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Wall St. Breakfast's Pre-Market Snapshot:

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

S&P 500: +5.30; 1,520.50
NASDAQ 100: +6.75; 1,897.00
Dow: +42.00; 13,548.00

International Indexes

Asia
NIKKEI 225: -0.57%; 17,399.58 (-99.02)
HANG SENG: -0.43%; 20,904.84 (-89.77)
S&P/ASX 200: -0.84%; 6,312.50 (-53.40)
BSE SENSEX 30: +0.03%; 14,303.41 (+3.70)

Europe
FTSE 100: +0.76%; 6,629.10 (+49.80)
CAC 40: +0.90%; 6,081.40 (+54.40)
XETRA-DAX: +1.05%; 7,578.05 (+78.55)

Commodity Futures (Reuters/Jefferies CRB)

Oil: +0.51%; $65.19 (+$0.33)
Gold: +0.27%; $659.00 (+$1.80)
Natural Gas: +0.98%; $8.15 (+$0.08)
Silver: +0.21%; $12.91 (+$0.027)

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

Microsoft Pays Up for aQuantive

Microsoft announced Friday it would acquire web advertising firm aQuantive Inc. for about $66.50/share -- an 85% premium to Thursday's close of $35.87. AQNT shares are trading at $65 in the pre-market. The move, which will cost Microsoft about $6 billion, follows WPP Group's acquisition of web advertiser 24/7 Real Media on Thursday for $650 million; it had been rumored Microsoft might attempt to buy 24/7. Other recent consolidation in the sector includes Google buying DoubleClick for $3.1 billion and Yahoo taking the remaining stake in Right Media for $680 million, both in April. In a post on Seeking Alpha Thursday, contributor Jason Jones looked at aQuantive's potential buyout value. His conclusion: "AQNT is worth $44 if you use the 24/7 Real Media take-out multiple (23x), $60 if you use the DoubleClick multiple (33x), and $75 if you use the Right Media multiple (10x EV/Revs)." Microsoft said in its press release the acquisition would help it provide a "world class, internet-wide advertising platform." Its units include the Atlas media toolset, DRIVEpm that matches ad inventory with availability, and its Avenue A/Razorfish ad agency. Microsoft 18 05 2007 Chart aQuantive 18 05 2007 ChartMicrosoft expects to close the deal in the second half of 2007. Analysts note the deal may serve as proof Microsoft has no intention of joining forces with Yahoo, as has been rumored recently. Microsoft said the deal would not have a significant impact on its previously provided financial outlook. Its shares are down 0.4% to $30.85 in pre-market trading. Shares of ValueClick, the only remaining soloist in web advertising, are up 7.25% to $29.90.
Sources: Press release, MarketWatch, TheStreet.com, SeekingAlpha
Commentary: Aquantive Shares Set To Soar On Blazing Q1 ResultsAquantive Shares Set To Soar On Blazing Q1 ResultsGoogle-DoubleClick Deal Makes aQuantive More Attractive
Stocks/ETFs to watch: Microsoft Corp. (NASDAQ:MSFT), aQuantive Inc. (AQNT), Google Inc. (NASDAQ:GOOG), ValueClick Inc. (VCLK), 24/7 Real Media Inc. (TFSM), Yahoo! Inc. (NASDAQ:YHOO). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Conference call transcript: aQuantive Q1 2007, Microsoft F3Q07

China Loosens Clamp on Yuan, Tightens Rates and Reserve Ratio

The People's Bank of China [PBoC] is taking action ahead of next week's (May 22 - 24) second biannual U.S.-China Strategic Economic Dialogue. Starting Saturday, (1) the yuan will be allowed to trade in a 0.5% band, versus 0.3% (2) the one-year benchmark lending rate will increase to 6.57%, from 6.39%, deposit rate to 3.06% from 2.79%, and (3) banks will have an 11.5% reserve requirement, up a half percent. The yuan reached a record high close Friday against the US$ at 7.67. In a statement on its website, the PBoC spoke of forex rate stability and equilibrium, based on market supply and demand with reference to a basket of currencies. The chief economist at Nomura Int'l in Hong Kong commented, "The signal is unmistakable: the government wants to stop the stock market exuberance and stem excess liquidity." A treasury dealer at Maybank Shanghai said, "This is China trying to show the U.S. that China is willing and trying to act on the currency issue." The Shanghai Composite lost 0.45% to 4,030, while the Hang Seng fell 0.43% to 20,904. Separately, there are unconfirmed reports Central Huijin, the investment arm of the PBoC, has entrusted private equity firm Blackstone Group to invest $3b of the nation's forex reserves overseas.
Sources: Press release and Q&A, Bloomberg, MarketWatch, Reuters
Commentary: Global Sources: Profit from China's Growing Trade SurplusChina's April Trade Surplus Jumps 63% to $17BChindia ETF Exposes Investors to 40% of World Population
Stocks/ETFs to watch: iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI), PowerShares Golden Dragon Halter USX China Portfolio (NYSEARCA:PGJ). Bond ETFs: iShares Lehman 1-3 YR Treasury Bond (NYSEARCA:SHY), iShares Lehman 7-10 YR Treasury Bond (NYSEARCA:IEF), iShares Lehman 20+ YR Treasury Bond (NYSEARCA:TLT). Currency ETFs: PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV), Euro Currency Trust (NYSEARCA:FXE), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY)

Dr. Reddy's Posts Big Earnings Beat on Nausea Treatment Sales

Dr. Reddy's Laboratories reported FQ4 earnings of $79.5 million (3.25 billion rupees) after losing $5 million a year earlier -- almost doubling consensus forecasts of 1.76 billion rupees [Reuters]. Sales more than doubled to $361 million. India's #3 drugmaker, and the only one that is U.S.-listed, began selling its anti-nausea drug (ondansetron), a generic copy of GlaxoSmithKline's Zofran, in the U.S. in December; it has 180 days to sell the drug without generic competition. Sales of the drug (2.7 billion rupees) boosted earnings, although Credit Suisse analysts Neelkanth Mishra and Anubhav Aggarwal caution against attaching too much importance to so-called 'one-off' profits, due to their short lifespan. The twenty-year-old company copies blockbuster drugs such as Bayer's Cipro and Merck's Zocar and imports them at large discounts. The company is likely to go after Pfizer's Norvasc hypertension drug (which already has Mylan and Pfizer generics) and Glaxo's Coreg heart disease treatment when their patents expire RDY Drug Mix 18 5 07later this year. Dr. Reddy's trades at about 14x estimated earnings, vs. 24x for #1 drugmaker Ranbaxy and 21x for #2 Cipla. Shares of its U.S. ADRs are down 11% YTD and 13.2% y/y, while its Bombay-traded shares are down 18% YTD. It is the worst performer on the exchange's 23-stock Healthcare Index. Shares lost 1.8% in Bombay trading Friday; its ADRs are up 3.3% in pre-market trading on the NYSE to $16.74.
Sources: Press release, Bloomberg, MarketWatch, Reuters
Commentary: Apotex Loses Emergency Appeal, Dr. Reddy's Launches Generic ZofranDr. Reddy's Launches Generic ZofranReddy's is Ready for Aggressive Growth
Stocks/ETFs to watch: Dr. Reddy's Laboratories Ltd (NYSE:RDY), GlaxoSmithKline plc (NYSE:GSK), Pfizer Inc. (NYSE:PFE), Merck & Co. Inc. (NYSE:MRK), Mylan Laboratories Inc. (NASDAQ:MYL). ETFs: HealthShares GI/Gender Health (HHU) [5.5% holding], iShares Dow Jones U.S. Pharmaceuticals (NYSEARCA:IHE), iPath MSCI India ETN (NYSEARCA:INP)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Today's Market (via Sam Collins, ChangeWave.com)

Recap of Yesterday's Action
After the big triple-digit day on Wednesday it was time for the bulls to curl up by the nearest watering hole and take a well-deserved rest -- which is what they did yesterday. And nothing -- not a new buyback of stock by Sun Microsystems (SUNW), a takeover of Real Media (TFSM) by Britain's WPP, better-than-expected earnings by retailer JC Penney (NYSE:JCP), or even positive economic news -- could get them up and running.

Early in the day initial jobless claims were reported down by 5000, at noon the Philly Fed said that regional factory activity rose more than expected, and the U.S. Leading Indicator fell a modest 0.5% indicating that inflation should remain under control and that growth is continuing at a modest pace.

At the closing bell the Dow Jones Industrial Average had lost 11 points closing at 12,477, the S&P 500 was down a point at 1,513 and Nasdaq lost 8 to close at 2,539. Volume on the NYSE dropped to 1.4 billion shares, and 1.9 billion traded on Nasdaq. Breadth on both exchanges was negative by about 19/12.

Oil futures rallied yesterday and that could also have put the lid on equities. The June contract was up $2.31 a barrel at $64.86 and the Amex Energy SPDR (NYSEARCA:XLE) closed at $66.67 up 98 cents and another new high. Gold was hit hard again with the June delivery losing $4.30 to close at $675.20 an ounce, and the Gold and Silver Index [XAU] fell by $1.16 closing at $134.98 on its way to a test at the support line at about $128.

What the Markets Are Saying
Even though the market's internal indicators are telling us that the indexes are overbought, the sentiment numbers are still bullish for the long term. Consider for example the much-followed American Association of Individual Investors Index [AAII]. Two weeks ago the AAII, which tracks the opinion of small investors, showed that despite the enormous run in the market from March to late April, the little guys are still bearish by a reading of 54% to 29%. Then last week they decided to take a chance and moved to even, at 43% bulls and 43% bears, but the day after that report the market got hit for a 140-point loss.

Well, that did it for them and so yesterday they retreated again. The numbers are interesting because instead of going to a full bearish stance they showed their total confusion by dropping the bullish figure to 39% and the bearish to 38%, but increasing the neutral figure to 25% -- which is the highest neutral reading in 6 weeks. The bottom line is the public is still on the sidelines and we should remain long the stocks in our quality portfolios, since any market weakness will again be viewed by big buyers as another opportunity.

Today's Trading Landscape
The only economic report due today is the preliminary May University of Michigan Confidence Index. There are no significant earnings reports, and so this may be a relatively slow day as traders look forward to the weekend. China has moved to tighten credit by raising its reserve requirements and other key rates in a move to cool its economy (read above). The move could cool world markets, but our markets look like they will open higher this morning.

Asian Headlines (via Bloomberg.com)

Asian Stocks Fall to a Two-Week Low; BHP Billiton, Nippon Steel Decline Asian stocks fell, with the region's benchmark index completing its first weekly decline this month, after copper, nickel and zinc prices tumbled.

Hong Kong's Economy Cools Amid Investment Slump, Slowing Exports to U.S. Hong Kong's economic expansion slowed as companies cut back investment amid waning exports to the U.S., the city's second-largest market after China.

China Mobile Adds Record 5.28 Million Users in April After Cutting Prices China Mobile Ltd. (NYSE:CHL), the world's largest mobile-phone company by users, added a record number of subscribers for a ninth consecutive month as the company cut prices on services to gain market share from fixed-line carriers.

Bajaj Auto Shares Plunge on Plan to Split Company, Brokerage Downgrades Shares of Bajaj Auto Ltd., India's second-biggest motorcycle maker, fell after the company said yesterday it will split into three companies and allow Allianz SE to raise stake in a venture. Credit Suisse Group and UBS AG downgraded the stock.

European Headlines (via Bloomberg.com)

Stocks in Europe Advance, Led by Shares of Cairn Energy, Cadbury, Legrand European stocks advanced for a second day as takeover speculation swept through the energy, banking, food and electrical components industries.

British Airways Has First Loss in Eight Quarters on Labor Dispute, Traffic British Airways Plc (NYSEARCA:BAB) reported its first loss in eight quarters after setting aside 350 million pounds ($691 million) to settle antitrust fines and canceling flights because of a labor dispute. The stock fell to a six-month low.

UniCredit May Be Close to Buying Capitalia; Trading in Shares Is Suspended UniCredit SpA may be close to announcing plans to acquire Capitalia SpA in Italy's second- biggest banking takeover.

U.K. Retail Sales Unexpectedly Fall in April, First Drop in Three Months U.K. retail sales unexpectedly fell for the first time in three months in April, a sign that record indebtedness, rising interest rates and spiraling prices may be starting to hurt consumer spending.

Valentino Falls; Permira Says It's in Exclusive Talks, Blocking Carlyle Shares of Valentino Fashion Group SpA fell after Permira Advisers LLP said it was in exclusive talks to buy a controlling stake in the Italian clothing company, which would thwart a potential bid from Carlyle Group.

Source: Pre-Market Snapshot: Decidedly Bullish Open On Tap