Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:35 AM ET
S&P 500: -4.20; 1,550.40
NASDAQ 100: -6.25; 2,129.25
Dow: -29; 14,077
NIKKEI 225: +0.90%; 17,199.89 (+153.11)
HANG SENG: -2.55%; 27,479.94 (-719.81)
SHANGHAI SE COMPOSITE: 5,552.30 [9/28]
BSE SENSEX 30: +2.99%; 17,847.04 (+518.42)
FTSE 100: +0.41%; 6,527.30 (+26.90)
CAC 40: -0.03%; 5,797.65 (-1.62)
XETRA-DAX: +0.08%; 7,953.51 (+6.72)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.57%; $80.51 (+$0.46)
Gold: +0.20%; $737.80 (+$1.50)
Natural Gas: +0.40%; $7.46 (+$0.03)
Silver: +0.26%; $13.485 (+$0.035)
U.S. Breaking Newssee today's Wall Street Breakfast for earlier news
Citigroup CEO Prince to Review Losses
Citigroup CEO Charles Prince reportedly wants to review the bank's estimate on Monday of $3.3 billion in losses and writedowns for Q3, before making any decisions on firings, according to senior Citi executives as reported in the Financial Times. Citi expects a 60% decline in Q3 earnings as a result of "dislocations" in credit markets. (See full story). Citi insiders say CEO Prince's review could affect future leadership at both the investment bank division and the chief executive position he currently holds. One Citi senior executive noted the fixed-income division reported record Q2 earnings and commented, "We need to go back and see what happened but people don't turn from peacocks to feather dusters in the space of six weeks." Saudi Prince Alwaleed bin Talal, Citi's largest shareholder, said, "I'm backing the management of Citi." He called Q3 a "hiccup" and said, "... our journey with Citi will continue because we remain loyal." Separately, MarketWatch reports NYSE-listed Genpact Ltd. has bought Citigroup's India-based business process outsourcing unit for $700M, according to unnamed sources. Shares of Citigroup rose 0.3% to $47.86 on Tuesday, but gave up most of the gains in extended trading.
Sources: Bloomberg, MarketWatch I, II
Commentary: Citi Falls on Q3 Profit Warning ・Financials Rally in the Face of Analyst Cuts ・Citi to Acquire Rest of Nikko; List on Tokyo Exchange
Stocks/ETFs to watch: C, G
Earnings call transcript: Citigroup Q2 2007
AT&T, IBM in $5B Telecom, Networking Contract
AT&T said it will provide global telecommunications and networking outsourcing services to IBM worth approximately $1 billion annually over a period of five years. The deal represents new revenues, but will not have a material impact on AT&T's financial results. AT&T had revenues of $85.5B in 2006 and analysts expect $121B in 2007 and $127B in 2008 (the large jump is due to the BellSouth merger, completed in late 2006). AT&T said it will take around $80M in charges over the next year related to the deal with IBM. Shares of AT&T gained 0.4% to $42.41 on Tuesday, while IBM lost 0.6% to $118.36.
Sources: Associated Press, Reuters
Commentary: A Look At Tech Stocks By Relative P/E and PEG ・Is Anyone Immune to the Ripple Effect of the Unfolding Financial Crisis? ・Safety in Tech? You Betcha -- Barron's
Stocks/ETFs to watch: IBM, T
Earnings call transcript: International Business Machines Q2 2007, AT&T 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
Most of the talk was about mergers yesterday, and if you hadn't seen the trading results on the various stock markets you'd have thought that the Q2 merger mania was back in force.
The big news started before the opening when TD Bank Financial Group (NYSE:TD), formerly Toronto Dominion Bank, announced plans to acquire Commerce Bancorp (CBH). Then J.C. Flowers made a revised offer for SLM Corp (NYSE:SLM), known as Sallie Mae, and the Nasdaq Stock Market, Inc. (NASDAQ:NDAQ) agreed to acquire the Boston Stock Exchange.
But despite the flurry of M&A activity it was the National Association of Realtors' annualized pending home sales for August that caught investors' attention -- and the report wasn't good. The consensus expected a drop of 2.0%, and instead sales were down 6.5% with a comparison versus last year of 21.4% downturn. For the rest of the day, most of the talk centered on the possible impact of such miserable home sales on the economy, but at the end most of the selling was contained and the averages closed mixed.
At the close, the Dow Jones Industrial Average was off 40 points at 14,047. The S&P 500 had a fractional loss closing at 1,546, and the Nasdaq gained six to close at 2,747. Volume on the Big Board totaled just over 1.2 billion shares and almost 1.8 billion shares traded on the Nasdaq. Breadth on both exchanges was positive at 9-to-7 on the New York and 4-to-3 on the Nasdaq.
The November crude oil contract fell 19 cents and closed at $80.05 a barrel after falling to an intraday low of $78.90. The Amex Energy SPDR (NYSEARCA:XLE) was off $1.22 at $74.90 and shows all of the signs of a double top with support at $71.55. The December gold contract took a big hit, down $17.80 per troy ounce to close at $730.80, and the Philadelphia Gold/Silver Index [XAU] fell to $167.42, down $5.64. The XAU may have a more serious problem than the XLE in that while the XLE is flirting with a very short-term top the XAU may have topped at around the high of May 11, which could drive prices down to the $130-$140 support zone.
What the Markets Are Saying
With momentum, MACD, and the Stochastics all overbought, the sentiment indicators still bullish (not good), and volume very light, I think it prudent to refrain from many new positions. Not that yesterday was a bad day -- in fact, it was a rather good one with the Nasdaq making another new high and only the Dow Industrials giving a minor reversal and the broad-based averages down a fraction. But, again, volume is shrinking and volume is the key to a major breakout; if you don't have it you won't get it.
However, if you are holding winners that are making new highs, like the shippers, hold on until you get a major reversal before nailing down profits. Independent investment advisory firm Dorsey Wright Associates reminded me last night of the saying "stocks that hit 90 go to 100" and they are correct.
Today's Trading Landscape
Earnings are expected today from RPM International (NYSE:RPM), Wolverine World Wide (NYSE:WWW), Immucor (NASDAQ:BLUD), Smart Modular (NASDAQ:SMOD), Arrow International (ARRO) and IDT Corp (NYSE:IDT). Look for the following economic reports: September employment with ADP Employment Change (the consensus expects 58,000), the Institute for Supply Management (ISM) Non-Manufacturing report (the consensus expects 54.8), and weekly mortgage applications.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Climb for Fifth Day, Led by Nikko Cordial; Hong Kong Slides Asian stocks rose for a fifth day, led by banks and brokerages, after Citigroup Inc. (NYSE:C) offered to buy the shares it doesn't own of Nikko Cordial Corp. (OTC:NIKOY) Hong Kong's Hang Seng Index slid on speculation a surge to a record high has overvalued companies' earnings prospects.
• Goldman Plans to Invest $1.7 Billion This Year in Japanese Property Boom Goldman Sachs Group Inc., Wall Street's most profitable securities firm, plans to invest about 200 billion yen ($1.7 billion) this year in Japanese property, betting real estate is short of its peak after a two-year rally.
European Headlines (via Bloomberg.com)
• Credit Suisse's Dougan Says Gridlock in Mortgage Market May Last 18 Months Credit Suisse Group (NYSE:CS) Chief Executive Officer Brady Dougan said the market for mortgage credit will be ``problematic'' for as long as 18 months.
• Lagardere to Sue Over Le Figaro Report About Insider Trading in EADS Stock Lagardere SCA, France's biggest publisher, said it plans legal action over an article in Le Figaro newspaper that said the company may have taken part in insider trading of European Aeronautic Defence & Space Co. shares.
• BAA Says Cap on Heathrow Passenger Charges Threatens $19 Billion Financing BAA Ltd., owner of London's Heathrow airport, said the refinancing of 9.3 billion pounds ($19 billion) of debt may be hampered by proposed caps on passenger charges, threatening the expansion of Europe's busiest air hub.