- GM hopes the worst is over. GM lost a stinging $15.5B in Q2, including $9.1B in charges and write-downs. "As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations." CEO Wagoner, talking on CNBC, says he's hopeful this is the worst it gets. Wagoner is still comfortable with GM's liquidity plans, he says. It will take a while to swing a deal for Hummer, but they are moving as quickly as possible.
- Schering-Plough slides. Shares of Schering-Plough (SGP) are down 5.1% in pre-market trading after it says it received a 'surprising and disappointing' non-approvable letter from the FDA for its post-surgery muscle relaxant sugammadex. The treatment received unanimous support from an FDA advisory panel in March, and was "the first major pharmaceutical innovation in the field of anesthesia in two decades," research chief Thomas Koestler said.
- Mittal may crash Cleveland party. ArcelorMittal (NYSE:MT) is considering whether to disrupt the $8.8B takeover of Alpha Natural Resources (ANR) by Cleveland-Cliffs (NYSE:CLF) with a counter-bid. It may also sit on the sidelines until the deal closes, and then make a move for the combo. Sources say MT indicated it was willing to make an all-cash offer of about $110/share for ANR in June, prompting it to seek other bids. CLF's offer is worth about $128/share; ANR closed Thursday at $98.95.
- Lehman shops stigmatized assets. Lehman CEO (LEH) Dick Fuld is trying to shop tens of billions of dollars in mortgage-based securities in order to reduce its leverage and prop up its balance sheet. Preliminary talks see LEH selling some of its risky assets to a domestic or foreign entity, and potentially providing funding for the sale. There is speculation Lazard (NYSE:LAZ) has been hired to advise Lehman.
- Lilly trained sales force to downplay risks. Eli Lilly (NYSE:LLY) trained its sales force to downplay the risks of Zyprexa and to encourage doctors to prescribe the drug beyond approved uses for schizophrenia and bipolar disorder, court documents reveal. Lilly's research shows some patients gained as much as 80 pounds while under treatment, and that the incidence of high blood-sugar at diabetes levels was 3.5x more than for placebos.
- 30-year mortgage rates fell to 6.52% this week, down from 6.63% last week. "A drop in commodity prices eased market concerns over inflation pressures," Freddie Mac economist Frank Nothaft says. "For instance, the Department of Energy reported that gasoline prices were the lowest since the end of May, and oil prices were at levels not seen since early May." 15-year mortgages fell to 6.07% from 6.16%.
- Initial Q2 GDP estimates of +1.9% fell well short of the +2.3% consensus, although it was still more than double last quarter's 0.9%. 2007 annual growth was revised up 1.0% to 4.8%, while Q4 GDP growth was revised down 0.8% to -0.2% - prompting further speculation that may have been the launching pad of a U.S. recession.
- Q2 Personal Consumption rose 1.5%, just short of the +1.7% consensus. Core PCE +2.2% vs. +2% consensus.
- Initial Jobless Claims came in much higher than expected - 448,000 vs. 393,000 consensus. The 4-week average jumped to 393K from 382K.
- NYC Business Activity declined at a faster pace in July, with the NAPM's index falling to 38.5. Future optimism turned abruptly to pessimism. Business impediments: 1) Financial concerns - "credit crisis, credit markets, market conditions, market slowdown, market uncertainty, market volatility;" 2) Growth concerns - "consumer spending, current economic conditions, decreasing revenue;" 3) Inflation concerns - "energy/fuel, high energy costs, price increases across the board, rising raw materials costs."
- Chicago Business Barometer rose for first time in five months - to 50.8 vs. 49 consensus - signalling modest growth "in spite of a consistent drum-beat from those seeking to establish a recession.
- Employment costs rose 0.7% in Q2, the same as Q1 and in-line with estimates. The increase extends the moderation in labor compensation; labor costs have been in a downtrend since Sep. 2006.
- Greenspan sees us on the brink of recession. Former Fed chief Alan Greenspan says the U.S. economy is "right on the brink" of a recession despite its surprising strength thus far. "Given the extraordinary pressures coming from the financial sector... the American economy is holding up rather well," Greenspan said on a CNBC interview Thursday, noting current data don't suggest recession. Still, "I think we're probably likely to go there, we're right on the brink," he said. "I would be more surprised if we didn't than if we did, given the financial state." He also noted the housing market is "still nowhere near the bottom" in terms of pricing. He called Fannie Mae (FNM) and Freddie Mac (FRE) "an accident waiting to happen," and suggests the government nationalize the GSEs, restructure them, give them more capital, split them into five or ten entities, and sell them back to the market.
- UK manufacturing contracts, prices soar. U.K. manufacturing shrunk by the most in a decade, while prices charged rose to nine-year highs. "Recession, here we come," BNP Paribas's Alan Clarke reacted. "The Bank of England's dilemma isn't changing but the extremes are fanning out and getting much worse."
- China loosens up. China watchers say Beijing has moved noticeably toward loosening commercial banks' credit quotas over the last week. The easing of the quotas, imposed on banks earlier this year as a key part of China's monetary tightening, show Beijing is quickly acting on its decision last week that maintaining steady economic growth is as vital as curbing inflation. [DJ]
Earnings: Friday Before Open
- Boyd Gaming (NYSE:BYD): Q2 EPS of $0.30 beats by $0.03. Revenue of $461M (-9.9%) in-line. Shares +5.6%. [PR]
- Cigna (NYSE:CI): Q2 EPS of $1.08 beats by $0.11. Revenue of $4.86B (+11%) vs. $4.76B. [PR]
- GM (NYSE:GM): Q2 EPS of -$11.21 vs. consensus of -$2.62. It shed $15.5B on the quarter. Revenue of $38.16B (-18.3%) vs. $44.57B. Shares -8.3%. [PR]
- Ingersoll-Rand (NYSE:IR): Q2 EPS of $1.03 beats by $0.14. Revenue of $3.08B (+6.6%) in-line. Sees full-year EPS of $3.80-3.90 vs. $3.71. Shares +3%. [PR]
- KBR Inc. (NYSE:KBR): Q2 EPS of $0.46 beats by $0.10. Revenue of $2.66B (+23.5%) vs. $2.32B. [PR]
- Nissan (OTCPK:NSANY): FQ1 net profit of ¥52.8B ($491M) fell 43% on the stronger yen. Sales fell 4.1% to ¥2.347T. U.S. sales fell 1.5% to 253K (vs. a 12% market decline); Japan -2.2% to 148K; Europe flat. "Nissan remains resilient but cautious on the outlook for our industry." [WSJ]
- NYSE Euronext (NYSE:NYX): Q2 EPS of $0.75 misses by $0.03. Revenue of $1.11B (+14.1%) vs. $810M. Shares -1.1% in Paris. [PR]
- Nortel (NT): Q2 EPS of -$0.23 vs. consensus of -$0.04 (?). Revenue of $2.62B (+2.3%) vs. $2.5B. Shares -1.7%. [PR]
- Oshkosh Truck (NYSE:OSK): FQ3 EPS of $1.19 beats by $0.14. Revenue of $1.97B (+6.6%) vs. $1.89B. Sees FQ4 EPS of $0.50-0.65 vs. $0.92. [PR]
- SCANA (NYSE:SCG): Q2 EPS of $0.48 beats by $0.03. Revenue of $1.22B (+21%) vs. $0.98B. [PR]
- Sun Microsystems (JAVA): FQ4 EPS of $0.11 vs. consensus of $0.25 (?). Revenue of $3.78B (-1.4%) in-line. Authorizes $1B share buyback. Shares +3.5%. [PR I, II]
- Total (NYSE:TOT): Adjusted profit of €3.72B beats by €0.1B. Sales increased 23% to €48.2B. Shares -1.9% in Paris. They're -9% over the past three months, as a U.S. slowdown has investors concerned oil prices will drop sharply. [WSJ]
Earnings: Thursday After Close
- Chemtura (NYSE:CEM): Q2 EPS of $0.18 in-line. Revenue of $1.02B (-1.4%) in-line. [PR]
- Chesapeake Energy (NYSE:CHK): Q2 EPS of $0.89 beats by $0.01. Revenue of $2.23B (+86.2%) in-line. Shares -2.3%. [PR]
- Chiquita (NYSE:CQB): Q2 EPS of $1.18 beats by $0.09. Revenue of $995M (+6.5%) vs. $1.32B. [PR]
- Cognizant Technology Solutions (NASDAQ:CTSH): Q2 EPS of $0.35 in-line. Revenue of $685M (+32.7%) in-line. Sees full-year EPS of $1.44 vs. $1.48. Shares -2.9%. [PR]
- Kindred Healthcare (NYSE:KND): Q2 EPS of $0.33 in-line. Revenue of $1.05B (-4.2%) in-line. [PR]
- McAfee (MFE): Q2 EPS of $0.52 beats by $0.07. Revenue of $397M vs. $369M. Sees full-year EPS of $1.90-2.00 vs. $1.91. Shares +1.1%. [PR]
- Monster Worldwide (NASDAQ:MNST): Q2 EPS of $0.40 beats by $0.03. Revenue of $323M (+14.9%) vs. $361M. Shares +1.5%. [PR]
- RealNetworks (NASDAQ:RNWK): Q2 EPS of -$0.01 beats by $0.01. Revenue of $153M (+12%) in-line. Sees full-year EPS of -$0.06 to -$0.02 vs. -$0.01. Shares +0.5%. [PR]
- ValueClick (VCLK): Q2 EPS of $0.17 in-line. Revenue of $164M (+10.2%) in-line. Sees full-year EPS of $0.69-0.71 vs. $0.74. [PR]
- VistaPrint (VPRT): FQ4 EPS of $0.32 beats by $0.02. Revenue of $110M (+52.3%) vs. $107M. Shares +9.4%. [PR]
- Asia was mixed Friday. Nikkei -2.11% to 13,095. Hang Seng +0.58% to 22,863. Shanghai +0.94% to 2,802. BSE +2.1% to 14,657.
- Europe is lower at midday: London -0.1%. Paris -0.7%. Frankfurt -0.5%.
- U.S. futures at 7:05am. Dow +0.24%. S&P +0.14%. Nasdaq -0.24%. Crude -0.43% to $123.55. Gold -0.16% to $921.20.
Friday's economic calendar:
8:30 Non-farm payrolls (consensus -72K jobs, 5.6% unemployment)
10:00 Construction Spending (cons. -0.4%)
10:00 ISM Manufacturing Index (cons. 49.2)
10:30 ERCI Leading Index
11:10 ERCI Future Inflation Gauge
12:00 PM Auto sales
- Notable earnings before Friday's open: AEE, AIV, BYD, CI, CLX, CVX, EQT, FE, GM, HTV, IR, JAVA, KBR, NT, NXG, NYX, OSK, PEG, PPK, STO, TDW, TOT, WPO
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