Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:55 AM EST
S&P 500: +1.20; 1,543.70
NASDAQ 100: +0.75; 2,009.75
Dow: +22.00; 13,730.00
NIKKEI 225: +0.67%; 18,261.98 (+121.04)
HANG SENG: +1.27%; 22,817.43 (+285.69)
S&P/ASX 200: +0.78%; 6,400.60 (+49.50)
BSE SENSEX 30: +0.55%; 15,045.73 (+81.61)
FTSE 100: +0.32%; 6,711.50 (+21.40)
CAC 40: +0.21%; 6,115.57 (+12.88)
XETRA-DAX: +0.63%; 8,098.81 (+50.49)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.54%; $72.42 (-$0.39)
Gold: +0.40%; $657.40 (+$2.60)
Natural Gas: +0.93%; $6.50 (+$0.06)
Silver: +0.53%; $12.825 (+$0.068)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Lexmark Shares Down 13% in Pre-Market on Q2, Q3 Earnings Warning
Shares of Lexmark were last down 13% to $43.00 in pre-market trading, on news the company warned Q2 revenue is expected to decline 2% y/y and adjusted EPS is now projected between $0.62 - $0.67, compared to prior guidance of $0.82 - $0.92. Analysts were expecting $0.86/share on average. Lexmark blamed the downward revision on "a shortfall in operating income in the consumer segment market ... due to less than expected inkjet supplies revenue, lower hardware average unit revenue driven by aggressive pricing and promotion, some greater than expected product costs, and greater than expected branded inkjet unit growth." It expects more of the same in Q3, compelling it to forecast EPS of breakeven to $0.10, compared to the $0.81/share analysts had estimated. Lexmark is holding a conference call Monday at 8:30 A.M. New York time. It is scheduled to report Q2 earnings July 24. Lexmark gained 0.8% to $49.40 on Friday.
Sources: Press release, MarketWatch
Commentary: Lexmark: LBO at $60-$70 A Share Looks Doable • Are Printer Companies Chasing the Wrong Target? • Lexmark Trips Up On Earnings, Continues To Be Unpredictable
Stocks/ETFs to watch: Lexmark International Inc. (NYSE:LXK). Competitors: Hewlett-Packard Co. (NYSE:HPQ), Canon Inc. (NYSE:CAJ), Eastman Kodak Co. (EK)
Conference call transcripts: Lexmark International Q1 2007, Hewlett-Packard F2Q07, Eastman Kodak Q1 2007
Specialist Firm LaBranche Soars On Announcement It Will Explore Strategic Alternatives
NYSE specialist firm LaBranche said Monday it has hired bankers and will evaluate strategic alternatives -- which usually but not always includes selling itself. LaBranche also said it expects positive Q2 earnings before unrealized losses related to its investment in NYSE Euronext, but that it will report a net Q2 loss including the charges. The company also announced the sale of its Amex specialist unit to Cohen Securities for an undisclosed price. It also said it will take "a substantial non-cash charge for a write-down of intangible assets related to its entire specialist business." Stock exchange market-makers, who once thrived on the floor of exchanges like the NYSE, have seen profits and margins shrink as traders move increasingly from the floor-based to electronic trading. Shares are up over 60% to $12.14 in pre-market trading.
Sources: Press release, MarketWatch, AP
Commentary: NYSE: Gains Are Far From Automatic -- Barron's • Low-Hanging Fruit on LaBranche? [Motley Fool]
Stocks/ETFs to watch: LaBranche & Co. Inc. (NYSE:LAB), NYSE Euronext (NYSE:NYX). Competitors: Van Der Moolen Holding NV (VDM)
Carlyle Group To Buy Sequa Corp. For 54% Premium
Sequa Corporation, diversified industrial maker of auto and aircraft parts, agreed to sell itself to private equity firm Carlyle Group for $175 a share, a whopping 54% premium to Friday's closing price of $113.52. Including debt assumption, the deal is valued at a total of $2.7 billion. Under the terms of the buyout, Sequa may continue to solicit acquisition proposals through Aug. 23. Sequa is also engaged in the manufacture of metal coating, specialty chemical and industrial machinery products. According to Carlyle, Sequa CEO Martin Weinstein and senior management will remain with Sequa. Sequa's board has already unanimously approved the deal and is recommending shareholders do the same. Sequa Chairman Gail A. Binderman on the deal: "Carlyle has a demonstrated track record of investing in and improving the companies it acquires and has great financial and operational expertise. Our Board unanimously supports becoming a part of the Carlyle family." The buyout is expected to close during the fourth quarter.
Sources: Press Release, MarketWatch, Reuters, TheStreet.com, AP
Commentary: Barron's Mid-2007 Analyst Roundtable
Stocks/ETFs to watch: Sequa Corporation (SQA.A)
Google Higher in Pre-Market on ThinkEquity Target Hike, Security Acquisition
Shares of Google were up nearly 1% to $544 in pre-market trading, on news of a $625 million cash acquisition of Postini, a privately held on-demand communications security and compliance solutions provider. Also, ThinkEquity boosted its target on Google to $700, from $620 previously, according to theflyonthewall.com by way of a Reuters report. Postini serves more than 35,000 business and 10 million users worldwide. Its primary services include message security, archiving, encryption, and policy enforcement in corporate email, instant messaging and other web-based communications. "With the addition of Postini, our apps [Google Apps: Gmail, Calendar, Talk, Docs & Spreadsheets, and Personal Start Page] are not just simple and appealing to users -- they can also streamline the complex information security mandates within these organizations," said Google CEO Eric Schmidt. The $625m acquisition price is subject to working capital and other adjustments. The transaction is expected to close by the end of Q3, with Postini becoming a wholly owned subsidiary. Google lost 0.4% to $539.40 on Friday.
Sources: Press release, Reuters I, II
Commentary: Google Hits All-Time Closing High • Google Buys Web-Phone Start-up GrandCentral
Stocks/ETFs to watch: Google Inc. (NASDAQ:GOOG). ETFs: PowerShares QQQ (QQQQ), First Trust IPOX-100 Index (NYSEARCA:FPX), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Conference call transcripts: Google Q1 2007
Related: Postini website and Google acquisition notice
Biomet Earnings Fall Short of Analyst Estimates
Orthopedic device maker Biomet said Monday FQ4 earnings fell more than 50% to $0.17/share ($41.5 million), from $0.41 ($100.4 million) a year earlier. Excluding special items and compensation expenses EPS was $0.39 cents a share on net sales of $549.4 million, up from $539 million a year ago. Both earnings and revenue fell short of analyst estimates, which were calling for EPS of $0.49 on revenue of $573 million. Sales of reconstructive devices fell 8%, fixation sales dropped 22%, and spinal products fell 10%, while hip sales gained 7% and extremity sales were up 13%. In June, the company agreed to be acquired by a private equity consortium of Blackstone, KKR, TPG and Goldman Sachs' private equity arm.
Sources: Press release, MarketWatch, Bloomberg,
Commentary: Biomet: I Would Cheer If The Deal Fell Apart • Biomet Buyout Offer Was Way Too Low
Stocks/ETFs to watch: Biomet Inc. (Pending:BMET), Blackstone Group LP (NYSE:BX), Goldman Sachs Group Inc. (NYSE:GS). Competitors: Medtronic Inc. (NYSE:MDT), ArthroCare Corp. (NASDAQ:ARTC), Johnson & Johnson (NYSE:JNJ), Orthofix International N.V. (NASDAQ:OFIX)
Conference call transcript: Biomet F1Q07
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 Friday's Action
Despite a weak bond market on Friday due to an unexpectedly strong jobs report, along with a rally in crude oil (its seventh in a row), stocks rose on light holiday volume.
Some of this buying was actually due to the rally in crude, as it resulted in the buying of energy stocks. Alcoa (NYSE:AA) was up because of rumored bid from Rio Tinto Plc (RTP) for Alcan (NYSE:AL), and that helped the blue chips along with gains from Caterpillar (NYSE:CAT), Honeywell (NYSE:HON) and IBM. You may remember that earlier in the year, Alcoa had made a hostile attempt to take over Alcan.
Technology stocks rallied, too, and that helped Nasdaq to post another high for the year -- its fourth in a row. At the close, the Dow gained 46 points at 13,611, the S&P 500 gained five to close at 1,530 and the Nasdaq was up 10 at 2,667. Volume was very low with many traders away, and so the NYSE traded just 1.2 billion shares while 1.6 billion traded on the Nasdaq. Breadth was positive on both exchanges at an average of 9-to-6 advancers to decliners.
The holiday week ended with the Dow gaining 1.5%, the S&P 500 up 1.8%, and Nasdaq leading the pack up 2.4%. The major news, in addition to a handful of mergers, was made by Apple (NASDAQ:AAPL) with its successful introduction of the iPhone, while new concerns over the hedge fund problems of Bear Stearns (NYSE:BSC) and a very disappointing report on home sales kept the lid on any major advances.
On Friday, crude oil (August contract) gained 1.4% to close at $72.81, up $1. The Amex Energy SPDR (NYSEARCA:XLE) gained 96 cents, closing at $71.54 for a new all-time high. The near-term upside target for the XLE is $76-$78.
Gold rose sharply as a result of the terrorist activity in the UK, with the August contract posting a $4.20 gain and closing at $654.80 per troy ounce. One trader was quoted as saying, "If gold breaks $660, it may well run quite a way." The Philly Gold and Silver Index [XAU] gained a whopping $4.68 and closed near to the top of its range at $145. The 10-year Treasury note fell 12/32 to yield 5.195%.
What the Markets Are Saying
With the Dow Industrials just 65 points from its June 4 closing high, the NYSE Composite breaking to new highs and the Nasdaq making four successive highs for the year last week, momentum has clearly shifted in favor of the bulls. Despite this, one prominent technician suggested that the recent rally was a bit limited and that "intermarket pressures" would keep a lid on further gains. He identified those pressures as the bond market and the price of oil, and he might be correct. But it is remarkable that the market rallied despite those factors as well as in the face of a new terrorist threat. In other words, "don't fight the tape." When the market flies higher and in the face of fear, you had better stick with your long positions.
Today's Trading Landscape
The new quarterly earnings season starts today with the report from Alcoa, and the number of reports will pick up sharply during the rest of the week as some big names will be reporting their Q2 results. The only economic report due today is the consumer credit report at 3 p.m. Foreign markets are strong this morning, while our markets will no doubt be most influenced by the direction of the bond market.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rally, Driving Nikkei 225 to Seven-Year High; Komatsu Climbs Asian stocks rose, driving the Nikkei 225 Stock Average to a seven-year high, on signs economic growth in Japan and South Korea is accelerating.
• Japan's Machinery Orders Rise More Than Expected, Supporting Rate Increase Japan's machinery orders, a key indicator of corporate spending plans, rose at triple the pace economists predicted, reinforcing expectations the central bank will raise interest rates as soon as next month.
• Yen Drops as Advance in Asian Stock Markets Spurs Increase in Carry Trades The yen fell to a record low against the euro and dropped for a fifth day versus the dollar as a rally in Asian stocks gave investors more confidence to buy higher- yielding assets with money borrowed in Japan.
• Morgan Stanley to Buy Daewoo Engineering's Headquarters for $1 Billion Morgan Stanley (NYSE:MS), investing a record $8 billion in real estate outside the U.S., plans to buy Daewoo Engineering & Construction Co.'s Seoul headquarters for 960 billion won ($1.04 billion).
European Headlines (via Bloomberg.com)
• European Stocks Rise on Takeover Speculation; Numico, Telekom Austria Gain European stocks climbed for a second day as takeover speculation lifted food and beverage shares and a higher profit forecast from Telekom Austria AG sparked a rally in telephone companies.
• CVC Capital Offers to Buy Chemicals Distributor Univar for $2.1 Billion CVC Capital Partners Ltd. agreed to buy Univar NV of the Netherlands for 1.52 billion euros ($2.07 billion) to gain the largest distributor of chemicals in the U.S.
• U.K. Producer Prices Rise for Seventh Month, Advancing Less Than Forecast U.K. manufacturers raised prices for a seventh month in June, a sign companies are feeding inflation pressures into the economy.
• Sarkozy May Clash With EU, Trichet Over Plans to Revive France's Economy French President Nicolas Sarkozy has a message for European finance ministers and central bankers criticizing his plans to revive France's economy: Back off.
• Altadis Shares Fall as FT Says CVC, Imperial May Make Joint Takeover Bid Shares of Altadis SA, the maker of Gauloises cigarettes, dropped after the Financial Times said Imperial Tobacco Group Plc (ITY) and CVC Capital Partners Ltd. may join forces for an offer, deflating speculation of a bidding contest.