Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 9:00 AM ET
S&P 500: -23.30; 1480.00
NASDAQ 100: -28.20; 1971.00
Dow: -185.00; 13,520.00
NIKKEI 225: +0.83%; 17,170.60 (+141.32)
HANG SENG: -0.43%; 22,439.36 (-97.31)
SHANGHAI SE COMPOSITE: +1.95%; 4,754.10 (+90.93)
BSE SENSEX 30: -1.36%; 15,100.15 (-207.83)
FTSE 100: -1.61%; 6,291.10 (-102.80)
CAC 40: -2.08%; 5,629.88 (-119.41)
XETRA-DAX: -1.83%; 7,467.11 (-138.83)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -1.08%; $71.37 (-$0.78)
Gold: -1.21%; $678.00 (-$8.30)
Natural Gas: +0.90%; $6.28 (+$0.06)
Silver: -1.52%; $12.97 (-$0.20)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
BNP Paribas Hit by Subprime, Suspends Redemptions on Three Funds
France's largest investment bank, BNP Paribas, released a statement Thursday saying it has temporarily suspended the net asset value [NAV] calculation of three funds, all of which are invested in U.S. asset-backed securities (inc. sub-prime mortgages) and it has also frozen redemptions. BNP shares were last down 3.5% to €82.44 in afternoon trading in Paris. Bloomberg reports the three funds: Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia, had approximately €2 billion ($2.76B) of assets on July 27, including €700M in subprime loans. BNP said, "The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating." NAV calculations and fund subscriptions/redemptions will resume as soon liquidity returns to the market. In the meantime, BNP plans to provide fund investors with additional information in one month. Subprime-related troubles have also forced redemption freezes at Bear Stearns and Union Investment Management in Germany; NIBC Holding in The Netherlands, reported a €137M year-to-date subprime loss.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Open Thread: Bear Stearns • Goldman Denies Hedge Fund Liquidation • I-Bank Stocks Are Falling Knives
Stocks/ETFs to watch: BNPQY.PK
Cardinal Health Beats On EPS, Misses On Revenue
Cardinal Health Inc. reported its F4Q profit nearly tripled, bolstered by the $3.3 billion sale of its pharmaceutical technologies and services segment. On a net earnings basis, profits were $902 million (EPS $2.33) versus $321.1 million in the year earlier period (EPS $0.76). On a non-GAAP basis, EPS was $0.89 vs. consensus estimates for EPS of $0.86. Revenue rose to $22.26 billion from $21.25 billion; analysts were expecting an average of $22.55 billion in revenue. Earnings from continuing operations fell to $0.61 from $0.73 on charges booked on the acquisition of Viasys Corp. (full story). The company earlier projected its FY2008 EPS would be in a range of $3.95-$4.15. Shares were lower by 0.56% in pre-market action as of 7:55 a.m. ET. Shares closed higher by 1.04% in composite trading Wednesday. Wednesday, the company announced it would buy back $2 billion worth of its own shares.
Sources: Press Release, Bloomberg, MarketWatch, AP, Reuters
Commentary: Cardinal Health: Litigation, Sale and Acquisition Leave 2007 EPS Unchanged • Cardinal Health Forecasts '07 EPS at Top End, Reiterates '08 Guidance • Multiple Symptoms of Excessive Pay at Cardinal Health
Stocks/ETFs to watch: CAH. Competitors: MCK, ABH, OMI. ETFs: XLV
Vonage 2Q Loss Narrows, Tops Estimates, But Subscriber Growth Drops
Vonage reported its 2Q loss narrowed to $33.6 million, or $0.22/share, compared to -$74.1M, or -$1.16 last year, beating analyst expectations of -$0.34/share. Sales growth of 40% to $205.9M came up short of analysts' average estimate of $208.1M. Vonage added around 57,000 new subscribers, missing some analyst forecasts and significantly trailing last year's same quarter gain of 256,000. Vonage now has 2.45 million total subscribers, more than rival Time Warner, which added 241,000 during the quarter for 2.3M total, but less than Comcast, which gained 671,000 for more than 3.0M. Cost-cutting including head count reduction and lower advertising expenses are said to be ahead of schedule. Vonage Chairman Jeffrey Citron said the company has "made a significant step toward moving ahead with business in the wake of the Verizon [patent infringement] litigation," by completing the deployment of workarounds. Vonage gained 4.8% to $2.20 on Wednesday and is untraded so far in Thursday's pre-market.
Sources: Press release, Bloomberg
Commentary: Vonage: The Trend Certainly Is Not Their Friend • Vonage Requests Lower Court Retrial, Cites Supreme Court Patent Decision • Telecom Meets Web 2.0 - Who Wins?
Stocks/ETFs to watch: VG. Competitors: TWX, CMCSA, T, VZ, Q
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Yesterday provided investors with a ride not unlike those at a summer amusement park as the "Wild Wall Street Roller Coaster" rose and fell and rose again within a 260-point range.
With just minutes left in the trading session, the Dow was in negative territory but gained more than 155 points in the last 20 minutes. The market opened strong on good earnings from Cisco (NASDAQ:CSCO), which brought buyers to the technology sector. Other good news followed: strong sales from McDonald's (NYSE:MCD) and an optimistic sales forecast from General Motors (NYSE:GM). Even the home builders rallied on news from the Mortgage Bankers Association of an increase in mortgage applications.
However, with just over an hour left in the day, a rumor spread that one of the "financial giants" would make a negative announcement after the close. When that giant was named as Wall Street gorilla Goldman Sachs (NYSE:GS), the market collapsed in an avalanche of sell orders. But around 3:30 p.m. Eastern, GS denied the rumor and the buyers came back.
After a dizzying ride, the Dow closed at 13,658. The S&P 500 gained 21 at 1,497, and the Nasdaq rose more than 2% to close at 2,613, up 51. Volume on the NYSE topped 2.6 billion shares, and the Nasdaq traded 3.5 billion shares while advancers beat decliners by about 7/3 on both exchanges.
Crude oil (September contract) fell 27 cents to $72.15 per barrel, and the Amex Energy SPDR (NYSEARCA:XLE) gained $1.48 and closed at $69.30 with an intraday high of $70.09 -- the 50-day moving average. The U.S. dollar had a small decline, which helped December gold prices gain $4.00 to $686.30. The Philadelphia Gold/Silver Index [XAU] gained $4.08 closing at $146.92.
What the Markets Are Saying
It looks like last week's panic selling and this week's rebound may have resulted in a minor low, but it is much too early to call it a bottom, since there hasn't been a test of the lows on any major average and no reversal patterns have yet emerged.
In other words, bottoms are not usually made with a single thrust down and then a sudden march to new highs. But the high volume did favor the bulls, and the internal indicators flashed buy signals on Monday. Both the S&P 500 and the NYSE Composite, the two broader-based indexes, have zones of resistance that are considerable.
For the S&P the zone starts at about 1,490 and runs first to 1,534 and then to the high at 1,553. The resistance for the NYSE Composite starts at 9,702 and runs to 10,045, then to the high at 10,221. Look now for a test of the lows, which I hope will result in much lower volume than on the recent rebound, since that would be a favorable indication that the low may hold.
Today's Trading Landscape
Today look for earnings from Briggs & Stratton (NYSE:BGG), Brooks Automation (NASDAQ:BRKS), Cardinal Health (NYSE:CAH) (read above), Cousins Properties (NYSE:CUZ), Dillard's (NYSE:DDS), Dynegy (NYSE:DYN), Edison International (NYSE:EIX), Emulex (NYSE:ELX), Global Crossing (NASDAQ:GLBC), HealthSouth (NYSE:HLS), Lionsgate (NYSE:LGF), Medifast (MEDI), Mirant (MIR), NVIDIA Corp. (NASDAQ:NVDA), Speedway Motorsports (NYSE:TRK), Suntech Power (NYSE:STP), US Concrete (RMIX), Vonage (VON) (read above), and others.
Economic data is expected from the International Council of Shopping Centers [ICSC] about July chain store sales, as well as the weekly jobless claims. BNP Paribus, the French bank, stopped valuing three of its funds that have exposure to U.S. credit markets after a "complete evaporation of liquidity." Liquidity issues are again back on the table and the equity futures are sharply lower this morning.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Advance for a Second Day, Led by Samsung, Sumitomo Mitsui Asian stocks rose, led by technology and financial shares, as a pickup in U.S. mortgage applications eased concern subprime losses will derail economic growth.
• Japan Stock Trading Sets Record Amid Speculation of Selling by Hedge Funds Japan's stock trading surged to a record on the Tokyo Stock Exchange amid speculation hedge funds sold shares to meet redemptions as investors reduced risk because of U.S. subprime mortgage losses.
• Bank of Korea Unexpectedly Raises Key Rate to 5 Percent to Curb Borrowing The Bank of Korea unexpectedly raised its benchmark interest rate for a second time in two months to curb lending that may fuel asset-price bubbles.
• HSBC to Be First Foreign Bank to Form Rural Lender Serving China's Farmers HSBC Holdings Plc (HBC) became the first overseas bank to win regulatory approval to set up a rural bank in China, a nation of 800 million farmers.
European Headlines (via Bloomberg.com)
• European Stocks, U.S. Futures Drop; BNP, Citigroup, Nobel Biocare Decline European stocks and U.S. index futures dropped after BNP Paribas SA (OTCQX:BNPQY), France's biggest bank, halted withdrawals from investment funds because it can't ``fairly'' value their holdings.
• ECB Will Provide Unlimited Funds at 4 Percent to Add Liquidity in Market The European Central Bank said it will launch an unlimited fine-tuning operation today to add liquidity at 4 percent after demand for cash in the European money market drove interest rates higher.
• Overnight Dollar Libor Rate Jumps to Highest Since 2001 as Banks Seek Cash The British Bankers Association said the overnight lending rate that banks charge each other to borrow in dollars rose to 5.86 percent today from 5.35 percent.
• BAE Profit Rises on Repairs for Bradley Fighting Vehicles, Parts for Jets BAE Systems Plc (OTCPK:BAESY), Europe's biggest defense company, said first-half profit rose 27 percent, beating analysts' estimates, on upgrades of Bradley fighting vehicles for the U.S. army in Iraq and production of fighter jet parts.