Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:50 AM ET
S&P 500: -7.75; 1,524.00
NASDAQ 100: -7.25; 2072.50
Dow: -50; 13,812
NIKKEI 225: +0.55%; 16,401.73 (+89.12)
HANG SENG: -0.46%; 26,430.29 (-121.65)
SHANGHAI SE COMPOSITE: -1.08%; 5,425.88 (-59.13)
BSE SENSEX 30: +0.32%; 16,899.54 (+53.71)
FTSE 100: -0.91%; 6,406.80 (-59.10)
CAC 40: -0.97%; 5,637.17 (-55.32)
XETRA-DAX: -0.54%; 7,745.62 (-42.30)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -1.15%; $80.02 (-$0.93)
Gold: -1.00%; $731.90 (-$7.40)
Natural Gas: -0.16%; $6.36 (-$0.01)
Silver: -1.17%; $13.48 (-$0.16)
U.S. Breaking Newssee today's Wall Street Breakfast for earlier news
Amazon Launches Much Awaited 'Amazon MP3'
Amazon said Tuesday is has launched a beta-version of its much-awaited online music store which is seen as a potential rival to Apple's dominant iTunes store (full story). The store, named Amazon MP3, sells its music without any copy protection technology (DRM-free), meaning the songs can be played on numerous devices, including Apple's iPod. Most singles sell for $0.89-0.99; the store's library boasts over 2 million songs from more than 180,000 artists and 20,000 labels, including Vivendi's Universal Music Group and EMI. Apple announced a similar deal with EMI in April; it plans to sell DRM-protected music for $0.99 a tune and DRM-free music for $1.29. Distributors hope DRM-free sales will boost waning revenues due to weak CD sales. They also hope a serious iTunes competitor will give them more leverage in their negotiations with Apple. Before launching the public beta, Amazon said it put the service through an extensive private beta test. Songs will be encoded at 256 kilobits per second. Some analysts say Amazon can compete with Apple's iTunes for a share of the $2 billion/year digital-music market because of its position as the largest and most active internet retailer, and the fact that it's already one of the largest online CD sellers. Others don't think even Amazon can break Apple's dominance.
Sources: Press release, Reuters
Commentary: Amazon , Apple, DRM And Digital Downloads - Seeking Alpha • Amazon's Digital Download Challenge to Apple: Brand Doesn't Trump Experience
Stocks/ETFs to watch: AMZN, AAPL
FactSet Tops Estimates Again
Financial data and analytical application provider FactSet reported fiscal fourth-quarter net income increased 31% to $30.7 million, or $0.60/share, topping analyst expectations of $0.56. Revenues rose 23% to $129.5M, mostly in-line with estimates. FactSet forecasts fiscal Q1-2008 (ending Nov. 30) revenues between $131M to $135M, with operating margins between 31.5% to 33.0% and an effective tax rate of 34.0% to 35.0%. Analysts had forecast revenues of $132.4M, on average. FactSet said its client retention rate remained above 95% during fiscal Q4. Free cash flows climbed 45% y/y to $43M. Also, the company repurchased 726,000 shares for $46M and now has 48.3M shares outstanding as of the end of August. FactSet has $57.2M remaining for buybacks. Shares of FactSet lost 1.1% to $64.22 on Monday.
Sources: Press release, Associated Press, MarketWatch
Commentary: FactSet Research Systems Has Been Catching My Eye • FactSet: A Good Run Doesn't Mean a Stock is Too Expensive • FactSet Beats By a Penny, Guidance Tops Estimates
Stocks/ETFs to watch: FDS. Competitors: RTRSY, TOC
ICE to Join S&P 500, Trades Higher
Shares of IntercontinentalExchange are up 3.6% to $146.88 in thin pre-market trading, on news the company has been added to the S&P 500 Index as of the close of trading Tuesday (Sept. 25). ICE chairman and CEO Jeffrey C. Sprecher commented, "We are pleased to be included in the S&P 500 Index as we continue to grow our business for our customers and our shareholders. I am proud of the dedicated team we've assembled who have helped to establish ICE as a leading global marketplace in just seven years." ICE shares have appreciated more than 260% since listing on the New York Stock Exchange in November 2005. ICE gained 4.7% to $141.81 on Monday and has a 52-week trading range of $68.12 - $174.15.
Sources: Press release, MarketWatch
Commentary: Intercontinental Exchange: Worth Owning As A Core Holding • An Exchange ETF Would Have Been a Top Performer Over Recent Years • ICE Chairman and CEO Saves Face On CME Deal
Stocks/ETFs to watch: ICE
Earnings call transcript: Intercontinental Exchange Q2 2007
PrimeWest Agrees to $5B Buyout by Mideast Firm
Shares of PrimeWest Energy Trust surged 32% to $26.25 Monday after the Canadian oil and gas producer agreed to be acquired by Abu Dhabi National Energy Co. for $4B, or $26.75 per trust unit, in cash. Including the assumption of debt, the deal is valued at about C$5B. It is the biggest-ever buyout of a North American entity by a United Arab Emirates company, and the largest purchase of a Canadian energy trust since the government said last October it would start taxing income funds in 2011. An economist at the Gulf Research Center in Dubai said he did not expect the deal to cause the type of furor seen last year by Dubai World's acquisition of six US port terminals through its purchase of London-based Peninsular & Oriental Steam Navigation Co. Canada's Industry Minister said the deal would be "reviewed, as others would, under the Investment Canada Act." Abu Dhabi, which also is known as TAQA, has been buying up Canadian assets, agreeing to a $540M purchase of Pioneer Natural Resources' Canadian assets in August and earlier this month completing the $2B purchase of Northrock Resources. It said it hopes to announce a follow-on transaction in Canada in 2008. TAQA has said it plans to spend as much as $60B worldwide by 2012; this deal would bring the amount to $21B thus far.
Sources: Press Release, Bloomberg, Wall Street Journal
Commentary: Abu Dhabi Energy Buys PrimeWest
Stocks/ETFs to watch: PWI. Competitors: PVX. ETFs: XOP, IEO
General Mills' President Powell Replaces CEO Sanger
In a surprise announcement Monday, General Mills said its board of directors has elected Kendall J. Powell as its new CEO. Powell is currently General Mills' President and COO. He replaces Steve Sanger, who will stay on as Chairman through the end of the current fiscal year in May 2008. Though it is considered unlikely Mr. Powell will significantly alter the growth plans he has helped develop alongside Mr. Sanger, he plans to increase advertising spending by as much as 9% during the current fiscal year, while increasing funds for the development of healthier snacks and cereals. Powell also plans to make more of an effort to target the Black and Latino populations in the U.S. Mr. Sanger offered his confidence his successor would fill his shoes well, saying Mr. Powell was "uniquely qualified to lead General Mills in the next phase of our long-term growth.” General Mills shares are up just 0.5% YTD.
Sources: Press Release, Bloomberg, Wall Street Journal, TheStreet.com, Financial Times
Commentary: General Mills Beats by a Penny; FY Guidance Still Soft • 100 Stocks to Offset Rising Food Prices • General Mills Q4 EPS Misses By a Penny, Sales Top Estimates
Stocks/ETFs to watch: GIS. Competitors: DA, K, KFT. ETFs: PBJ, PWC, IYK
Earnings call transcript: General Mills, Inc. F1Q08 (Qtr End 8/26/07)
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
By the end of yesterday's first hour of trading, the Dow was up by more than 50 points, led by the technology and auto sectors -- there was even cautious talk of a double-digit close.
Optimism surrounded the UAW/General Motors (NYSE:GM) talks as a result of weekend comments from spokespeople on both sides who said that they were very close to a deal.
Brokerage upgrades of some key tech issues also helped to attract buyers, but at 11 a.m. it was announced that, because no agreement had been reached, the UAW ordered its 73,000 members to walk off their jobs. So for the first time in 37 years, GM's plants were shut down.
Instead of GM stock maintaining its early rise of 4%, it closed down 0.6%. Analysts point to the fact that most issues between management and the union have been resolved and therefore look for a fairly quick settlement. But for now, it is not a matter of "buy on strike news, sell on settlement" but "wait it out," since the impact on other dependent industries could be profound if the strike continues for an indefinite time.
The techs maintained their early price gains as a result of EMC Corporation's (EMC) upgrade from Bear Stearns (NYSE:BSC) and Citigroup (NYSE:C) raising its target on Apple Inc. (NASDAQ:AAPL) from $160 to $185. Microsoft (NASDAQ:MSFT) led the Dow stocks as a result of favorable reviews of its "Halo 3P" video game which will be released this week, and Motorola (MOT) rose after an upgrade from RBC Capital Markets.
But despite the good news on techs, the Dow Industrials closed lower by 61 points ending the day at 13,759. The S&P 500 was off eight at 1,518, and the Nasdaq fell by three to 2,668. The NYSE traded 1.3 billion shares, and 1.9 billion shares traded on the Nasdaq. Decliners exceeded advancers on both exchanges by about 9-to-5.
The November crude oil contract fell to $80.95 a barrel, down 67 cents, and the Amex Energy SPDR (NYSEARCA:XLE) lost 30 cents and closed at $75.40. The December gold contract was up by 40 cents, closing at $739.30, and the Philadelphia Gold/Silver index [XAU] lost 96 cents at $170.60. Momentum on the XAU is now falling, and its internal indicators are grossly overbought. As a result, the index could easily double top here and head back to support at $160.
What the Markets Are Saying
Even though yesterday's pullback would have to be considered mild (because of low volume and shallow breadth) it was, however, a sign that the S&P 500's resistance at 1,540 is significant.
In fact, twice in June it was this barrier that turned prices back down to 1,490 where the index double bottomed before making the run to a new high at 1,555. So with the internal indicators all overbought, sentiment bullish (which is bad), and momentum now lagging, it looks like we might be range bound at 1,490 to 1,540 until some outside force, like positive Q3 earnings, punches stocks out of the pattern.
Today's Trading Landscape
Today the following economic reports are due: Case-Shiller Home Price Index, September consumer confidence (the consensus expects 104.5), and August existing home sales (the consensus expects 5.55 million).
Earnings are due from Discover Financial Services (DFX), FactSet Research (NYSE:FDS) (read above), H.B. Fuller (NYSE:FUL), Lennar (NYSE:LEN), Red Hat (RHAT), Spectrum Control (OTCPK:SPEC) and Worthington Industries (NYSE:WOR).
For the first time in years, Wall Street will focus on Detroit and the UAW strike against GM. A quick settlement could lead to another rally, but if the negotiations drag on they could also be a drag on the market.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Gain, Led by BHP Billiton; Toyota, Honda Climb on GM Strike Asian stocks rose to a two-month high, led by BHP Billiton Ltd. (NYSE:BHP) and Sumitomo Metal Mining Co., after prices of copper, nickel and zinc gained.
• China Construction Bank Jumps on Shanghai Debut After $7.7 Billion Sale China Construction Bank Corp., the nation's second-largest by assets, rose 32 percent on its first day of trading in Shanghai after investors placed more orders for the shares than in any other stock sale.
• Bank of Japan Held Rates in August Because of Market Turmoil, Minutes Show The Bank of Japan refrained from raising interest rates in August after losses in global financial markets clouded the outlook for economic growth, minutes show.
• Cathay Pacific, Air China Plunge After Scrapping China Eastern Bid Plan Cathay Pacific Airways Ltd. (OTCPK:CPCAY) and Air China Ltd. slumped in Hong Kong trading after scrapping plans to challenge Singapore Airlines Ltd. for a stake in China's third- largest carrier.
• Dollar Falls Against Euro, Yen Before U.S. Home Sales, Confidence Reports The dollar weakened against the yen and fell to within a cent of a record low versus the euro before economic reports that may add to evidence U.S. growth is losing momentum.
European Headlines (via Bloomberg.com)
• Stocks in Europe Decline After Oil Drops; BP, Total, Deutsche Bank Fall European stocks fell for a second day as a retreat in crude prices pushed energy shares lower and mining companies snapped a five-day rally. U.S. index futures also dropped.
• German Business Confidence Fell More Than Forecast in September, Ifo Says German business confidence fell more than economists forecast in September, reaching a 19-month low, on concern the strength of the euro and increasing cost of credit will sap economic growth.
• OMV Wants to Buy Mol, Valuing the Hungarian Oil Refiner at $19.6 Billion OMV AG, central Europe's biggest oil company, made a hostile 2.8 trillion-forint ($15.7 billion) bid for Hungary's Mol Nyrt. to expand refinery production by 66 percent and gain control of the country's gas pipelines.
• ECB's Garganas Says Euro's Rally Won't Prevent Inflation From Accelerating European Central Bank council member Nicholas Garganas said the euro's rally to a record against the dollar won't be enough to diminish price pressures, suggesting he would support raising interest rates again.