Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:55 AM EST
S&P 500: -1.70; 1,517.20
NASDAQ 100: +1.00; 1,956.50
Dow: -25.00; 13,495.00
NIKKEI 225: +0.46%; 17,932.27 (+82.99)
HANG SENG: +1.07%; 21,938.22 (+232.66)
S&P/ASX 200: +1.32%; 6,265.60 (+81.40)
BSE SENSEX 30: +0.51%; 14,504.57 (+73.51)
FTSE 100: +0.54%; 6,563.10 (+35.50)
CAC 40: +0.61%; 5,978.15 (+36.48)
XETRA-DAX: +1.08%; 7,885.86 (+84.63)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.96%; $69.63 (+$0.66)
Gold: +0.81%; $650.00 (+$5.20)
Natural Gas: -0.07%; $7.08 (-$0.005)
Silver: +1.63%; $12.53 (+$0.201)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
GDP Growth at Four-Year Low of 0.7%
Real GDP increased at a rate of 0.7%/year in Q1 2007, according to final estimates released by the Commerce Department Thursday, down from 2.5% in Q4 2006, but up 0.1% (or $1.1 billion) from its May initial estimate of 0.6%. Economists thought GDP would be a slightly-higher 0.8%. Growth is currently at its slowest rate in four years. Q1 deceleration of GDP growth reflects rising imports, falling exports and reduced government spending, it said. The price index for domestic purchases was up 3.7%, or 2.9% excluding food and energy, up 0.5% from Q4 -- its fastest level since Q2 2006. The increase in prices supports economist assumptions that the Fed will leave its target rate at 5.25% at today's meeting. Personal consumption was up 4.2%, the same as last quarter, but nonresidential investment was up 2.6% vs. a 3.1% drop in the previous period. Corporate profits were up by $23 billion, compared to a $4.9 decrease in Q4. Inventories fell at $4.2 billion annually. "The inventory correction is over and with that usually comes an acceleration of growth. What was ailing the economy last year and early this year is really behind us," said Credit Suisse economist Jonathan Basile.
Sources: GDP release, Bloomberg
Commentary: Tops and Bottoms: Reflections and Predictions • Waiting and Wondering About What's Next For the U.S. Economy • Odds of a Fed Rate Cut By Halloween Rising After Hitting Zero
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)
Corn Fuels 71% Surge in Monsanto's Q3 Net, Shares Trading Higher
Shares of Monsanto were last up 1.8% to $67.20 in thin pre-market trading, on news it reported a 71% increase in net income to $570 million, or $1.03/share, beating the Street on an adjusted basis at $1.02/share versus analysts' average estimate of $0.98. Revenues were up nearly 24% to $2.84b, topping analysts' average forecast for $2.77b. "The 2007 season is shaping up to be an extraordinary year for agriculture," said chairman and CEO Hugh Grant. Monsanto is seeing positive market conditions and strong demand in the U.S. and overseas. Earlier in June, Monsanto raised its fiscal 2007 EPS guidance to $1.75 - $1.80 (from $1.60 - $1.65 previously). On average, 13 analysts expect EPS of $1.81. Shares of Monsanto lost 1.8% to $66.00 on Wednesday.
Sources: Press release, MarketWatch
Commentary: Monsanto Earnings: Volatility Is The Name of the Game • Earnings Preview: Expecting Negative News From Lennar, Micron Tech; Good News From Monsanto • Taking Eric Bolling’s Agriculture Stock Play, Making it My Own
Stocks/ETFs to watch: Monsanto Company (NYSE:MON). Competitors: DuPont (NYSE:DD), BASF AG (BF), Syngenta AG (NYSE:SYT). ETFs: Materials Select Sector SPDR (NYSEARCA:XLB), iShares Dow Jones US Basic Materials (NYSEARCA:IYM), Vanguard Materials (NYSEARCA:VAW)
General Mills Q4 EPS Misses By a Penny, Sales Top Estimates
General Mills reported a slight increase in Q4 net income to $224 million, or $0.62 (vs. $222m, $0.61 last Q4), coming up a penny shy of the Street's consensus estimate. Full fiscal 2008 EPS guidance of $3.39 - $3.43 (+7 to 8% y/y) also came up short of analysts' average estimate of $3.44. Q4 Revenues rose 7% to $3.06b, beating analysts' average forecast of $2.99b. In its earnings press release, General Mills said higher input and marketing costs are expected to continue in fiscal 2008. The company projected fiscal '08 sales growth in the low single-digits and for segment operating profits to increase in the mid single-digits. General Mills' average diluted shares outstanding declined to 360 million in FY'07, from 379m in the prior fiscal year. Shares of General Mills were last down 1.2% to $58.73 on thin pre-market trading, after rising 0.3% to $59.45 Wednesday.
Sources: Press release, Bloomberg, MarketWatch
Commentary: 32 Big Dividend Payers: Buy Now, Profit Later • Dean Foods: Milk This Oversell - Barron's
Stocks/ETFs to watch: General Mills Inc. (NYSE:GIS). Competitors: Group Danone (DA), Kellogg Co. (NYSE:K), Kraft Foods Inc. (KFT). ETFs: PowerShares Dynamic Food & Beverage (NYSEARCA:PBJ), PowerShares Dynamic Market (NYSEARCA:PWC), iShares Dow Jones US Consumer Goods Sector Index Fund (NYSEARCA:IYK)
Constellation Brands Beats, Names New CEO
Constellation Brands said Thursday FQ1 2008 net income dropped 65% as it implements its March decision to downsize U.S. distributor inventory levels, and on weak U.K. sales. Reported net income of $29.8 million was down from $85.5 million y/y. After items, EPS fell 31% to $0.21, ahead of analyst estimates of $0.15. Net sales fell 22% to $901 million; analysts were calling for $868 million. Management noted at the time that the inventory cuts would reduce short-term profits in order to help the company streamline its operations, "ultimately making the company's brands more competitive in the marketplace." The changes are expected to be mainly finished by the end of FQ2. A week ago, Constellation reiterated its F2008 EPS forecast of $1.16-1.26. Last month the company said a massive drought in Australia has curbed the wine glut there, allowing it to raise its U.K. prices now that the market is no longer being flooded by Australian wines. Constellation also announced Thursday that Robert Sands, 49, will succeed his brother, Richard, 56, as CEO. Robert has previously been the company's president and COO. In a May 7 note, HSBC said it is satisfied with Constellation's "shareholder friendly" policies such as share repurchases and moving away from lower-margin businesses, but questioned its true organic growth in the face of both company- and industry-specific concerns. Shares dropped from $24 to below $20 in March when it announced the inventory reductions, but have since regained $24.
Sources: Press release, Wall Street Journal, AP I, II, Bloomberg
Commentary: Barron's Toasts Constellation Brands -- Shares Should Climb 25% • Constellation Brands Vs. Diageo: A Good Stock Picking Study • Word on the Grapevine: Wine Stocks
Stocks/ETFs to watch: Constellation Brands Inc. (NYSE:STZ). Competitors: Diageo plc (NYSE:DEO), Molson Coors Brewing Co. (NYSE:TAP), Anheuser-Busch Companies Inc. (NYSE:BUD), Fortune Brands Inc. (FO), Heineken N.V. ADR (HINKY). ETFs: PowerShares Dynamic Food & Beverage (PBJ), Consumer Staples Select Sector SPDR (NYSEARCA:XLP), Consumer Discretionary SPDR ETF (NYSEARCA:XLY)
Rite Aid Shares Jump On Earnings Beat
Rite Aid Corp. reported Thursday net income increased six-fold in its recently ended quarter, on sales gains in both the pharmacy and front-end sections of its stores. The company's EPS of $0.04 on profits of $19.5 million handily exceeded Thomson Financial consensus analyst estimates of an EPS loss of $0.01; net was $3.2 million in the year earlier period. Sales rose 3% to $4.46 billion; Thomson consensus estimates called for revenue of $4.67 billion. The U.S.' third largest drugstore chain reported same store sales grew 2.3%, buoyed by a 2.7% gain in its pharmacy business. Prescription sales, which rose 1%, account for 64% of the company's total sales. The company maintained its FY2008 sales guidance in a range of $25.3 billion - $26 billion. Chairman, President and CEO of Rite Aid Mary Sammons: "Our team continued to do a good job of controlling operating expenses." Shares jumped $0.33, 5.37%, to $6.48 in pre-market trading as of 8:05 a.m. EST.
Sources: Press Release, AP, Reuters, MarketWatch [check back later today for RAD's most recent conference call transcript]
Commentary: Is Rite Aid Heading in the Right Direction? • Cramer's Take on RAD
Stocks/ETFs to watch: Rite Aid Corporation (NYSE:RAD). Competitors: CVS Caremark Corporation (NYSE:CVS), Walgreen Company (WAG), Wal-Mart (NYSE:WMT)
Conference call transcripts: Rite Aid F4Q07 (Qtr End 3/3/07) Earnings Call Transcript
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
The market rallied sharply yesterday despite a Commerce Department report stating that durable goods orders last month dropped by 8%, which exceeded by a wide margin an expected fall of just 1.7%. But with only two days left in the second quarter, institutions seemed intent on dressing up their portfolios.
Good news from Oracle (NASDAQ:ORCL) , which topped earnings expectations Tuesday night, brought in buyers to the beleaguered tech sector. Crude rallied by almost 2% and that helped the energy stocks, as the August crude contract finally had a plus day following three declines and closed at $68.97 a barrel, up $1.20, and the Amex Energy SPDR (NYSEARCA:XLE) rose $1.05 to $68.96.
The financial group received its share of buyers, too, after being hit hard by the subprime problem and its spillover into Bear Stearns' (NYSE:BSC) hedge funds.
Brokerage stocks were big gainers Wednesday with Bear Stearns gaining almost four points and Merrill Lynch (MER) up $1.78. Merck (NYSE:MRK) made the biggest advance of the day for a Dow stock -- it was up 2.5% following the granting of a priority review status of its HIV drug Isentress.
At the closing bell yesterday, the Dow Industrials were up more than 90 points at 13,428, the S&P 500 gained 13 points to 1,506 and the Nasdaq was up 31 points, closing at 2,605. Volume on the Big Board totaled 1.7 billion shares while 2 billion traded on the Nasdaq. Breadth was positive on both markets: 3-to-1 on the NYSE and better than 2-to-1 on the Nasdaq.
Gold fell again -- this time by 50 cents to close at $644.80 per troy ounce (August contract), but the Philly Gold and Silver Index [XAU] executed an upside reversal of $2.30 and closed at $135.02. But traders will be watching to see whether yesterday's XAU intraday low holds at $130.84, since a close below that would be considered a serious breakdown.
What the Markets Are Saying
The market has run into some difficulty lately, and much of the weakness seems to be due to news surrounding the subprime situation and its impact on the hedge funds. But beyond that, the market's internal technical condition has not been strong for more than a month, with most indicators suggesting that the market is strongly overbought and the sentiment indicators showing that the public is becoming more bullish while the pros are becoming more cautious.
There has been some serious selling, and the charts have formed an ominous double-top with support very close to Tuesday's closing numbers. But yesterday, buyers emerged just at the crucial moment. And so, at least for now, some of the pressure has subsided.
However, if yesterday's reversal -- which occurred just 50 Dow Industrial points above the crucial support at 13,207 -- fails to hold, look for a further pullback and a very uncomfortable summer. The next support is at Dow 12,800.
Today's Trading Landscape
Today brings the final revision to Q1 GDP (read above), personal consumption expenditures, core PCE and weekly jobless claims. And, oh yes -- the usual announcement following the Federal Open Market Committee meeting.
Look for earnings from General Mills (GIS) (read above), 3Com (COMS), Biomet (Pending:BMET), Black Box (NASDAQ:BBOX), Family Dollar (NYSE:FDO), Gerber Scientific (NYSE:GRB), KB Home (NYSE:KBH), Micron Technology (NASDAQ:MU), Monsanto (MON) (read above), Rite Aid (RAD) (read above), Solectron (SLR), Worthington Industries (NYSE:WOR) and others.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rebound From a Two-Week Low as Crude Oil Climbs, Yen Weakens Asian stocks rebounded from a two- week low, led by energy producers and Japanese exporters, after crude oil prices advanced and the yen halted a three-day climb.
• Japan's Industrial Production Unexpectedly Drops, Damping Economic Growth Japan's industrial production unexpectedly dropped for a third month in May, the longest decline in almost two years, raising concern that growth is slowing in the world's second-largest economy.
• China Stocks Tumble on $200 Billion Bond Sale, Plan to Start Index Futures China's stocks posted their biggest drop in more than three weeks on concern that government plans for a $200 billion bond sale and the proposed introduction of index futures will drain cash from equities.
European Headlines (via Bloomberg.com)
• European Stocks Rise, Led by Energy, Mining Shares; BP, BHP, Nestle Gain European stocks rose for the first time in six days as higher commodity prices lifted energy and mining companies and Citigroup Inc. (NYSE:C) said shares in the region are cheap.
• U.K. House Prices Advance at Fastest Pace Since December, Nationwide Says U.K. house prices advanced this month at the fastest pace since December, bolstering the case for an interest-rate increase by the Bank of England next week.
• German Unemployment Falls to 12-Year Low as Economic Growth Prompts Hiring Germany's unemployment rate fell to the lowest level in 12 years in June as growth in Europe's largest economy encouraged companies to invest and hire.
• Carlyle Postpones $415 Million Initial Public Offering of Mortgage Fund Carlyle Group, the buyout firm run by David Rubenstein, postponed a planned $415 million initial public offering of a fund that invests in bonds backed by mortgages after a slump in the U.S. subprime market.
• Greece Sells $1.5 Billion Stake in Hellenic Telecom to Fund Debt Repayment Greece's government is selling as much as 1.1 billion euros ($1.5 billion) of shares in Hellenic Telecommunications Organization SA (OTE) to help repay debt after failing to find an investor from the industry.