Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:53 AM EST
S&P 500: +0.60; 1,556.30
NASDAQ 100: +1.75; 2,036.50
Dow: +10.00; 13,930.00
NIKKEI 225: +1.42%; 18,238.95 (+254.81)
HANG SENG: +1.27%; 23,099.29 (+290.27)
SHANGHAI SE COMPOSITE: -0.04%; 3,914.40 (-1.60)
BSE SENSEX 30: +1.20%; 15,272.72 (+180.68)
FTSE 100: +0.33%; 6,719.50 (+21.80)
CAC 40: +0.28%; 6,119.86 (+16.81)
XETRA-DAX: +0.55%; 8,097.64 (+44.21)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.40%; $72.79 (+$0.29)
Gold: -0.28%; $666.40 (-$1.90)
Natural Gas: +1.23%; $6.58 (+$0.08)
Silver: -0.38%; $13.13 (-$0.05)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Retail Sales Fall 0.9%, Steepest Drop in Two Years
Retail sales took their largest fall since August 2005 amid weak demand for durables and falling gas prices, dropping 0.9% in June, according to data released by the Census Bureau. The drop was steeper than the 0.3% anticipated by economists. Excluding auto, retail sales dropped 0.4%; economists were calling for a 0.2% gain. Retail sales are up 3.8% over the last year. Economists have recently begun anticipating a sharp slowdown in consumer spending. First quarter growth of 4.2% could drop below 2%, they say. Furniture sales fell 3%, electronics and appliances fell 1.4%, and building materials were down 2.3%. Non-store retailers, including online stores, saw 1.2% growth over the month. Separately, the Labor Department reported that imports into the U.S. rose 1.0% in June, mainly on a 4.7% increase in imported petroleum prices. Excluding petroleum, the rise was a milder 0.2%. Export prices rose 0.3%. Over the past year, import prices are up 2.3%, while export prices have risen 4.1%. "Sales are definitely slowing down. We'll continue to see very modest gains in consumer spending. That will temper the economy's growth for the rest of the year," said Dresdner Kleinwort economist Kevin Logan.
Sources: Press release, MarketWatch I, MarketWatch IIBloomberg,
Commentary: Feeling Bearish? Don't Short This Market Yet • June Retail Same-Store Sales Roundup • Friday the 13th Market Performance: Nothing To Be Afraid Of
Stocks/ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)
Baker Hughes Drops On Q2 Earnings Warning
Baker Hughes Incorporated said in a press release Friday morning it expects EPS of just $1.07-$1.09, sending its shares lower by 4% in pe-market trading (as of 8:10 a.m. EST). During the first quarter, Baker Hughes reported EPS of $1.17; consensus estimates forecast EPS of $1.18 in Q2. The company is due to report full Q2 results on July 27. Among the causes of expected soft earnings in Q2, Baker Hughes cited "significant deterioration of activity and profitability in Canada -- particularly in the Drilling and Evaluation segment," as well as "an increase in the effective tax rate for the company" and higher "repair and maintenance cost at INTEQ." As of yesterday's close, Baker's shares have risen 13% over the last year.
Sources: Press Release, Reuters, MarketWatch, RTT News
Commentary: The Ins and Outs of Terror-Free Investing • Baker Hughes CEO To Investors: 'Keep the Faith'
Stocks/ETFs to watch: Baker Hughes Incorporated (BHI). Competitors: Schlumberger Limited (SLB), Halliburton Company (HAL), Smith International (SII)
ETFs: Oil Service HOLDRs (OIH), iShares Dow Jones US Oil Equipment (IEZ), SPDR S&P Oil & Gas Equipt & Servs. (XES)
Financial Times and CNBC May Begin Sharing Resources -- WSJ
The Financial Times and CNBC may begin sharing news resources in order to beef up both companies' sluggish web concerns, according to a report in Friday's Wall Street Journal. People familiar with the situation say one possibility is for FT to use CNBC video on its website, while CNBC would get access to FT's articles. Both websites have had difficulties getting users to sign up for their premium services. FT, which charges to read most of its articles, has 90,000 subscribers vs. Wall Street Journal's 931,000, while CNBC.com is only the 58th most-popular financial-news site with 823,000 visitors in May. FT is owned by Pearson plc, and CNBC's parent NBC Universal is owned by GE and Vivendi SA. Recently, NBC and Pearson considered a joint counterbid to News Corp.'s $5 billion offer to Dow Jones, but dropped the plan after deciding the price was too high. One reason News Corp. wants Dow Jones is to gain access to the Wall Street Journal (a DJ property) for the financial channel it's launching this fall that will compete with CNBC. The Wall Street Journal currently has an exclusive arrangement with CNBC to make its reporters available for programming and to provide it with news. If News Corp. were to succeed in acquiring DJ and the Journal, CNBC might look to FT to fill in the gap left by its departure. Sources said the negotiations were "highly likely" to lead to a commercial affiliation between the companies, but that there is no discussion of combining operations, and added an announcement is not imminent.
Sources: Wall Street Journal
Commentary: What Is CNBC .com Thinking? • Dow Jones/News Corp. Merger Unlikely to Succeed • GE and Pearson Will Not Pursue Dow Jones
Stocks/ETFs to watch: Pearson plc (PSO), General Electric Co. (GE), Dow Jones & Company Inc. (DJ), News Corp. (NWS), Vivendi (OTCPK:VIVEF)
Google Willing to Talk to Facebook, But Acquisition Seems Unlikely
Google co-founder Sergey Brin told a media deal-makers conference in Idaho on Thursday, that Google is "certainly open to talking" to Facebook, "if they come to us," but noted the popular social networking site is "building a great company of their own." In a report on CNBC, Brin mentioned Google executives "don't look at companies for acquisition unless they are really interesting." His comments have market watchers confused as to whether Facebook is a Google takeover target, especially after its $625m acquisition of communications security firm Postini on Monday. Rival Yahoo! was reportedly prepared to pay up to $1b for Facebook last year. However, just as it rejected Yahoo!, Facebook's founder Mark Zuckerberg contends the company will remain independent. In 2005, News Corp paid $580m for rival social networking site MySpace, which some analysts say is now worth about $10b. Yahoo! has even offered a 25% stake to News Corp for MySpace.
Sources: Reuters, webpronews, AccuraCast
Commentary: Companies With 100% Earnings Beat Rates Over Last Few Years • Google Continues Its Climb • 6 Reasons Why Google Search Share Can Reach 90%
Stocks/ETFs to watch: Google Inc. (GOOG), News Corp (NWS). Competitors: Yahoo! Inc. (YHOO), Microsoft Corp.(MSFT). ETFs: PowerShares QQQ (QQQQ), First Trust IPOX-100 Index (FPX), First Trust Dow Jones Internet Index (FDN)
Earnings call transcripts: Google Q1 2007
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 Dow Jones Industrial Average vaulted to new highs yesterday with the first gain of better than 200 points in almost a year -- it was the first time since Oct. 1, 2003, that it gained more than 2.09%.
With a combination of a weaker U.S. dollar (which increases sales from abroad), a big M&A deal and better-than-expected sales from some key retailers, institutions that were underinvested committed cash to stocks, creating a panic among short sellers to cover their positions.
The big deal of the day -- Rio Tinto's bid (RTP) for Alcan (AL) and the suspicion that Alcoa (AA) just might come back with another offer -- was actually reported last night. That's hot stuff for a Wall Street that hasn't seen a real hostile takeover war in years.
Buying was heavily weighted to the blue chips and Wal-Mart (WMT) was the leader, up 2.4%, after its June same-store sales beat expectations, along with Limited Brands (LTD) and Nordstrom (JWN). The retail earnings improvements seemed to surprise everyone and raised hopes that Q2 earnings from other sectors will also beat lowered expectations.
At the close, the Dow Industrials had gained 284 points to finish at a record high of 13,862. The S&P 500 closed at a new high of 1,548, up 29, and the Nasdaq hit a 6 1/2-year high at 2,702. Volume on the NYSE totaled 1.6 billion shares, and 2.3 billion shares traded on the Nasdaq. Breadth was a positive 3/1 on the Big Board and 21/8 on the Nasdaq.
Crude oil (August contracts) closed lower by 6 cents at $72.50 a barrel, and the Amex Energy SPDR (XLE) rose $1.39 to $73.21. Gold (August contracts) rose by $6.20 per troy ounce closing at $668.30, and the Philadelphia Gold/Silver Index [XAU] gained $4.86 to close at $150.80.
What the Markets Are Saying
Fear of a possible triple top in the major averages was blown to pieces yesterday as virtually every major index made new highs or, as in the case of the Nasdaq, a six-year high. A combination of factors conspired to squeeze the shorts: loads of cash generating lower returns than available in stocks, a large odd-lot short reading coupled with a record number of NYSE shorts, and some unexpected earnings from a group (retail) that some thought was in trouble.
In addition, a lot of yesterday's buying was in the higher-quality issues and especially the blue chips -- every one of the Dow 30 Industrials made a gain. This high-quality breakout will no doubt prove to be the beginning of a new leg up for the first bull market of the 21st century.
Today's Trading Landscape
Today will be busy with economic reports as we get the June import price index, advance retail sales (read above), May business inventories and the July University of Michigan confidence numbers. In the way of earnings, the focus will be on General Electric (GE).
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise the Most in Two Months on Takeovers; Posco, BHP Climb Asian stocks rose the most in two months, spurred by Rio Tinto Group's (RTP) $38 billion bid for Alcan Inc. (AL) and higher sales at U.S. retailers.
• Fang, Goldman's Partner in China, Plans $790 Million Private Equity Fund Fang Fenglei, who founded China's first investment bank more than a decade ago, now wants to open one of the country's first independently run private equity funds, said two people with direct knowledge of the matter.
• Samsung Electronics Posts Lowest Profit in Four Years on Prices of Chips Samsung Electronics Co., Asia's largest maker of semiconductors, flat screens and mobile phones, reported its smallest quarterly profit in four years after a glut drove prices of computer memory chips to record lows.
• U.S. Urges China's Central Bank to Buy Mortgage Bonds Amid Subprime Woes The U.S. is urging China's central bank to buy more mortgage-backed securities after a surge in defaults by risky borrowers in the world's largest economy eroded demand for such instruments.
• Moody's Checking Asian Banks for Possible Exposure to Subprime Market Moody's Investors Service is investigating Asian banks for holdings linked to subprime loans, which caused losses in mortgage-backed bonds in the U.S., Moody's analyst Deborah Schuler said.
European Headlines (via Bloomberg.com)
• European Stocks Advance, Paced by ASML, Saab; Schneider, FCC Shares Rise European stocks climbed for a second day, led by ASML Holding NV and Nokia Oyj after Samsung Electronics Co., Asia's largest maker of semiconductors, reported profit that topped analysts' estimates.
• Lehman Says Worst Is Over in Credit Markets, Buy European Corporate Debt Lehman Brothers Holdings Inc. (LEH) said the worst of the global credit market rout caused by the U.S. subprime mortgage slump is over and investors should buy European investment-grade debt.
• London's Luxury-Home Prices Jump 3.1 Percent, the Fastest Rate in 31 Years Luxury home prices in London rose at the fastest monthly rate since real estate broker Knight Frank LLC began tracking them 31 years ago, suggesting the most expensive properties remain resilient to rising interest rates.
• Fiat, BMW Lead Rebound in European Car Sales on Gains in Emerging Markets Fiat SpA (FIA) and Bayerische Motoren Werke AG led the first increase in European car sales in five months as surging demand in Romania and Poland helped make up for a decline in Germany.