Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:55 AM ET
S&P 500: +5.00; 1,448.00
NASDAQ 100: +3.50; 1,943.00
Dow: +26; 13,292.00
NIKKEI 225: -0.39%; 16,914.46 (-65.40)
HANG SENG: -2.67%; 21,936.73 (-601.71)
SHANGHAI SE COMPOSITE: +1.48%; 4,628.11 (+67.33)
BSE SENSEX 30: -1.55%; 14,903.03 (-235.37)
FTSE 100: +0.13%; 6,232.30 (+8.00)
CAC 40: -0.66%; 5,561.19 (-36.70)
XETRA-DAX: +0.01%; 7,436.63 (+0.96)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -1.47%; $74.37 (-$1.11)
Gold: +0.07%; $684.90 (+$0.50)
Natural Gas: -1.94%; $5.97 (-$0.12)
Silver: -0.06%; $13.150 (-$0.008)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Wal-Mart Announces Wholesale JV in India
Wal-Mart and India's Bharti Enterprises announced Monday they have signed an agreement to establish Bharti Wal-Mart Private Limited, a 50:50 joint venture for wholesale cash-and-carry and back-end supply chain management operations in India. The venture will serve business-to-business wholesale in product areas including fruits and vegetables, groceries and staples, stationery, footwear, clothing, consumer durables and other general merchandise items. Bharti Retail, a wholly-owned subsidiary of Bharti Enterprises, which is setting up chain supermarkets and convenience stores will also be served by the venture. Wal-Mart will play a key role in helping Bharti develop its supply chain and back-end logistics. The venture is expected to open 10 - 15 wholesale facilities annually over the next seven years. Foreign retailers of multiple brands are restricted to cash-and-carry and franchise operations in India. Coverage by Reuters notes India's retail industry is forecast to double in size by 2015 from its current value of around $350 billion.
Sources: Press release, Bloomberg, MarketWatch, Reuters
Commentary: Wal-Mart: Going For Quality • Wal-Mart Nears India Expansion • Wal-Mart Clinches Indian Retail Deal
Stocks/ETFs to watch: WMT. ETFs: RTH, DIA,PRFS, VDC
Conference call transcripts: Wal-Mart F1Q08
Fuel Tech Drops on Earnings Miss, Lowered Outlook
Air pollution control company Fuel Tech said Monday Q2 net sales were $16.2 million, down 18% from $19.8 million a year ago, while net income plunged to $0.3 million ($0.01/share), from $2 million in the year-ago quarter. Both numbers were short of polled analysts, who were expecting $0.06/share on revenue of $18.5 million. The company said the results reflect delays in new project awards, and not a fundamental shift in the industry. "The outlook for new domestic APC (Air Pollution Control) business has never been brighter, as utilities begin to implement compliance strategies for NOx emission requirements set to take hold in 2009," said CEO John F. Norris. The company also lowered its full-year revenue outlook to $80M-$85M; it had previously forecast $90M-$95M. Fuel Tech's NOxOUT is equipped with a retrofittable system for the reduction of nitrogen oxide in boilers, incinerators, furnaces, and other combustion sources. Its Fuel Chem reduces slag formation and corrosion in boilers and furnaces. Shares are down 18% to $22.95 in pre-market trading.
Sources: Press release, Dow Jones, Hoover's
Commentary: Fuel Tech: Watch Price Action As Earnings are Due Out This Morning • Fuel Tech Profitably Cleans Up Pollution • Barron's Picks Five Clean Tech Stocks for a Greener Future
Stocks/ETFs to watch: FTEK. Competitors: FWLT
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Actionable Barron's Calls
Barron's articles likely to move stocks today, culled from our Annotated Barron's Summaries
- Private investor David Richards believes the recent market selloff is not serious. Spreading capitalism is bringing almost four billion new consumers into the global economy -- which should stimulate a 20 to 40% growth boom similar to the Industrial Revolution. His plays on the global boom: (1) General Electric (NYSE:GE) -- at 16x earnings, with global participation in aircraft, trains, power and finance, it is very low risk. (2) Coca-Cola (NYSE:KO), Johnson & Johnson (NYSE:JNJ) and Eli Lilly (NYSE:LLY) -- are selling at 15x earnings, not the 25-30x they deserve. (3) ConocoPhillips (NYSE:COP) and BP plc (NYSE:BP) -- at 5-10% growth over the last few years, they have severely lagged peers who are up 50--60%. (full summary)
- Loan insurer ACA Capital Holdings' (ACA) shares lost almost 2/3 of their value, dropping from $15 in mid-June to just over $5 on July 24, before rallying back to a current $7. Barron's says investors' relief may be short lived. Including shareholder net worth, the company says it has claims-paying resources of over $1 billion. Should subprime woes prove systemic, losses could be $3 to $5 billion. (full summary)
- While the reported earnings of cable giant Liberty Global (NASDAQ:LBTYA) may look bad (-$0.35/share in Q1 and an estimated -$0.84 on the year), its Ebitda [earnings before interest, taxes, depreciation and amortization] have grown by 16% in each of the past two years amid cash-flow growth, market share increases, and share buybacks. "[Liberty] is at an earlier stage in its development cycle, and has a commanding position in cable markets overseas that are not as mature or consolidated, and not nearly as competitive as those dominated by Comcast (NASDAQ:CMCSA) in the U.S.," says M&R Capital's John Maloney. Wall Street expects Liberty Global to generate $3.4B and $3.8B in Ebitda over the next two years. At a current $42, using its cash to buy back its shares -- which could hit $60 over the next 18 months -- is still its best option. (full summary)
- Shares of video rental rivals Netflix (NASDAQ:NFLX) and Blockbuster (BBI) are down 34% and 17% respectively YTD as their profits disintegrate amid cut-throat competition.Blockbuster's Total Access plan gives subscribers the dual benefit of their choice of in-store or internet rentals (Netflix has no stores) has taken its toll: In its past quarter, Netflix reported its first-ever sequential customer decline. But Blockbuster now admits the program is killing its bottom line (it lost $113 million before items in the past quarter). When Blockbuster finally cracks and raises prices, Netflix shares will rally. (full summary)
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Last Week's Action
Despite consistent modest losses until about 2 p.m. on Friday, heavy selling drove stocks sharply lower. Investors and traders alike headed for the exits, not willing to chance another round of credit problems triggered by Standard & Poor's move to reduce Bear Stearns' (NYSE:BSC) long-term credit rating to negative from stable.
As might be expected, one of the worst performing sectors was the financial group with American Express (NYSE:AXP) off $3.42, Bear Stearns (BSC) down $7.28, Merrill Lynch (MER) down $2.50, and JPMorgan Chase (NYSE:JPM) off 94 cents. The mortgage sector took another hit, too, and despite some assurances from Countrywide Financial (CFC) that it has access to nearly $50 billion in short-term funding, its stock was hit for a 6.6% loss of $1.77.
By the close, the Dow registered its third-worst day of the year and even Dow component Proctor & Gamble's (NYSE:PG) 19% gain in Q2 profits and a $30-million buyback of its stock had little impact on the market. PG closed lower by 42 cents. The markets opened lower as a result of a somewhat disappointing jobs report that showed unemployment rising to 4.6% from 4.5%. Treasury bonds traded higher following the jobs report with the 10-year note up 19/32 at 98-16/32 and a yield of 4.698%.
The Dow Jones Industrial Average lost 281 points to close at 13,182. The S&P 500 was off 39.14, closing at 1,433, and the Nasdaq fell by 65 points to 2,511. The NYSE traded 2 billion shares, while 2.5 billion crossed on the Nasdaq; on both exchanges declines exceeded advances by about 6/1.
September crude oil contracts closed down $1.38 at $75.48, and the Amex Energy SPDR (NYSEARCA:XLE) suffered its largest loss of the year falling $2.23 to $66.12, penetrating the support line at $66.80. The next support for the XLE is at $62.
Gold contacts were one of Friday's few havens, closing higher by $7.80 at $684.10. However, the Gold/Silver Index [XAU] fell by $2.76 to close at $143.72, failing to hold support at the July 6 breakout line at $145. The next support for the XAU is at the 50-day moving average at $142.86.
Last week, despite some very rough days, the Dow Industrials lost just 0.6%, but the S&P 500 was down 1.8%, and the Nasdaq fell by almost 2%. Despite some excellent earnings from General Motors (NYSE:GM), Verizon Communications (NYSE:VZ), Walt Disney (NYSE:DIS) and Proctor & Gamble (PG), the major averages lost ground for the third successive week, primarily because of the huge sell-off in the last half hour of trading on Friday.
What the Markets Are Saying
With the market's internal indicators (Stochastics, MACD, etc.) now grossly oversold and slightly below the March lows, it is reasonable to begin looking for another reflex rally.
However, the March lows in the indicators were made six trading days prior to the final low in the Dow and seven days prior to the S&P 500 March low. Could that indicate that we have at least another week to go before we get a decent rally? Not necessarily since the current sell-off is much steeper than that of March and represents a full 66.6% Fibonacci retracement of the March-to-July rally.
In other words in, the absence of any more bad news from the credit areas, we are due for a rally and, since a number of better-quality technology stocks held firm last week, it would seem that they may lead a temporary charge up. The first areas of resistance to such buying would be at Dow 13,500-13,685; S&P 1,500; and the Nasdaq 2,600.
Today's Trading Landscape
Look for earnings today from the following companies: Bancorp Inc. Del (NASDAQ:BRKL), Conseco (NYSE:CNO), Cooper Tire & Rubber (NYSE:CTB), Dun & Bradstreet (NYSE:DNB), Fuel-Tech (NASDAQ:FTEK), Gladstone Capital (NASDAQ:GLAD), Hawaiian Electric (NYSE:HE), Home Properties (NYSE:HME), Morgan Stanley (NYSE:MS), Unisource Energy (NYSE:UNS) and many more.
There are no significant economic reports due today. An upgrade of Merrill Lynch (MER) by UBS to a buy may help other Wall Street stocks. After a strong opening, things may settle down awaiting the results of the Fed meeting tomorrow.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Slump on Rising Global Funding Costs; Macquarie, BHP Slide Asian stocks fell, extending a rout that wiped $2.66 trillion from global equities, on concern losses in the U.S. subprime mortgage market will slow economic growth and drive up financing costs.
• Dollar Falls to Four-Month Low Against Yen on Concerns About U.S. Growth The dollar fell to the weakest in four months against the yen and traded near a record low versus the euro on concern losses on subprime mortgages will slow the economy and prompt the Federal Reserve to cut interest rates.
• Honda Says It May Miss Its Japan Sales Target This Year as Market Shrinks Honda Motor Co. (NYSE:HMC), Japan's second-largest automaker, may miss its domestic sales target this business year after demand for its models plunged a more-than- expected 13 percent in the first four months.
• China's CSI 300 Index Climbs to Record; Baoshan Iron, Metal Producers Gain China's stocks rose to a record for a second day. Baoshan Iron & Steel Co. led metal producers higher on speculation accelerating growth in the world's fourth-largest economy will spur demand for their products, boosting profits.
European Headlines (via Bloomberg.com)
• Stocks Decline on Concern Economic Growth Will Slow; UBS, BNP Paribas Fall Stocks in Europe and Asia fell, extending a rout that wiped $2.66 trillion from global equities, as concern mounted that losses in the U.S. mortgage market will erode economic growth and increase companies' financing costs.
• Akzo Sweetens Bid for U.K. Paintmaker ICI to $16 Billion; ICI Opens Books Akzo Nobel NV (OTCQX:AKZOY), the world's largest maker of paints and coatings, raised its bid for Imperial Chemical Industries Plc to 8 billion pounds ($16 billion) and won access to the U.K. company's books.
• Munich Re Reports Surprise Increase in Profit on Taxes, Raises Forecast Munich Re, the world's second-biggest reinsurer, reported profit that beat analysts' estimates because of a lower tax bill and raised its earnings forecast.
• Putin Favors Ruble Traders Over Oil Profits in Battle Against Inflation Russian President Vladimir Putin's plan to keep inflation from accelerating depends on favoring foreign-exchange traders over the country's oil and gas companies.
• Dexia Says It Is `Very Well Protected' From U.S. Subprime-Mortgage Losses Dexia SA reiterated that it is ``very well protected'' against potential losses related to the U.S. subprime mortgage market and it scheduled a telephone conference for today to discuss the issue.