Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:52 AM EST
S&P 500: +2.60; 1,536.50
NASDAQ 100: +4.75; 1,927.25
Dow: +22.00; 13,678.00
NIKKEI 225: +1.63%; 17,875.75 (+287.49)
HANG SENG: +1.68%; 20,634.47 (+340.71)
S&P/ASX 200: +1.12%; 6,313.50 (+70.10)
BSE SENSEX 30: +0.92%; 14,544.46 (+133.08)
FTSE 100: +0.47%; 6,633.40 (+31.30)
CAC 40: +1.02%; 6,103.81 (+61.66)
XETRA-DAX: +1.49%; 7,880.35 (+115.38)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.49%; $63.18 (-$0.31)
Gold: +0.64%; $663.50 (+$4.20)
Natural Gas: +0.40%; $7.97 (+$0.03)
Silver: +0.76%; $13.32 (+$0.10)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
GDP Drops to Just 0.6% Annual Growth; Bottom May Be In
The U.S. economy slowed more than expected to just 0.6% annual growth in the first quarter, according to figures released by the Commerce Department. Growth was stunted by weak home investment, shrinking business inventories, and a large trade gap. The government had initially forecast 1.3% growth, and economists were calling for a revision of that number to 0.7%. The drop puts last-four-quarter cumulative growth at just 1.9%, well below the 3% economists are looking for in the long-term. Consumer spending continued to be strong (+4.4% vs. 3.8% estimate), as did disposable incomes (+4.7%), while business spending fell to its lowest growth level in five years. House investments fell at a 15.4% rate (down from a 17% estimate). Inventories dropped by $4.5 billion, shaving 1% off total growth. Corporate profits climbed $20.3 billion (+1.2%) to $1.67 trillion; profits are up 6.3% over the past year, their weakest y/y growth since Q4 2001. Exports dropped 0.6%, their biggest decline in four years, while imports jumped 5.7%; the trade deficit was responsible for trimming another 1% off growth. On the positive side, economists said this may prove to be the low point for the U.S. economy: "Most of the weakness was on the inventory side and that is a positive for growth going forward... We are looking for modestly below trend growth through the rest of the year, which will leave the Fed on hold," said Lehman economist Michelle Meyer.
Sources: BEA Press Release, MarketWatch, Bloomberg
Commentary: The Wall Street-Main Street Disconnect Continues: Three Housing Slump Tales of Woe • Wall Street Should Be On Sale • Want To Catch a Falling Knife? Buy Into the American Dream
Stocks/ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)
Wachovia To Buy A.G. Edwards, Forming Second Largest U.S. Retail Broker
In a merger that will create the #2 U.S. retail brokerage firm, Wachovia Corp. will acquire A.G. Edwards for $6.8 billion in cash and stock. Wachovia will offer A.G. Edwards shareholders 0.98 shares of Wachovia stock and $35.80 cash per share ($89.50 total), a 16% premium over A.G.'s Wednesday closing price of $77.15. If completed, the deal will double the size of Wachovia's brokerage unit; Wachovia expects it to affect earnings materially within the year, excluding acquisition costs of approximately $860 million. The combined brokerage will have $1.1 trillion in client assets and 15,000 financial advisers. In explaining Wachovia's strategy, CEO Kennedy Thompson believes "the long-term growth opportunities of the brokerage industry are extremely compelling." Prudential Financial, owner of 38% of Wachovia's brokerage arm, Wachovia Securities, supports the deal.
Sources: Press Release, Wall Street Journal, Bloomberg, MarketWatch, Reuters
Commentary: Wachovia's Earnings Jump 33% on Golden West Integration • Wachovia Acquires One of Europe's Largest Fixed-Income Credit Funds • AG Edwards Reports Strong Results - Should Investors Be Worried Going Forward?
Stocks/ETFs to watch: Wachovia Corp. (WB), A.G. Edwards (AGE). Competitors: Citigroup (C), Merrill Lynch (MER), Bank of American (BAC). ETFs: iShares Dow Jones US Broker-Dealer Index (IAI), streetTRACKS KBW Bank (KBE), Regional Bank HOLDRS (RKH)
Tiffany Beats By a Penny, Ups Guidance, Poised to Set New All-time High
The weak dollar and its remodeled New York flagship store helped drive Tiffany & Co.'s sales and a penny earnings beat. Q1 net income rose 15% to $50 million, or $0.36/share. Sales also increased 15% to $621m. In thin pre-market activity, shares of Tiffany are trading to the upside by about 2.9% to $54.00. Tiffany gained 1.5% to $52.46 during normal trading Wednesday. Revenues were up 26% at its NY flagship. Tiffany Chairman and CEO Michael J. Kowalski said, "We are now one month into the second quarter and sales in May are achieving our overall expectation. Strong sales growth in the U.S. and in most international markets is offsetting continued weakness in Japan." The Company expects a "continued favorable retail environment," and as a result raised its FY guidance for sales to +12% (from 11% - 12% prior) and EPS of $2.10 - $2.15 (from $2.07 previously, based on a 15% increase from $1.80/share).
Sources: Press release, Bloomberg, MarketWatch
Commentary: Tiffany & Co: Just Follow the Sales • Five Outperformers That Break the Basic Laws of Economics • Tiffany: Q4 Earnings In-line, Shares Trade Higher on Q1 Outlook • Tiffany & Co Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Tiffany & Co (TIF)
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
A negative opening Wednesday due to the Chinese move to throttle growth gave way to a resumption of strong buying in the afternoon, when the Federal Reserve released the minutes from its last meeting.
From those minutes, it is clear that the Fed governors are still focused on inflation as their main concern but believe that the risks to growth have "diminished slightly." They went on to say that fears of an inventory correction were lessened and that the economic growth rate was expected to "pick up in the coming quarters." That announcement came at 2 p.m., and the market immediately drew some strong buying despite the fact that the Fed said nothing about the future of interest rates.
At one point during the trading day, the Dow Industrials were down more than 60 points but they managed to close higher by 112 -- at another new high of 13,633. The S&P 500 finally broke through the longstanding close of 1,527 and ended the day at 1,530. The Nasdaq added 21 points to close at 2,593. Volume on the NYSE totaled 1.5 billion shares, and 2 billion shares traded on the Nasdaq. Advancers beat decliners by better than 2-to-1 on the Big Board, but on the Nasdaq it was a narrow victory, with the score at 16-to-13 in favor of advancing issues.
Crude oil (July contract) had a slight rebound following Tuesday's sell-off and was up 40 cents, closing at $63.55 a barrel; the near-term trend is still down within a longer-term uptrend. The Amex Energy SPDR (XLE) added $1.39 to close at a new high of $68.67. Gold resumed its downward ways by losing $4.10 and closing at $653.10 per troy ounce. But the Philly Gold and Silver index [XAU] was up 66 cents, closing at $136.06.
What the Markets Are Saying
Yesterday's attention rightfully focused on the S&P 500, as it closed at a new record high. But the significance of that was even enhanced by a new high in the other broader-based index -- the NYSE Composite -- since that provides confirmation of the new high in the "500."
The next target for the "500" is 1,557, and it should achieve that with little trouble.
Today's Trading Landscape
Earnings reports are due today from Activision (ATVI), Costco Wholesale (COST), Big Lots (BIG), Dell (DELL), H.J. Heinz (HNZ), Hovnanian (HOV) and Tiffany (TIF) (read above), among others. The Q1 revision of GDP is due today as well as the personal consumption and April construction spending numbers.
M&A activity has spread into the financial services area, as Wachovia Bank (WB) will acquire broker A.G. Edwards (AGE) for $6.8 billion (read above). This could create buying in that sector today as analysts try to focus on the next takeover candidates.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise to Record on Federal Reserve's U.S. Outlook; China Gains Asian stocks rallied to a record after the U.S. Federal Reserve predicted growth will pick up in the world's biggest economy.
• Morgan Stanley Real Estate to Buy Australia's Investa for $3.9 Billion Morgan Stanley (MS) agreed to buy Investa Property Group, Australia's biggest office owner, capping $12.5 billion of real estate investments this month, spread across three continents.
• India's Annual Economic Growth Rate Accelerates to Highest in Two Decades India's economy grew at the fastest pace in almost 20 years as companies lifted production to meet surging consumer demand.
• BHP Billiton Names Marius Kloppers to Succeed Goodyear as Chief Executive BHP Billiton Ltd. (BHP), the world's largest mining company, promoted Marius Kloppers to chief executive officer, succeeding Charles ``Chip'' Goodyear who delivered record profits during his four-year tenure.
• HSBC to Start Islamic Bank in Malaysia to Sell Wealth Management, Funds HSBC Holdings Plc. (HBC), the largest overseas bank offering Islamic services in Malaysia, plans to set up a standalone unit in the country to target Asia's growing Muslim population.
European Headlines (via Bloomberg.com)
• European Stocks Climb to Highest Since 2000; E.ON, Iberdrola, BHP Advance European stocks rallied, sending the Dow Jones Stoxx 600 Index to the highest since September 2000, after E.ON AG (EON) said it will buy back $9.4 billion in shares and Belgian billionaire Albert Frere bought a stake in Iberdrola SA .
• E.ON to Build 18 Power Plants in Europe as Part of $81 Billion Expansion E.ON AG (EON), Germany's biggest utility, plans to build 18 new power plants in Europe as part of a 60 billion-euro ($81 billion) investment plan unveiled after failing to take over Spain's largest electricity producer.
• Man Group Full-Year Profit Rises 27 Percent as Assets Managed Increase Man Group Plc, the world's largest publicly traded hedge fund manager, reported record annual profit as a 24 percent increase in assets under management boosted fees.
• Iberdrola Shares Climb After Frere's Companies Acquire 5 Percent of Stock Shares of Iberdrola SA jumped after Belgian billionaire Albert Frere said he had bought 5 percent of the power company, Spain's second-largest.
• Polish Economy Expanded at Fastest Rate in 10 Years in the First Quarter The Polish economy accelerated at the fastest pace since 1997 as rising demand for homes and consumer goods fueled investment by companies while growth in the European Union fed exports.