Wall Street Breakfast: Must-Know News

• Barclays boosted by share sale. Barclays (BCS) is up 5.7% in pre-market trading. It said it is raising £4.5B ($8.9B) in a share sale, with Sumitomo Mitsui and Qatar taking stakes. Half of the money will go to fund new opportunities, and the other half will be used to raise its capital level.
• UBS hires advisors. Media reports say UBS (UBS) has hired Lazard (LAZ) to conduct a strategic review of its business, apparently fueling recent speculation of a sellout (to HSBC (HBC)?) or spinoff of its investment banking unit. Shares gained 6.9% yesterday on the speculation, and are up another 4.95% in early pre-market trading.
• SEC to endorse borderless trading. The SEC will propose allowing U.S. retail customers to trade directly with overseas brokerage houses, easing the 'chaperone rule' which requires overseas brokers to solicit U.S. business through a U.S. partner. It will also suggest lowering the bar for investors qualifying for direct contact with overseas brokers to $25M from $100M. E*TRADE (ETFC) and Interactive Brokers (IBKR) already give customers access to select foreign markets.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• Will airplane orders fall from the sky? As many as 1/3 of new orders for Boeing (BA) and Airbus jets may be cancelled or deferred by airlines hit by the high price of oil. With 7,000+ orders for $500B of planes, losses could be heavy. "Many airline business models cease to work at $135-a-barrel oil prices," an RBS strategist says.
• Fishy deal. South Korea's Donwon is buying a controlling stake in StarKist from Del Monte (DLM) for $300M.
• Google's Ad Planner sinks comScore. Shares of ComScore (SCOR) tumbled 22.5% after Google (GOOG -0.5%) introduced Ad Planner, a free tool that helps users identify websites that match their target audiences. At least one analyst said Google's tools are no match for comScore's, which tracks a diverse set of demographic information on millions of users worldwide.
• Yahoo/Microsoft rumors. Shares of Yahoo (YHOO) went on a wild roller-coaster ride Tuesday. First, Weisel analyst Christa Quarles cut shares to Underweight with an $18 target "until we see major action as it relates to organizational hurdles, product improvements and the re-acceleration of organic revenue," sending shares down in early trading. Yahoo later jumped after TechCrunch cited multiple inside sources who insist full-scale buyout talks are on again between Microsoft (MSFT) and Yahoo. It said Microsoft's answer of "no comment," as opposed to previous retorts of "there are no talks currently," was telling. CNBC and NY Times DealBook later debunked the rumor, saying inside sources verified "nothing has changed" since Microsoft and Yahoo split ways earlier this month.
• Kodak takes tax refund to the bank. Eastman Kodak (EK) jumped 13.7% after announcing a $1B share repurchase, which equals about 25% of its total shares outstanding. Even better: $581M is coming from a mammoth tax refund.
• Merrill moves into Chile. Merrill Lynch (MER) is acquiring Chile's oldest stock brokerage, Ureta y Bianchi Corredores de Bolsa, giving it an exchange seat and securities licenses to ramp up its equities business in the region. Merrill recently hired nine investment bankers in Brazil from rivals Credit Suisse (CS) and UBS (UBS) in an effort to expand its Latin America footprint.
• Pier 1 sails off. Pier 1 Imports (PIR) withdrew its stock-only proposal to buy rival Cost Plus (CPWM), saying it was unlikely it could acquire a majority interest at a decent price.
• Consumer confidence fell to levels not seen since 1992. The Conference Board's June index plunged to 50.4 from 58.1, far worse than the economist consensus of 56. "Perhaps the silver lining to this otherwise dismal report is that Consumer Confidence may be nearing a bottom," The Conference Board's Lynn Franco said. A White House spokeswoman was unmoved by the severe drop: "We are confident that [the stimulus package] will have the impact that we thought it would toward the latter half of the year. We believe that the long-term resilience of our economy is very strong," Dana Perino said.
• Manufacturing activity, as measured by the Richmond Fed, pulled further back in June, to -12 from May's -3. Order expectations and hiring outlooks were less optimistic than a month ago. Service sector revenues and retail sales fell as well; the latter dragged down by a sharp drop in big-ticket sales. Merchants eliminated more jobs during the past month.
• Dice it and slice it, home prices fell. Home prices fell 1.4% from March to April and a record 15.3% on the year, less than the 2% and 15.9% expected by economists, according to S&P/Case Shiller's index. Huge inventories could produce further price declines, it said. Ofheo said home prices fell 0.8% in April, based on a different matrix. Consensus was for -0.4%. Prices have now retreated to their Dec. 2005 levels. Analysts were encouraged by the better-than-expected Shiller numbers: "We're approaching a bottom in term of house prices... the very worst of the crisis may be behind us," Morgan Stanley's James Caron said.
• UK retail sales surprisingly strong. A key measure of UK retail sales found sales lower than a year ago, but better than May, and far stronger than economist expectations.

Earnings: Tuesday After Close

• 3Com (COMS): FQ4 EPS of $0.09 beats by $0.04. Revenue of $321M (+3.3%) vs. $315M. Shares: +6.3%.
• Darden Restaurants (DRI): FQ4 EPS of $0.78 beats by $0.03. Revenue of $1.83B (+25.1%) in line. Sees 2009 EPS and revenue growth of 9-10% and 14-15%, in line. Shares: +0.8%.
• Jabil Circuit (JBL): FQ3 EPS of $0.26 beats by $0.06. Revenue of $3.09B (+2.9%) in line. Sees Q4 EPS of $0.29-0.3 vs. $0.29 consensus, and revenue of $3.2-3.3B vs. $3.19B consensus. Shares: +7.75%.
• Sonic (SONC): FQ3 EPS of $0.28 misses by $0.03. Revenue of $213M (+1.5%) vs. $220M consensus. Sees full-year EPS growth of 4-6% -$1-1.02 vs. consensus of $1.05. Shares: -9.15%.

Earnings: Wednesday Before Open

• General Mills (GIS): FQ4 EPS of $0.73 in line. Revenue of $3.47B (+13.4%) vs. $3.37B consensus. Sees 2009 EPS of $3.78-3.83, short of $3.84 consensus. [PR]

Today's Markets

• Asia markets were generally higher Wednesday: Japan -0.14%. Hong Kong +0.8%. China +3.64%. India +0.8%. Taiwan +1.51%.
• In Europe, markets are higher across the board: London +0.32%. Paris +1.2%. Frankfurt +0.74%.
• Futures point to a higher open. Dow +0.45%. S&P +0.61%. Nasdaq +0.88%. Crude -0.21% to $136.71. Gold -0.47% to $887.40.

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Comments

[TheSnail]

We want a return of "Under the Radar News"!!!!!

Please Eli!!!

[jlounsbury59]

Another vote for "Under the Radar News".

[PCScipio]

A third vote.

[Mazel Tov]

Mazel Tov to that!!! Under the Radar baby!!! Give it to us Rabbi Hoffmann

[RiverCat]

4th vote - Under the Radar

[Reader 1]

I love WS breakfast! Thank You Eli. Can't wait for the return
of "UNDER THE RADAR NEWS".

[SA EditorEli Hoffmann]

Thanks for your comments guys. I'm interested in your feedback.

My thoughts were that our new Market Currents (archive page: seekingalpha.com/marke...) is like Under The Radar on steroids. Have you seen it?

[BillF]

Somehow I missed a couple of issues. Really missed them. :-)

[RightinSanFrancisco]

One more vote for "Under the Radar". Have checked Market Currents, but it is too much. What I most appreciate on both of your columns is your ability to select those items that seem to fit into a pattern - although I would be hard pressed to identify what that pattern is.

[User 109922]

sure like Under the Radar News

[Amidwesternneighbor]

GS really doesn't get BA. Sure, airlines are hurting. Yes, some orders will get cancelled. But let me ask...how many years worth of backlog are there? Yeah, several, worth ~10 times BA's market cap! And a big reason many of those orders exist is because the newer planes are more fuel-efficient...*help... the airlines deal with high fuel costs. Yet GS cites that high fuel cost as a source of hurt for BA. The reality is, high fuel costs for airlines are a moot point - these effects cancel each other to some degree. Furthermore, given the multi-year backlog, it is likely that fuel costs will have either moderated again, or that the overall economic situation will change in some way that diminishes the effect of high oil prices. Those lost orders could easily be renewed two years down the road, before they were originally scheduled for delivery anyway!

Furthermore...aside from all the talk of lost orders and high fuel costs, GS is downgrading BA right at the time when BA is *finally* starting to meet milestones on the 787...if anything, BA is finally building momentum on that project, and apart from macro-economic worries, BA would be seen as having bottomed.

In short, I think there's a better than 50% chance that GS has muffed this one big time! The dollar may soon begin strengthening; we may soon see offshore drilling limits lifted...both causing lower oil prices; and BA is building momentum. Note that they beat last quarter, also amidst record high oil, and during a period where it seemed like the 787 project was announcing a new delay every month. Their existing production deliveries were being made more efficiently than expected, showing the company is thriving despite the 787 delays, and despite high oil.

I am long BA.

[User 144216]

Market Currents is great. It may take some time for people to get used to it, though.