Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:25 AM EST
S&P 500: +5.40; 1,560.20
NASDAQ 100: +9.00; 2,068.75
Dow: +50.00; 14,053.00
NIKKEI 225: +0.56%; 18,116.57 (+100.99)
HANG SENG: +0.76%; 23,016.20 (+174.28)
SHANGHAI SE COMPOSITE: -0.44%; 3,912.94 (-17.12)
BSE SENSEX 30: +1.63%; 15,550.13 (+248.96)
FTSE 100: +0.89%; 6,625.30 (+58.20)
CAC 40: +0.84%; 6,046.19 (+50.22)
XETRA-DAX: +1.04%; 7,975.40 (+81.79)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.59%; $75.49 (+$0.44)
Gold: +0.04%; $674.00 (+$0.30)
Natural Gas: +1.38%; $6.62 (+$0.09)
Silver: +0.38%; $13.34 (+$0.05)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Bank of America Beats, Increases Provision for Credit Losses
Number-two U.S. bank Bank of America reported a second-quarter profit of $5.76 billion ($1.28/share), up 5.2% from $5.48 billion ($1.19) a year ago. Revenue grew 8% to $19.96 billion from last year's $18.52 billion. Both numbers beat analyst estimates of $1.20 and $18.49 billion. The bank set aside a provisional $1.81 billion for credit losses, up from $1.01 billion last year and just $1.24 billion last quarter, but said that strong capital-markets earnings and investment-banking income outdid credit losses and helped the company achieve "attractive earnings growth despite challenging headwinds." Investment banking income jumped 26%, wealth-management profits were up 6.4%, while its consumer unit earnings fell 23% hurt by loan losses. BoA acquired U.S. Trust from Charles Schwab Corp. at the end of the quarter, which it hopes will improve wealth-management growth. On July 13, the Dutch Supreme Court approved ABN Amro's sale of its LaSalle unit to BoA for $21 billion. Assuming ABN doesn't renege on the deal, BoA hopes to close the deal as soon as possible, and assume control of LaSalle's 135 branches in the Chicago area. The deal is expected to be immediately accretive to EPS, and produce $400M in after-tax cost savings in 2008 and $800M in 2009. "We believe the deal would provide BAC with a strong presence in the attractive Chicago market, and we expect BAC's experience in similar transactions to aid in its success," S&P wrote in a July 13 note. On Wednesday, number-three bank JP Morgan said its profits climbed 20%. Number-one bank, Citigroup, reports Friday. Bank of America's shares have gained just 1.2% over the past year, vs. 9.2% and 13% gains for Citi and JPM.
Sources: Press release, TheStreet.com, Reuters, Thomson Financial, Bloomberg
Commentary: Why Aren't Banks Keeping Up With the Market? • Bank of America: A Value, Growth and Income Stock • Bank of America to Benefit From Citigroup's Climb?
Stocks/ETFs to watch: Bank of America Corp. (NYSE:BAC). Competitors: Citigroup Inc. (NYSE:C), JPMorgan & Chase Co. (NYSE:JPM). ETFs: HOLDRS Regional Bank (NYSEARCA:RKH), Vanguard Financials VIPERs (NYSEARCA:VFH), Ultra Financials ProShares (NYSEARCA:UYG)
Earnings call transcript: Bank of America Earnings Call Transcript (later today)
Related: CNBC earnings tables for BAC
Motorola Misses On 19% Sales Decline
Motorola reported it swung to a net loss Thursday in its recently ended quarter, a result of a 19% decline in sales. The company had warned investors on July 11 it would miss on its 2Q outlook. Chairman and CEO Ed Zander described the recent quarter as "challenging... due to a decline in mobile device unit shipments." By the numbers, net income was negative $28 million, good for EPS of -$0.01, versus a profit of $1.38 billion (EPS of $0.55) in the year earlier period. Revenue tumbled 19% to $8.73 billion from $10.82 billion a year ago. Consensus estimates were for break-even EPS on sales of $8.64 billion. Motorola shipped 35.5 million handsets during its latest quarter versus 51.1 million in the year earlier period, and saw mobile phone revenues fall a whopping 40% to $4.27 billion from $7.14 billion a year earlier. The company predicts 3Q EPS will be $0.02 or slightly higher excluding costs; consensus estimates call for EPS of $0.05 in 3Q.
Sources: Press Release, Bloomberg, MarketWatch, Reuters, AP [check back later today for MOT's latest conference call transcript]
Commentary: Deutsche Bank: The Worst is Over at Motorola • Motorola Climbs Despite Warning: Sellers Exhausted? • Motorola Trades Lower in AH on Earnings Warning • Cramer's Take on MOT
Stocks/ETFs to watch: Motorola, Inc. (MOT). Competitors: Nokia Corp. (NYSE:NOK), LM Ericsson Telephone Co. (NASDAQ:ERIC), Palm Inc. (PALM), Research In Motion Ltd. (RIMM), Apple Inc. (NASDAQ:AAPL). ETFs: Broadband HOLDRs (NYSE:BDH), Wireless HOLDRs (NYSEARCA:WMH)
Conference call transcripts: Motorola Q1 2007 Earnings Call Transcript
Wyeth Q2 Earnings Beat Estimates, Full Year Guidance Upped
Wyeth reported a 13% rise in Q2 net income to $1.2 billion, or $0.87/share, with adjusted EPS of $0.90 beating the Street by $0.03. Revenues rose 9.5% to $5.6b, boosted by overseas sales of the Prevnar vaccine and biotech product Enbrel. Wyeth raised its full year pro forma diluted EPS guidance to $3.48 - $3.56. Analysts had been expecting $3.49 on average, with the lowest estimate at $3.14 and the highest at $3.55. Wyeth earned $3.14/share last year. CEO Robert Essner said Wyeth is "on track for another excellent year," and announced the company "received FDA approval for the novel contraceptive Lybrel, as well as Torisel for the treatment of advanced renal cancer during the quarter." Wyeth is untraded so far in the pre-market. Its shares lost 0.1% to $56.61 on Wednesday.
Sources: Press release, Bloomberg
Commentary: Barron's: Value Investor Cliff Hoover's Quality Picks • Stocks Trading Just Above Their 50-Day Moving Averages • HealthShares Founder: Buy Biotech Stocks and ETFs, Avoid Big Pharma
Stocks/ETFs to watch: Wyeth (WYE). Competitors: Eli Lilly & Co. (NYSE:LLY), Novartis AG (NYSE:NVS), Pfizer, Inc. (NYSE:PFE). ETFs: Pharmaceutical HOLDRs (NYSEARCA:PPH), Health Care Select Sector SPDR (NYSEARCA:XLV), iShares Dow Jones US Healthcare (NYSEARCA:IYH)
Dow Jones Q2 Net Down 27%, Adjusted EPS In-line, Revenues Up 16%
Dow Jones & Co. reported a 27% decline in Q2 net income to $21 million, or $0.25/share, due to restructuring costs and higher stock-based compensation expenses related to the appreciation of its shares from Rupert Murdoch's $5b, $60/share takeover offer. Adjusted EPS of $0.45/share matched the Street's average forecast. Revenues rose 16% to $529.7m, but came up short of analysts' average estimate of $534.4m. Sales from its digital businesses, including from its acquisition of Factiva, helped offset a 6.8% decline in print advertising revenue at The Wall Street Journal. An S&P analyst commented that "Dow Jones is one of the few newspaper companies that will show positive revenue growth because they get so much more revenue as a percentage from online sources." However, the analyst said, "Investors are really focused on whether the merger goes through regardless of the current fundamentals." Shares of Dow Jones lost 1.4% to $55.65 on Wednesday.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Dow Jones Board Approves Murdoch Bid; Bancrofts to Decide • At Long Last, Dow Jones And News Corp. Reach (Possible) Deal • Dow Jones/News Corp. Merger Unlikely to Succeed Dow Jones Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NASDAQ:NWS). Competitors: Reuters Group PLC [ADR] (RTRSY)
Vodafone Tops Subscriber Estimates, Reports Strong Emerging Markets Growth
Vodafone Group released its Interim Management Statement for the First Quarter Thursday, beating analyst estimates on how many subscribers it would add globally, and sending its shares higher by 0.63% in London Trading, just before 11 a.m. BST. The world's second largest mobile provider by customer size (China Mobile is #1) reported especially strong y/y revenue growth in India and Turkey, 50% and 32% respectively. Overall, Vodafone added 9.1 million customers, to reach a total of 232 million globally, versus Bloomberg estimates of 230 million. Revenue grew 7.5% y/y, coming in at 8.3 billion pounds ($17 billion). On an organic basis, sales grew 4%. According to Hargreaves Lansdown analyst Richard Hunter, "The competitiveness and saturation of developed European markets has meant that Vodafone has identified additional potential elsewhere." CEO Arun Sarin: "We have made a good start to the financial year, with a strong performance from the [emerging markets] region offsetting continued challenging markets in Europe." The company left its full year guidance unchanged.
Sources: Press Release, AP, Bloomberg, MarketWatch, Reuters
Commentary: Vodafone Denies It's Considering a $160B Bid for Verizon • Promising Outlook For Vodacom (Vodafone's African Subsidiary) • Vodafone Activists Should Show More Patience - Barron's
Stocks/ETFs to watch: Vodafone Group plc (NASDAQ:VOD). Competitors: Verizon Communications Inc. (NYSE:VZ), Telecom Italia S.p.A. (NYSE:TI), Sprint Nextel (NYSE:S), France Telecom (FTE), Deutsche Telekom (DT). ETFs: PowerShares Dynamic Telecom & Wireless ETF (PTE), HOLDRS Wireless (WMH), iShares S&P Global Telecommunications (NYSEARCA:IXP)
Conference call transcripts: Verizon Q1 2007, Vodafone Group FY 2006
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
It was just one thing after another yesterday, and most of it wasn't good.
Before the opening the market was primed for selling when Intel (NASDAQ:INTC) said that its big jump in profits (up 44%) was offset by weaker-than-expected margin forecasts. And then Yahoo! (NASDAQ:YHOO) cut its full-year earnings estimate while Pfizer (PFE) missed analysts' earnings forecasts with a profit decline of 48%.
This was followed by a downgrade of some of the key financial stocks -- Morgan Stanley (NYSE:MS), Merrill (MER), Goldman (NYSE:GS) and Lehman Brothers (LEH) -- by a noted analyst who said that the depth of the subprime problem "simply cannot be calculated." He also downgraded several banks including Bank of America (BAC), Citigroup (C), and JPMorgan (JPM).
Fed Chairman Ben Bernanke appeared before Congress just after the opening Wednesday. Despite some thoughts that he might rescue the day, the chairman added more fuel to the fire by saying that the subprime mess would likely get worse before getting better, as "The situation has deteriorated significantly."
Later, he remarked that inflation was likely to recede a bit and growth was expected to pick up next year, but that isn't likely what will be remembered from his remarks.
At the close yesterday, the Dow Industrials were down 53 points at 13,918, the S&P 500 lost three at 1,546, and the Nasdaq fell 13 to 2,699. Volume on the NYSE was posted at 1.7 billion shares and 2.2 billion traded on the Nasdaq, with breadth negative on both exchanges at 20-to-11 on the New York and 9-to-5 on the Nasdaq.
On top of all of the other negative news to hit stocks, crude oil (August contract) rallied by $1.03 to close at $75.05 a barrel, its highest price since last August. Gold (August contract) was higher, too -- up $7.80 and closing at $673.70 per troy ounce, its highest close in six weeks.
The Amex Energy SPDR (NYSEARCA:XLE) was up $1.41 at $73.69 and the Philly Gold and Silver Index [XAU] rallied again -- this time by $5.30 to $154.42, its highest close since last April. Traders might take note of a trading gap in the XAU that appears between $153.28 and $157.26 -- $171.72 is the all-time high.
What the Markets Are Saying
The most significant thing about yesterday's market was that it didn't take more of a beating than it did and, in fact, rallied strongly during the last hour of trading -- making up almost 90 Dow points!
The Dow ended the day more than 230 points above its first initial support. And even though the margins on the S&P 500 and the NYSE Composite are a bit slimmer, yesterday was a good test of the market under tough circumstances, and it came through with flying colors.
Today we'll get an indication as to where the sentiment numbers stand, and this should provide a hint as to whether or not we will see a test of the first zones of support.
Today's Trading Landscape
The May trade balance, June chain store sales, monthly budget statement and the weekly jobless claims reports are due.
Earnings are slated from Advanced Micro (NASDAQ:AMD), Ametek (NYSE:AME), Arbitron (NYSE:ARB), Avocent (AVCT), Bank of New York (NYSE:BK), Bank of America (BAC) (read above), BB&T (NYSE:BBT), Broadcom (BRCM), Capital One (NYSE:COF), Continental Airlines (NYSE:CAL), Cypress Semi (NASDAQ:CY), Dow Jones (DJ) (read above), Fifth Third Bancorp (NASDAQ:FITB), First Data (NYSE:FDC), Genuine Parts (NYSE:GPC), Google (NASDAQ:GOOG), Gilead Sciences (NASDAQ:GILD), Harley-Davidson (NYSE:HOG), Hershey (NYSE:HSY), Honeywell (NYSE:HON), Hub Group (NASDAQ:HUBG), Mellon Financial (MEL), Microsoft (NASDAQ:MSFT), Motorola (MOT) (read above), Nucor (NYSE:NUE), Provident Bankshares (PBKS), Safeway (NYSE:SWY), SanDisk (SNDK), Seagate (NASDAQ:STX), Sherwin-Williams (NYSE:SHW), SunTrust Banks (NYSE:STI), Textron (NYSE:TXT), Wyeth (WYE) (read above), Xilinx (NASDAQ:XLNX) and many others.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise for First Day in Four; BHP, JFE Holdings Gain on Metals Asian stocks rose for the first time in four days, led by BHP Billiton Ltd. (NYSE:BHP) and Zijin Mining Group Co., after copper, gold and oil prices gained.
• Bank of East Asia's Li Denies SEC Allegations in Dow Jones Insider Case Dow Jones & Co. (DJ) director David Li denied allegations by the U.S. Securities and Exchange Commission that he may have breached securities laws in connection with News Corp.'s (NWS) bid for the company.
• Ranbaxy Second-Quarter Profit Doubles on India Sales, Drug Acquisitions Ranbaxy Laboratories Ltd. (OTC:RBXLF), India's second-biggest drugmaker, said profit almost tripled in the second quarter after buying companies in Europe and South Africa.
• Morgan Stanley May Move Some Hong Kong Operations to Kowloon, People Say Morgan Stanley (MS) is in talks to move some operations from Hong Kong Island's Central business district to Kowloon on the other side of Victoria Harbor, two people with knowledge of the matter said.
European Headlines (via Bloomberg.com)
• European Stocks Advance, Led by Technology Companies; SAP, Vodafone Rise European stocks rose for the first time in three days after profit from SAP AG (SAP) and Roche Holding AG (OTCQX:RHHBY) beat analysts' estimates.
• Roche Appoints New Chief Executive Officer as Profit Advances 24 Percent Roche Holding AG (OTCQX:RHHBY) named Severin Schwan as chief executive officer after the 40-year-old manager led the Swiss company's expansion into diagnostic tools to help find patients who respond to its medicines.