- Crop losses widen. The USDA released its weekly Crop Progress report: 9% of the corn is in excellent condition (vs. 10% last week), 48% good (vs. 50%), 31% fair (unchanged), 9% poor (vs. 7%), and 3% very poor (vs. 2%). Total corn in excellent-to-good condition is 57%, vs. 60% last week and 70% last year. 95% of corn has emerged, vs. 100% last year and a five-year average of 98%. Soybeans emerged is 71%, vs. 90% last year and a five-year average of 86%. This year's crop rating is the lowest since 1996.
- Rotten outlook sinks Chiquita. Food companies were slammed Monday after Chiquita (NYSE:CQB) predicted a significant Q3 loss on higher fuel and fertilizer costs. CQB -29.1%. FDP -13.7%. PPC -10.1%. SFD -4.35%. SAFM -4.7%. TSN -1.1%.
- Food could cost 7-9% more next year. Economists say heavy Midwest flooding may cause U.S. food prices to climb 7-9% in 2009. "The U.S. consumer has gotten used to cheap, affordable food," food-industry analyst Fiona Boal says. "Now the goal posts are moving."
- Junk and junkier. Junk bond defaults hit a 31-month high of 1.45% in May, up from 1.29% in April. U.S. junk fared worse - 1.89% up from 1.64%. 16 of 33 global corporate debt defaults this year, totalling $38.3B (up from $8.1B in all of 2007!), are from consumer-related sectors such as retail, restaurants, leisure and media.
- Trade-talks' $14B prelude. Leading businesses in China and the U.S., including GM, F, ORCL, IBM, MOT, JAVA, TXN and QCOM, announced $14B in new business deals on Monday -- a precursor to a likely bilateral investment treaty.
- Buffett backs InBev. Sources say Warren Buffett, whose Berkshire Hathaway (NYSE:BRK.A) owns a 5%+ stake in Anheuser-Busch (NYSE:BUD), supports InBev's $65/share bid for the brewer.
- Daimler launches another big buyback. Daimler (DAI) said it will buy back up to €6B of its shares, reducing shares outstanding by 10%. Shares were up 4.8% in Frankfurt.
- Alcatel gets $1B China Mobile contract. Alcatel-Lucent (NYSE:ALU) is +4.2% in pre-market trading. Late Monday, it signed a $1B framework with China Mobile (NYSE:CHL) to provide mobile equipment and services.
- Analysts on the move. Energy analysts are being lured by hedge funds from big-name Wall Street brokerages like Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C). Morgan was forced to drop coverage of ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) when its big-oil analyst left suddenly. Going from a securities firm to a hedge fund can often mean doubling one's salary, to as much as $4B. The pre-2000 sell-side model is falling apart, one hedge fund manager says. "You don't have the means by which to really underwrite a successful sell-side operation. As a result, they're no longer able to pay the salaries to attract the top talent."
- CME Nymex deal cleared by DoJ. CME Group's (NASDAQ:CME) proposed merger with Nymex (NMX) was approved by the DoJ late Monday. Some industry watchers thought the deal would face greater opposition, considering it gives the combo 95% of the U.S. futures business. 75% of Nymex shareholders must still approve the $9B deal (it was originally worth $11B), and there is substantial opposition. CME is up 3.9% in the pre-market; NMX is up 1.6%.
- Chinalco may want more Rio. Chinese aluminium giant Chinalco (NYSE:ACH) appears keen to add to its stake in Rio Tinto (RTP). Earlier this year Chinalco and Alcoa (NYSE:AA) took a $14B joint stake in RTP. The stake could be used to foil BHP Billiton's (NYSE:BHP) $180B hostile takeover bid.
- TNK-BP pressure goes up another notch. Russian oligarch Mikhail M. Fridman attacked BP’s (NYSE:BP) management of TNK-BP, and threatened to go to court to wrest more control over their joint venture. BP chairman Peter Sutherland has been critical of recent Kremlin raids of its offices; there is speculation the Kremlin might try to take over TNK-BP by forcing a sale to Gazprom.
- Hershey staying independent. Hershey Foods (HSY -6.4%) says it considered strategic options, but has completely ruled out a sale of the company. There had been speculation of a sale/merger in order for Hershey to remain competitive with the Mars/Wrigley (WWY) combo.
- Builder confidence at record lows. The NAHB Housing Market Index came in at 18, down from 19 in May. Ratings below 50 signal negativity. Builders see traffic continuing to weaken over the next six months.
- Intel to spinoff solar unit. Intel (NASDAQ:INTC) is spinning-off an internal start-up to form SpectraWatt, which will supply photovoltaic cells to solar module makers. Goldman's (NYSE:GS) Congentrix Energy is investing in a $50M round.
- UK prices up more than expected. U.K. consumer price inflation jumped 3.3% from a year ago, exceeding analyst estimates of 3.1%. While the BoE has indicated future cuts to its 5% target rate may be in store, today's number makes it likely cuts will not be anytime soon. Food prices were up 7.8% Y/Y; energy prices soared 11.2%. Core CPI was up 1.5%.
Earnings: Monday After Close
- Adobe (NASDAQ:ADBE): Q2 EPS of $0.50 beats by $0.04. Revenue of $887M in-line. Sees Q3 EPS of $0.45-0.47 (consensus $0.45). Shares -1.2%.
- Cemex (NYSE:CX): Sees Q2 revenue of $6.4B, better than consensus of $6.18B. Shares +2%.
- Infinera (NASDAQ:INFN): Sees Q2 EPS of $0.01-0.02, better than consensus of -$0.02. Sees Q2 revenue of $88-90M in-line. Sees Q3 revenue of $75-$80M, short of consensus of $97.7M. Shares: -25.6%.
- La-Z-Boy (NYSE:LZB) FQ4 EPS of -$0.09 misses by $0.11. Revenue of $368M (-9.8%) vs. consensus of $376M. -10.3%.
- Asia closed mixed Tuesday: Nikkei -0.04% to 14,348. Hang Seng +0.12% to 23,058. Shanghai -2.76% to 2,794. BSE +1.96% to 15,697.
- Europe is up strongly at midday: London +1.7%. Paris +0.9%. Frankfurt +1.4%.
- Futures indicate a strong open: Dow +0.47%. S&P +0.53%. Nasdaq +0.45%.
- Gold is flat at $886.50. Crude -0.92% to $133.37.
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