- Costco comps rise 10%; Wal-Mart falls short. Bellwether Costco's (COST) July same-store sales rise 10% - far stronger than the 7.6% consensus. Excluding gas, comps would have gained 6%. Total sales were up 14% to $5.02B. At Wal-Mart (WMT), same-store sales growth of 3% fell short of analyst forecasts of 3.3% growth.
- Chrysler, Nissan may team up. Chrysler and Nissan (OTCPK:NSANY) are in talks to jointly produce midsize cars. With Nissan producing the cars and Chrysler supplying the brand name for the U.S. market, the move would be a major shift in Chrysler's business model - which until recently has focused on the strength of its in-house engineering. The two companies already reached an agreement earlier this year to team up on pickup trucks and subcompact cars. Though the model could prove risky, Chrysler is hoping that this will help bring the company back to profitability.
- Freddie's capital position turns red. Freddie Mac (FRE) now has to deal with the reality that according to GAAP, its equity attributable to common shareholders is -$1.2B - meaning investors would be left with nothing if Freddie sold its assets and paid down its debt. Looking at 'regulatory capital,' Freddie's sees its core capital at about $37B. Yesterday CEO Richard Syron said he is committed to raising a previously discussed $5.5B, and more if needed, though he'd rather wait for a more "propitious time."
- Worse and worser. Delinquencies on mortgages issued in the first half of 2007 hit 0.91% - a figure that far outpaces the rate for 2006 mortgages (0.33%), and suggests housing woes may take a far greater toll on the U.S. financial system than previously expected. Until these bad loans are fully digested, "foreclosures will remain at record highs, the financial system will be under severe stress and the broader economy will sputter," Moody's Mark Zandi says. The 'light at the end of the tunnel' may be the fact that loans originated in the fourth quarter of 2007 and early 2008 appear to be performing better.
- Moody's sees bond defaults as high as 10%. Worldwide defaults on corporate bonds may rise to as much as 10% over the coming year as economic growth slows, Moody's says. Current estimates of 6.3% defaults on high-yield, high-risk bonds would likely jump should the housing market slump lead to a "protracted U.S. recession." In July, the rate increased to 2.5% from a revised 2.1% the month before - the biggest jump since November. Defaults in Europe are also on the rise.
- Money keeps getting more expensive. Despite 2% Fed-determined lending rates, municipal borrowers continue to pony up for money. "The cost of money just went way up," San Francisco Bay Toll Authority's CFO Brian Mayhew says. He would know; the agency sold $700M+ in muni-bonds this week for rates as high as 5.34%. "The unwinding of the credit bubble has had dramatic implications," Citigroup strategist George Friedlander says. "Nothing has stabilized, and rates have just been going up," a college VP laments.
- Hot on the trail of ice makers. Federal authorizes are investigating an alleged criminal price-fixing conspiracy in the $1.8B packaged ice market. They're being lead by a former industry executive who claims companies forced up prices and artificially suppressed competition. Companies being scrutinized include Home City Ice (IACI) and Reddy Ice (FRZ).
- Dish takes another look at DirecTV. Dish Network (DISH) CEO Charles Ergen appears to be readying himself for another go at a merger with DirecTV Group (DTV), hopeful that the SIRI/XMSR merger will pave the way for FCC approval. Analysts question whether the two combos are indeed comparable.
- Japanese equipment orders fell 2.6% in June, way better than the -9.9% consensus. This may be a sign any Japanese recession may be mild.
- BoE holds. As expected, the Bank of England maintains its key lending rate at 5%, where it's been since April. BoE is struggling to balance the opposing factors of slowing economic growth and rising inflation.
- ECB stays put. As expected, the ECB leaves it key rate unchanged at 4.25%. Press conference at 8:30 to discuss its decision.
- The IMF said Wednesday it sees U.K. growth of 1.4% this year and 1.1% the next, down from 1.8% and 1.7% in June.
- EIA crude inventories +1.61M vs. consensus of -0.2M. Gasoline -4.34M vs. -1.5M. Distillate +2.84M vs. +2M. In overnight trading, crude rises 2.5% to $121.50.
- MBA Mortgage Applications were up 2.8% after reaching a seven-year low last week. The average rate on a 30-yr. fixed mortgage drops to 6.41%, from a one-yr. high of 6.58%.
July Same-Store Sales
- Wall Street gets its first glimpse of how much stressed U.S. consumers are willing to spend during the critical back-to-school season with today's retail same-store sales. Analysts see comps up 2.3%, below last year's 2.9% July gain. Numbers are actual vs. consensus, in groups of 5 or 6 to make it easier to read.
- COST +10% vs. +7.6%. HOTT +1.0% vs. -0.9%. SSI -6.2% vs. -1.0%. ZUMZ -1.4% vs. -0.7%.
- CACH +2% in-line. PLCE 0% vs. +6.3%. PSUN -4% vs. +0.3%. WMT +3% vs. +3.3%. WTSLA -8.2% vs. -2.0%.
- ANF -7% vs. -1.4%. ARO +13% vs. +8.2%. BKE +20.9% vs. +21.0%. DDS +2% vs. -3.5%. LTD -7.0% vs. -7.3%.
- AEO -7% vs. -3.3%. BJ +16.7% vs. +13.9%. BONT +0.7% vs. -1%. FDO +4.6% vs. +4.5%. FRED +4.6% vs. +3%.
- GPS -11.0% vs. -7.1%. KSS -10.4% vs. -6.1%. ROST +4% vs. +3.3%. SKS -5.3% vs. -0.7%. TGT -1.2% vs. -0.2%. TJX +3.0% vs. +3.4%.
Earnings: Thursday Before Open
- Allianz (AZ): Q2 revenue of €22B (-9.5%) vs. €23.4B consensus. Allianz cut its operating profit outlook through next year, saying it expects the "difficult market environment to continue to 2009." [WSJ]
- Axa (AXA): H1 net income of €2.2B (-32%) vs. €1.9B consensus. Shares, down 26% this year, are up 6.1% in Paris. [Bloomberg]
- Cardinal Health (CAH): FQ4 EPS of $0.97 beats by $0.02. Revenue of $22.93B (+3%) vs. $23.17B. Sees FQ1 EPS of $0.70 vs. $0.94. [PR]
- Citadel Broadcasting (CDL): Q2 EPS of -$0.96 misses by $1.04. Revenue of $230M (-8.5%) vs. $238M. [PR]
- Deutsche Telekom (DT): Q2 revenue of €15.1B (-3%) in-line. Net profit falls 35% to €394M on a stronger euro and higher interest costs. [Bloomberg]
- Dynegy (DYN): Q2 EPS of -$0.32 misses by $0.35. Revenue of $323M (-61%). [PR]
- Food giant Nestle (OTCPK:NSRGY): H1 net profits of 5.2B Swiss francs (+6.1%) and revenue of 53.1B francs (+3.8%), despite rising input and transportation costs. Nestle plans to spend 9B francs this year buying back shares. [Bloomberg]
- PMI Group (PMI): Q2 EPS of -$3.03 misses by $1.24. Revenue of $330M (+10.3%) vs. $320M. Shares -7.1%. [PR]
- Sirius Satellite Radio (SIRI): Q2 EPS of -$0.06 beats by $0.01. Revenue of $283M (+25%) in-line. [PR]
- Toyota (TM): FQ1 revenue of ¥6.22T ($56.8B) (-4.7%). The strong yen and a dip in North American sales hurt sales. [AP]
- Vale (RIO): Q2 EPS of $1.02 beats by $0.07. Revenue of $10.9B (+22.5%) vs. $12.1B. [PR]
- Warner Music Group (WMG): FQ3 EPS of -$0.06 beats by $0.12. Revenue of $848M (+5.5%) vs. $769M. [PR]
Earnings: Wednesday After Close
- Advance Auto Parts (AAP): Q2 EPS of $0.79 beats by $0.07. Revenue of $1.24B (+5.6%) in-line. Shares +2.6%. [PR]
- AIG (AIG): Q2 EPS of -$0.51 misses by $1.14. Takes $5.56B writedown on CDS portfolio. Shares -8%. [PR]
- Avis Budget Group (CAR): Q2 EPS of $0.15 beats by $0.09. Revenue of $1.58B (+4%) vs. $1.52B. Shares +5.6%. [PR]
- Brookdale Senior Living (BKD): Q2 EPS of -$0.03 beats by $0.29. Revenue of $478M (+4.3%) vs. $486M. [PR]
- Career Education (CECO): Q2 EPS of $0.12 beats by $0.06. Revenue of $419M (-2.2%) vs. $423M. Shares -5.6%. [PR]
- Sunoco (SUN): Q2 EPS of $0.52 beats by $0.22. Revenue of $16.08B (+49.4%) vs. $12.47B. Shares +3.7%. [PR]
- The Andersons (ANDE): Q2 EPS of $2.48 beats by $0.29. Revenue of $1.1B (+73.7%) vs. $0.95B. [PR]
- True Religion Apparel (TRLG): Q2 EPS of $0.39 beats by $0.07. Revenue of $64.2M (+78.8%) vs. $50.2M. Shares -0.9%. [PR]
- VeriSign (VRSN): Q2 EPS of $0.25 beats by $0.02. Revenue of $233M (+21%) vs. $231M. Shares -6.1%. [PR]
- Yamana Gold (AUY): Q2 EPS of $0.15 misses by $0.01. Revenue of $337M (+83%) vs. $349M. Shares +0.7%. [PR]
- Asian markets were mostly higher Thursday: Nikkei -0.98% to 13,125. Hang Seng +0.7% to 22,104. Shanghai +0.3% to 2,728. BSE +0.29% to 15,117.
- Europe is trading higher at midday: London +0.44%. Paris +1.09%. Frankfurt +0.33%.
- Futures indicate a lower open. Dow -0.63%. S&P -0.5%. Nasdaq -0.3%. Crude +2.5% to $121.50. Gold +0.72% to $889.50.
- Thursday's economic calendar:
5:00 Retail same-store sales
7:00 BoE Announcement
7:45 ECB Announcement
8:30 Jobless Claims
9:00 RBC CASH Index
10:00 Pending Home Sales
10:35 EIA Natural Gas
3:00 PM Consumer Credit
4:30 PM Money Supply
- Notable pre-market earnings: ACM, AES, ANSS, ARCC, BBI, BKUNA, BRL, CAH, CDL, CNQ, DPTR, DTV, DYN, ED, FTO, ISIS, KG, LIZ, MCGC, MF, OMG, PCS, PDE, PGN, PMI, SBH, SIRI, SLE, SNH, SRE, TM, WMB, WNR
- Notable post-market earnings: AGO, ALKS, ATW, CHINA, CLWR, CROX, DAR, ELX, FMD, FRP, FVRL, HANS, HTZ, ME, MVSN, NDN, PDLI, PSA, SAPE, SD, TMA, XOMA
Seeking Alpha editor Rachael Granby contributed to this post.
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