Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
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.
  • All eyes on Yahoo. Lots of jockeying for position: Sources say AOL (NYSE:TWX) and Yahoo (NASDAQ:YHOO) are working on a deal that would fold AOL into Yahoo, with Time Warner taking a 20% stake in the combined entity for about $10B, some of which would be used to repurchase Yahoo shares at $30-40. News Corp. (NASDAQ:NWS) and Microsoft (NASDAQ:MSFT) have discussed the possibility of a joint Yahoo acquisition, which would "create a huge one-stop shop for online advertisers and bring together some of the largest players in social networking, online news and email." Yahoo and Google (NASDAQ:GOOG) announced Wednesday a joint search advertising test, in which Yahoo will try supplementing its search results with AdSense ads. This may turn up the heat on Microsoft, which wants Yahoo to challenge Google's dominance.
  • Microsoft chimes in. Microsoft (MSFT) General Counsel Brad Smith, on Yahoo (YHOO)/Google (GOOG) test: "Any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google's hands. This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo!"
  • As expected, the Bank of England cut interest rates by 0.25% to 5%.
  • Wal-Mart misses on SSS, boosts Q1 outlook. Wal-Mart reported March same-store sales growth ex-fuel of 0.7%, missing estimates of 1%. For Q1, Wal-Mart sees EPS of $0.74 to $0.76, vs. a prior $0.70-0.74, and consensus estimates of $0.72. April SSS ex-fuel will grow 1% to 3%, it said, which exceeds its 0-2% guidance of the previous two months.
  • Blue Chip economists see recession this year. The U.S. economy is already in recession, or will be sometime this year, the Blue Chip Economic Indicators Survey released today says -- but economists don't think it will be deep or protracted. GDP growth will be 0.1% for quarters one and two, and 1.4% for the year. Business investment will grow 2.5%, down almost 1% from previous estimates. Meanwhile, the IMF said Wednesday GDP growth would slow to an anemic 0.5%, and only 0.6% in 2009. David McCormick, the Treasury's number-one expert on international affairs, called the projections "unduly pessimistic."
  • Inflation becoming serious concern. The IMF pegs 2008 consumer inflation in developed countries at 2.6%, the highest since 1995, amid soaring food, energy and raw-materials prices. Emerging-nations can expect a 7.4% increase in prices. Central banks hope weak U.S. and European economic growth will slow the inflation train.
  • Takeda takes Millennium Pharma for $8.8B. Japan's number-one drug maker Takeda agreed to buy Millennium Pharmaceuticals (MLNM) for $8.8B. The $25/share deal is a 53% premium to Wednesday's close. Millennium has a strong pipeline, including a treatment for inflammatory bowel disease slated for Phase III late this year. Its flagship melanoma treatment, Velcade, had $83.5M in sales in Q1. UBS advised Takeda; Goldman (NYSE:GS) advised Millennium.
  • Costco comps beat, again. Costco Wholesale (NASDAQ:COST) reported March same-store sales growth of 7%, beating consensus estimates of 5.9%. Net sales of $6.57B were up 11%. Domestic SSS grew 5%, while international sales were up 17%.
  • DuPont sees better Q1, worse Q2. DuPont (NYSE:DD) said this morning it sees Q1 EPS of $1.29 and Q2 EPS of $1.05; consensus estimates were for $1.17 and $1.12. It raised the lower-end of its full-year outlook by $0.05 to $3.40-3.55; analysts are looking for $3.45. DuPont reports on Apr. 22.
  • IBM buys enterprise data protection firm. IBM (NYSE:IBM) is acquiring privately-held FilesX, a storage software developer that specializes in continuous data protection and nearly instant data and application recovery software, for an undisclosed amount.
  • Boeing delays; airlines look for compensation. Boeing (NYSE:BA) pushed off delivery of its 787 Dreamliner for another six months to Q3 2009, more than a year later than its original target. It also delayed indefinitely the short-range 787-3. Airlines said they would look for compensation. Industry insiders thought it likely some airlines are secretly relieved, as a weak U.S. economy is expected to take a toll on the industry, and the delay will help keep yields and passenger load figures healthy.
  • BBBY takes a bath on outlook. Bed Bath & Beyond (NASDAQ:BBBY) reported Q4 EPS of $0.66 on revenue of $1.93B (-3.1%), in line with analyst forecasts. For the coming quarter, BBBY sees EPS of $0.26-0.30, well short of a $0.36/share consensus. For 2008, EPS will decline by "low-double-digit to mid-teens" percentage from 2007's $2.10. Shares were pounded in AH trading, -5.6%.
  • No second-half bounce - Soros. The global credit crunch will get worse before it gets better, George Soros said today. Unlike Greenspan yesterday, Soros blamed regulators' "false belief that markets correct their own excesses" for the mess. The IMF said Tuesday global losses will swell to $945B (banks have written down a combined $232B so far), which Soros thinks is accurate, but notes they don't fully reflect the decline in the quality of the loans banks keep on their books. He thinks expectations of a second-half rebound are wildly optimistic.
  • Wholesale inventories more than double forecasts. Inventories at U.S. wholesalers rose 1.1% (vs. 0.5% consensus), while wholesale sales fell 0.8%, the most in more than a year. "Supply is starting to run ahead of demand and that could mean slower growth and also slower inflation further on down the line," Credit Suisse economist Jonathan Basile says. "Rising inventories likely reflect unanticipated shortfalls in demand and often heralds cutbacks in orders and production... a common recession dynamic," economist John Ryding adds.
  • Flight cancellations ground airline stocks. American Airlines (AMR) says recent cancellations, including 900 today, 1,100 Wednesday and 460 Tuesday, are "bleeding" its revenue. "Its going to be big," a spokesman said. FAA inspections of wheel-well wiring are keeping planes on the ground; it has stepped up its oversight in recent weeks following the discovery of lapses at Southwest (NYSE:LUV). Shares fell 11.1% yesterday. Other airlines: LCC -10.4%; CAL -7.6%; UAUA -6.9%; NWA -5%; LUV -1.3%.
  • Net-TV minus the net. MySpace TV (NWS) is partnering with ShineReveille in an effort to take its content global. ShineReveille will distribute MySpace web-shows on TV and DVD outside the U.S. Analysts note web-TV has yet to prove it has a life outside the internet: MySpace's Quarterlife garnered lackluster ratings on in an NBC (NYSE:GE) debut.
  • Toyota, GM to recall 662K cars. Toyota (NYSE:TM) is recalling 539,000 cars and GM (NYSE:GM) is recalling 123,000 due to defects in their power windows.
  • Dollar dips below seven yuan. The dollar traded below seven yuan, its lowest in more than a decade. Beijing seems to be loosening its grip on the currency, and allowing the yuan to more closely reflect its burgeoning economy.
  • Lehman liquidations. Lehman Brothers (LEH) liquidated three investments funds, worth about $1B, and took their assets onto its balance sheet because of "market disruptions." It also bought "certain deteriorated assets" worth $800M from other (unidentified) funds.
  • Moves at MOT. Former AT&T (NYSE:T) CEO David Dorman will succeed Motorola (MOT) CEO Ed Zander as chairman.
  • Dell to launch a low-cost notebook by June. Dell (NASDAQ:DELL) says its offering will be similar to the UMPC (ultra-mobile PC) launched by rival H-P (NYSE:HPQ) this week, which starts at $499. Sources say the machines will more likely compete with Asustek's Eee PC than H-P's Mini-Note (which targets schools); they will have a 8.9-inch display and start at $399.
  • BHP Billiton unaware of rumored challenge. BHP Billiton (NYSE:BHP) said Thursday it isn't aware of a proposed Chinese acquisition of a (rumored 9%+) stake in the firm.

Today's Markets

  • Asian markets were a mixed picture Thursday. Nikkei -1.27% to 12,945. Hang Seng +0.84% to 24,187. Shanghai +1.69% to 3,472. BSE Sensex -0.6% to 15,695.
  • European bourses were all lower at midday. FTSE -0.78% to 5,939. CAC -1.35% to 4,809. DAX -1.4% to 6,627.
  • U.S. equity futures are down at 7:15. Dow -0.45% to 12,513. S&P -0.48% to 1,354.50. Nasdaq -0.45% to 1,829.
  • Gold is up 0.29% to $940. Oil is up 0.67% to $111.62.

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