Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:42 AM ET
S&P 500: -4.50; 1,477.25
NASDAQ 100: -5.00; 1,975.00
Dow: -40.00; 13,487
NIKKEI 225: -0.03%; 16,979.86 (-4.25)
HANG SENG: +0.42%; 22,538.44 (+95.19)
SHANGHAI SE COMPOSITE: +3.47%; 4,560.77 (+153.04)
BSE SENSEX 30: +1.02%; 15,138.40 (+152.70)
FTSE 100: -0.13%; 6,291.80 (-8.50)
CAC 40: -0.62%; 5,646.71 (-35.36)
XETRA-DAX: -0.01%; 7,533.70 (-0.43)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.51%; $77.25 (+$0.39)
Gold: +0.04%; $676.90 (+$0.30)
Natural Gas: +0.33%; $6.13 (+$0.02)
Silver: +0.04%; $13.00 (+$0.005)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Payrolls Fall Short
Nonfarm payrolls climbed just 92,000 in July, well short of the 130K gain forecast by economists. Unemployment ticked up 0.1% to 4.6%. The July number follows stronger [revised] gains of 126K and 188K in June and May. "It's an OK, somewhat mediocre labor market. It's not indicative of massive distress, rather a slow deterioration of the labor market. The economy has adjusted to lower growth," said Horizon Investments' Jeffrey Roach before the report. Health care employment grew by 36,000, financial activities employment rose by 27,000, food services was up 22K, while manufacturing was flat, retailers shed 1,200 jobs and builders lost 12K jobs. Manufacturing has lost 175,000 jobs over the past 12 months. Consumers turned optimistic about employment last month, according a report from independent research group Conference Board this week. Consumers who felt jobs were 'plentiful' surged in to the highest level since August 2001. Average hourly wages increased $0.06 (0.3%) to $17.45, up 3.9% from a year ago. DJIA futures, which had traded as high as 13543, are currently down 37 points at 13490.
Sources: Department of Labor news release, Wall Street Journal, Bloomberg
Commentary: Is the U.S. Heading Towards a Recession? • The Plunge Protection Team Exposed • Fundamentals And The Market: Review and Expectations
Stocks/ETFs to watch: SPY, DIA, AGG
P&G Beats By $0.01, Announces Up To $30B Buyback; EPS Guidance Soft
Procter & Gamble reported fiscal 4Q net income increased 19% to $2.27 billion, or $0.67/share, on sales growth of 8% to $19.27b, topping analyst expectations of $0.66 on sales of $19.1b. P&G also announced it plans to repurchase $24b - $30b of its shares over the next three years. P&G said it will repurchase shares at a rate of $8 - $10b per year, compared to its FY'07 level of $5.6b. 4Q organic sales rose 5%. P&G had forecast growth of as much as 6%. P&G expects fiscal 1Q EPS of $0.88 - $0.90, on sales growth of 6% - 8% ($19.92b - $20.29b). Analysts were expecting $0.91, on sales of $19.95b. For the full year, P&G is targeting EPS of $3.44 - $3.47, on sales growth of $5% - 7% ($80.33b - $81.86b). Analysts had forecast $3.48, on sales of $80.69b. Shares of P&G were last up 0.6% to $63.70 in thin pre-market trading, after gaining 0.2% to $63.30 on Thursday. P&G's earnings call is at 8:30 a.m. EDT. Check for P&G's earnings call transcript later today.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Declining Stocks Barely Above Their 50-DMAs • Three Safer Stocks For This Shaky Market • The DJIA's Best Performing Stocks
Stocks/ETFs to watch: PG. Competitors: JNJ, KMB, CL. ETFs: XLP, DIA, VDC, PRFG
Tim Hortons Q2 Net Income Drops; In Line with Estimates
Canada's number-one quick-service restaurant, Tim Hortons Inc., said Friday Q2 net income dropped 12% to $63.6 million (C$67.2 million), or $0.36/share, from C$76.3 million ($0.39/share) a year ago -- in line with analyst estimates. Revenue rose 14% to C$465.3 million. Canadian same-store sales performance exceeded expectations, while U.S. same-store growth missed targets. "Although U.S. same-store sales fell below our long-term targeted growth, we are executing on our plan of developing selected markets and growing our brand in the U.S.," CEO Paul House said. Price increases contributed 1% to same-store sales growth. The company expects to meet or exceed its 2007 operating income growth target of 10%. The company opened 18 new stores in the quarter. Last year, it introduced a breakfast sandwich in an attempt to lure customers from McDonald's Egg McMuffin. Since its IPO in March 2006, shares have increased 24%.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Tim Hortons Reports Earnings Friday: Preview • Can Tim Hortons Keep Rolling? [Motley Fool] • The Tim Hortons Spinoff Created Value for Wendy's Shareholders
Stocks/ETFs to watch: THI. Competitors: MCD, SBUX
Silver Wheaton Misses On EPS, Sales
Silver producer Silver Wheaton missed earnings in the second quarter on a shortfall in production at its Luismin mines in Mexico. EPS came in at $0.10 on net income of $22.9 million, versus net of $25.2 million a year ago (EPS of $0.12). Sales were $41.46 million, marking a 13% decline from the year earlier period. Consensus estimates were for EPS of $0.11 on sales of $51.5 million. President and CEO Peter Barnes expressed confidence the shortfall in production "is only temporary and production will be back to normal by the end of the year." Barnes also pointed out acquisitions in the Penasquito and Stratoni silver mines "boosted our long-term cash flow per share by approximately 30% with no equity dilution, and give us one of the best growth profiles in the industry." The company's shares have gained nearly 30% YTD.
Sources: Press Release, MarketWatch, RTT News, Reuters Estimates
Commentary: Silver Wheaton: A Pure Play Against the Falling US Dollar • Cramer's take on SLW • Why Silver Stocks Are Outperforming Gold
Stocks/ETFs to watch: SLW. Competitors: CDE, HL, PAAS, PCU. ETFs: SLV
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Dynamite earnings from big names, such as Nokia (NOK), Starbucks (SBUX), and Disney (DIS), helped the stock market continue Wednesday's rally with a triple-digit replay. Adding to that was an M&A deal from Fiserv Inc. (FISV) with an offer to buy CheckFree (CKFR) for $4.4 billion. CheckFree closed with a 23% gain. Supportive comments about the lending and credit situation from some strong foreign banks Barclays (BCS), Credit Suisse (CS), and Societe Generale also helped things.
The two economic reports of the day were just as expected. The Labor Department reported that weekly claims in the latest week rose by 4,000 to 307,000, and the Commerce Department said that demand for capital goods in June was flat, which was better than the previously reported 0.7% decline.
Overall, the emphasis was on earnings yesterday, so with little other news the shift to quality blue chips continued, though a few got bumped and bruised. Mattel (MAT) said that its Fisher-Price toys would be recalled because a Chinese supplier painted them with lead-based paint and the stock fell by 2.2%. Accredited Home Lenders (LEND) said that it might not be able to "continue as a going concern" as a result of defaults.
At the close, the Dow Industrials were up 101 at 13,463. The S&P 500 gained 6 at 1,472, and the Nasdaq was up 22 to close at 2.576. The Big Board traded 1.9 billion shares and the Nasdaq did 2.5 billion; breadth was positive on both exchanges at 2/1 on the New York and 4/3 on the Nasdaq.
Crude oil (September contracts) closed 33 cents higher at $676.60 a barrel, and the Amex Energy SPDR (XLE) dropped 76 cents to $68.35, still above support at $66.80. Gold (December contracts) rose 70 cents to $676.60 per troy ounce and the Philadelphia Gold/Silver Index [XAU] was up $1.10 at $146.48 and still holding above the breakout at $145.
What the Markets Are Saying
Yesterday's follow-through rally from Wednesday's strong close looked more like a bargain hunting-short covering rally than anything else, with reduced volume and an emphasis upon the blue chips. Investors and traders alike are now looking for a safer place to house some profits, and the Dow stocks have largely provided the good earnings to satisfy that need.
But a reflex rally is just a rebound and this one will likely come into some selling at just above 13,500 -- more precisely the conjunction of the 20- and 50-day moving averages at 13,568 to 13,669. If you are trading, it's probably wise to book some profits today before the weekend and wait for another round of selling before bottom fishing again.
Today's Trading Landscape
Just a few earnings reports are due today. They include Alliance Imaging (AIQ), Arbor Realty (ABR), Hansen Natural (HANS), Hercules Offshore (THE), Proctor & Gamble (PG) (read above), Tim Hortons (THI) (read above), TOP Tankers (TOPT), Washington Post (WPO) and Weyerhaeuser (WY).
The big economic report today, and in fact the most anticipated of the week, is July's unemployment report (the consensus expects 4.5%). We will also receive the change in both non-farm payrolls (the consensus expects 130,000) and manufacturing payrolls (the consensus expects -14,000), average hourly earnings (the consensus expects 3.8% year-over-year, 0.3% month over month), and ISM non-manufacturing (the consensus expects 59.0).
Proctor & Gamble beat estimates by a penny and confirmed 2008 estimates. Overseas companies continue to strike pay dirt with Allianz (AZ), Deutsche Post (OTC:DPSTF), Royal Bank of Scotland (RBS) and Toyota (TM) reporting better-than-expected earnings. In the United States, mortgage rates were hiked overnight by key lenders.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Gain, Paring Weekly Decline, on Profits; Konica, Chi Mei Rise Asian stocks advanced, paring a weekly decline, after Konica Minolta Holdings Inc. and Chi Mei Optoelectronics Corp. reported better-than-estimated profits.
• Samsung Electronics May Halt Chip Production for 2 Days After Power Outage Samsung Electronics Co., the world's second-largest chipmaker, will shut down some of its production lines for as long as two days because of a power outage that may cost the company up to 50 billion won ($54 million) in lost sales.
• MBK Offers to Buy C&M for $3.2 Billion in Korea's Biggest Leveraged Buyout MBK Partners Ltd., the South Korean private equity group founded by former Carlyle Group executives, offered 3 trillion won ($3.2 billion) for cable-TV operator C&M, said two bankers who were asked to provide financing.
• Carry Trade a `Threat' to Markets, Yen Too Weak, South Korea's Kwon Says South Korea's Finance Minister Kwon Okyu said excessive yen carry trades threaten global financial markets and the yen's weakness isn't in line with the strength of Japan's economy.
European Headlines (via Bloomberg.com)
• Allianz Profit Declines Less Than Estimated on Earnings Gains at Dresdner Allianz SE (AZ), Europe's biggest insurer, said second-quarter profit fell 6 percent, less than analysts estimated, as earnings at Dresdner Bank more than doubled.
• Royal Bank of Scotland Net Rises More Than Expected on Investment Banking Royal Bank of Scotland Group Plc (RBSPY.PK), part of a group vying for ABN Amro Holding NV, said first-half profit rose 19 percent, beating analysts' estimates, fueled by international earnings at the securities unit.
• Union Investment of Germany Halts Redemptions From $1.3 Billion Bond Fund Union Investment Asset Management Holding AG, Germany's third-largest mutual fund manager, halted redemptions from a fund holding subprime mortgages after clients withdrew 100 million euros ($137 million) in the past month.
• British Airways First-Quarter Profit Rises 75 Percent on Business Traffic British Airways Plc (OTC:BAIRY) increased first-quarter profit 75 percent, more than analysts estimated, after cutting jobs, reducing pension liabilities and paying less tax. The shares rose the most in 14 months.
• UniCredit Second-Quarter Net Increases 6.8 Percent on Lending, Commissions UniCredit SpA (OTC:UNCIF), Italy's biggest bank, said second-quarter profit rose as it earned more from lending and asset-management fees.