Wall Street Breakfast: Must-Know News

U.S. Markets

• Investors staged a "relief rally" in U.S. equities late Wednesday despite Goldman's recession warning and more bad news on delinquencies at Countrywide (CFC). The DJIA closed up 1.16%, the Nasdaq 1.39% and the S&P 500 1.36%. All S&P 500 sectors closed up, including financials. Yields on 10-year Treasurys declined 0.36%. Oil settled down $0.66 at $95.67 after a rise in gasoline supplies offset a drop in crude oil inventories. Recession fears might also have played a part in the decline. Gold gained $1.40 to $881.70. The dollar strengthened against the yen and the euro.
• Online luxury sales rise. Sales of women's apparel and jewelry declined in December from year-ago levels, but online sales rose 32%, MasterCard SpendingPulse reported. Online purchases of luxury items, excluding jewelry, rose 6%.
• Pros to blame for crisis, Poole says. St. Louis Federal Reserve President William Poole said Wednesday that "shortsightedness" among investment professionals led to the mortgage crisis and credit crunch. "I can understand the mistakes many financially naive borrowers made but have a hard time understanding how so many investment professionals could have been so wrong," he said.
• Goldman says Japan could follow U.S. into recession. Goldman Sachs (GS), which predicted on Wednesday that the U.S. would enter recession this year, said Thursday the chance of a recession in Japan is 50%.

Global Markets

• Asia: Nikkei down 1.45% to 14388.11, Hang Seng down 1.30% to 27255.73. Refiners and utilities fell in Shanghai and Hong Kong following China's announcement of a freeze in fuel and power prices to curb inflation. China Petroleum & Chemical Corp., or Sinopec (SNP), fell 5.7% in Hong Kong and 3% in Shanghai; Huaneng Power (HNP) fell 4.5% and 3.2%.
• Europe: European shares ticked up in morning trading Thursday, with the FTSE 100 up 0.3%, the DAX 30 up 0.4% and the CAC 40 up 0.4%. British supermarket group J. Sainsbury (JSAIY) rose 6.9% on a rise in Q3 comps and brewer Scottish & Newcastle was up 3.5% following a report of a possible bid for the company. German retailer Metro gained 6.4% on a strong quarterly report. Apple (AAPL) has settled the antitrust suit brought against it by European regulators by agreeing to cut prices at its U.K. online digital music store to bring them into line with the prices it charges customers on mainland Europe.

Must-Know News for Thursday

• DuPont boosts forecasts; shares rise. The conglomerate (DD) said it expects 2007 earnings to come in at the high end of its $3.15-3.20 forecast and raised its 2008 outlook to $3.35-3.55 from $3.31-3.52. Analysts had been expecting $3.19 in 2007 and $3.42 in 2008. The company's shares closed up 4.75%, their biggest gain in four years.
• MBIA spells out strategy; stock falls anyway. The bond insurer (MBI) issued details Wednesday on how it plans to protect its AAA rating, including cutting its dividend 62% and selling $1 billion in bonds to raise capital. Unimpressed investors sent the stock down 15%; it rebounded to close down 4.15%.
• Alcoa posts beat Q4 EPS. The aluminum producer (AA) reported a 76% rise in profit to $632 million ($0.75/share, or $0.36 excluding items, ahead of analyst expectations of $0.33). Most of the rise was due to the recent $2.7 billion sale of the company's packaging and consumer business. Alcoa shares gained 3.7% after hours.
• Capital One warns on 2007 profit. Capital One Financial (COF) is expected to announce Thursday that 2007 profit will come in at about $3.97 per share, well shy of its earlier forecast of $5.00.
• NYSE Euronext in talks to buy Amex. NYSE Euronext (NYX), the largest stock exchange operator in the U.S., has emerged as the frontrunner to buy the American Stock Exchange. Analysts estimate the Amex could sell for about $350 million.
• Citigroup, Merrill to tap foreign capital again. Merrill (MER) is expected to get a $3-4 billion infusion, mostly from a Middle Eastern government fund, while Citi (C) is believed to be lining up as much as $10 billion from foreign governments.
• Costco posts 7% comps rise. Costco Wholesale (COST) reported a 7% rise in total same-store sales in December over last year.
• Toyota eyes GM as sales rise 6%. Toyota (TM) said global vehicle sales rose 6% in 2007, as a 10% increase in international sales offset a drop in its home market. Toyota inched closer to overtaking GM (GM) as number-one global auto maker by sales volume.
• Three apparel retailers lower outlooks. American Eagle Outfitters (AEO), Men's Wearhouse (MW) and Hot Topic (HOTT) all reduced their Q4 earnings guidance on lower-than-expected December sales. Men's Wearhouse shares fell 12.58% after hours.
• UPS quintuples buyback; Moody's affirms rating. The package delivery service (UPS) is upping its stock buyback plan fivefold to $10 billion. The company also announced a new target ratio for funds from operations to total debt within a range of 50-60%, prompting Moody's to affirm its 'Aa2' rating.
• StatoilHydro stumbles. The newly merged Norwegian oil and gas major (STO) disappointed the market by saying it expects oil and gas production to reach 1.96 million boe a day by 2012, below analyst expectations of 2.04 million. Shares fell 2.6% in Oslo and 0.9% in New York.
• E*Trade ditches institutional business. The online broker (ETFC) will cease all trading services to institutional clients and has sold $3 billion in securities.

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