Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:20 AM ET
S&P 500: +6.90; 1,489.30
NASDAQ 100: +12.80; 1,986.00
Dow: +63.00; 13,611.00
NIKKEI 225: +0.64%; 17,029.28 (+107.51)
HANG SENG: +2.87%; 22,536.67 (+628.68)
SHANGHAI SE COMPOSITE: +0.26%; 4,663.16 (+11.94)
BSE SENSEX 30: +2.51%; 15,307.98 (+375.21)
FTSE 100: +0.84%; 6,361.90 (+53.10)
CAC 40: +1.08%; 5,680.86 (+60.46)
XETRA-DAX: +0.71%; 7,567.12 (+53.46)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.30%; $72.20 (-$0.22)
Gold: +0.29%; $684.30 (+$2.00)
Natural Gas: -0.18%; $6.19 (-$0.01)
Silver: +0.27%; $13.13 (+$0.035)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Sprint 2Q Profit Tumbles on Merger and Restructuring Costs, But Beats Street
Sprint reported a 95% drop in 2Q net income to $19 million, or $0.01/share, but adjusted EPS of $0.25 (vs. $0.32 last year) beat analysts' average estimate of $0.22. Sales rose a modest 1.5% to $10.2b, mostly in-line with analyst estimates. Sprint said it gained 16,000 postpaid subscribers during the quarter, significantly lagging rivals AT&T and Verizon's subscriber gains of 900,000 and 1.5 million, respectively. On a more positive note, Sprint said postpaid churn fell to slightly more than 2%, compared to 2.3% in 1Q. Sprint forecasts full-year sales of $41b - $42b, compared to analyst expectations of $41b. Shares of Sprint gained 1.6% to $20.22 on Tuesday and were last up 3.9% to $21.00 in very thin pre-market trading. Sprint's earnings call is at 8 a.m. Eastern. Check for Sprint's earnings call transcript later today.
Sources: Press release, Bloomberg, MarketWatch, Reuters
Commentary: Sprint And Clearwire To Build National WiMax Network • Sprint Rises on Takeover Rumor; SK Telecom Denies Interest • Sprint Admits It Is "Unable Meet Your Current Wireless Needs"
Stocks/ETFs to watch: S. Competitors: T, Q, VZ. ETFs: WMH, IYZ, TTH
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• Polo Ralph Lauren Corp. (NYSE:RL) reported profit in its latest quarter rose 10% on higher apparel sales, but missed consensus analyst estimates by $0.03. Net income was $88.3 million, good for EPS of $0.82, versus net of $80.2 million (EPS of $0.74) a year earlier. Revenue climbed 18.5% y/y. (source: Reuters)
• Foster Wheeler Ltd. (FWLT) reported a significant drop in its 2Q profit, with net income coming in at $71.9 million versus $108.4 million a year earlier. EPS was $0.99 versus $1.53 in the year earlier period. The latest quarter included $0.42 a share expenditure on a legacy power project. On that basis, the company earned $1.41 a share, well above consensus estimates of $1.33 a share. (source: Reuters)
• Bausch & Lomb Inc. (BOL) posted a profit in its latest quarter, after reporting a loss a year ago. Net income was $15 million, good for EPS of $0.27, versus a loss of $0.28 a share a year earlier. Sales were higher by 14%, to $649.5 million. Consensus estimates were for adjusted EPS of $0.53 on sales of $614.6 million. It was not immediately clear if the estimates were comparable to the EPS figure released by Bausch & Lomb. Gross margins improved to 57.9%, versus 56.3% a year ago. (source: AP)
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
With the Labor Department's reporting early yesterday that second-quarter productivity was less than expected (1.8% versus 2.1%), many thought that even if the Fed didn't reduce interest rates, it would at least acknowledge that future growth was a concern and pave the way for a future cut.
Instead, the Fed governors issued a statement that further emphasized inflation is the prime concern and said little about the possibility of a slowing economy. Immediately following the Fed's policy statement, stock prices sagged until a thorough reading of the report led some commentators to conclude that the Fed was really on the side of growth and would come to the aid of the economy if needed (isn't that its job?).
But the Fed's key concern was an increase in labor costs, which rose at an annual rate of 2.1% -- 1.6% was expected and the increase can cause inflation. After hitting a low point just after the Fed news, a rally got going with both energy and financial stocks leading the way, and the averages closed on the plus side.
At the close, the Dow Jones Industrial Average gained 36 points at 13,504. The S&P 500 was up 9 at 1,477, and the Nasdaq gained 14 points to close at 2,562. Volume was again on the heavy side with the Big Board trading 2.2 billion shares and the Nasdaq trading at 2.7 billion. Breadth was positive on the NYSE by a margin of 9/7 and ahead on the Nasdaq by 17/13.
September crude oil contract prices were up 14 cents yesterday at $72.20 a barrel, and the Amex Energy SPDR (NYSEARCA:XLE) rose $1.33 to $67.82, completing a reversal signaled on Monday off of the 100-day moving average. The next test for the XLE is at the 50-day moving average at $70. Gold fell by $1, closing at $682.30 per troy ounce (December contract), and the Gold/Silver index [XAU] added $1.20 closing at $142.84 after reversing from the 200-day moving average at $140.
What the Markets Are Saying
The market closed higher yesterday, but breadth on both Monday and Tuesday showed little conviction on the part of buyers even though volume churned at fairly high levels. The S&P 500 did get up to the resistance line at 1,487, and the Dow Industrials almost reached its next resistance at 13,638, but both failed to punch through despite an oversold stochastic and MACD reading and a buy signal on the stochastic.
The next support for the "500" is the 200-day moving average at around 1,450, and a failure to hold that will likely result in a test of the 325-day exponential moving average at 1,408.
There is no way to know for sure when or where the market will eventually find bottom. However, the indicators are telling us that it is sold out. The put/call ratio is at 1.05 (high), NYSE short interest is again at an all-time high, and odd-lot short selling is through the roof.
We'll get an idea of the public's real sentiment Thursday night with the unbiased AAII bullish/bearish numbers, but for now we'll just have to play this day by day as stocks attempt to form a bottom.
Today's Trading Landscape
Look for quarterly earnings today from Advance Auto Parts (NYSE:AAP), American International Group (NYSE:AIG), AmeriCredit (ACF), Avnet (NYSE:AVT), Barr Pharma (BRL), Chesapeake Energy (NYSE:CHK), Florida Power (NYSE:FPL), Foster Wheeler (FWLT) (read above), James River Coal (JRCC), Progress Energy (PGN), SkyWest (NASDAQ:SKYW), Sprint Nextel (NYSE:S) (read above), Tyco Electronics (NYSE:TEL) and many others.
The lone economic report due today is the June wholesale inventories (the consensus expects 0.4%). Cisco (NASDAQ:CSCO) rallied on the European exchanges after reporting a 25% jump in quarterly profits and received an upgraded by a major firm, which could help the other tech stocks at the opening bell.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rebound as Fed Allays Growth Concerns; Banks, Samsung Advance Asian stocks rebounded from an eight- week low after the Federal Reserve said the U.S. economy will probably weather subprime mortgage defaults that sparked a $2.65 trillion sell-off in equities worldwide.
• Cathay Pacific First-Half Net Rises 55 Percent on Dragonair, China Travel Cathay Pacific Airways Ltd. (OTCPK:CPCAY), Asia's second-most profitable carrier, said first-half profit rose 55 percent, beating analysts' estimates, after it bought a rival to expand in China, the world's fastest-growing major economy.
• Softbank First-Quarter Net Rises 18-Fold on New Users, Gain on Asset Sales Softbank Corp. (OTCPK:SFTBF), Japan's third-largest mobile-phone company, posted an 18-fold increase in first-quarter profit after adding twice as many users as market leader NTT DoCoMo Inc. (NYSE:DCM).
• Australia's Benchmark Rate Is Raised to 11-Year High, Undermining Howard Australia's central bank raised its benchmark interest rate a quarter point to the highest in almost 11 years. The increase may undermine Prime Minister John Howard's campaign to win a fifth term in office this year.
• ICBC Shares Post Record Gain as Company Closes In on Microsoft's Value Industrial & Commercial Bank of China Ltd., until today the worst-performing stock on the nation's 300-strong benchmark index, rose by a record 9.8 percent in Shanghai to become the world's fourth-biggest company.
European Headlines (via Bloomberg.com)
• Stocks Climb Worldwide After Fed Rate Decision; ING, Adidas, Samsung Rise Stocks in Europe and Asia advanced after the Federal Reserve left interest rates unchanged and said losses in the U.S. mortgage market probably won't hold back growth in the world's biggest economy.
• ING Posts Surprise Profit Increase, Boosted by Sale of Stake in ABN Amro ING Groep NV (NYSE:ING), the largest Dutch financial-services company, reported second-quarter profit that exceeded analysts' estimates, boosted by gains from insurance and the sale of a stake in ABN Amro Holding NV (ABN).
• Bank of England Signals 6 Percent Interest Rate Is Needed to Cut Inflation Bank of England forecasts suggest one more interest-rate increase will be needed to bring inflation back to target in two years.
• OMV Rules Out Hostile Takeover of Mol, Calls for Merger Talks With Company OMV AG, Austria's state-controlled oil company that wants to merge with rival Mol Nyrt., won't make a formal bid against the wishes of the Hungarian company's management.
• Swisscom Net Surges 59 Percent as FastWeb Purchase Raises Internet Revenue Swisscom AG (NYSE:SCM), Switzerland's largest phone company, posted the biggest quarterly profit jump in almost two years after the purchase of FastWeb SpA bolstered Internet- service sales. The stock rose the most in almost five years.