Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
Dell takes a battering after woeful earnings report. Dell (NASDAQ:DELL) shares were -13.1% premarket after the company's FQ1 earnings missed expectations and it offered no EPS guidance. FQ1 EPS fell to $0.43 from $0.55 as revenue slipped 4% to $14.42B, hurt by tablets eating into the sales of notebooks, price competition, and an inefficient sales structure. Dell's road to turning itself from mainly a PC firm to a one-stop shop for corporate IT is a long one. Opinion: Dell's buyback disaster shows need for a dividend.

EU leaders divided once more. EU leaders are due to meet in Brussels today as Germany comes under increasing pressure to agree to a softening of austerity and to eurobonds, ideas favored by Francois Hollande. However, as an EU diplomat puts it to Reuters: eurobonds are "the equivalent of ringing the bell for a happy hour so the inebriated can postpone their hangover indefinitely." Opinion: The calm before the storm.

Top Stock News
Morgan Stanley probed over Facebook IPO claim. Massachusetts' top securities regulator has subpoenaed Morgan Stanley (NYSE:MS) over allegations that the bank only told selected clients that its analyst had cut his revenue estimate for Facebook (NASDAQ:FB). The investigation adds to those of Finra and the SEC. Business Insider reports that the estimates were reduced on the orders of Facebook, a claim that's backed up by a Bloomberg report from May 11. Opinion: Facebook: Who's to blame?

SAP to buy Ariba for $4.3B. SAP (NYSE:SAP) is making further inroads into cloud-computing with the $4.3B acquisition of Ariba (NASDAQ:ARBA), a major developer of networking and online commerce software. However, SAP might have to be prepared for a bidding war with Oracle (NASDAQ:ORCL), Cross Research analyst Richard Williams tells Reuters, as many of Ariba's customers use Oracle's services. Opinion: SAP and databases: No longer an oxymoron.

Barclays earned $5.5B from BlackRock stake sale. Barclays (NYSE:BCS) has taken a step to raising its Tier 1 capital ratio to meet Basel III requirements by raising a net $5.5B from the divestment of its 19.6% stake in BlackRock (NYSE:BLK). Barclays sold 26.2M shares to money managers for $160 each and 6.38M shares to BlackRock for $156.80. There's also a greenshoe option of 2.6M shares. Opinion: 3 substantially undervalued financial stocks.

Getty could be sold or go to IPO. P-E firm Hellman & Friedman is reportedly considering selling or listing Getty Images, the world's biggest provider of stock photos, video and other digital content. The company could be valued at $4B, up from the $2.4B that H&F paid to acquire the firm four years ago. Opinion: 2 IPOs planned for this week.

H-P earnings seen falling as investors await reorganization plan. Following Dell's (DELL) poor showing yesterday, the attention now switches to Hewlett-Packard (NYSE:HPQ), which is due to release its FQ2 earnings after the bell. Analysts forecast that EPS fell to $0.91 from $1.24 and that revenue declined 5.4% to $29.9B. H-P is also expected to unveil a restructuring plan that will include laying off over 25,000 employees. Opinion: HP will tank without firm PC grip.

RailAmerica catches Berkshire's eye. RailAmerica (NYSE:RA-OLD) rose 10.7% in post-market trading after saying, in response to market rumors, that its board is considering strategic alternatives, including a sale of the company. Berkshire Hathaway (BRK.A, BRK.B) is reportedly interested in buying RailAmerica, which is worth $1.1B, from majority-owner Fortress Investment. Opinion: Railroad stocks are heading higher.

Sony, Samsung try to stop discounts. Sony (NYSE:SNE) and Samsung (OTC:SSNLF) are trying to force retailers to rein in discounts on televisions, a move that could not only save profit margins at two of the world's largest TV makers but also help retail chains like Best Buy (NYSE:BBY) and Target (NYSE:TGT) remain competitive against online discounters. Opinion: Best Buy: Wrong place, wrong time.

Top Economic & Other News
CBO warns about "fiscal cliff." The CBO has predicted that the U.S. economy would enter another recession in H1 2013 if planned tax increases and spending cuts are allowed to go into effect in January. The CBO projects the economy would contract 1.3% in H1, but if the spending cuts and tax increases don't come into force, the economy would add 2M jobs in 2013 and U.S. GDP would grow 4.4%. Opinion: The importance of the looming fiscal cliff.

BOJ leaves policy unchanged as Japanese trade deficit widens. The Bank of Japan has kept its monetary policy unchanged, leaving rates at 0-0.1% and holding asset purchases steady at a total of ¥70T ($880B). The decision came as data showed that Japan's trade deficit widened to ¥520.3B ($6.5B) in April from a shortfall of ¥84.5B in March, with exports rising a less-than-expected 7.9%. Finance Minister Jun Azumi called for the BOJ to "take appropriate steps in a timely manner." Opinion: How an aging society can impact the markets.

Germany sells bonds with zero coupon. Germany has sold €4.56B of two-year notes carrying a coupon of zero and priced to yield 0.07%. There was strong demand for the paper as investors seek safe havens even at these prices. How low can the yield go? Well, Swiss two-year paper yields -0.1%. Opinion: Does it make sense to invest in German bonds for zero return?

Iran, world powers set to meet after IAEA deal. Iran expects "good news" from the latest talks with the P5+1 group - which are due to take place today in Baghdad - although the U.S. says Iran won't receive relief from sanctions. The talks come a day after Iran and the IAEA agreed to a deal over the inspection of nuclear sites, which sent oil prices lower. Opinion: Why oil will rally soon.

Today's Markets:
In Asia, Japan -2.0%. Hong Kong -1.3%. China -0.4%. India -0.5%.
In Europe, at midday, London -1.8%. Paris -2.0%. Frankfurt -1.7%.
Futures at 7:00: Dow -0.65%. S&P -0.7%. Nasdaq -0.7%. Crude -1% to $90.91. Gold -1.2% to $1558.30.

Today's economic calendar:
7:00 MBA Mortgage Applications
10:00 New Home Sales
10:00 FHFA House Price Index
10:30 EIA Petroleum Inventories
1:00 PM Results of $35B, 5-Year Note Auction
2:00 PM Fed's Kocherlakota: Monetary Policy

Notable earnings before today's open: AEO, AINV, BIG, BMO, EV, HRL, TOL

Notable earnings after today's close: HPQ, NTAP, P, PVH, SNPS

See full real-time earnings coverage »

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