Pre-Market Snapshot: M&A Rumors Spark Futures

by: SA Editors
SA Editors
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Wall St. Breakfast's Pre-Market Snapshot:

U.S. Futures As of 8:52 AM EST

S&P 500: +5.70; 1,514.00
NASDAQ 100: +9.50; 1,916.00
Dow: +42.00; 13,320.00

International Indexes

NIKKEI 225: 17,394.92 (05/02)
HANG SENG: +0.77%; 20,841.08 (+159.50)
S&P/ASX 200: +0.95%; 6,304.90 (+59.30)
BSE SENSEX 30: -1.02%; 13,934.27 (-143.94)

FTSE 100: +0.87%; 6,594.90 (+57.10)
CAC 40: +0.41%; 6,029.16 (+24.88)
XETRA-DAX: +0.34%; 7,502.40 (+25.71)

Commodity Futures (Reuters/Jefferies CRB)

Oil: +0.05%; $63.22 (+$0.03)
Gold: +0.28%; $686.30 (+$1.90)
Natural Gas: +0.35%; $7.98 (+$0.03)
Silver: +0.56%; $13.585 (+0.075)

U.S. Breaking Newssee today's Wall Street Breakfast for earlier news

Nonfarm Job Growth Lowest in Over Two Years, Unemployment Edges Up

U.S. job growth came in at a less-than-expected 88,000, while unemployment came back up 0.1% to 4.5%. Economists had been calling for a 100,000 job gain and 4.5% unemployment. Jobs created were down from 177,000 (revised) in March -- 88,000 is the smallest gain since November 2004. Average hourly wage was up 0.2% to $17.25, and the average workweek dropped 0.1 hour to 33.8 hours. Discounting 25,000 government jobs, private sector job growth was 63,000; ADP's Wednesday employment survey predicted 64,000. Goods producers saw a net loss of 28,000 jobs, retail lost 26,000, manufacturing employment shed 19,000 and construction jobs were down 11,000. Strong sectors included the service sector which gained 116,000 and healthcare which was up 53,000. On Thursday, Monster Worldwide President Steve Pogorzelski said recent employment figures "reflect a moderating U.S. economy so we see growth and demand at lower levels than we saw in 2006 and 2005... At the same time the demand we do see is relatively stable."
Sources: Nonfarm Payrolls press release, MarketWatch
Commentary: Labor Demand Grows Moderately -- Monster SurveyJob Growth Slows to Weakest Rate in Four Years -- ADPDallas Fed President Fisher: Dead Wrong On Subprime Woes Not Spreading
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)

Kodak Posts Narrower Loss, but Earnings Out of Focus with Street Estimates

Eastman Kodak halved its Q1 net loss (-$151 million, or -$0.53/share) compared to the same period last year, and reported a loss from continuing operations of $0.61/share, but came up well short of analysts' average estimate of a $0.02 loss. Sales declined 8% to $2.12b, versus analysts' forecast of $2.11b. Eastman-Kodak-EK-chart-05-03-07 Kodak lowered its full-year guidance for net cash generation for ink jets and digital products. However, it reiterated its forecast for digital revenues to increase 3% - 5%, and for overall revenues to decline 4% - 7%. CEO Antonio M. Perez commented, "We are just beginning to scratch the surface of what we think we can achieve in the printing industry, on both the consumer and commercial side." Shares of Kodak gained 1.1% to $25.97 during normal trading. It last traded at $25.40 (-2.2%) in pre-market activity, on thin volume of 27,000 shares.

Sources: Press release, Bloomberg, MarketWatch
Commentary: Recent Earnings Strength Tied to International ExposureLegg Mason's Bill Miller: Buys, Sells, PortfolioWill Kodak 'Print' Money?Eastman Kodak Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Eastman Kodak Co. (EK). Competitors: Hewlett-Packard Co. (NYSE:HPQ), Lexmark International Inc. (NYSE:LXK), Canon Inc. (NYSE:CAJ), FUJIFILM Holdings (FUJI), Sony Corp. (NYSE:SNE)

Nokia Siemens Networks To Slash 15% of Its Workforce; Shares Decline

Friday morning Nokia Siemens Networks, equally co-owned by Nokia Corp. and Siemens AG, said it will slash 9,000 jobs globally, sending shares of both companies lower in pre-market trading. The networking giant is hoping to improve its competitive position through cost cutting synergies of €1.5 billion annually by 2010. The job cuts amount to roughly 15% of Nokia Siemens 60,000 strong work force, at the high end of its 10%-15% projection last June. Nokia Siemens CEO Simon Beresford-Wylie called it "a necessary step to build a Nokia Siemens Networks able to compete now and in the future." The cuts will occur between now and 2010, with the most cuts coming in Germany (2,800-2,900 employees) and Finland (1,500-1,700), where Siemens and Nokia are headquartered, respectively. In pre-market action (8:00 AM), ADR shares of Nokia were down $0.39, or 1.52%, to $25.25, while Siemens ADR shares were lower by $1.47, or 1.19%, to $122.08. noksi
Sources: Wall Street Journal, MarketWatch, AP
Commentary: Apple's iPhone and The Future of NokiaProfiting From the Global Cellular Wireless BoomSiemens' CEO Departure Should Worry Investors - Barron's
Stocks/ETFs to watch: Nokia (NYSE:NOK), Siemens AG (SI). Competitors: Ericsson (NASDAQ:ERIC), Cisco Systems (NASDAQ:CSCO), Alcatel-Lucent (ALU), Motorola (MOT).
ETFs: iShares Goldman Sachs Network Index Fund (NYSEARCA:IGN), PowerShares Dynamic Networking (NYSEARCA:PXQ)

Washington Post Net Falls 16%, Misses Street Estimates, Newspaper Division's Struggles Continue

The Washington Post reported Q1 net income fell 16.3% to $64.4 million, or $6.70/share, missing analysts' average estimate of $8.73/share. Revenues rose 4% to $985.6m, as increases at its education and cable TV divisions helped offset declines in newspaper and magazine publishing and in TV broadcasting. Newspaper publishing sales fell 10% to $219.2m, while operating income dropped 53% to $14.9m. Washington-Post-WPO-chart-05-03-07Print advertising revenue at The Post declined 16% to $125.1m, as both daily and Sunday circulation declined 3.9% and 3.3%, respectively. The Post said revenues from online publishing activities rose 10% to $25.1m, including a 20% increase in online ad revenue and a 4% rise in classified ads on Shares of The Washington Post traded slightly higher (0.10%) to $768.90 in normal trading.
Sources: Press release
Commentary: Michael Price on Murdoch, Dow Jones and the Washington PostNewspaper Stocks Climb on Dow Jones BidDaily Newspaper Circulation Drops 2.1%
Stocks/ETFs to watch: The Washington Post Co. (WPO). Competitors: The New York Times Co. (NYSE:NYT), Gannett Co. (NYSE:GCI), Tribune Company (TRB), The McClatchy Company (NYSE:MNI)

Hovnanian Says Q2 Loss Will Exceed Forecasts

Hovnanian Enterprises said it's Q2 loss would come in at $0.30/share, far worse that the company's original guidance of a $0.05-0.20 per-share loss. It said it expects a $15-20 million loss on abandoning deposits on land it would not develop, which will increase its per-share loss to $0.45-0.50. The #6 U.S. homebuilder said, "The adverse publicity surrounding the subprime market has further damaged homebuyers' psychology, resulting in decreased demand and leading to continued use of sales incentives." Hovnanian delivered 3,196 homes, down from 4,555 last year. Hovnanian 04 05 2007 ChartCancellations fell from 36% to 32% q/q. Net contracts were down 21% to 3,116. Shares gained 1.1% Thursday to $24.57; they have fallen 38.2% over the past year.
Sources: Press release, MarketWatch, Bloomberg
Commentary: Holding Onto Hovnanian, With Some TrepidationHovnanian: Housing Slump BuyHolding Onto Hovnanian, With Some Trepidation
Stocks/ETFs to watch: Hovnanian Enterprises Inc. (NYSE:HOV). Competitors: Toll Brothers Inc. (NYSE:TOL), D.R. Horton Inc. (NYSE:DHI), KB Home (NYSE:KBH), Beazer Homes USA Inc. (NYSE:BZH), Pulte Homes Inc. (NYSE:PHM). ETFs: streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (NYSEARCA:ITB)
Conference call transcript: Hovnanian Enterprises F1Q07 Earnings Call Transcript

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Today's Market (via Sam Collins,

Recap of Yesterday's Action
With almost two-thirds of S&P 500 companies having reported earnings, investors shifted their attention to economic data yesterday, and they were not disappointed.

Indeed the news could have hardly been better, as reports showed that inflation was down and productivity was up. An hour before Thursday's opening, the Labor Department announced that the productivity of the U.S. non-farm sector rose at a 1.7% annual rate in the first quarter, above the forecast of 0.8%. And unit labor costs rose at an annual rate of just 0.6% instead of the 2.15% expected -- this is a key inflation gauge, and one that the Fed watches closely.

Later in the morning, the market got a further boost from the Institute for Supply Management when it reported that its service-sector index rose to 56% in April from 52.4% in March. The expectation had been for it to rise to 53.3%, and that capped a perfect day for the economy.

The financial sector was strong yesterday led by Prudential Financial (NYSE:PRU), up $2.65 at $99.45 as a result of beating analysts' forecasts. And Unum Group (NYSE:UNM) was up $2.44 to $27.36 as a result of its Q1 profits more than doubling. But the big gainer among the blue chips was Verizon (NYSE:VZ), which rose 3.7% after courts denied Vonage's (NYSE:VG) request for a retrial in a patent-infringement case against VZ.

Before the opening, General Motors (NYSE:GM) missed its Q1 forecast by a mile and the stock felt the pain by falling $1.75 to $30.69. But despite the big miss by GM, the Dow Industrials closed up 30 points at 13,241. The S&P 500 gained six and closed above 1,500 for the first time since Sept. 7, 2000 -- ending the day at 1,503. The Nasdaq was up eight points to close at 2,565.

Trading volume on the NYSE totaled 1.6 billion shares, and 2.1 billion changed hands on the Nasdaq. Advancers beat decliners by 18-to-13 on the NYSE and by 15-to-14 on the Nasdaq. The Dow has risen in 22 of the last 25 sessions, culminating in the longest winning streak since 1929.

Rising inventories pushed crude oil lower again yesterday, with the June contract closing down 49 cents at $63.19 a barrel. A drop below $62.50 would break a double-bottom and establish a series of lower highs and lower lows, with the next support for June crude at the $60 area. The Amex Energy SPDR (NYSEARCA:XLE) ended the day up by 57 cents at $63.86 for a new closing high.

June gold rallied by $9.30 and closed at $684.40 per troy ounce, and that created a reversal following Wednesday's drop of $2.20 to $675. The Philly Gold and Silver Index [XAU] rose by $1.66, completing a reversal on Wednesday when it closed above the 200-day moving average on a strong stochastic buy signal. A close above the 20-day moving average at $142.88 would put the next target at the May 3 high at $148.50.

What the Markets Are Saying
Sentiment is still in favor of higher prices, as noted in yesterday's comments that the public and investment advisers were being very cautious. But last night the new American Association of Individual Investors' report was published, showing that the public is not just skeptical of further gains but instead downright terrified of a sell-off. The new figures indicate that 54% of investors are now bearish while only 29% are bullish -- compared to a breakeven number last week.

We also know that short interest on the NYSE is very high. So, with the market breaking into new highs against the public's and traders' opinions, we can only imagine what might develop if the shorts decide that enough is enough and cover en masse. However, it is more likely that the shorts will reluctantly cover piecemeal, and that should drive the market at a steady pace. But a piece of very bullish news could cause a dramatic buying climax.

Today's Trading Landscape
The most important economic report of the week will be issued this morning, and that is the April employment report. We've been holding our breath on this one. Consensus expectations are modest (just 100,000), but if the figure is too high or too low, the market could have a nasty reaction.

Earnings are forthcoming today by Eastman Kodak (EK) (read above), USEC (USU) and Weyerhaeuser (NYSE:WY), among others. The big news this morning is that Microsoft (NASDAQ:MSFT) has approached Yahoo! (NASDAQ:YHOO) with a $50 billion buyout offer. And there's another deal pending, too -- Reuters has been approached by an unnamed company. With all of the "deal talk," the market looks like it's going to open strong.

Asian Headlines (via

Asian Stocks Rise to Record on Metals, U.S. Economy; BHP, PetroChina Gain Asian stocks climbed to a record after metals prices gained and reports showed better-than-forecast productivity growth in the U.S.

Macquarie's $9 Billion Qantas Buyout Fails After Investors Spurn Offer Macquarie Bank Ltd. and TPG Inc. failed to complete the world's biggest airline takeover after investors rejected an A$11.1 billion ($9 billion) buyout of Australia's Qantas Airways Ltd.

China, Japan and South Korea Agree to Help Pool Foreign Currency Reserves China, Japan and South Korea agreed to pool part of their foreign-exchange reserves to prevent a repeat of the crisis that depleted Asia's holdings ten years ago.

Shinhan Bank of South Korea Posts Record Profit on Sale of LG Card Stake Shinhan Financial Group Ltd. (NYSE:SHG), South Korea's second-largest financial services company by market value, reported record quarterly profit on gains from the sale of its stake in credit card firm LG Card Co.

European Headlines (via

Credit Suisse Banker Arrested, Charged With Insider Trading in TXU Buyout U.S. prosecutors charged a Credit Suisse Group (NYSE:CS) investment banker in the second major insider-trading case this year, saying he leaked tips on nine acquisitions to investors who used them to profit illegally.

CVC, PAI Partners Offer $17.4 Billion for Altadis, Topping Imperial's Bid CVC Capital Partners Ltd. and PAI Partners offered 12.8 billion euros ($17.4 billion) for Altadis SA, topping Imperial Tobacco Group Plc's (ITY) bid for the Spanish maker of Gauloises cigarettes.

European Stocks Rise for Fourth Day, Led by EMI, Reuters on Merger Outlook European stocks rose for a fourth day after Reuters Group Plc (RTSY) and music company EMI Group Plc (OTC:EMIPY) said they received takeover approaches.