Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:50 AM ET
S&P 500: +8.25; 1,533.25
NASDAQ 100: +14.25; 2,207.50
Dow: +46; 13,785
NIKKEI 225: +1.36%; 16,505.63 (+221.46)
HANG SENG: +1.84%; 30,405.22 (+550.73)
SHANGHAI SE COMPOSITE: +0.49%; 5,589.63 (+27.24)
BSE SENSEX 30: +2.52%; 19,243.17 (+472.28)
FTSE 100: +1.24%; 6,658.00 (+81.70)
CAC 40: +0.43%; 5,785.29 (+24.99)
XETRA-DAX: +0.40%; 7,963.95 (+31.51)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +1.08%; $91.44 (+$0.98)
Gold: +1.08%; $779.30 (+$8.30)
Natural Gas: -0.85%; $7.13 (-$0.06)
Silver: +1.47%; $14.11 (+$0.205)
U.S. Breaking Newssee today's Wall Street Breakfast for earlier news
Countrywide Surges on Expected Return to Profitability in Q4
Shares of number-one U.S. mortgage lender Countrywide Financial surged more than 20% in pre-market trading Friday after posting a worse-than-expected quarterly loss, but surprising the Street by saying it expects to return to profitability by next quarter. A net loss of $1.2 billion (-$2.85/share) was the company's first quarterly loss in 25 years. Last year, the company earned $647.6 million ($1.03/share) in Q3. Analysts, on average, had expected a $1.65/share loss. The company said the situation will be short-lived: "We view the third quarter of 2007 as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008," President David Sambol told investors. "Over the longer term, we believe that prospects for the U.S. housing and mortgage markets, as well as for Countrywide, remain very attractive," (full earnings call transcript later today). Countrywide blamed the loss on three factors: inventory valuation adjustments caused by unprecedented disruption in the capital markets; increased credit costs related to continued deterioration in the housing market; and restructuring charges resulting from Countrywide's expense reduction initiatives. The company took a $1 billion write-down on its mortgage-backed loans and securities. It increased loan loss provisions to $934 million, compared to $293 million last quarter. It also said housing-market weakness and credit-market tightening are expected to substantially reduce mortgage origination volume in 2007 and 2008 relative to earlier volumes. For Q4, Countrywide expects EPS between $0.25 and $0.75. "The wide range in the guidance is caused by the significant potential volatility," it said. Countrywide also told investors it was able to secure $18 billion in "additional highly-reliable liquidity."
Commentary: Option Arm Problems at Countrywide Deepen • Countrywide's Troubled Financials • How Egregious Was Countrywide's Option ARM Lending?
Stocks to watch: CFC. Competitors: BAC, FRE, FNM
Earnings call transcript: Countrywide Financial Q2 2007
Waste Management's Q3 Net Down, Misses; Lowers FY Outlook
Waste Management reported a 7.3% decline in third-quarter net income to $278 million, or $0.54/share, missing analysts' average estimate of $0.59/share. Revenues were also down, by 1.2% to $3.4B, compared to analyst estimates of $3.41B. Waste Management lowered its full-year EPS forecast by $0.04, to $2.03 to $2.07, since it no longer expects to receive a tax credit by that amount versus when it issued guidance in July. On a more positive note, the company said it generated $771M in cash from operations during the quarter ($550M in free cash flow) and now expects full-year FCF to be approximately $1.5B, or around $100M higher than the high-end of its previous estimate. In a statement, CEO David P. Steiner commented, "Our collection and recycling businesses continue to grow income from operations at double digit rates, and we will continue to follow our strategy of pricing work to generate acceptable margins and returns on our business." (Full transcript later). Waste Management said it repurchased $499M of its common stock during Q3. Shares of Waste Management gained 0.7% to $39.03 on Thursday, but were last trading lower by 2.7% to $37.99 in thin pre-market activity.
Ingersoll-Rand Beats, Raises FY EPS Outlook
Global industrial conglomerate Ingersoll-Rand reported a 9.4% increase in third-quarter net income to $266.6 million, or $0.92/share. Excluding items, EPS were $0.96, topping the Street's consensus estimate of $0.88. Revenues rose 10% (9% organic growth) to $2.24B, but fell short of estimates of $2.29B. IR said it continues to expect record earnings for 2007 and raised its full-year adjusted EPS forecast to $3.55 to $3.60. Analysts were expecting $3.49/share, on average. IR forecast Q4 revenue growth of 5% to 7% (est. $3.03B to $3.09B) and adjusted EPS of $0.94 to $0.99, compared to analyst estimates of $2.37B and $0.96/share. IR said it will provide 2008 guidance when its reports Q4 earnings. Q3 orders ex-North America rose a total of 7%, improving across its core businesses. "We again offset several soft domestic markets with strong revenue growth from international operations, new product offerings and recurring revenues," commented CEO Herbert L. Henkel. (Full transcript later). IR repurchased 21M shares of its common stock for $1.1B during Q3. It has approximately $2B remaining of a $4B buyback program. Shares of Ingersoll-Rand fell 2.1% to $49.71 on Thursday.
Commentary: Berkshire Hathaway Releases Latest 13F: Summary of Holdings • JANA Partners Discloses Stake in Alcoa, Ingersoll-Rand
Stocks to watch: IR. Competitors: EMR, JCI, TEX
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.
• The U.S.'s largest nuclear power utility, Exelon Corp. (NYSE:EXC), credited higher wholesale margins and increased production for its turn to profit of $1.15 a share in Q3, after it posted negative EPS of $0.07 during the previous-year period. Last year's loss included a $776 million one-time charge; net income was $780 million in its latest quarter, vs. a loss of $44 million a year ago. On an adjusted basis, EPS were $1.21 - just below consensus analyst estimates for adjusted EPS of $1.22. Shares of EXC were untraded in pre-market action. (source: Reuters)
• Managed healthcare provider Coventry Health Care Inc. (CVH) saw its Q3 EPS rose to $1.08, vs. EPS of $0.92 a year ago. Operating revenue was $2.52 billion. Both numbers were in line with consensus analyst estimates. Guidance was somewhat soft: Coventry expects Q4 EPS of $1.17 - $1.18 on sales of $2.65 billion - $2.75 billion, FY EPS of $3.97 - $3.98, and FY2008 EPS of $4.42 - $4.58. Analysts were expecting Q4 EPS of $1.19 on sales of $2.75 billion, FY EPS of $4.02 and FY 2008 EPS of $4.63. Shares of CVH were unmoved in pre-market trading. (source: Dow Jones Newswires)
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Yesterday turned out to be another big roller coaster with the Dow Industrials swinging almost 200 points from high to low. But, instead of opening lower and then making a run backup like in most recent sessions, the market held ground. It was even ahead nicely by 10:30 a.m. Eastern as a result of better earnings from Motorola (MOT) -- even though it took some time for the market to figure it out. Aetna (NYSE:AET), Express Scripts (NASDAQ:ESRX) and Estee Lauder (NYSE:EL) also delivered good reports.
The market was buoyed by better-than-expected new-homes sales, which were up 4.8%. This helped to offset earlier reports of weaker-than-expected durable goods and weekly jobless claims. The jobless claims report was a bit of a surprise, hitting the highest level in seven weeks at 324,750.
But higher and calmer was just not to be for stocks, and when a rumor spread that Dow stock AIG (NYSE:AIG) was about to be hit with a large write-off (up to $9.8 billion), the sellers hit hard.
Since the bail out was not just confined to the financial sector but the entire market, the Dow dropped steadily to its low of the day at 13,547 off 128 points. Then, near 2 p.m. Eastern, the rumor was denied and the buyers came back in. In the end, the market made back almost all of its losses.
At the close, the Dow Industrials were off just over three points at 13,672. The S&P 500 was off over a point at 1,514, and the Nasdaq lost 24 points at 2,751. Volume on the Big Board totaled 1.6 billion shares and 2.7 billion traded on the Nasdaq. Breadth was negative on both exchanges but barely so on the NYSE and negative on Nasdaq by 3-to-2.
Crude oil (December contract) hit another new high yesterday at $90.60 a barrel and then closed at $90.46, up $3.36. The Amex Energy SPDR (NYSEARCA:XLE) gained 68 cents at $75.95. The December gold contract rose to $771.00 per troy ounce, up $5.40. The Philadelphia Gold/Silver Index [XAU] was up $1.30 at $177.20.
What the Markets Are Saying
With swings of 100 to 200 Dow points almost normal now, the public is becoming frustrated with the routine. Maybe that's why the American Association of Individual Investor's survey has suddenly gone bearish again, with a reading of 31.25% bullish and 48.21% bearish (this is bullish for the market).
However, according to Investor's Intelligence, that bullish stance is contrary to what insiders are doing, which is selling (that is bearish). So with the averages now stuck in a volatile trading band and some key sentiment indicators giving mixed signals, this reinforces the view that the best place to be in times of confusion is on vacation -- or maybe just in cash.
Today's Trading Landscape
Look for the following companies to report earnings: Alexander & Baldwin, Allete, Arkansas Best, Baker Hughes, Brookfield Homes, Brunswick, Castle AM, Clayton Holdings, CNA Surety, Colgate-Palmolive, Concurrent Computer, Convergys, Countrywide Financial, Coventry Health, Exelon, Fortune Brands, Health Management Associates, Horizon Lines, Idexx Labs, Ingersoll-Rand, ITT Industries, Kimco Realty, LSI Industrials, Lubrizol, Lydal, Multi Color, Nidec, Oppenheimer Holdings, Performance Technologies, Shaw Communications, Tidewater, Tim Hortons, Viad, Volkswagen, Waste Management and others.
The sole economic report due today is for October consumer sentiment, and the consensus expects 82. The big news this morning and the one that will capture everyone's attention, however, is Microsoft's (NASDAQ:MSFT) earnings. In Q2, the company beat estimates by 6 cents a share.
And here's one for the book: Merrill Lynch's (MER) chairman is rumored to have been close to being fired by the board because of approaching Wachovia (NASDAQ:WB) about a merger without consulting Merrill's board. The MER story may not move markets but the price of crude oil could -- this morning black gold looks like it will break yesterday's mark and some analysts say that the next stop for crude is north of $100 a barrel.
Asian Headlines (via Bloomberg.com)
Asian Shares Rise Most in a Month, Led by Sony, Honda on Profit; BHP Gains Asian stocks rose the most in almost a month after Sony Corp. and Honda Motor Co. reported earnings that beat analysts' estimates, signaling companies in the region are withstanding a slowdown in the U.S.
DoCoMo Posts Decline in Second-Quarter Net After Customers Leave for KDDI NTT DoCoMo Inc., Japan's largest mobile-phone operator, posted its sixth straight decline in quarterly profit as price cuts failed to stem user defections to KDDI Corp. and Softbank Corp.
Daiwa Securities Posts Lower Profit on Stock-Trading Loss, Underwriting Daiwa Securities Group Inc., Japan's second-biggest securities firm, posted a 14 percent decline in second-quarter profit on a loss from trading stocks and as it earned less underwriting sales of securities.
Honda Shares Gain Most in Two Months After Carmaker Raises Profit Forecast Honda Motor Co., Japan's second- largest automaker, gained the most in six years after it raised its full-year profit forecast on a weaker yen and higher sales of fuel-efficient models. Shares of other automakers also rose.
Sumitomo Mitsui Profit Falls 30 Percent to $1.5 Billion, Missing Target Sumitomo Mitsui Financial Group Inc., Japan's third-biggest bank by market value, had a 30 percent decline in first-half net income on increased bad loan costs and after writing down the value of securities held.
Shanghai Pudong Bank Profit Climbs 60 Percent on Loan Growth, Fee Income Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., said third-quarter profit gained 60 percent on increases in loans and fees from financial services such as distributing mutual funds.
European Headlines (via Bloomberg.com)
Standard Life Agrees to Buy Resolution for $10 Billion in Cash, New Shares Standard Life Plc agreed to buy Resolution Plc, the U.K.'s biggest administrator of closed life- insurance funds, for 4.9 billion pounds ($10 billion) in the biggest takeover of a British insurer since 2000.
European Retail Stocks, Ahold, Air France Decline; Renault Shares Advance European retail and travel stocks fell after the dollar declined to a record low against the euro and oil prices surged to an all-time high.
Dollar Falls to Record Low Against Euro as Bets on Fed Rate Cut Increase The dollar fell to a record low against the euro before a report that may show waning U.S. consumer confidence, adding to the case for the Federal Reserve to cut interest rates.
Deutsche Bank May Join Planned $80 Billion U.S. Fund to Revive SIV Market Deutsche Bank AG, Germany's biggest bank, is considering participation in an $80 billion plan supported by the U.S. Treasury to revive the commercial paper market, Chief Executive Officer Josef Ackermann said.
Sainsbury Says Delta Seeks Another $1 Billion in Funding; Bid Deadline Set J Sainsbury Plc, the U.K. supermarket chain in takeover talks with a Qatar-backed fund, cast doubt on the deal by saying the bidder is seeking more cash from the Persian Gulf emirate.
Ahold Slides the Most in Two Years as U.S. Price Cuts Erode Profitability Royal Ahold NV, the Dutch owner of the U.S. Stop & Shop supermarket chain, fell the most in two years in Amsterdam trading after saying price cuts will continue eroding profitability at its American stores.