Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 9:07 AM EST
S&P 500: +0.60; 1,560.70
NASDAQ 100: +1.75; 2,048.50
Dow: +7.00; 13,980.00
NIKKEI 225: 18,238.95 [07/13]
HANG SENG: -0.63%; 22,953.94 (-145.35)
SHANGHAI SE COMPOSITE: -2.36%; 3,821.92 (-92.48)
BSE SENSEX 30: +0.25%; 15,311.22 (+38.50)
FTSE 100: -0.30%; 6,696.40 (-20.30)
CAC 40: -0.20%; 6,105.88 (-12.08)
XETRA-DAX: +0.07%; 8,098.16 (+5.39)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.14%; $74.03 (+$0.10)
Gold: +0.22%; $668.80 (+$1.50)
Natural Gas: -3.17%; $6.45 (-$0.21)
Silver: +0.31%; $13.15 (+$0.04)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Syntax-Brillian Jumps in Pre-Market Trading on Guidance Revision
Shares of Syntax-Brillian were last up 15.5% to $6.42 in pre-market trading, surging on its release of upward revised revenue guidance citing "strong demand and the deployment of the proceeds of our public stock offering in May, as well as the cash from accounts receivable collections." Syntax-Brillian raised its calendar year revenue guidance to a range of $1.1 billion to $1.3 billion, from its previous estimate of $950m to $1.1b. It said Q4 (ending June 30) revenue will be within the $190m to $210m range it forecasted on May 10. Analysts were expecting $196m. Gross margins are now expected to be within or above the top half of the 15% to 17% range of its previous guidance. Q4 and fiscal year results are scheduled to be released no later than the second week of September. Synxtax-Brillian fell 2.8% to $5.56 on Friday.
Sources: Press release, MarketWatch
Commentary: Syntax-Brillian: Worldwide LCD Markets Continue Torrid Growth • Syntax-Brillian Likely to $8.50 Target By Next Month • Optimistic Forecast For Syntax-Brillian: The Rollercoaster Ride May Be Over
Stocks/ETFs to watch: Syntax-Brillian Corp. (BRLC). Competitors: Sony Corp. (NYSE:SNE), Koninklijke Philips Electronics N.V. (NYSE:PHG), Matsushita Electric Industrial Company Ltd. (NYSE:MC), Corning Inc. (NYSE:GLW), AU Optronics Corp. (NYSE:AUO)
Eaton Jumps On Strong Beat and Raise
Eaton Corp. reported flat earnings before the open Monday, topping estimates by $0.17. Shares were propelled higher in pre-market action on the beat, as well as by Eaton's decision to raise its full year guidance to well above analyst expectations, jumping 6% to an all-time high of $103.97. 2Q net income slipped 2.8% y/y to $246 million, leaving EPS at a flat $1.64 as the company reduced its total shares outstanding. Sales climbed 3.9% to $3.25 billion; consensus estimates called for EPS of $1.47 on revenue of $3.20 billion. The diversified industrial manufacturer raised its full year adjusted EPS outlook by $0.30, to between $6.75 to $6.95 a share; consensus estimates had previously called for EPS of $6.44. Eaton's recently ended quarter saw earnings benefit by $0.17 a share due to a lower tax rate; organic growth was down 1%. Eaton CEO and Chairman, Alexander M. Cutler, was "very pleased with our second quarter results, which substantially exceeded our guidance."
Sources: Press Release, MarketWatch, AP I, II, Reuters
Commentary: Midcap and Smallcap Beneficiaries From Boeing's New 787 Dreamliner • Eaton Corp Flies On Increased Aerospace Activity
Stocks/ETFs to watch: Eaton Corporation (NYSE:ETN)
IHOP to Acquire Applebee's for $2.1 Billion
IHOP Corp. said Monday it would acquire Applebee's International for about $2.1 billion, giving Applebee shareholders $25.50/share -- a 4.6% premium to Friday's close. The deal has been approved by both companies. Applebee's said in February it was looking to sell itself after activist investor Richard C. Breeden launched a campaign for board seats. It has tried largely unsuccessfully to lure higher-income diners with menu changes; analysts say it needs to remodel its restaurants' dated interiors. IHOP will need to undertake substantial debt to fund its offer, with the help of Lehman Brothers: its pre-merger market cap was just under $1 billion. The move joins IHOP's 1,300 family-style locations with Applebee's 1,900 mostly-franchised casual-dining restaurants. IHOP said it will sell Applebee's 508 company-owned restaurants in order to pay down some of the acquisition debt, while looking to sell more franchises domestically and abroad. Reviving the Applebee's brand, the Wall Street Journal says, may prove difficult, in part because of a bar & grill glut. The deal is expected to close in Q4. Applebee's shares are up 1.5% to $24.75 in pre-market trading. IHOP shares have gained 23.6% over the past year.
Sources: Press release, Wall Street Journal, MarketWatch
Commentary: Applebee's Buyout: Virtually a 'Take-Under' [24/7 Wall St.] • Darden on Casual Dining and the Future of Chain Restaurants • Applebee's High Flying Ex-CEO
Stocks/ETFs to watch: IHOP Corp. (IHP), Applebee's International Inc. (APPB). Competitors: Denny's Corp. (NASDAQ:DENN), Ruby Tuesday Inc. (NYSE:RT), Brinker International Inc. (NYSE:EAT)
Blackstone Entity to Acquire DJ Orthopedics for $1.6B, 19.4% Premium
ReAble Therapeutics, a company owned by The Blackstone Group, said it has agreed to buy DJ Orthopedics [DJO] for $1.6 billion in cash, or $50.25/share, representing a 19.4% premium over its Friday close of $42.10. Blackstone has committed to provide the equity financing for the transaction. DJO's Board of Directors and a Transaction Committee unanimously approved the deal and recommend shareholders vote in favor of the merger. "We believe that the value of this transaction appropriately recognizes DJO's leadership position in non-operative orthopedics, demonstrated by our highly respected brands, innovative products, and commitment to continuous improvement," said Les Cross, President and CEO of DJO, in a statement. The transaction is expected to close in Q4, subject to certain closing conditions and approvals. DJO may solicit superior third-party proposals overs the next 50 days and would incur an $18.7m break-up fee in the event of an execution of a definitive agreement.
Sources: Press release, MarketWatch
Commentary: DJO Incorporated: Buyout Prone MMI Investments Discloses 9.4% Stake • DJ Orthopedics: Creaky Joints, Healthy Body - Barron's • Is Blackstone Group Going to $80 or $0?
Stocks/ETFs to watch: DJO Inc. (DJO), The Blackstone Group L.P. (NYSE:BX). Competitors: Biomet Inc. (Pending:BMET), Smith & Nephew plc (NYSE:SNN), Stryker Corp. (NYSE:SYK)
Vodafone Denies It's Considering a $160B Bid for Verizon
Mobile phone carrier Vodafone Group is considering a mammoth $160 billion takeover bid for Verizon Communications, its partner in Verizon Wireless, the Financial Times reports on its Alphaville website. UK-based Vodafone in a brief statement Monday denied the report, saying it has no such plans. The plan, according to the FT, would be to spin-off Verizon's fixed-line holdings to private-equity groups in order to focus only on wireless. The FT said Vodafone has not yet approached Verizon, and that there's no certainty it will. A combined Vodafone/Verizon would carry an market cap of about $300 billion, bigger than the world's current number-one telecom carrier AT&T. Shares in Verizon spiked briefly to $47 (+12.5%) on the rumor, but have since retreated to $42, up 0.9%. Vodafone ADRs are off 0.6% to $33.33 in the pre-market.
Sources: FT Alphaville, Reuters
Commentary: Verizon: More Upside Ahead In Wireless • Is Verizon Coming Closer to Owning Verizon Wireless? • Vodafone Activists Should Show More Patience - Barron's
Stocks/ETFs to watch: Verizon Communications Inc. (NYSE:VZ), Vodafone Group plc (NASDAQ:VOD). Competitors: AT&T Inc. (NYSE:T). ETFs: PowerShares Dynamic Telecom & Wireless ETF (PTE), HOLDRS Wireless (NYSEARCA:WMH)
Conference call transcripts: Verizon Q1 2007, Vodafone Group FY 2006
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Friday's Action
After the trading best day in four years -- with the Dow Jones Industrial Average up 280 points on Thursday -- most observers looked for a strong opening on Friday and then some profit-taking going into the weekend. Instead, stocks opened slightly lower Friday and then proceeded to rally gradually for most of the day, with the emphasis squarely on the blue-chip stocks, just like the day before.
Dow component General Electric (NYSE:GE) was the focus of much attention, since it is a proxy for so many industries. So, when GE reported an expected increase in Q2 earnings that met analysts' forecasts -- along with an announcement that it was getting out of the subprime business and was also doing a big buyback of its shares -- the market seemed to heave a sigh of relief and then continued on its merry way.
The University of Michigan's survey of consumer sentiment helped the markets along, too, as it showed an increase in July in consumers' outlook despite rising oil prices.
Several other Dow stocks helped the markets' advance, with Alcoa (NYSE:AA) up 4.5% as a result of announcing that it will withdraw its offer for Alcan (NYSE:AL) and let Rio Tinto (RTP) take over the Canadian producer, and Caterpillar (NYSE:CAT) rose by more than 1% -- its sixth-consecutive advance and the second new all-time high in as many days.
At the close Friday, the Dow Industrials advanced by 46 points to 13,907, the S&P 500 added five at 1,553 and the Nasdaq rose by five, closing at 2,707. Volume on the NYSE was low -- just 1.3 billion shares -- and 1.7 billion traded on the Nasdaq, with breadth at about a positive 17-to-15 on both exchanges.
For the week it was a dramatic showing of the blue chips' strength, with the Dow gaining 2.2% for its best showing since April. The S&P 500 was up 1.4%, and the Nasdaq gained 1.5%. For the year, the Dow is up 11.6%, the S&P 500 is up 9.5% and the Nasdaq has risen 12.1%
In the futures pits, the week ended with crude oil (August contract) rising by $1.43 at $73.93 a barrel. Gold (August contract) fell by a dollar to close at $667.30 per troy ounce. The Amex Energy SPDR (NYSEARCA:XLE) gained 74 cents at $73.95 and the Philly Gold and Silver Index [XAU] rose by 28 cents at $151.08. The 10-year Treasury note closed on Friday at a yield of 5.107%, up in price by 3/32.
What the Markets Are Saying
Believe it or not, the skeptics still abound. Some claim that even though the major averages have vaulted to either new all-time highs or recovered highs (like the Nasdaq), the volume last week was somewhat low (which was especially true on Friday) and that highs made on low volume are a bad sign.
This year almost every new high was accompanied by lower average volume. But after several days, as the advance broadened, investors became more confident and the volume ultimately expanded. And last week, the following the July 4 holiday, is traditionally one of the slowest, with traders and investors vacationing and away from Wall
So, with the doomsayers still doomsaying and the shorts in a panic, it looks like the markets will continue to plow new, higher ground. After the shorts have been sufficiently beaten, you may want to take a few profits. But for now, you should join the rest of the Street at the beach but stay long stocks.
Tomorrow I plan to talk about some trading targets for the major averages.
Today's Trading Landscape
This week will be very active for corporate earnings with the focus on some of the country's most visible financial institutions. Today look for earnings from the following companies: Eaton Corp. (ETN) (read above), W.W. Grainger (NYSE:GWW), Mattel (NASDAQ:MAT), Novellus (NASDAQ:NVLS), Posco (NYSE:PKX), Sensient Technologies (NYSE:SXT), Stanley Furniture (NASDAQ:STLY) and Sun Bancorp (NASDAQ:SNBC).
Today's only economic report is due late in the day, and that's consumer credit. The big news this morning is that Vodafone (VOD) is "mulling over" an offer for Verizon Communications (VZ) (read above). And so, M&A is again back in the spotlight, and this time it could result in the biggest-ever leveraged buyout -- estimated at $160 billion.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Fall; Samsung Slides Most in Three Years, Hon Hai Declines Asian stocks fell, dragging a regional benchmark from a record, as a slide in technology shares countered gains in energy-related companies.
• Thai Baht Climbs to Decade High, Passes 30 Per Dollar in Offshore Market The Thai baht gained to the highest in almost a decade in the offshore and onshore markets, as global funds bought more of the nation's equities.
• Posco Reports Highest Net Income in Two Years as Steel Prices, Demand Rise Posco (PKX), Asia's third-biggest producer of steel, reported second-quarter profit climbed 55 percent, as it raised prices to benefit from rising demand from carmakers and shipbuilders.
• New Zealand Probably Will Raise Interest Rate After Inflation Accelerates New Zealand central bank Governor Alan Bollard will probably raise the benchmark interest rate to a record 8.25 percent next week after a report today showed inflation accelerated faster than he expected, according to economists.
• China May Let Yuan Trade Freely After 2008 Olympics Ends, UOB's Suan Says China may allow the yuan to trade freely after Beijing hosts the Olympics next year, seeking to curb excessive lending and cool the economy, said Suan Teck Kin, an economist at United Overseas Bank Ltd.
European Headlines (via Bloomberg.com)
• European Bank Stocks Rise, Led by ABN Amro on Bid; Saipem, Technip Decline European bank stocks rose, led by ABN Amro Holding NV (ABN) after Royal Bank of Scotland Group Plc (RBSPY.PK) sweetened its 71.1 billion-euro ($98.1 billion) offer for the Dutch lender.
• EADS Names Gallois as Sole Chief Executive Officer; Enders Will Run Airbus European Aeronautic Defence & Space Co., the owner of Airbus SAS, named Louis Gallois as sole chief executive officer, ending seven years of dual management that investors said contributed to the planemaking unit's losses.