Pre-Market Snapshot: Futures Indicate Bullish Start To Summer Trading

Wall St. Breakfast's Pre-Market Snapshot:

U.S. Futures As of 8:40 AM EST

S&P 500: +3.30; 1,520.60
NASDAQ 100: +2.75; 1,895.75
Dow: +23.00; 13,550.00

International Indexes

Asia
NIKKEI 225: +0.48%; 17,672.56 (+84.97)
HANG SENG: -0.29%; 20,469.59 (-60.17)
S&P/ASX 200: +1.06%; 6,317.60 (+66.20)
BSE SENSEX 30: +0.77%; 14,508.21 (+110.32)

Europe
FTSE 100: +0.32%; 6,591.50 (+21.00)
CAC 40: -0.21%; 6,059.02 (-12.45)
XETRA-DAX: +0.37%; 7,767.58 (+28.38)

Commodity Futures (Reuters/Jefferies CRB)

Oil: -1.30%; $64.35 (-$0.85)
Gold: +0.35%; $663.70 (+$2.30)
Natural Gas: -1.05%; $7.56 (-$0.08)
Silver: +0.38%; $13.05 (+$0.05)

U.S. Breaking News — see today's Wall Street Breakfast for earlier news

AMD Trades Higher on News Toshiba Will Use its Chips

Toshiba said it will begin using microprocessors made by Advanced Micro Devices, ending an exclusive contract with Intel dating from 2001. Toshiba will join rival global PC makers in offering both types of chips. It plans to use AMD chips in 20% of its shipments to the U.S. and EU (which reportedly account for 60% of its PC business) in moderate-priced retail and corporate models. Reuters reports Toshiba is the world's fourth largest notebook PC maker. Toshiba's decision to use AMD chips appears to be a win-win situation, as Toshiba will be able to reduce costs and supply chain risk and offer more options to end users. Shares of AMD are trading to the upside, +1.9% to $15.04, in pre-market activity, although on somewhat light volume of just under 73,000. AMD lost 0.8% to $14.76 on Friday. Ordinary shares of Toshiba gained 1.2% to ¥908 in Tuesday trading.
Sources: Bloomberg, Reuters
Commentary: Intel on AMD’s Quad-core Barcelona: 'Too Little, Too Late' • Intel: Price Cut Coming On Quad-Core Processors To Counter AMD’s Barcelona • Intel vs. Negroponte: Time For AMD’s Take
Stocks/ETFs to watch: Advanced Micro Devices, Inc. (AMD), Toshiba Corp (TOSBF.PK) (JP: 6502). Competitors: Intel Corp. (INTC). ETFs: SPDR S&P Semiconductor (XSD), Semiconductor HOLDRs (SMH)
Conference call transcripts: AMD Q1 2007, Intel Q1 2007

Alcan Shares Climb On Rio Tinto, Norsk Hydro Bid Speculation

Shares of Canadian aluminum producer Alcan climbed 1.5% in pre-market trading Tuesday, as speculation built the company would receive a higher bid from either Norsk Hydro or Rio Tinto than what Alcoa is offering. Alcoa has remained firm on its hostile cash and stock bid for Alcan despite its rejection by Alcan's board. As of last Wednesday, Alcoa's bid for Alcan stood at $27.6 billion, good for $74.60/share. Talk over the weekend of a Rio Tinto bid was essentially rejected by Rio CEO Oscar Groeneveld. Amid reports Rio has hired Deutsche Bank to advise it over a possible bid for Alcan, Groeneveld said "We always consider opportunities but whether or not we are moving ahead, doing anything like due diligence, is pure speculation." The Globe and Mail quotes investment bankers "working with the two companies" as saying Norsk Hydro has begun work on a $30-billion-plus bid for Alcan. Alcan shares traded as high as $86.50 in pre-market action Tuesday (as of 7:34 A.M. EST).
Sources: Wall Street Journal, Bloomberg, Globe and Mail, MarketWatch, Reuters
Commentary: Alcan Rejected Marriage Proposal; Now Alcoa Has Something to Prove • Alcan/Alcoa Merger: This One Won't Be Easy • Alcoa Stays Put on Alcan Bid, Shares Surge on Bid War Speculation
Stocks/ETFs to watch: Alcoa Inc. (AA), Alcan Inc. (AL), Rio Tinto plc (RTP), Norsk Hydro (NHY). Competitors: BHP Billiton Limited (BHP), Companhia Vale do Rio Doce (RIO). ETFs: Vanguard Materials VIPERs (VAW), iShares Dow Jones US Basic Materials Index (IYM), PowerShares FTSE RAFI Basic Materials ETF (PRFM)

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

Recap of Last Week's Action
The Friday prior to a three-day weekend is usually a flat day in the markets, as many traders and investors take off and make it a four-day celebration. But those who took off last Friday missed a strong performance by the bulls.

Volume dropped a bit, but buying came in as a result of a weak existing home sales report that countered Thursday's strong new home sales number -- a scenario that could prompt the Fed to again consider an interest-rate cut. Also, another takeover deal was in the news, and this time it was Coca-Cola's (KO) $4.1 billion purchase of vitamin-water maker Glaceau.

At the close Friday, the Dow had advanced by more than 66 points to end at 13,507. The S&P 500 gained eight points at 1,516, and the Nasdaq was up 19 to 2,557. Volume dropped, as expected, and the NYSE traded 1.2 billion shares while the Nasdaq traded 1.5 billion. Advancers exceeded decliners by better than 2-to-1 on both major exchanges.

More merger-and-acquisition deals surfaced again last week, starting off with Alltel (AT) going private in the largest telecom deal ever and the Chinese taking a $3 billion piece of Blackstone. Later, there was Alcan's (AL) rejection of Alcoa's (AA) offer and a possible turning of the tables with rumors of AL potentially going after AA instead.

But all of that was put aside when, on Wednesday, former Fed Chairman Alan Greenspan said that the Chinese markets were due for a "dramatic correction at some point." On Thursday, it looked like the market might recover from the Greenspan remarks, but good news became bad when three positive economic reports (durable goods, weekly job claims and April new home sales) led investors to conclude that, because of all the encouraging data, the Fed was unlikely to cut interest rates anytime soon.

So, despite Friday's strong showing, the Dow had its first loss in seven weeks, falling 0.4%. Meanwhile, the S&P 500 was off by 0.5% after coming within several points of its record close of 1,527 made in March 2000. The Nasdaq lost less than 0.1% for the week.

What the Markets Are Saying
The stock market and especially the broader-based indexes (S&P 500 and NYSE Composite) have been rising at such a torrid pace that they had to eventually run out of steam and take a breather. And that appears to be happening now, with the first weekly pullback in the markets in seven weeks.

Some of the hesitation to move higher may be the overhanging S&P 500 high that was missed by an ever-so-narrow margin after three attempts, and some of it could be attributed to the Memorial Day weekend.

But even prior to last week, momentum numbers were slipping, some minor divergences were noted, and sentiment was very overbought. The measurement of public sentiment (American Association of Individual Investors' data) shows that the public is still, on balance, bearish. Meanwhile, on Friday, it was noted by Standard & Poor's, quoting MarketVane, that market professionals continue to be very bullish by a reading of 78% -- one of the highest readings since 1990.

So, after a reasonable rest, look for the S&P to crack its old closing high as the market resumes its upward march.

Today's Trading Landscape
Consumer confidence is the report to focus on today -- look for 103.5 compared to last month's 104. There are no significant earnings to report today, but again, mergers and acquisitions are serving as the main theme this morning, thanks to the following stories: Avaya (AV) is reported to be a takeover target, Archstone-Smith (ASN) is close to a deal, the Volvo division of Ford (F) has interest from BMW, ABN Amro (ABN) is being targeted by the Royal Bank of Scotland, URS Corp. (URS) agreed to buy Washington Group (WNG), and now Norsk Hydro (NHY) and Rio Tino (RTP) are throwing their hat into the Alcan (AL) arena (read above). These deals will no doubt have a positive impact on the opening of our markets today.

Asian Headlines (via Bloomberg.com)

• Asian Stocks Rise After Japan's Jobless Rate Drops; Mizuho Financial Jumps Asian stocks advanced for a second day after reports in Japan showed an unexpected drop in unemployment and a rise in household spending.

• Japan's Jobless Rate Unexpectedly Falls to Nine-Year Low, Spending Climbs Japan's jobless rate unexpectedly fell to a nine-year low in April and consumer spending increased for a fourth month, suggesting the economy is resilient enough to withstand higher interest rates.

• KKR Quits Coles Buyout Group, Giving Wesfarmers Edge in $16.1 Billion Bid Kohlberg Kravis Roberts & Co. abandoned its nine-month pursuit of Coles Group Ltd., Australia's second-largest retailer, boosting the prospects Wesfarmers Ltd.'s A$19.7 billion ($16.1 billion) offer will succeed.

• Sanyo Shares Surge After Company Forecasts Profit, Nomura Raises Rating Shares of Sanyo Electric Co. (SANYY.PK), the world's largest maker of rechargeable batteries, rose the most in 18 months after its fourth-quarter loss narrowed and the company forecast its first annual profit in four years.

European Headlines (via Bloomberg.com)

• European Stocks Rise, Led by Vodafone; Philips, IMI Gain on Rating Upgrade European stocks rose for the first time in three days after a sales forecast from Vodafone Group Plc (VOD) lifted phone companies and analysts recommended investors buy shares of Royal Philips Electronics NV (PHG) and IMI Plc.

• IPO Fees in Europe Catch Wall Street for First Time Since World War II The lights may be going out on Wall Street, where for the first time since World War II bankers are on the verge of earning less from initial public offerings than in Europe.

• Tax-Cut War Erupts as U.K., France, Germany Slash Rates to Lure Investment A tax-cut war is spreading across Europe as leaders of the continent's biggest economies give up criticizing smaller neighbors for slashing business rates and decide to join them instead.