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Wall St. Breakfast's Pre-Market Snapshot:

U.S. Futures

As of 8:25 AM ET

S&P 500: -4.75; 1,555.50
NASDAQ 100: -10.00; 2,170.75
Dow: -32; 14,034

International Indexes

Asia
NIKKEI 225: -1.27%; 17,137.92 (-220.23)
HANG SENG: -1.98%; 28,954.55 (-586.23)
SHANGHAI SE COMPOSITE: +1.03%; 6,092.06 (+61.97)
BSE SENSEX 30: -0.04%; 19,051.86 (-6.81)

Europe
FTSE 100: -0.54%; 6,608.90 (-35.60)
CAC 40: -1.04%; 5,746.82 (-60.62)
XETRA-DAX: -0.35%; 7,941.38 (-28.09)

Commodity Futures

(Reuters/Jefferies CRB)

Oil: +1.37%; $87.31 (+$1.18)
Gold: +0.21%; $763.80 (+$1.60)
Natural Gas: +0.39%; $7.47 (+$0.03)
Silver: -0.47%; $13.79 (-$0.065)

U.S. Breaking News

see today's Wall Street Breakfast for earlier news

J&J's Q3 Profit Down, But Beats, Raises Outlook
Johnson & Johnson reported a 7.7% decline in third-quarter net income to $2.55 billion, or $0.88/share, hurt by a $528M after-tax restructuring charge related to its cost improvement program announced in July (see full story). Adjusted EPS of $1.06 and sales growth of 12.7% to $15B both beat Street estimates of $0.99/share on sales of $14.8B. J&J benefited from overseas sales growth of 21.5%, consisting of 14.7% higher operational growth and a positive forex impact of 6.8%. Domestic revenues rose 5.8%. Global sales at its Medical Devices and Diagnostics unit increased 6% to $5.2B, Pharmaceutical division sales grew 3.7% to $6.1B and Consumer segment sales jumped 47.5% to $3.6B boosted by its acquisition of Pfizer Consumer Healthcare. Sales grew fastest overseas for its pharma unit, while suffering a 2% decline domestically. J&J raised its full-year EPS outlook to between $4.10 to $4.13, from $4.02 to $4.07 previously. Analysts had expected $4.06/share. J&J's earnings conference call is at 8:30 A.M. (check later for J&J's earnings call transcript). Shares of Johnson & Johnson lost 0.4% to $65.65 on Monday and were last up 0.8% to $66.20 in thin pre-market trading.

Well Fargo Reports 4% Increase in Profits, But Misses Targets
Wells Fargo released third-quarter earnings Tuesday, announcing a 4% increase in profits. Net income increased to $2.28 billion ($0.68/share) from $2.19 billion ($0.64/share) the same time last year. Revenues jumped 10% to $9.85 billion. Analysts expected earnings of $0.70/share on revenues of $10.02 billion. Though Well Fargo is the US's second-largest home lender, it managed to avoid the worse of the credit crisis by shutting down its subprime lending unit in July. "It's not that Wells Fargo isn't affected by the mortgage industry problems, but they are so well-capitalized and they seem to be managing their way through this market mess," said Keith Gumbinger, vice president of HSH Associates, a mortgage research firm. The company did writedown about $500 million for mortgages whose value had decreased. Still, it's easy to see it could have been much worse, as many mortgage lenders went under, or took extreme measures to ride out the subprime storm. "We maintained our conservative risk management practices, and our strong balance sheet and capital ratios, perhaps the strongest in the industry, which allowed us to continue to grow profitably despite the problems in the market," said CEO John Stumpf. In pre-market trading Tuesday, shares of Wells Fargo traded down 1.4% to $35.49.

US Bancorp Tops Estimates Despite Loan Losses
USBancorp said Tuesday morning its Q3 net income fell 2.2% to $1.18 billion ($0.67/share), from $1.2 billion ($0.66/share) in Q3 2006, hurt by higher loan losses stemming from difficulties in the mortgage banking and home-building sectors, but still topped analyst forecasts. Revenue was up 3.2% to $3.53 billion. Analysts forecast EPS of $0.66 on revenue of $3.54 billion, according to a Reuters poll. "Despite the very challenging economic environment, our Company's earnings remained solid, reflecting our core financial strength," CEO Richard K. Davis said (full earnings transcript later today). USB, which is the holding company for U.S. Bank and provides commercial banking and financial services, set aside $199 million for credit charge-offs, up 47% from $135 million a year ago, due primarily to an increase in credit cards charge-offs and mildly higher commercial loan net charge-offs, adding it anticipates higher delinquencies over the next several quarters. "Looking ahead, we would expect that the continuing pressures felt by both businesses and consumers related to the residential mortgage and homebuilding industries will lead to somewhat higher net charge-offs and nonperforming assets. These increases should, however, be very manageable for our company," it said. Shares are down 10.2% YTD.

State Street Beats Estimates, Says Conduit Exposure Limited
Number-one global institutional money manager State Street said Tuesday its Q3 net income climbed 28.8% from a year ago. Its shares climbed 3% in pre-market trading after revenue numbers came in ahead of analyst estimates, the firm boosted its full-year outlook, and dismissed concerns over its conduit portfolio. Q3 earnings were $358 million ($0.91/share), up from $278 million ($0.83/share) a year ago; analyst forecasts were for EPS of $0.94. Revenue surged 48% to $2.24 billion, up from $1.51 billion last year, and better than the $2.02 billion analysts were looking for. State Street said that for 2007, it expects to exceed the top of its previous ranges for all three goals -- EPS, revenue and return on equity -- assuming markets remain stable. Over the first nine months, it said, the company has performed at or above the top of its ranges for EPS growth of 10%-15%, revenue growth of 20%-22%, and return on equity of 14%-17%. According to Reuters Estimates, analysts had been expecting full-year revenue of $7.67 billion and EPS of $3.93. Commenting on the impact of recent market activity affecting fixed-income investments, CEO Ronald Logue said, "The fixed-income markets have experienced unprecedented disruption in this past quarter. We believe we are well positioned with both our portfolio and our asset-backed commercial paper conduits. While liquidity in the fixed income market remains challenging, our concentration in high-quality assets in our own portfolios as well as in the conduits, have limited the impact of this disruption on our business." On Aug. 28, the London Times raised concerns when it reported State Street had $22 billion in exposure to asset-backed commercial paper conduits, with credit lines to at least six conduits, collectively representing 17% of its total assets (full story). On Oct. 1 Prudential Financial sued State Street for mortgage-related losses in retirement accounts.

Delta's Q3 Profit Soars, Beats Estimates
Delta Air Lines reported third-quarter net income more than quadrupled to $220 million, or $0.56/share, easily beating analysts' average estimate of $0.42. Delta didn't report EPS last Q3 when it was still in bankruptcy. Revenues rose 10% to $5.23B, a company record, helped by strong demand and industry-wide price hikes on at least seven occasions so far in 2007. Analysts were expecting revenues of $5.10B. Delta's operating margin improved to 8.7% from 3.5% last year. Delta also benefitted from higher international route bookings, as capacity increased double-digits compared to a slight decline in its home market. "With our successful international expansion in 2007 and more destinations planned for 2008, including new service to China and expanded service throughout Africa, we are strengthening our position as the premier global carrier," commented executive VP Glen Hauenstein. The company said it continues to strengthen its balance sheet, having paid down $1.0B in debt during the quarter. Delta is targeting operating margin of 3% to 5% in Q4 and 6% to 7% for the year. Delta's earnings conference call is at 10:00 A.M. (check later for Delta's earnings call transcript). Shares of Delta Air Lines gained 0.20% to $20.00 on Monday.

Regions Financial Misses Estimates
Regions Financial Corp. reported earnings that missed expectations Tuesday, despite 12% growth in net income. Net was $394 million, versus $352 million in the prior year period, but EPS actually fell to $0.56 from $0.77 a year ago due to the acquisition of AmSouth for $10.5 billion, which Regions issued stock to buy. The merger made Regions the 10th largest U.S. bank by assets under management ($138 billion); YTD the company has realized $237 million in savings. Next year it hopes to reach $500 million in synergies as a result of the merger. Net income fell 13% on a quarterly basis, due to what CEO Dowd Ritter labeled "less than optimal" business conditions. EPS were $0.64 not including merger-related charges, missing consensus analyst EPS estimates of $0.69. Despite unloading its EquiFirst subprime lending arm to Barclays Plc in April, concerns have remained regarding the bank's loan portfolio, making the stock the fourth-worst performer this year among the 24 banks that make up the KBW Bank Index. Its shares are down 22% YTD.

DHI Q4 Sales: -39%, Cancellations: 48%
U.S. number-two homebuilder D.R. Horton said Tuesday its Q4 net sales orders fell 39% to 6,374 homes ($1.3 billion), from 10,430 homes ($2.5 billion) a year ago, while its cancellations rate jumped to 48%. For 2007, net sales orders fell 35% to 33,687 homes ($8.2 billion) from 51,980 homes ($13.9 billion) in fiscal 2006. The company said it expects the housing environment to "remain challenging." It also said it "experienced reduced mortgage availability due to tighter lending standards," and that "buyers continued to approach the home buying decision cautiously." The company told investors it will continue to focus on reducing inventory, generating cash flow and reducing outstanding debt. "We significantly reduced our homes under construction during the fourth quarter, which contributed to achieving our cash flow from operations goal of $1 billion for the fiscal year." In March, CEO Donald Tomnitz said the housing market will remain in a slump this year, and that "2007 is going to suck, all 12 months of the calendar year." DHI reports Q4 results on Nov. 20. Its shares have dropped 48.7% YTD, compared to a 41.1% drop in the S&P Homebuilders ETF. In pre-market trading, the stock is down 2.4% to $13.25.

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Additional Earnings

KeyCorp (NYSE:KEY) reported Q3 net income fell 33% y/y, as loan writedowns and mortgage loss provisions tripled. EPS was $0.54 vs. $0.76 a year ago. Excluding one-time items, EPS was $0.57 - well below consensus estimates of $0.71. Shares were down 5.1% in pre-market action (source: AP).

• Number two U.S. grocer Supervalu Inc. (NYSE:SVU) reported quarterly profit rose to $0.69 a share vs. $0.61 a year earlier. Consensus estimates were for EPS of $0.68. The company expects full year EPS in a range of $2.73 - $2.83, excluding one-time items; analysts are looking for $2.77 on average. Shares rose 2.2% in pre-market trading on the report (source: Reuters).

Forest Laboratories Inc. (NYSE:FRX) took a $0.15 a share charge related to a product deal in its latest quarter and saw net income fall to $0.71 a share as a result, vs. $0.75 a year earlier. Excluding one-time items, EPS was $0.86 vs. consensus EPS estimates of $0.78. Shares were lower by 3.4% in pre-market action (source: Reuters).

Today's Market

(via Sam Collins, ChangeWave.com)

Recap of Yesterday's Action

Citigroup (NYSE:C) set the tone before the opening yesterday as, even though it exceeded sharply-adjusted Q3 earnings estimates, the firm said the consumer credit market will continue to negatively impact Q4's earnings.

Mattel (NASDAQ:MAT) also reported a 1% earnings decline, missing analysts' targets. Even Eaton Corp. (NYSE:ETN), which reported a net income gain of 4% and exceeded forecasts by 4 cents, had to say that Q4 wouldn't match earlier expectations and its stock fell by $3.36.

Also before the opening, a consortium of banks, including JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC) and Citigroup, announced they and others have agreed to form a "superfund" designed to clean up the credit markets. Initially the announcement was greeted with positive comments and the U.S. Treasury Department even said that it supported the idea. But the market's reaction, as measured by heavy selling in the financial sector, seemed to say that investors would rather not be reminded of the whole mess.

Then to top off a perfectly miserable Monday, crude oil prices hit a new high. Oil has been regularly setting records but this development coupled with the financial reports sent stocks plummeting amid a flurry of selling as a result of fears that such high prices will negatively impact future economic growth.

At the close, the Dow Industrials were off 108 points at 13,985. The S&P 500 was off 13 points at 1,549, and the Nasdaq lost 26 points, closing at 2,780. The NYSE traded 1.2 billion shares, and 2 billion shares crossed on the Nasdaq with breadth decidedly negative on both exchanges to the tune of about 2-to-1.

The new crude oil high (November contract) crushed the old high by $2.44, closing at $86.13. The Amex Energy SPDR (NYSEARCA:XLE) also closed at a new record high of $77.85, up 68 cents. The December gold contract rose $8.40 to finish at $762.20, and the Philadelphia Gold/Silver Index [XAU] gained 78 cents at $179.82.

What the Markets Are Saying

Investor Intelligence, a publication by Mike Burke and John Gray, reviews a lot of interesting data and this week, buy and sell Climaxes caught my eye.

A "buying climax" occurs when a stock makes a 12-month high but closes the week with a loss ("selling climaxes" are the opposite). Burke and Gray point out that buying climaxes usually indicate that smart money is moving out of stocks and this usually occurs in high numbers at market tops.

Investor Intelligence reported that last week there were 160 buying climaxes versus 56 selling climaxes. This level of buying climaxes is far from the numbers at major market tops, but it is increasing and may be telling us that an intermediate top has formed.

Along with other sentiment numbers and our chart patterns, this is more evidence that points to a correction. As I said on Friday, I believe that Thursday's reversal gave the signal and the markets are headed for at least a moderate pullback. Tomorrow, I'll provide the support zones and targets for the correction.

Today's Trading Landscape

Today look for the TICS accounting of foreign capital investment in the United States, September's industrial production report (the consensus expects 0.1% within a wide 0.3% to +0.4% range), and the NAHB housing sentiment index (the consensus sees a new all-time low of 19).

Q3 earnings are now in full swing, so expect reports today from Johnson & Johnson (read above), Wells Fargo (read above), Yahoo, AO Smith, Adtran, AMB Property, Champion Enterprises, Corus Bankshares, Crown Holdings, CSX, Delta (read above), Domino's, Forest Labs (read above), Fulton Financial, Great Atlantic & Pacific Tea, Intel, IBM, KeyCorp (read above), Linear Technology, Polaris, POSCO, Regions Financial (read above), RLI, Seagate Technology, Spansion, Stanley Furniture, State Street (read above), Supervalue (read above), Steel Dynamics, McClatchy and Thornburg Mortgage.

Energy prices are at the center of investors' concerns since they may finally tip the scale toward slower growth. Investors will be closely watching those prices today in addition to the earnings of some big movers.

Asian Headlines

(via Bloomberg.com)

Asian Stocks Decline on U.S. Home Loan Concern; Nomura Leads Banks Lower Asian stocks dropped the most in four weeks after losses reported by Nomura Holdings Inc. and Citigroup Inc. renewed concern a U.S. housing slowdown will stunt earnings growth at financial companies.

Posco's Profit Falls for First Time in a Year on Higher Iron Ore Prices Posco, Asia's biggest steelmaker by market value, reported a surprise drop in third quarter profit because of higher iron ore costs and reduced stainless steel production.

Nomura Will Stop Making Markets for U.S. Treasuries, Close Chicago Office Nomura Holdings Inc., Japan's largest securities firm, will cease making markets for Treasuries and close its Chicago office as it reorganizes operations in the U.S.

Mitsubishi UFJ Leads Bank Stocks Lower After Nomura's U.S. Subprime Loss Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by market value, led stocks lower in Tokyo after subprime losses at Nomura Holdings Inc. renewed concern earnings may be eroded at the nation's financial companies.

European Headlines

(via Bloomberg.com)

Roche Third-Quarter Sales Rose 5.7 Percent on Demand for Cancer Treatments Roche Holding AG, the world's biggest maker of cancer medicines, reported third-quarter sales that missed analyst estimates as demand for the Tamiflu influenza pill waned and growth of Herceptin for breast cancer drug slowed.

Eni, Libya Plan $28 Billion Investment to Expand Production of Gas, Oil Eni SpA said it will invest $28 billion over the next 10 years together with Libya's national oil company to expand crude oil and natural-gas production in the North African country.

Diageo Annual Profit Meets Forecasts on Sales of Johnnie Walker, Smirnoff Diageo Plc, the world's biggest liquor maker, said profit is meeting its forecast this fiscal year on higher sales of Johnnie Walker whiskey and Smirnoff vodka in the U.S. and Latin America.

RWE Chief Says Acquisitions Are Required for Utility to Meet Growth Goals RWE AG, Germany's second-largest utility, will have to make ``selective'' acquisitions to meet its goals for growth, Chief Executive Officer Juergen Grossmann said. The shares had their biggest gain in three months.

Source: Pre-Market Snapshot