Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -8.00; 1,514.50
NASDAQ 100: -11.00; 1,895.50
Dow: -63.00; 13,495.00
NIKKEI 225: -0.48%; 17,588.26 (-84.30)
HANG SENG: -0.86%; 20,293.76 (-175.83)
S&P/ASX 200: -1.17%; 6,243.40 (-74.20)
BSE SENSEX 30: -0.67%; 14,411.38 (-96.83)
FTSE 100: -0.91%; 6,546.50 (-60.00)
CAC 40: -0.86%; 6,004.18 (-52.21)
XETRA-DAX: -1.09%; 7,696.38 (-84.66)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.03%; $63.13 (-$0.02)
Gold: -0.39%; $660.80 (-$2.60)
Natural Gas: +1.15%; $7.82 (+$0.09)
Silver: -0.59%; $13.145 (-$0.078)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Polo Ralph Lauren Trading Lower on Weak Guidance Despite Earnings Beat
Polo Ralph Lauren reported fiscal Q4 net income increased 17% to $73.2 million, or $0.68/share, on sales growth of 6% to $1.03b. Analysts were expecting $0.62/share on sales of $1.03b. Shares of Polo gained 1.15% to $93.28 during normal trading Tuesday and gained 1.31% to $94.50 in very thin after-hours trading. However, in pre-market activity Wednesday, it was last trading down 3.52% to $90.00, also on very thin volume. Polo forecast revised full year fiscal 2008 EPS of $3.70 - $3.80, including a -$0.27 impact from acquisitions. Analysts polled by Thomson expect $4.13/share. Q1 consolidated revenues are expected to increase in the mid-teens. Polo said Q4 wholesale revenues increased 10% to $629m, while operating income rose $10% to $139m; operating margin was flat at 22.1%. Retail sales rose 3% to $346m, as overall same-store-sales were up 6.3%, but an operating loss of $2m was reported (compared to last year's profit of $1m).
Sources: Press release, Bloomberg, MarketWatch
Commentary: Polo Ralph Lauren Spends $370 Million to Take Control of Its Japan Operations • Polo Ralph Lauren Corp.: Expanding the Brand • Jim Cramer's Take on Ralph Lauren
Stocks/ETFs to watch: Polo Ralph Lauren Corp. (RL). Competitors: Jones Apparel Group Inc. (JNY), Liz Claiborne Inc. (LIZ). ETFs: PowerShares Dynamic Consumer Discretionary (PEZ), PowerShares Dynamic Mid Cap Growth (PWJ)
ICE Pact With Chicago Options Exchange May Assist In Its CBOT Bid
InterContinental Exchange [ICE] has reached an agreement with the Chicago Board Options Exchange [CBOE] which may help it in its bid to buy the Chicago Board of Trade [CBOT], according to the Wall Street Journal. CBOT members founded the Options Exchange in the 1970s but are now caught in a dispute as to how much ownership they still posses over the CBOE. The case has gone to court, as the CBOE has contemplated a public offering. The agreement would only take hold if ICE successfully buys CBOT, and would pay each of the 1,300 CBOT members in question $500,000 for their stakes in the CBOE. The Chicago Mercantile exchange is currently the front runner to buy CBOT; though more lucrative, CBOT's board said earlier this month that a combination with ICE "would take longer to integrate and would involve significantly greater execution risk" than a Chicago Merc deal.
Sources: Wall Street Journal, Reuters, Financial Times
Commentary: CME Sweetens Offer for CBOT; ICE Considers Its Position • CBOT Favors ICE Over CME, May Stay Independent -- Papers • CBOT Taking ICE Offer Seriously: Money Talks
Stocks/ETFs to watch: IntercontinentalExchange, Inc. (ICE), CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings Inc. (CME). Competitors: NYMEX Holdings Inc. (NMX), International Securities Exchange Inc. (ISE)
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Yesterday opened with an explosion of merger-and-acquisition deals and news ranging from the $95.5 billion offer from a Royal Bank of Scotland group for the Dutch bank ABN Amro (ABN), to Norsk Hydro (NHY) and Rio Tinto (RTP) as new possible bidders for Alcan (AL).
And in between these monster deals was the rumor that BMW is interested in Ford's (F) Volvo unit, along with Archstone-Smith's (ASN) agreement to be taken private by Tishman Speyer and Lehman Brothers (LEH).
The consumer confidence numbers helped, too, with a reading of 108 in May up from 106.3 in April. But Tuesday morning's news gave way to more talk of a Chinese crackdown on its growth, and that put a temporary damper on the market. However, crude oil took a sharp dip, and despite relatively light volume, a mid-afternoon deficit was overcome and the averages closed higher.
At the close yesterday, the Dow Industrials gained 14 points to 12,521, the S&P 500 added two points to 1,518, and the Nasdaq rose almost 15 to settle at 2,572. Volume on the NYSE totaled 1.4 billion shares and 1.6 billion traded on the Nasdaq. Breadth on both exchanges was a positive 2-to-1.
Crude oil (July contract) took a hit, down $2.05 at $63.15 a barrel, and the Amex Energy SPDR (XLE) lost 42 cents and closed at $67.28. Gold (June contract) rose $1.90 to $657.20 per troy ounce, but the Philly Gold and Silver Index [XAU] lost 40 cents and closed at $135.40. The XAU is still in a near-term decline with the next support at $128.
What the Markets Are Saying
With the number of M&A deals done and on the table, it is obvious that the world's key companies are loaded with liquidity and are determined to put it to use.
This is apparently the reason why so many investment professionals are bullish -- they are in contact with this huge pool of money. They know that, despite the fact that there have been more than double the number of deals done this year than last, the M&A game has only just begun.
Conclusion: More money will be chasing fewer stocks for a classic case of price inflation. Couple this with continued consumer confidence, a strong job market and modest inflation, and it means that the bull has a long road ahead of him.
Today's Trading Landscape
The focus today will be on the Federal Open Market Committee's minutes from its last meeting. And we'll also be looking for the reaction to more acquisitions that were announced last night, including a private deal takeover of CDW Corp. (CDWC) for $7.3 billion and an announcement by IBM of a $12.5 billion accelerated share buyback plan. But the big news this morning comes again from China, where the government has tripled the tax on stock trades. Asian markets are sharply down, and this could impact our opening today.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Drop After China Raises Stamp Tax; Citic Securities Plunges Asian stocks fell for the first time in three days after China tripled the tax on securities transactions, causing the biggest slump in the region's best performing equity market in three months.
• Japan's Industrial Production Unexpectedly Fell for Second Month in April Japan's industrial production unexpectedly fell for a second month in April as the slowest economic growth in the U.S. in four years reduced demand for Toyota Motor Corp. (TM) and Honda Motor Co. (HMC) cars.
• Bank of Communications Profit Rises 31 Percent on Loans, Income From Fees Bank of Communications Ltd., part owned by HSBC Holdings Plc (HBC), said first-quarter profit rose 31 percent as economic growth in China bolstered loan demand and income from fees gained.
• Greenspan's Predicted China-Stock Decline Might Not Damage Global Growth Even if former Federal Reserve Chairman Alan Greenspan is right, the ``dramatic contraction'' he predicts for Chinese stocks isn't likely to infect the international economy.
European Headlines (via Bloomberg.com)
• European Stocks Retreat on China Concern, Led by LVMH, Standard Chartered European stocks dropped the most in two months after China increased taxes on securities trades, sparking concern that global shares face another sell-off.
• Airbus Wins Qatar Airways Pledge for 80 A350 Planes Valued at $16 Billion Airbus SAS won an $16 billion pledge from Qatar Airways to buy 80 A350 XWB long-range planes, beating out Boeing Co.'s (BA) 787 Dreamliner in the first large commitment to the European aircraft in almost a year.
• ECB Likely to Raise Inflation Forecast, Keep Options `Open,' Garganas Says European Central Bank council member Nicholas Garganas said the bank will probably raise its inflation forecast next month and is keeping options ``open'' on interest rate increases after June.
• Retail Sales in Europe Decline for First Time in Three Months, PMI Shows Retail sales in the euro area fell for the first time in three months in May, as spending on clothing and shoes dropped, the Bloomberg purchasing managers index showed.
• Ferrovial Says BAA Won't Contribute to Earnings to 2011 After Terror Alert Grupo Ferrovial SA, the Spanish builder that spent $20 billion buying BAA Plc, said the U.K. airport operator won't contribute to earnings until 2011 after a terror alert last year led to higher security costs.