economy slowed. The company reiterated its January forecast for 2007 EPS growth of 6-10%, despite what it called a "softer" U.S. economy than originally expected. UPS took an $0.18/share charge in the quarter for retiring older aircraft and employee buyouts. CEO Mike Eskew said strong gains in international freight helped offset the impact of a slowing U.S. economy. "We will continue to invest aggressively to seize the growth opportunities created by the rise in global trade." UPS celebrates its 100th anniversary in 2007. Shares, which are down 4% on the year, are down 0.95% to $71.25 in pre-market trading.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Truck Shipment Slowdown Confirms Weakening Consumer Spending • UPS Divines Economic Prophecy for 2007 • Options Trader: 2007 Predictions
Stocks/ETFs to watch: United Parcel Service (NYSE:UPS). Competitors: FedEx Corp. (NYSE:FDX), TNT N.V. (TNT). ETFs: Vanguard Industrials ETF (NYSEARCA:VIS), PowerShares Industrial ETF (PRFN)
Corning Shares Gain On Earnings Beat, Strong Guidance
LCD panel and fiber optic maker Corning Inc. reported earnings this morning, beating both the Street's EPS and revenue estimates, and issuing strong guidance for next quarter. Shares rose $1.00, or $4.21, to $24.73 in pre-market (7:50 AM EST) action on the news. Better-than-expected performance from its telecom unit produced EPS of $0.20; excluding special charges, it would have earned $0.28 a share. Sales came in at $1.31 billion. Thomson Financial estimates were for EPS of $0.26 on revenue of $1.29 billion. Looking ahead, the company said it expects second-quarter earnings of $0.30 to $0.33 a share on sales of between $1.40 and $1.45 billion. Consensus estimates had been for earnings of $0.30 a share on sales of $1.42 billion. Shares closed up 1.8% to $23.73 in regular trading yesterday.
Sources: Press Release, Wall Street Journal, AP, Reuters, MarketWatch [check back for Corning's conference call transcript later today]
Commentary: Corning: Estimates Up On Improving Telecom Business • The $100B Nortel-Corning Deal That Wasn’t: Finisar CEO (mis)Speaks • Cramer's Take on GLW
Stocks/ETFs to watch: Corning Incorporated (NYSE:GLW). Competitors: AU Optronics (AUO, LG Philips (NYSE:LPL) • Philips Electronics (NYSE:PHG). Sony (NYSE:SNE). ETFs: Broadband HOLDRS (NYSE:BDH)
Conference call transcripts: Corning Q4 2006 Earnings Call Transcript
Honda: Profit Falls Less Than Expected, Beats Estimates
Honda's 20% decline in Q4 net income to ¥176.2 billion ($1.48b) topped analysts' average estimate of ¥141.1b, as sales rose 9% to ¥3.09 trillion. The U.S. market accounts for 70% of Honda's operating profit. During Q1, U.S. sales increased 6.1% to 354,208 units and its market share rose 0.6% to 9.1%, according to a report by Bloomberg. Fiscal year (ending next March) sales in the U.S. are expected to grow 2.9% to 1.84m units. Rival Nissan reports earnings tomorrow and Toyota annnounces results on May 9. Ordinary shares of Honda lost 2% to ¥3,990 ($33.60 ADR equiv. at ¥118.75/$1) ahead of its after hours release. Its ADRs fell 1.7% to $34.18 yesterday and are down 2.4% to $33.35 in pre-market activity on thin volume under 5,000 shares.
Sources: Press release, Bloomberg
Commentary: Auto Retail Earnings Season: Headlines Rarely Tell the True Story • Auto Stocks: Some Speeding Ahead, Some Stalling • Honda: Buying Opportunity Coming Soon
Stocks/ETFs to watch: Honda (NYSE:HMC) [JP: 7267]. Competitors: Toyota (NYSE:TM), Nissan (OTCPK:NSANY), General Motors (NYSE:GM), Ford (NYSE:F), DaimlerChrysler (DCX). ETFs: BLDRS Asia 50 ADR Index (NASDAQ:ADRA), iShares S&P/TOPIX 150 (ITF), iShares MSCI Japan (NYSEARCA:EWJ)
Related: Honda financial results presentation [pdf]
Northrop Grumman Shares Fall On Earnings Miss
Northrop Grumman Corp. reported earnings that came up short of analyst expectations, sending shares lower by 3.2% to $74.17 in trading yesterday. The company did reaffirm its full year guidance, and shares recovered slightly in after-hours trading, gaining $0.42, (0.56%) to $74.59. Northrop pulled in $387 million, good for EPS of $1.10 on sales of $7.34 billion. Consensus estimates, however, were predicting EPS of $1.14 on sales of $7.52 billion. For 2007, Northrop projects sales of $31-$32 billion with EPS from continuing operations of $4.80-$5.05. Consensus analyst forecasts for the full year are for $31.79 billion in sales and $5 a share in earnings. According to the company, a nearly month-long strike at Northrop's Ingalls shipyard in Pascagoula, Mississippi cut EPS by about $0.02.
Sources: Press Release, Reuters, Newsday, TheStreet.com
Commentary: Lockheed, Northrop Face Probe Over Coast Guard Program Cost Overruns • DoD's FY-08 Budget: The Largest in US History • Cramer's Take on NOC
Stocks/ETFs to watch: Northrop Grumman Corporation (NOC). Competitors: Lockheed Martin Corporation (LMT), The Boeing Company (BA), Raytheon Company (NYSE:RTN), General Dynamics (GD). ETFs: PowerShares Aerospace & Defense (PPA), iShares Dow Jones US Aerospace & Defense (ITA)
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Today's Market (via ChangeWave.com)
At the close Tuesday, the Dow Industrials gained 35 points at 12,953, the S&P 500 lost under a point at 1,480, and the Nasdaq gained just under a point to close at 2,525. The NYSE traded 1.65 billion shares and the Nasdaq 2.28 billion, with decliners ahead of gainers by about 9-to-7 on both exchanges.
Crude fell by $1.31 to close at $64.58 per barrel, resulting in a reversal and one of our proprietary sell signals. The Amex Energy SPDR (NYSEARCA:XLE) fell by just 19 cents and may have formed a small double-top, which could be confirmed if the XLE closes below $62.40 today. Gold fell, too, with the June contract losing $6.50 at $687.70 per troy ounce. The Philly Gold and Silver Index (XAU) lost $1.70, closing at $140.88, but it is just above support at the 50-day moving average at $139.47, where I expect it to hold.
What the markets are saying
In the short term, the market is overbought with internal indicators like the Moving Average Convergence Divergence, stochastics, etc., all indicating the probability of a shallow pullback.
The good earnings news of yesterday was overlooked in favor of the less-than-encouraging economic announcements, and this shows that momentum is beginning to lag after a gain of more than 8% in the S&P 500 in just over a month.
Yesterday the two very broad-based indexes -- the S&P 500 and the NYSE Composite -- closed lower. This may indicate that the broader market is finding it difficult to sustain the sharp advance that we've seen lately and may be due for a breather.
On the other hand, the Philly Semiconductor Index [SOX] blew out of a trading rectangle that has lasted for upward of six months, and so momentum may be shifting from the blue chips to the techs, giving the latter a chance to make up for their lagging performance during the last month.
Today's trading landscape
The Energy Department's report of oil stocks and the Fed Blue Book are the only economic reports today, and so the focus should shift back to earnings.
Just one Dow component reports today, and that's Boeing (BA). But there are others that could tell us something about the direction of the markets and especially that of technology stocks. Of particular interest on today's earnings front are reports by Akamai Technologies (NASDAQ:AKAM), Apple Computer (NASDAQ:AAPL), Fair Isaac (FIC), Qualcomm (NASDAQ:QCOM) and Xilinx (NASDAQ:XLNX).
After the bell yesterday, Amazon.com (NASDAQ:AMZN) crushed earnings estimates by reporting 26 cents -- Wall Street had been expecting 15 cents. Although the focus will again be on Dow 13,000, the real action to watch is in the techs, since a rally there would drive the Nasdaq (and perhaps even the rest of the market) to another leg up.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Slide on Concern U.S. Demand Will Cool; Toyota, Hon Hai Fall Asian stocks fell, snapping a three-day advance, after slides in U.S. home sales and consumer confidence fueled concern demand for exports will cool.
• Merrill to Invest $3 Billion in Resona to Help Bank Repay Japan Government Merrill Lynch & Co. (MER), the world's largest brokerage, will buy 350 billion yen ($3 billion) of preferred shares in Resona, helping the Japanese bank raise cash to repay public funds owed from a previous state bailout.
• Sharp Reports Smallest Profit Gain in 18 Months After Losing Share to Sony Sharp Corp.'s (OTCPK:SHCAY) profit rose at the slowest pace in 18 months last quarter after Sony Corp. (SNE) and Samsung Electronics Co. took a larger share of the global market for flat-screen televisions.
• ICBC First-Quarter Net Reaches $2.4 Billion as China's Growth Accelerates Industrial & Commercial Bank of China Ltd., the nation's largest, posted first-quarter profit of 18.7 billion yuan ($2.4 billion) as accelerating economic growth lifted demand for loans and bolstered a stock market boom.
European Headlines (via Bloomberg.com)
• Stocks in Europe Rise, Led by ABN Amro; Siemens, Sainsbury Shares Advance European stocks rose for the first time in three days on increased takeover speculation.
• Sainsbury Shares Jump as 14 Percent Stock Trade Fuels Takeover Speculation Shares of J Sainsbury Plc jumped after a 1.4 billion-pound ($2.8 billion) block of stock was acquired, spurring speculation an investor is targeting the supermarket company or its real estate.
• German Business Confidence Increases for Second Month, Beating Estimates German business confidence rose to the second-highest level on record in April, indicating growth in Europe's largest economy may accelerate.