Wall Street Breakfast: Must-Know News

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Includes: AAPL, ADBE, ALKS, ARO, ARUN, AXL, BAC, BBOX, BHP, BX, CA, CBS, CMCSA, DDS, DIA, F, FL, FNMA, GE, GM, GOOG, GPS, HAL, LMCA, MER, MSFT, NDAQ, NYX, PHG, PSUN, QQQ, RIO, SKIL, SPY, TWX, VRGY, WYE, YHOO, ZUMZ
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.
  • Home prices post record drop. U.S. home prices recorded their first-ever recorded quarterly drop, falling 3.1% from a year ago. Prices also fell 1.7% from last quarter, the largest quarterly drop on record. "The large overhang of real estate inventory awaiting sale continues to force price declines," Ofheo chief economist Patrick Lawler said.
  • Ballmer distances himself from Yahoo. Microsoft (NASDAQ:MSFT) CEO Steve Ballmer says its bid for Yahoo was "never the strategy we were pursuing," (ok, so what was it?), and that the company now has $50B to spend on other strategic acquisitions. He denied speculation of a tie-up between Adobe's (NASDAQ:ADBE) Flash technology and Microsoft's Silverlight as a move to forestall a possible Apple (NASDAQ:AAPL)/Adobe merger.
  • Yahoo pushes off shareholder meeting. Yahoo (NASDAQ:YHOO) delayed its annual shareholder meeting from July 3 to "around the end of July." The move may give Yahoo more time to stave off a proxy fight with activist shareholder Carl Icahn. Icahn will have to reduce his proposed slate to 9 from 10, after Yahoo veteran board member Edward Kozel resigned to spend more time with his family.
  • Google makes pitch for white space. Google (NASDAQ:GOOG) CEO Larry Page urged Congress and the FCC to open up so-called white space -- TV's unused spectrum. Page says the move would ultimately "blanket" the U.S. with wireless internet access. The FCC has tested white space devices from Motorola (MOT), Microsoft (MSFT) and Philips Electronics (NYSE:PHG), but has thus far found flaws. Separately, Page said a Microsoft (MSFT)/Yahoo (YHOO) merger would give the two 90% of the communications market -- but that a proposed Google/Yahoo search ad deal could be structured to be reasonable.
  • Halliburton hounds Expro. Halliburton (NYSE:HAL) put in a £1.71B ($3.38B) bid for U.K. oilfield-services company Expro International Group plc, trumping an agreed-upon private-equity deal worth £1.6B. Oil services companies are boosting activity due to robust oil prices and strong demand.
  • Regulators wary on BHP/Rio tie-up. European regulators are scrutinizing BHP Billiton's (NYSE:BHP) $188.5B bid for Rio Tinto (RTP) amid concerns a merger could further lift already high steel prices. BHP CEO Marium Kloppers claims a linkup would result in synergies that could boost iron ore (a critical steel component) production and ease prices, and says he's confident authorities won't block the deal (to which Rio has not agreed). Eurofer, Europe's steel trade and lobbying group, and the China Iron and Steel Association, are opposed to the merger.
  • Fed frets foreclosure. Fed governor Randall Kroszner said the rising rate of foreclosures is an urgent problem that requires non-traditional remedies. "High loan-to-value ratios at origination, combined with stagnant and eventually declining home prices, are a key aspect of the recent rise in delinquencies and foreclosures," he said, adding that "risk layering" maneuvers such as piggyback loans and negative amortization are compounding the problem.
  • Paulson says end of credit crunch in sight. Treasury Secretary Henry Paulson says the U.S. is approaching the end of the credit crisis. He expressed confidence current policies will succeed in addressing economic issues. "Ultimately, the fundamentals will restore confidence in the U.S. economy."
  • Weather Channel bidders down to two. Time Warner (NYSE:TWX) and an NBC (NYSE:GE)/Blackstone (NYSE:BX) partnership are the lead contenders in today's round-two of the Weather Channel auction, sources say. Bids, due today, are expected to come in at $3-4B. Dropouts include CBS (NYSE:CBS), Liberty Media (LCAPA) and Comcast (NASDAQ:CMCSA). Time Warner would join the Weather Channel with CNN (both are in Atlanta), resulting in staff reductions. NBC would merge it with its NBC Weather Plus.
  • Merrill shrinking asset book. Merrill Lynch (MER) is setting up a unit to dump underperforming assets such as CDOs. Fixed-income, currencies and commodities assets are among those the group will look to exit.
  • NYSE losing grip. Trading on the NYSE (NYSE:NYX) fell 26% to the lowest since 2001 as traders move their business to alternative options such ECNs Bats Trading and Direct Edge. Nasdaq (NASDAQ:NDAQ) trade volume is at its lowest level in more than three years. This, despite an overall jump in trade volume of U.S. equities. A noteworthy side issue is that trading systems that depend on NYSE and Nasdaq trade volume data as a critical input are losing their edge.
  • Wyeth drug delayed. The FDA again denied approval of Wyeth's (WYE) osteoporosis drug bazedoxifene, saying it wants more information on stroke and blood-clot issues. Wyeth says the request was expected.
  • Kerkorian wants more Ford. Kirk Kerkorian increased his loan request from Bank of America (NYSE:BAC) to buy Ford (NYSE:F) shares to $600M from $500M. Kerkorian revealed in late April a 4.6% stake. Ford (F) yesterday warned it will not hit a key return-to-profitability target in 2009, sending shares down 8%. CEO Alan Mulally now expects to be "about break-even" in 2009 before taxes and special items. "Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American automotive profitability goal."
  • American Axle strike history. The UAW strike at American Axle & Manufacturing (NYSE:AXL), which decimated much of General Motors' (NYSE:GM) production, is officially over.
  • Fannie's mortgage purchases jump. Fannie Mae's (FNM) mortgage purchase commitments soared 9.8% in April to $30.7B. Refinance activity fell 19.7%, following a 24.9% drop the month before.
  • Debt defaults ominous. Global corporate debt defaults in 2008 have already surpassed 2007's total. S&P reports 28 defaults on $18.9B in debt. Diane Vazza, head of S&P's global fixed-income research group, says defaults will hit 4.7% over the coming year. "Defaults could be significantly more pronounced and severe, especially if the recession would be deeper and longer than expected."

Earnings: Thursday After Close

  • Aeropostale (NYSE:ARO): Q1 EPS of $0.26 just beats consensus of $0.25. Revenue of $336M (+21.9%) vs. consensus of $332M. Sees Q2 EPS of $0.22-0.24 vs. consensus of $0.24.
  • Alkermes (NASDAQ:ALKS): Full-year EPS of $0.31 beats consensus of $0.15. Revenue of $241M in-line. Sees 2009 EPS of -$0.16 to -$0.11, short of consensus of $0.19, and revenue of $175-200M vs. consensus of $246M.
  • Aruba Networks (NASDAQ:ARUN): FQ3 EPS of -$0.01 in-line. Revenue of $42.6M (+22.8%) in-line.
  • Black Box (NASDAQ:BBOX): FQ4 EPS of $0.74 misses consensus of $0.77. Revenue of $245M (-2%) vs. consensus of $242M. Sees 2009 revenues of $1B vs. consensus of $1.05B.
  • CA Inc. (NASDAQ:CA): FQ4 EPS of $0.22 misses consensus of $0.28. Revenue of $1.085B (+8%) in-line. Sees 2009 EPS of $1.45-1.52, better than consensus of $1.32, and revenue of $4.5-4.6B vs. consensus of $4.42B.
  • Dillard's (NYSE:DDS): Q1 EPS of $0.04 misses consensus of $0.21. Revenue of $1.67B vs. consensus of $1.71B.
  • Foot Locker (NYSE:FL): Q1 EPS of $0.14 in-line. Revenue of $1.31B (-0.5%) vs. consensus of $1.28B. Sees full-year EPS of $0.65-0.85, better than consensus of $0.70.
  • Gap (NYSE:GPS): Q1 EPS of $0.34 beats consensus of $0.31. Revenue of $3.38B (-4.6%) vs. consensus of $3.42B. Sees full-year EPS of $1.20-1.27, short of consensus of $1.25
  • Pacific Sunwear (NASDAQ:PSUN): Q1 EPS of -$0.17 misses consensus of -$0.10. Revenue of $267M (-0.4%) in-line. Sees Q2 EPS of $0.03-0.08, short of consensus of $0.12. Sees full-year EPS of $0.59-0.64, short of consensus of $0.67.
  • Verigy (NASDAQ:VRGY): FQ2 EPS of $0.23 beats consensus of $0.19. Revenue of $162M (-11.5%) in-line. Sees Q3 EPS of $0.24-0.29, better than consensus of $0.19, and revenue of $170-180M vs. consensus of $159M.
  • Zumiez (NASDAQ:ZUMZ): Q1 EPS of $0.05 beats consensus of $0.03. Revenue of $78.7M (+14.4%) vs. consensus of $78.1M. Sees full-year EPS of $0.90-0.93 vs. consensus of $0.92.

Earnings: Friday Before Open

  • Skillsoft Corp (SKIL): Q1 EPS of $0.06 beats consensus of $0.05. Revenue of $81.6M vs. consensus of $80.4M. Sees Q2 EPS of $0.06-0.07, short of consensus of $0.08. Sees full-year EPS of $0.32-0.35 vs. consensus of $0.35.

Today's Markets

  • Asia: Nikkei +0.24%. Hang Seng -1.31%. Shanghai -0.36%. BSE Sensex -1.52%.
  • In Europe, markets are off at midday. FTSE -0.39%. CAC -0.76%. DAX -0.33%.
  • U.S. equity futures are lower into the open. Dow -0.42%. S&P -0.39%. Nasdaq -0.29%.
  • Gold +0.81% to $925.60. Crude +2% to $133.41.

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