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.
  • Microsoft's new run at Yahoo. Sources say Microsoft (NASDAQ:MSFT) has talked with both Time Warner (NYSE:TWX) and News Corp. (NASDAQ:NWS) about joining it in a deal that would see Microsoft buy Yahoo's (NASDAQ:YHOO) search business, while one of them would combine forces with what remained of Yahoo. Talks are thought to be preliminary and somewhat of a long-shot. Meanwhile sources also say Yahoo offered to sell itself to Microsoft in mid-May for about $33/share - a price it had earlier rejected. Microsoft dropped its official pursuit of Yahoo two weeks prior. In early pre-market trading, Yahoo is up 5.9% on heavy volume.
  • Google/Yahoo probe may be serious. The Justice Department opened a formal antitrust investigation into a search-ad deal between Google (NASDAQ:GOOG) and Yahoo (YHOO). Yahoo said the probe was not unexpected, given that Google and it are numbers one (60%+) and two (16.6%) in U.S. web search. But lawyers said that the kind of legal requests being issued by the Justice Department in this case - "civil investigative demands" - are not routine.
  • UnitedHealth guides down, to pay almost $1B. UnitedHealth (NYSE:UNH) now sees Q2 EPS of $0.64-0.66, short of the $0.81 Street consensus, and 2008 EPS of $2.95-3.05 vs. $3.52 consensus. It is suffering from gross margin pressures. UnitedHealth also said it agreed to pay $912M to settle two class-action lawsuits related to stock-options backdating. Shares are down 2.4% in pre-market trading.
  • Las Vegas Sands seeks $7B for Macau. Sources say Las Vegas Sands (NYSE:LVS) will borrow $7B to expand and refinance debt for projects in Macau. The money will help it fund $12B in spending on a 20,000-room complex. "Demand for gaming in Macau is still growing fairly well but... the growth of supply is just outrageous," Credit Suisse analyst Gabriel Chan said. "This, together with rising labor costs and inflation, will put further pressure on every casino operator in the next couple of years."
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  • Deutsche Bank soothes Street. Deutsche Bank (NYSE:DB) said it will report a profit for Q2 and won't need to raise capital, sending shares up 3.7% in Frankfurt. It says its Tier 1 ratio, a measure of balance-sheet strength, remains at 9%. The announcement contradicts recent rumors of a profit warning and capital crunch.
  • AstraZeneca bolstered by patent victory. Shares of AstraZeneca (NYSE:AZN) jumped more than 6% in overseas trading after they won a key patent battle against Teva (NASDAQ:TEVA) and Novartis (NYSE:NVS). The court ruling makes it highly unlikely generic copies of its $4B/year blockbuster schizophrenia and bipolar-disorder drug Seroquel will be launched any time soon.
  • Massive downsizing at Starbucks. Starbucks (NASDAQ:SBUX) said it will close 600 'underperforming' stores - 500 more than its previous forecast. It will also reduce its workforce by 12,000 full and part timers - about 7% of its total.
  • Blockbuster deal not to be. Blockbuster (BBI) officially withdrew its offer to buy Circuit City Stores (NYSE:CC), citing market conditions. BBI is up 11.4%; CC is down 7.8% after losing 11.8% Tuesday.
  • Tough Q2 ahead for small banks. Small and regional banks will "fess up to large losses from their mounting volume of soured construction loans made primarily to home builders" when they report Q2 earnings in the coming weeks. $45.4B of $631.8B in outstanding construction loans is already delinquent, and banks trying to sell off their troubled loans are finding fewer buyers and price discounts far more severe than they expected.
  • Labor demand steady. Monster's online employment index edged down to 163 from 166 in May - suggesting no significant change in underlying demand for labor. "While online hiring activity is clearly less robust than a year ago, an encouraging take-away and potential sign of stability is the fact that the index’s year-over-year growth rate in June remained unchanged from May," Monster VP Jesse Harriott said. Demand for retail workers jumped sharply, which correlates with other reports showing continued growth in retail sales, and may indicate growing optimism among retailers that consumers will spend at least a portion of their stimulus checks on purchases over the coming months.
  • Car sales shrink. June U.S. auto sales fell to 13.6M annualized - the lowest since 1993. Domestic car sales of 9.9M were short of the 10.1M vehicle consensus. GM (NYSE:GM) sales fell an adjusted 8% - far better than the Street consensus of -21% - lifting the auto group and the broader markets. Other firms didn't fare as well: Ford's (NYSE:F) June sales fell 28.1%, vs. -19% Street consensus. Ford said June sales were limited due to tight supplies of small cars. Toyota's (NYSE:TM) June sales fell 11.5% to 193K vehicles. Lexus sales fell a steeper 21.1%. Honda's (NYSE:HMC) June sales rose 13.8% to 142.5K units. Nissan's (OTCPK:NSANY) June sales fell 7.5%. Truck sales fell 30.1%.
  • Middle east concerns keep oil prices up. Senior Pentagon officials say there is an increasing likelihood Israel will attack Iran, a move that could lead to the closure of the key Strait of Hormuz, and draw the U.S. into the fray. Crude is flat at $141.20 in overnight trading. Recent Israeli threats to Iran are seen by many pundits as saber-rattling - for now. Media reports said Israel PM Olmert visited Israel's main nuclear reactor Tuesday.
  • LBO debt gets cheaper. Sources say Citigroup (NYSE:C) and Deutsche Bank (DB) are trying to sell $3B of the LBO debt they took on in the Clear Channel (CCU-OLD) buyout - for 'mid-80s' on the dollar, down from $0.90–0.91 last week.
  • Retail sales shine - dimly. Chain store sales increased a slight 0.1% according to the ICSC. Demand continues to be driven by basics and staples. Yearly sales growth remains at 2.2%. Redbook said same-store sales grew 2.9% vs. a year ago, which it depicts as firm but below retailers' goals.
  • Construction spending fell 0.4% in May, slightly better than the -0.6% Street consensus.
  • The ISM's Manufacturing Index edged into 'expansive' territory at 50.2%, up from 49.6 last month - and well ahead of the 48.7% Street consensus.

Today's Markets

  • Asia: Nikkei -1.3%. Hang Seng -1.8%. BSE Sensex +5.4%. Shanghai +0.1%. The Nikkei is in the midst of its longest losing streak in 43 years.
  • Europe: FTSE +1.4%, German DAX +1.2%, French CAC +0.5%.
  • U.S. futures are up in overnight trading. Dow +0.33%. S&P +0.52%. Nasdaq +0.88%. Crude +0.13% to $141.15. Gold -0.65% to $938.40.

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