Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:57 AM ET
S&P 500: +6.25; 1,475.00
NASDAQ 100: +3.00; 1,948.00
Dow: +43.00, 13,318.00
NIKKEI 225: +2.61%; 16,316.32 (+415.68)
HANG SENG: +2.77%; 22,966.97 (+620.09)
SHANGHAI SE COMPOSITE: +1.05%; 5,032.49 (+52.42)
BSE SENSEX 30: -0.59%; 14,163.98 (-84.68)
FTSE 100: +0.55%; 6,229.90 (+33.90)
CAC 40: +0.78%; 5,560.99 (+42.82)
XETRA-DAX: +0.63%; 7,547.44 (+46.96)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.52%; $69.62 (+$0.36)
Gold: +0.66%; $673.10 (+$4.40)
Natural Gas: +0.29%; $5.59 (+$0.02)
Silver: +2.69%; $12.045 (+$0.316)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Home Depot Unit Sale in Last-Minute Peril -- FT
Home Depot's planned sale of its wholesale supplies division is in jeopardy, the Financial Times reports, as the private equity group slated to acquire it for an original $10.3 billion (full summary) remains reluctant to follow through even at a reduced price. In recent weeks, the number-two U.S. retailer has discussed restructuring the June deal with buyers Bain Capital, Carlyle and Clayton Dubilier & Rice. But people familiar with the negotiations say the deal's financiers, Merrill Lynch, Lehman Brothers and JPMorgan, are still hesitant. The parties are expected to hold a last-ditch round of negotiations; the deal is scheduled to close Thursday. The deal's outcome will likely be closely watched by Wall Street, as anxious investors gage whether buyout groups are still able to close leveraged takeovers announced earlier in the year, when credit markets were healthy.
Sources: Financial Times
Commentary: Home Depot: Poor Earnings Puts Supply Division and Buyback Deal At Risk • Home Depot Sells Supply Unit for $10.3B, Boosts Share Buyback • The Collapse of Fixed Commitments
Stocks/ETFs to watch: HD, MER, LEH, JPM. ETFs: PSP
Earnings call transcript: The Home Depot Q2 2007
PetroChina H1 Earnings Up Slightly, Beats Estimates
PetroChina reported a 1.4% rise in first-half net income to 81.83 billion yuan ($10.79B), beating analysts' average estimate of 78.9 billion yuan, per a Bloomberg poll. Revenues increased 20% to 392.7 billion yuan. PetroChina was helped by a return to profitability at its refinery unit, which earned 3.93 billion yuan in H1, compared to a 13.9 billion yuan loss last year. Operating profits jumped 86% to 5.4 billion yuan at its chemicals and marketing unit and grew 34% to 6.1 billion yuan at its pipeline unit. PetroChina also benefited from lower tax payments, due to incentives it received from certain provinces in China. Earlier this month, PetroChina shareholders approved plans to list on the Shanghai Exchange, likely at a discount to its Hang Seng listing, but a date has not been fixed. PetroChina's ADRs gained 3.3% to $139.29 on Wednesday.
Sources: Bloomberg, MarketWatch
Commentary: PetroChina's Growth Prospects May Attract Investors • Energy Stocks: Buy Something • Berkshire Hathaway Releases Latest 13F: Summary of Holdings
Stocks/ETFs to watch: PTR. Competitors: CVX, CEO, SHI. ETFs: FXI, PGJ, ADRE, EEB
Related: PetroChina Investor Relations
Smithfield's Q1 Net Doubles, Sales Up 21%, Tops Estimates
Smithfield Foods, the world's largest pork and turkey producer, reported fiscal Q1 net income more than doubled to $54.5 million, or $0.41/share, on 21% higher sales to $3.36B. Adjusted EPS of $0.47 beat analysts' average estimate of $0.42. CEO Larry Pope said he's "generally satisfied" with fiscal Q1 results, "Given the challenges of higher grain costs and the continued adverse fresh pork environment." Sales of Pork grew 28% during the quarter, while beef sales rose 21% and hog production sales increased 32%. CEO Pope expects higher demand for pork during Q2 and Q3 due to seasonality. He said the hog market should remain strong for the next 6 - 12 months based on futures trading. Shares of Smithfield were last up 4.7% to $31.50 in thin pre-market trading, after gaining 1.9% to $30.09 on Wednesday.
Sources: Press release, Bloomberg, MarketWatch
Commentary: 100 Stocks to Offset Rising Food Prices • Low FQ4 Earnings Expectations for Smithfield Foods • Fisher's Buyout Candidates
Stocks/ETFs to watch: SFD. Competitors: HRL, TSN. ETFs: FXG
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
With M&A back in the news and an ease in credit due to the Fed's injection of funds, it almost seemed like the good old days were here again and the markets responded with a solid rally yesterday.
Prior to yesterday's opening, the Wall Street Journal report that TD Ameritrade (NASDAQ:AMTD) and E*Trade Financial (NASDAQ:ETFC) were in merger discussions, which started the day off on a positive note. Then around noon, some selling developed on the news that four big banks -- Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC) and Wachovia (NASDAQ:WB) -- had tapped the Fed's discount window for $2 billion. Although this was initially greeted negatively, the market rallied when several of the borrowers reported they wished to take the lead in demonstrating the potential value of the Fed's move and not because they couldn't find funds elsewhere.
Buying throughout the afternoon was strong despite reports of sharply declining mortgage applications last week and an 85% profit hit by home builder Toll Brothers (NYSE:TOL). Then a bit of icing was put on the cake when MGM Mirage (NYSE:MGM) said it inked a $5-billion deal in which Dubai World would take a 9.5% stake in MGM along with a part ownership in a huge real-estate project, so for at least one day life was good again.
The Dow Jones Industrial Average closed at 13,236 up 145. The S&P 500 gained 17 to close at 1,464, and the Nasdaq was up 32 points at 2,553. Volume on the Big Board totaled 1.5 billion shares and on the Nasdaq 1.8 billion shares changed hands. Breadth was positive on both exchanges with a 4/1 ratio on the NYSE and 2/1 on the Nasdaq.
Crude oil (October contract) fell by 31 cents to $69.16 a barrel, and the Amex Energy SPDR (NYSEARCA:XLE) gained 88 cents to close at $67.25. Support for the XLE is now at $65.20. December gold prices gained $2.50 to close at $668.70 per troy ounce, and the Philadelphia Gold/Silver Index [XAU] was up $4.84 to $137.72. The next resistance for the XAU is at the conjunction of the 20- and 200-day moving averages at $140.
What the Markets Are Saying
Yesterday's rally, following a slow day on Tuesday, shows that last Thursday's powerful reversal has legs and the negative sentiment should propel the rally further.
All of the major indices rallied with the Dow surmounting some minor resistance at 13,207. Further, the S&P 500 closing nicely above the conjunction of its 20- and 200-day moving averages at 1,460, and the Nasdaq gapping through its 20-day moving average and resistance at 2,530.
Volume could have been higher but breadth shows that the reason for the decline in volume is that there are so few sellers, so it is likely that the rally will continue at least to the next area of major resistance. For the S&P 500, that resistance starts at 1,490. The Dow is now into resistance and the major amount runs to 13,368. For the Nasdaq, resistance starts at about 2,600 and diminishes at about 2,652.
Today's Trading Landscape
Expect earnings today from Barnes & Noble (NYSE:BKS), Bon-Ton Stores (NASDAQ:BONT), Brocade Communications (NASDAQ:BRCD), Deb Shops (DEBS), GameStop (NYSE:GME), Gap Inc. (NYSE:GPS), Hormel Foods (NYSE:HRL), LSI Industries (NASDAQ:LYTS), Marvell Technology (NASDAQ:MRVL), Mentor Graphics (NASDAQ:MENT), Pacific Sunwear (NASDAQ:PSUN), ScanSource (NASDAQ:SCSC), Stein Mart (NASDAQ:SMRT), Toro (NYSE:TTC), Toronto Dominion Bank (NYSE:TD) and many others.
The weekly jobs claims report is due today. Additionally, Countrywide Financial (NYSE:CF) was upgraded this morning by several research departments following Bank of America's "strategic equity investment" of $2 billion in the troubled leading mortgage lender. Smithfield Foods (NYSE:SFD) reported FY Q1 net that more than doubled, but earnings missed forecasts by a penny.
European stocks are sharply higher this morning following yesterday's Wall Street rally. The focus today may be on the Fed again, as investors listen for any clues that it might lower rates at September's Federal Open Market Committee [FOMC] meeting.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise for a Fourth Day as Credit Woes Ease; BHP Billiton Jumps Asian stocks gained for a fourth day, the longest winning streak in seven weeks, after a capital injection into the biggest U.S. mortgage lender reduced concern a rout in credit markets will derail economic growth.
• ICBC, Bank of China First-Half Profits Swell on Surge in Fees, Lending Industrial & Commercial Bank of China Ltd. and Bank of China Ltd., the nation's two largest financial institutions, reported first-half profits that beat estimates on sales of mutual funds and credit cards.
• Bank of China Holds $9.7 Billion of Subprime Assets, Most of Any Asian Bank Bank of China Ltd., the nation's second-largest bank, said it holds almost $9.7 billion of securities backed by U.S. subprime loans, the most of any Asian company.
• General Electric's Bank of Ayudhya to Buy Its Thai Auto Financing Unit General Electric Co.'s (NYSE:GE) Bank of Ayudhya Pcl plans to pay 17 billion baht ($494 million) for its auto financing unit in Thailand to help cut funding costs and expand. The lender's shares rose.
European Headlines (via Bloomberg.com)
• Holcim Profit Almost Triples on Sales in India, China; Plans Ambuja Offer Holcim Ltd., the world's second- biggest cement maker, increased profit more than analysts estimated on expansion in China and India and plans to buy more than $1 billion of stock in Ambuja Cements India Ltd.
• Yen Falls Most in Three Years Versus Euro as Stock Rally Spurs Carry Trade The yen fell the most in three years against the euro as stocks rallied, reviving confidence in trades that depend on borrowing in the Japanese currency to buy riskier assets.
• Rentokil Profit Declines 50 Percent After Losing Contracts, Sales Increase Rentokil Initial Plc (OTCPK:RTOKY), the U.K. company whose services range from pest control to tropical plants, said first-half earnings fell 50 percent after it lost some contracts.
• Kuoni Profit Falls 57 Percent, Missing Estimates, on Fewer Package Tours Kuoni Reisen Holding AG, the largest Swiss travel company, said first-half profit fell 57 percent, missing analysts' estimates, as consumers in its domestic market bought fewer all-inclusive beach vacations.