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Wall St. Breakfast's Pre-Market Snapshot:

U.S. Futures

As of 8:52 AM ET

S&P 500: -5.25; 1,541.75
NASDAQ 100: -5.00; 2,210.50
Dow: -42; 13,865

International Indexes

Asia
NIKKEI 225: -0.28%; 16,651.01 (-47.07)
HANG SENG: +0.16%; 31,638.22 (+51.32)
SHANGHAI SE COMPOSITE: +2.60%; 5,897.19 (+149.20)
BSE SENSEX 30: -0.97%; 19,783.51 (-194.16)

Europe
FTSE 100: -0.65%; 6,662.70 (-43.30)
CAC 40: -0.55%; 5,804.04 (-32.15)
XETRA-DAX: -0.45%; 7,973.70 (-35.97)

Commodity Futures

(Reuters/Jefferies CRB)

Oil: -1.66%; $91.98 (-$1.55)
Gold: -0.63%; $787.60 (-$5.00)
Natural Gas: +0.65%; $8.03 (+$0.05)
Silver: -0.76%; $14.32 (-$0.11)

U.S. Breaking News

see today's Wall Street Breakfast for earlier news

P&G Beats by $0.01, Sales In-line; Ups FY Outlook
Procter & Gamble posted a 14% increase in fiscal Q1 net income to $3.08 billion, or $0.92/share. Excluding a $0.02/share tax benefit, EPS beat the Street's consensus estimate of $0.89. Sales growth of 7.5% to $20.2B was in-line with analyst estimates. For fiscal Q2, P&G forecast EPS of $0.95 to $0.97, compared to analyst estimates of $0.97. For the full fiscal year, P&G raised its EPS guidance to $3.46 to $3.49, citing a $0.02/share tax benefit compared to its earlier guidance. Analysts were expecting $3.47/share, on average. P&G also raised its full year sales expectations by 1%, to 6% to 8%, based on positive forex impact. P&G said every reportable segment delivered mid-single digit or higher sales growth in Q3, while organic sales rose 5%, in-line with its 4% to 6% target. Higher commodity prices hurt gross margins by 80 basis points, but overall, gross margins improved 10 basis points to 52.9%, as volume leverage, cost saving projects and pricing offset higher input costs. In a statement, CEO A.G. Lafley commented that "the fiscal year is off to a good start" and the company is "confident it will deliver another strong year of growth." (Earnings call transcript later today). P&G repurchased $2.6B of its common stock during the quarter. Shares of P&G gained 0.1% to $71.83 on Monday, but were off 2.9% to $69.75 in thin pre-market activity.

ON Sinks on Weak Earnings, Outlook
ON Semiconductor shares sunk 20% in pre-market trading Tuesday after the maker of power, data management and standard chips posted lower-than-expected earnings, and lowered its Q4 outlook. Adjusted third-quarter EPS were $0.21 on revenue of $403 million, down from $0.23/share on revenue of $421M a year ago. Analysts polled by Reuters expected EPS of $0.22 on revenue of $398.7M, on average. Total gross margin climbed 0.3% to to 38.6%. For the coming quarter, ON now expects revenue to be flat to up 2% sequentially, or $403M-$413M; analysts were looking for $417M. ON forecasts average selling prices in Q4 to drop about 2% sequentially, with flat gross margin growth. "As we enter the fourth quarter of 2007, we remain cautiously optimistic about the overall consumer demand environment for the upcoming holiday season," CEO Keith Jackson said. In a note last month, Wachovia Capital Markets told investors recent consolidation in the firm's shares is "an opportunity to get positioned ahead improved seasonal growth trends." Analysts cited growing desktop PC revenue and strong sales of gaming consoles as positive growth factors.

Qwest's Net Jumps on Tax Benefit; Operating Revenues Disappoint
Qwest Communications reported a surge in third-quarter earnings to $2.07 billion, or $1.08/share, compared to $194M ($0.09/share) last year, boosted by a $2.15B tax benefit -- Qwest also took a charge of $353M for a shareholder litigation settlement. Operating revenue declined 1.5% to $3.43B, falling short of analysts' average estimate of $3.49B. "The settlement of remaining opt-out shareholder litigation matters is a significant step in putting uncertainties behind us, and the accounting recognition of the value of tax assets indicates confidence in our future profitability," CEO Edward A. Mueller commented in a statement. (Earnings call transcript later today). Data, internet and video services revenue increased 10% y/y to $1.3B. Qwest gained 110,000 high-speed internet subscribers, a sharp drop from last year's 175,000 adds. Qwest said year-to-date capex of $1.16B is about 5% off last year's level, due to the decline in housing starts, but it still expects redeployment of capital for growth projects and fiber to the node to result in 2007 capex equating approximately to 2006. Shares of Qwest lost 1% to $8.18 on Monday and were last down 2.25% to $8.00 in pre-market trading.

Sirius Narrows Q3 Loss on Strong Revenue, Subscriber Growth
Sirius Satellite Radio said Tuesday its quarterly loss narrowed on strong revenue gains and a sharp increase in subscribers to its fee-based satellite radio feed. Third-quarter losses were $120 million ($0.08/share), down from a $163M ($0.12) loss a year earlier. Revenue jumped 45% to $242 million from $167M. Sirius said net subscribers to its service grew 50% from 2006, to 7.67 million. "Strong demand for the Sirius service drove robust subscriber growth and, when coupled with a continuing focus on cost control, allowed Sirius to significantly reduce our net loss and places us on-track to achieve our financial goals," CEO Mel Karmazin said. "We expect strong holiday season sales and we are targeting positive free cash flow for the fourth quarter of 2007," (full earnings call transcript later today). Advertising revenue was $8.5 million, and average monthly revenue per subscriber was $10.71. Subscriber acquisition costs per gross subscriber addition were $103, down from $114. Customer churn rate was 2.1%, up from 2% a year ago. SIRI reaffirmed its F2007 outlook of revenue approaching $1B and more than 8 million subscribers. Sirius plans to merge with the slightly larger XM Satellite Radio (8.6M subscribers) pending regulatory approval. On Monday, Democratic members of the House of Representatives sent a letter to FCC chairman Kevin Martin urging him to support the merger, saying it would benefit consumers with lower prices, and that satellite radio should be seen as part of a larger media market. Signal Hills analyst Maurice McKenzie has said it's unlikely the deal will receive approval because regulators will probably see satellite radio as a distinct service from audio media. SIRI shares are up 2% to $3.69 in pre-market trading.

U.S. Steel Tanks on Earnings Miss, Warning
United States Steel Corporation saw its Q3 earnings fall 35% on a variety of one-time charges, while missing Wall Street's estimates and warning Q4 earnings will "decline" further. Shares fell 7.1% in pre-market action (as of 8:08 AM ET) on the news. Net income was $269 million, good for EPS of $2.27, versus EPS of $3.42 a year ago. A variety of one-time items took $0.23 a share off earnings, giving U.S. Steel adjusted earnings of $2.50 - well below consensus analyst EPS estimates of $2.63. Revenue climbed 6% to $4.35 billion; the Street was expecting slightly higher revenue of $4.36 billion. Despite the misses on EPS and sales, Chairman and CEO John P. Surma believes his company, "had a good quarter as each of our segments effectively responded to diverse challenges, including general economic concerns." Looking ahead: "We expect a decline in overall results for the fourth quarter mainly due to normal seasonal effects and several scheduled blast furnace outages... In Europe, steel consumption remains healthy; however, high imports, particularly from China, and high service center inventories are resulting in some pressure on spot prices and order rates." The company expects a decrease in earnings in Q4 "due primarily to lower shipments and higher raw material, outage and modernization-related costs," though steel prices are expected to remain at their Q3 levels. In other news, U.S. Steel received approval from the Canadian Minister of Industry for its purchase of Stelco, which it agreed to buy in August (full summary).

Fed Rate Cut No Shoe-In - WSJ
A widely-predicted Fed rate cut this week is not a shoe-in, and officials are not considering a half-point cut in the fed funds target rate, the Wall Street Journal said Tuesday. The article's author, Greg Ip, is thought to at times reflect views of senior central bankers. Ip said Fed officials see Wednesday's decision as a choice between a 0.25% to 4.5% to further stimulate weak housing and credit markets, or no cut at all. Perhaps the biggest challenge the Fed faces, he said, is dealing with the Street's certainty of a rate drop: "The current market environment is more fragile than usual, and thus the consequences of disappointing the market are potentially more damaging. Against that, the Fed will have to weigh the risk that a cut will stoke inflationary psychology," Ip wrote. Currently, the implied probability of no change was 16%, according to data analyzed by the Cleveland Fed; the probability of a quarter-point cut was 72%, and of half-a-point cut, 10%. There has been little evidence that a weak housing market has spilled over into the broader economy, thus Fed officials "don't appear to have significantly altered their forecast of a return to moderate growth next year," Ip writes. Tokyo-based currency traders said the article helped push the dollar up slightly from near record lows against the euro in overseas trading, Reuters reported.

No Bottom Yet in Housing, Paulson Says
The US "hasn't hit bottom yet in housing," Henry Paulson said Tuesday but noted that the country had enough economic strength to "grow through" the situation. Speaking at a conference in New Delhi, the Treasury Secretary said the administration was studying what went wrong with the subprime market so it could make policy adjustments "so this doesn't happen again." In wake of the currency's continued weakness and record lows, Paulson also said he was "strongly committed to a strong dollar." He noted that "major parts of the capital markets are performing well," but said markets for highly structured debt, asset-backed paper and high-yielding debt were taking longer to "reprice" risk. Former Federal Reserve chief Alan Greenspan appeared to agree, telling a group of hedge fund managers and investors Monday that markets have decided subprime securitization "is much too risky" and that those types of investment weren't likely to make a comeback any time soon. The Fed is widely expected to cut the benchmark interest rate a quarter-point to 4.5% on Wednesday.

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.

Additional Earnings

• Shares of Automatic Data Processing (NASDAQ:ADP) rose nearly 4% in pre-market action (as of 8:27 AM ET) as the company topped the Street's expectations and offered strong guidance. Net income climbed to $297.4 million, good for adjusted EPS of $0.55, vs. EPS of $0.46 a year ago. Analysts were looking for adjusted EPS of $0.43. Sales rose to $1.99 billion, up from $1.75 billion in the year-ago period. The company predicted its FY2008 revenue will rise between 12%-13% after a previous prediction of a 12% gain. (source: Dow Jones Newswires)

Today's Market

(via Sam Collins, ChangeWave.com)

Recap of Yesterday's Action

What accounted for the broad rise in stock prices yesterday?

There was some positive news -- like Verizon's (NYSE:VZ) and RadioShack's (NYSE:RSH) better-than-expected Q3 reports and their upbeat comments about Q4 expectations, but that wasn't behind the climb.

In fact, with crude oil hitting another new high, the U.S. dollar getting crushed again, and last week's strong showing, many investors were ready for some profit taking. Instead, markets were strong on the opening and held the gains throughout the day because of optimism regarding another possible cut in interest rates by the Fed.

All day, the media rehashed the possible scenarios from a quarter- to a half-point cut, and touted the various bond market indicators they claimed could predict with some accuracy the probability of both. But hardly anyone mentioned the possibility of no cut at all --zounds!

Ghouls in the night, witches on broomsticks, ghosts, goblins, and no rate cut -- what a real-live, scary Halloween thought that is! Larry Kudlow of CNBC even said that if the Fed failed to cut rates, he would stay away from his studio on Wednesday night since the market would drop 500 points that day and open 500 lower the next. Boo! Take that, Fed governors!

Still, the Dow Jones Industrial Average gained 63 points to close at 13,870. The S&P 500 gained six points at 1,541, and the Nasdaq was ahead by 13 points at 2,817. The NYSE traded over 1.2 billion shares and the Nasdaq crossed over 2 billion shares. Breadth was a positive, at 9-to-7 on the NYSE and just positive on the Nasdaq.

Crude oil for December delivery closed at another new record high -- this time $93.53, up $1.67 a barrel, and the Amex Energy SPDR (NYSEARCA:XLE) gained 34 cents and closed at $77.29. Gold continued its march higher with the December contract closing at $793.50 up $6 per troy ounce, and the Philadelphia Gold/Silver Index [XAU] gained $3.04 to close at a new high of $185.46.

What the Markets Are Saying

I've often said that when the market reacts well to bad news that's good, and when it reacts well to no news that's good, too. But yesterday's positive reaction to no news that hinges on the expectation of good news (another rate cut) seems to me just a bit over the edge of optimism.

Everyone is looking for a rate cut and for the market to continue the current rally following Wednesday's anticipated announcement.

I could be all wet but, with the indices at the high side of their ranges, here is the way I see it if the Fed cuts by a quarter point (the majority opinion): Since everyone is looking for it, we'll see a small rally, then profit taking back down to the support lines that I outlined last week.

Or what happens if the Fed doesn't cut? The market gets crushed and Kudlow stays home.

Don't forget Scenario #3 -- a half-point cut. This is unlikely, but it could result in an immediate rally and another false breakout, since the press would undoubtedly jump on this as an overreaction and even inflationary.

Whichever way rates go, for now it makes sense to hold cash.

Today's Trading Landscape

Today's economic reports will bring us the Case-Shiller Home Price Index for August (the consensus expects 4.2% year-over-year decline) and the October Consumer Confidence figures at 10 a.m.

Also look for earnings from the following companies: Agco, Airtran Holdings, American Axle & Manufacturing, American Campus, American Capital Strategies, Amerigon, AMN Healthcare Services, Apria Healthcare, Asbury Automotive Group, Asyst Technology, Atmel, Automatic Data Processing, Avon Prods, BE Aerospace, Beckman Coulter, Bemis, Bigband Networks, BJ Services, Black Box, BRE Properties, Buffalo Wild Wings, Cardiac Science, Carrier Access, Central Pacific Financial, Ceradyne, Chemed, China Petreloeum & Chemical, Chipotle Mexican Grill, Clarient, Commercial Metals, Commscope, Community Health Systems, Corinthian Colleges, Corn Products International, Corvel, Crown Castle International, Dollar Financial, R.R. Donnelley & Sons, DPL, Dreamworks Animation, Edgar Online, EMS Technologies, Encore Acquisition, Energizer Holdings, Enersis, Entertainment Properties, Enzon Pharmaceuticals, Equinix, Equity One, Equity Residential, ESS Technology, Evans Bancorp, Extra Space Storage, Fair Isaac, First Potomac Realty, FirstEnergy, Fresh Del Monte Produce, Gartner, Genomic Health, Geron, Getty Realty, Glatfelter, Goodyear Tire & Rubber, Great Plains Energy, Group 1 Automotive, Healthspring, Highwoods Properties, Holly Energy Partners, Imperial Oil, Insignia Sys, Invacare, Jarden, Key Tronics, Kyocera, Landamerica Financial Group, Lincoln National Corp., Liz Claiborne, Lodgenet, Luxottica Group, M/I Homes, Martin Marietta Materials, Masco, Matritech, Matsushita Electronics, McKesson, MF Global, MGM Mirage, Monolithic Power Systems, Monolithic System Technology, Nacco Industries, Nalco Holding, NCI, Newmarket, Norsk Hydro, Ocwen Financial, Overland Storage, Pacer International, Pennsylvania Real Estate Investment Trust, Perot Systems, PMI Group, Polypore International, Poore Brothers, Qwest Communications, Renaissancere Holdings, Ritchie Bros Auctioneers, Safeco, Sanmina Sciences, Semiconductor Manufacturing Intenational, Shutterfly, Silicon Motion Technology, Sirius Satellite Radio, Sonic Automotive, Sonic Innovations, Steris, Sun Life Financial, Tanger Factory Outlet Centers, Tekelec, Tenneco Automotive, Teva Pharmaceutical, Transcanada, Transglobe Energy, Union Drilling, United States Steel, Varian, Verichip, Watts Water Technologies, Wellman, Whiting Pete, Wynn Resorts and many others.

UBS (NYSE:USB) reported a Q3 net loss that was worse than expected and said that the impact of the subprime mess will also impact its Q4 figures. Chemical giant, BASF Group (BF), said its Q3 net profit almost doubled and is well above estimates, and both Proctor & Gamble (NYSE:PG) and Colgate-Palmolive (NYSE:CL) reported Q3 above estimates by a penny.

However, our markets now look forward to the Fed meeting, so expect a slow market today.

Asian Headlines

(via Bloomberg.com)

Asian Stocks Fall; Kookmin Bank, Baoshan Drop on Profit; Takeda Plunges Asian stocks fell, dragging a key regional index from a record, after Kookmin Bank reported earnings that missed analyst estimates and Baoshan Iron & Steel Co.'s profit decreased for the first time in more than a year.

Japan's Jobless Rate Unexpectedly Rises for Second Month as Hiring Slows Japan's unemployment rate unexpectedly rose for a second month, undermining the central bank's case for raising interest rates.

Bank of China Profit Rises 22 Percent, Trailing Rivals on Subprime Losses Bank of China Ltd. said third-quarter profit rose 22 percent, the slowest increase of the nation's top five banks, after a loss on subprime mortgage investments.

India Raises Banks' Reserve Ratios to Slow Inflows, Keeps Rates Unchanged India's central bank unexpectedly ordered lenders to set aside more reserves for a fourth time this year to prevent ``unacceptably high'' inflows of foreign cash from reigniting inflation.

Aozora Bank Soars on Report JPMorgan Chase to Seek Acquisitions in Japan Aozora Bank Ltd., restored to profit by U.S. buyout firm Cerberus Partners LP, rose by a record in Tokyo trading after a report JPMorgan Chase & Co. is seeking acquisitions in Japan.

Matsushita Electric Industrial Profit Declines 17 Percent to $575 Million Matsushita Electric Industrial Co., the world's largest maker of consumer electronics, reported profit that beat some analysts' estimates as digital camera shipments lifted sales to a record.

European Headlines

(via Bloomberg.com)

BASF Profit Doubles After Acquisitions, Increased Demand for Herbicides BASF AG, the world's biggest chemical producer, said third-quarter profit doubled and raised its forecast for 2007 after more than $8 billion in acquisitions and a tax gain in Germany.

European Retail Sales Fell in October for the First Time in Three Months European retail sales declined for the first time in three months in October as rising food and energy prices damped consumer confidence, the Bloomberg purchasing managers index showed.

Pernod Sales Rise 6.8 Percent, More Than Estimates, on Asia, Latin America Pernod Ricard SA, the world's second- largest liquor company, said first-quarter sales beat analysts' estimates on Asian and Latin American demand for imported spirits.

Imperial Tobacco Profit Misses Estimates; Altadis Purchase Is Postponed Imperial Tobacco Group Plc, the maker of John Player cigarettes, posted second-half profit that missed analysts' estimates and said its takeover of Spain's Altadis SA will be delayed until January, pushing the shares lower.

Source: Pre-Market Snapshot