Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:32 AM ET
S&P 500: +2.00; 1,457.00
NASDAQ 100: -0.50; 1,942.00
Dow: +10.00; 13,265.00
NIKKEI 225: +0.27%; 16,844.61 (+44.56)
HANG SENG: +0.53%; 22,007.32 (+116.22)
SHANGHAI SE COMPOSITE: +1.09%; 4,872.78 (+52.72)
BSE SENSEX 30: -0.11%; 15,000.91 (-16.30)
FTSE 100: +0.30%; 6,237.80 (+18.80)
CAC 40: -0.50%; 5,541.17 (-28.11)
XETRA-DAX: -0.22%; 7,457.62 (-16.71)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.53%; $72.00 (+$0.38)
Gold: -0.22%; $679.40 (-$1.50)
Natural Gas: -0.28%; $6.78 (-$0.02)
Silver: -0.51%; $12.79 (-$0.065)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Fortress Net Falls Further, But Adjusted EPS Beats
Fortress Investment Group reported a wider Q2 net loss, -30% to $55.1 million, or $0.66/share, on an 18% decrease in revenues to $268M. Adjusted EPS totaled $0.33, topping analyst expectations of $0.27 on sales of $275.5M. Fortress blamed its net operating loss on compensation expenses in excess of $271M. Hedge fund investment profit fees of $151M, more than triple the amount earned in the second quarter last year, helped offset a decline in private equity revenue. Segment revenue rose 50% to $283M, while total assets under management soared 70% to $43.3B. Fortress paid a quarterly dividend of $0.225/share ($0.90/share annualized) on July 13, a 32.4% pre-IPO increase. Fortress is hosting an earnings call at 8 a.m. Check for its earnings call transcript later today. Shares of Fortress were last down 6.7% to $19.19 in thin pre-market trading, after surging 7.7% to $20.57 on Monday.
Sources: Press release, Bloomberg, MarketWatch, Reuters
Commentary: Options Ideas for This Volatile Market: EMC and Private Equity Players • KKR Might Postpone IPO -- WSJ • PowerShares Private Equity ETF As A Tell On PE's Top
Stocks/ETFs to watch: FIG. Competitors: BX, GS, MER, MS. ETFs: PSP
Microsoft Overhauls Internet Unit
Microsoft said Monday it was overhauling the organization and management of its online services unit following the completion of its $6 billion purchase of internet advertising company aQuantive. Microsoft said it was dividing the management of its online services business: Former aQuantive CEO Brian McAndrews will now head Microsoft's advertising unit, while Steve Berkowitz, who previously ran the entire internet unit, will now head the audience/content side of the equation. The split between advertising and audience groups would create a clear division of responsibilities and allow both sides to focus more clearly, said McAndrews. The plan closely resembles one initiated at Yahoo by former CEO Terry Semel, but recently abandoned by present CEO Jerry Yang, who said it was unnecessary. Integrating Microsoft's AdCenter search engine advertising with aQuantive's online operations would allow the new division to best approach the changes that now are likely in online advertising, McAndrews said. While the growth of search was the big news in first part of the decade, he said, advertisers were now looking towards a broader mix of display, rich media and web video. "Today we take a significant step forward in our ability to capture share of the $40 billion online ad opportunity and the larger $600 billion ad market, which is rapidly shifting to the world of online and IP-served platforms, including TV and gaming,” the company said. “The addition of aQuantive’s technologies and people to the Microsoft portfolio is a core, strategic investment and step forward in our plans to become one of the top two online advertising platforms in the industry."
Sources: Press release, Financial Times
Commentary: Old Media Struggles With New Media Demands • Is Internet Advertising Really Worth Billions? • Google vs. Microsoft: What's Going on Here?
Stocks/ETFs to watch: MSFT. Competitors: GOOG, YHOO, VCLK. ETFs: HHH, FDN, IIH
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
How quickly things change. Late last week, a rumor that Goldman Sachs (GS) would release a negative announcement drove the market down more than 150 points. Goldman denied the charges and certainly atoned for any prior damage yesterday, as it helped ease the tension with an announcement before the opening bell that along with other investors, it would buy into its troubled quantitative hedge fund.
That support paved the way for a strong open yesterday with the Dow Industrials up more than 100 points in just minutes, thanks to better-than-expected retail sales figures and a credit injection into the market by the Bank of Japan, the European Central Bank and the Federal Reserve. More good news came from the Blackstone Group's (BX) Q2 earnings, which saw triple growth over last year.
But by 2 p.m. Eastern, the market sagged on a lack of further buying interest, and a weak rally in the last hour of trading failed, leaving sellers in charge at the close.
The Dow Jones Industrials closed lower by three points at 13,237. The S&P 500 dropped by less than a point at 1,453, and the Nasdaq fell by just under three points to close at 2,542. The NYSE traded 1.7 billion shares, and 2.1 billion shares traded on the Nasdaq with breadth at almost even on both exchanges.
September crude oil prices gained 15 cents at $71.62, and the Amex Energy SPDR (XLE) gained 3 cents closing at $67.75. Gold ended with a small loss -- December was off 70 cents at $680.90 per troy ounce, and the Philadelphia Gold/Silver Index [XAU] fell by $1.28 at $143.06.
Despite warnings that the financial world was coming to an end and incessant calls for the Fed or Fannie Mai or Berkshire or someone to "rescue" us from the credit "crisis," the Dow Industrials actually gained 58 points last week. The S&P 500 had the biggest two-day gain it had seen in years on Aug. 6 and 7, and even after Thursday's plunge managed to pull off a 1.4% gain for the week while the Nasdaq gained 1.3%. But with the biggest sell-off since February on Thursday, there was still plenty of damage and the most beleaguered sector was, of course, the financials.
Further, in futures, land oil fell by nearly $4 per barrel and gold lost $2.20 per troy ounce. Economic news took a back seat to the subprime mess and, on balance, wasn't all that encouraging: Q2 productivity figures came in slightly below expectations, unit labor costs were up a bit, wholesale inventories rose slightly, and weekly jobless claims were higher. But gasoline prices were down an average of 10.7 cents a gallon in the last two weeks, and stock buybacks soared to $43.9 billion up from $13.6 billion in the same week last year.
What the Markets Are Saying
With lower volume on afternoon selling, even breadth and much lower volatility yesterday, the stock market's first day of the week was as good as could be expected. The major averages held well above last week's lows and even the financials (the worst performing group over the last two weeks) managed to stay even.
Internal market indicators are still oversold and sentiment is negative, which is good. Private investment advisory firm Dorsey Wright reported that its sector curve is now below 40%, which means that it is somewhat oversold but not as dire as some of the major bottoms of the last 10 years. They are not quite ready to bring the offensive team back onto the field, but they are suiting up, so for now it looks like the selling has at least temporarily abated. If we can just get past a couple of days without another nasty report from the mortgage group, we may be able to let them have the ball again.
Today's Trading Landscape
Earnings are expected from the following companies: Agilent Tech (A), Applied Materials (AMAT), Black Box (BBOX), Cadence Pharma (CADX), Eddie Bauer (EBHI), Hanover Capital Mortgage (HCM), Harman International (HAR), Impac Mortgage (IMH), TJX Companies (TJX) as well as others.
UBS reported a 79% increase in profits versus an estimate of a 10% rise but warned of a drop in the second half due to turbulent markets. Wal-Mart missed estimates by 4 cents and cut its earnings forecast for the year, and Home Depot said that its net fell by 15% but its earnings beat estimates.
Today, the July Producer Price Index and the international trade balance will be reported. The focus will likely shift from the credit markets to earnings and economics, but the markets are still edgy and any hint of further trouble with the credit "crisis" could send stocks sharply lower.
Asian Headlines (via Bloomberg.com)
• Asian Financial Stocks Fall on Debt-Market Concern; Mitsubishi UFJ Drops Asian financial stocks fell after Australian mortgage lender Rams Home Loans Group Ltd. said ``unprecedented disruptions'' in credit markets may reduce its profit.
• Citic Securities First-Half Profit Surges Fivefold on China Stocks Rally Citic Securities Co., poised to overtake Nomura Holdings Inc. (NMR) as Asia's biggest brokerage, said first-half profit jumped more than fivefold as a surging Chinese stock market fueled share trading and underwriting fees.
• Rams Home Loans Shares Plunge, U.S. Subprime Rout Threatens to Cut Profit Australia's Rams Home Loans Group Ltd. said the shakeout in global debt markets may cut profit, sparking a 19 percent plunge in the stock that makes it the nation's worst-performing initial public offering this year.
• Seiyu, Wal-Mart's Japan Unit, Forecasts Fifth Annual Loss as Sales Stall Seiyu Ltd., the Japan unit of Wal-Mart Stores Inc. (WMT), changed its forecast to a fifth-straight annual loss as sales growth stalls.
European Headlines (via Bloomberg.com)
• Stocks in Europe Drop; Led by UBS, Morrison, Hochtief, K+S, Credit Suisse European stocks fell, led by financial-services companies after UBS AG (UBS) said profit growth may slow and bank shares declined in the U.S. and Asia.
• Europe Second-Quarter Economic Growth Slows More Than Economists Forecast Europe's economy grew at the slowest pace in more than two years in the second quarter, hurt by weakness in manufacturing and construction.
• European Central Bank Cuts Lending to $10.5 Billion as Interest Rates Drop The European Central Bank pared the amount of money lent to banks in its fourth day of emergency money-market financing, saying that euro interest rates are ``close to normal.''