Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM ET
S&P 500: -6.50; 1,463.30
NASDAQ 100: -7.00; 1,943.50
Dow: -49.00; 13,303.00
NIKKEI 225: -0.09%; 16,287.49 (-13.90)
HANG SENG: -0.91%; 23,363.76 (-213.97)
SHANGHAI SE COMPOSITE: +0.87%; 5,194.69 (+44.57)
BSE SENSEX 30: +0.52%; 14,919.19 (+76.81)
FTSE 100: -0.98%; 6,158.90 (-61.20)
CAC 40: -1.03%; 5,532.99 (-57.55)
XETRA-DAX: -0.37%; 7,458.23 (-27.76)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.14%; $72.07 (+$0.10)
Gold: +0.12%; $677.00 (+$0.80)
Natural Gas: +1.86%; $5.48 (+$0.10)
Silver: +0.60%; $11.995 (+$0.071)
U.S. Breaking News — see today's Wall Street Breakfast for earlier newsMedco to Buy Diabetes Care Giver Polymedica for $1.5B
Number-one U.S. drug benefit manager Medco Health Solutions said Tuesday it will buy diabetes-care provider PolyMedica Corp. for $1.5 billion. The $53/share all-cash offer represents a 17% premium over Monday's $45.29 close. Medco expects the acquisition to be "slightly accretive" to its 2008 earnings; it should close late this year. The combined company will treat 3.8 million diabetes patients. Diabetes affects 5% of the U.S. population, and accounts for about 15% of all drug spending. Spending on diabetes-related products is growing at 14.5% annually, and is expected to overtake cholesterol as the fastest-growing therapeutic category in 2009, the company said. "PolyMedica has developed a deep expertise and focus in diabetes care and, through the Liberty brand, excels at attracting seniors to their high-value mail-order pharmacy," Medco CEO David Snow Jr. said in a statement. "We expect PolyMedica's brand strength and media profile to prove an important asset to support Medco's growing Medicare and direct-to-consumer initiatives." Deutsche Bank and Lazard advised PolyMedica and Medco respectively.
Sources: Press release, MarketWatch, Bloomberg
Commentary: Express Scripts: After Losing Caremark Bid, Will Medco Be the Next Target? • Biotech Generics: Who Stands Where? - Barron's
Stocks/ETFs to watch: MHS, PLMD. Competitors: ESRX, WLP, CI, UNH, . ETFs: IHF, PTJ
Kuwait Airways Cancels $3B of Boeing, Airbus Plane Orders
Kuwait Airways has canceled $3 billion of plane orders for 19 new Boeing and Airbus planes from Aviation Lease & Finance Co. [Alafco], according to a report by MarketWatch. In a statement, Alafco explained, "The deal to supply 19 aircraft to Kuwait Airways has not been approved by the Kuwaiti government, so the letter of intent is now canceled." Shares of Alafco fell 7.2%, limit down, in Kuwait following the news. The 19 plane order consisted of 12 Boeing 787 Dreamliners and seven Airbus A320s scheduled for delivery between 2009 and 2014. Kuwait Airways was set to pay a 10% to 15% premium for the planes, for an early delivery, given its urgency to replace its aging fleet, a Kuwaiti investor told Zawya Dow Jones. However, continued financial troubles surrounding the company likely forced the government to block the purchases, before any corporate restructuring occurs, according to the investor. Shares of Airbus parent EADS were last trading down 0.7% to €21.21 in Paris. Boeing traded slightly higher, +0.1% to $98.54 on Monday.
Commentary: China Southern to Buy 55 Boeing 737s • Pentagon Says Splitting $40B Refueling Tanker Order Too Costly • Boeing's 787 Dreamliner Faces Hurdles -- Business Week
Stocks/ETFs to watch: BA, EADS (Paris: 005730). ETFs: ITA, PPA
Earnings call transcripts: Boeing Q2 2007
Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Last week, stocks were stronger than they had been in more than four months, capping the run Friday with a rally triggered by news that new-home sales eclipsed every estimate.
The trigger for last week's advance was a $2-billion investment in Countrywide Financial (CFC) by Bank of America (NYSE:BAC), following a discount rate cut the week before. These two pieces of very good news led investors to conclude that a credit crunch might be averted, which led to a 2.9% advance in the tech-heavy Nasdaq 100, a rise of 2.3% for the S&P 500, and a 2.3% gain for the Dow Industrials.
But yesterday started off with some profit taking thanks to Home Depot's (NYSE:HD) announcement before the bell that it was going to sell its wholesale-supply unit for $2 billion less than expected. Then later in the morning, the unsold homes number for July hit a 16-year low. After that it was not a question of whether the market would be down but by how much.
But despite the negatives, the sellers lacked enthusiasm and several M&A deals eased the tension. Chicago Bridge & Iron (NYSE:CBI) agreed to buy Lummus Global for $950 million, Taiwan's Acer Inc. announced the purchase of Gateway (GTW) for $710 million, and U.S. Steel (NYSE:X) agreed to purchase Canada's Stelco for $1 billion.
At the close, the Dow Industrials were down 57 points at 13,322. The S&P 500 was off 13 at 1,467, and the Nasdaq fell by 15 to 2,561. The NYSE traded 1.1 billion shares with declining stocks over advancers by 3/1, while at the Nasdaq decliners were ahead by 9/5 on volume of 1.4 billion.
Crude oil (October contract) ended up 88 cents at $71.97 a barrel, and the Amex Energy SPDR (NYSEARCA:XLE) lost 79 cents to close at $68.46. Gold (December contract) fell by $1.30 to $676.20 and the Philadelphia Gold/Silver Index [XAU] lost $2.98 closing at $136.46.
What the Markets Are Saying
With the significant resistance that was created during the heavy-volume months of May to July, it is going to be a chore for stocks to punch through to new highs as easily as they did earlier this year. But will the S&P 500 double bottom of March 14 and Aug. 16 hold and result in the launch pin that will eventually catapult us to new highs?
The Aug. 16 reversal occurred on virtually every major index, and the CBOE Volatility Index [VIX] rose to 37.5 -- a clear indication that panic selling had taken place. This was accompanied by five days of very heavy volume with the ratio of losers to winners at around 9-to-1.
On Aug. 16, the percentage of new NYSE lows hit 32.8% -- an extraordinarily high number. According to Standard & Poor's, within the last two decades the only time that the index dropped below 30% was just before the bear market low of 1990. All of the evidence is in except for tests of the low, but likelihood that the Aug. 16 low will hold is overwhelming.
Today's Trading Landscape
With Q2 earnings now mostly behind us, this week will be relatively quiet for earnings announcements. Today look for reports from Anaren (NASDAQ:ANEN), Applied Signal Technology (APSG), Borders Group (BGP), China Medical Tech (CMED), Corinthian Colleges (NASDAQ:COCO), Micros Systems (NASDAQ:MCRS), Pike Electric (PEC), Sanderson Farms (NASDAQ:SAFM), Semtech (NASDAQ:SMTC) and aptly named surplus retailer Tuesday Morning (NASDAQ:TUES).
As for economic reports, we'll get the Case-Shiller home price index, the Consumer Confidence Index (the consensus expects 104), and the minutes from the August Federal Open Market Committee [FOMC] meeting.
Markets are slightly negative this morning stemming from rumors of more trouble in the subprime sector but the focus will likely be on the Consumer Confidence numbers.
Asian Headlines (via Bloomberg.com)
• Asian Financial Stocks Drop on Subprime Concern; DBS Group, Westpac Fall Asian financial stocks fell, led by DBS Group Holdings Ltd. (OTCPK:DBSDY) and Westpac Banking Corp. (NYSE:WBK), as the decline in the market for U.S. subprime mortgages caused the cost of credit to rise.
• China Eastern to Sell Stake to Singapore Airlines Next Week, Official Says Singapore Airlines Ltd., Asia's most profitable carrier, will buy a stake in China Eastern Airlines Corp., gaining more access to a market forecast to grow fivefold by 2025.
• Yen Strengthens on Speculation Credit-Market Losses Will Deter Carry Trade The yen strengthened for a second day against the dollar on speculation banks will report more credit- market losses, prompting traders to pare higher-yielding investments funded by loans in Japan.
European Headlines (via Bloomberg.com)
• European Stocks Fall on Subprime Concern; Societe Generale, Barclays Drop European stocks fell, following declines in U.S. and Asian markets, on renewed concern the subprime-mortgage rout is spreading and will erode global economic growth.
• German Business Confidence Declines as Debt Turmoil Clouds Growth Outlook German business confidence fell to a 10-month low in August after an increase in the cost of credit clouded the outlook for economic growth.
• Barclays Rebuffs Report It Funded SachsenLB Unit Hurt by Credit Turmoil Barclays Plc (NYSE:BCS) rebuffed a newspaper report that it provided funding to an investment unit for Landesbank Sachsen Girozentrale, the German public lender squeezed by a global credit crunch.
• Who's Advising Barclays, ABN Amro, RBS? Only 19 Who Insist `I'm Spartacus' Like the rebellious Roman slaves who vowed to save their leader by declaring ``I'm Spartacus,'' the contested sale of ABN Amro Holding NV (ABN) has 19 investment banks each insisting it is advising the would-be winner in the financial industry's largest takeover.
• Buyout Funds Face Elusive Returns as Financing Costs Erode Takeover Gains Hellman & Friedman LLC's Capital Partners IV Fund has generated a 36 percent return for investors since 2000. Kohlberg Kravis Roberts & Co.'s Millennium Fund has done even better, notching a 41 percent take since 2002.