Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -5.20; 1,530.60
NASDAQ 100: -5.50; 1,960.25
Dow: -50.00; 13,610.00
NIKKEI 225: -0.28%; 18,188.63 (-51.67)
HANG SENG: +0.21%; 21,999.91 (+45.24)
S&P/ASX 200: -0.07%; 6,382.60 (-4.40)
BSE SENSEX 30: -0.22%; 14,467.36 (-31.88)
FTSE 100: -0.27%; 6,578.30 (-17.70)
CAC 40: -0.17%; 6,019.25 (-10.54)
XETRA-DAX: -0.26%; 7,944.30 (-20.41)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.13%; $68.56 (-$0.09)
Gold: +0.61%; $658.20 (+$4.00)
Natural Gas: -0.54%; $7.31 (-$0.04)
Silver: +0.42%; $13.145 (+$0.055)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Stocks Fall in Asia, Paced by Shanghai; Yen Drops to Multi-Year Lows
Indices fell across most of Asia Friday, on profit-taking and concerns over rising bond yields, as many benchmarks were trading near all-time highs. Shanghai led decliners on speculation of a rate hike over the weekend. Meanwhile, the yen weakened further against a basket of currencies. The Shanghai Composite fell 3.3% to 4,091.45, led downward by B-shares (-5.7%). A-shares in Shenzhen lost 4.6%, while B-shares were down 3.6%. The Seoul Composite lost 1.3%, Singapore's Straits Times fell 0.7% and the Nikkei 225 was off 0.3%. Only the Hang Seng (+0.2%) and Malaysia's KLSE Composite (+0.3%) posted gains in the region. As for the yen, the head of global currency strategy at Calyon in London commented, "The market appetite for carry trades remains very, very strong. It doesn't look like the conditions are changing. We'll probably see more yen weakness." The yen has fallen 0.5% to 124.00 against the US$ during the week, a 4.5-year low. It is trading at an all-time low against the euro, a two-decade low against the NZ$, a 16-year low against the A$ and a 15-year low against the British pound.
Sources: Bloomberg I, II
Commentary: More Volatility in Sight for China's Markets • Shanghai Composite: Dip Buyers Quick To Step In On Any Declines • Mr. Yen Calls the Currency 'Absurdly Cheap', Says BoJ Must Raise Rates • Morgan Stanley's Jen: The 'Schizophrenic' Yen
Stocks/ETFs to watch: iShares Lehman 1-3 YR Treasury Bond (NYSEARCA:SHY), iShares Lehman 7-10 YR Treasury Bond (NYSEARCA:IEF), iShares Lehman 20+ YR Treasury Bond (NYSEARCA:TLT). Currency funds: PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV), Euro Currency Trust (NYSEARCA:FXE), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY). China funds: Morgan Stanley China A (NYSE:CAF), iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI), PowerShares Golden Dragon Halter USX China Portfolio (NASDAQ:PGJ)
Archer Daniels Midland to Enter Brazil Sugar-Cane Ethanol Market
Archer Daniels Midland will enter Brazil's sugar-cane ethanol market, according to company executives. In an interview with the Wall Street Journal, VP Steve Mills said the company was looking at a number of ways to enter the market, including building sugar-cane mills and ethanol plants from scratch, to acquisitions. ADM already owns a small stake in Brazil's largest ethanol producer, Cosan SA. ADM, the #1 U.S. ethanol producer, said sugar-cane ethanol is now a key strategy component: "We're devoting a lot of time and energy to this area. We're not talking about something 10 years down the road. It's on the front burner," Mills said. ADM has seven corn ethanol plants in the U.S. The company did not rule out ultimately importing its Brazilian output to the U.S.; imported ethanol is tariffed $0.54/gallon. ADM has been supportive of the tariff in Senate (which this week extended it to 2010), and said its current move "doesn't necessarily signal" a change in its policy. But a shift in its position, the Journal says "could swing momentum in favor of importers, some oil companies and others who oppose it." Brazilian sugar-cane ethanol costs about $0.90 to produce, about 33% cheaper than weather-dependent U.S. corn-based ethanol. ADM made $1.3 billion in F2007 on revenue of $39.6B; analysts estimate 30% of its profits are from ethanol.
Sources: Wall Street Journal
Commentary: The Ethanol Industry: An Insider's Take • Spectacular Ethanol Production Breakthrough • Jeffrey Saut: Four Ethanol Stocks That Will Outperform
Stocks/ETFs to watch: Archer Daniels Midland Co. (NYSE:ADM). Competitors: The Andersons Inc. (NASDAQ:ANDE), Aventine Renewable Energy Holdings Inc (AVR), Pacific Ethanol Inc. (NASDAQ:PEIX), Verasun Energy Corp. (VSE), US BioEnergy Corp (USBE). ETFs: PowerShares WilderHill Clean Energy ETF (NYSEARCA:PBW), PowerShares WilderHill Progressive Energy ETF (NYSEARCA:PUW)
Pfizer's Lyrica Gets FDA Approval to Treat Fibromyalgia
Pfizer said the FDA has approved the use of its pain killer Lyrica for treating fibromyalgia, a common chronic-pain condition that affects 3-6 million Americans. Lyrica is the first FDA-approved medication to treat the condition. Lyrica was already approved for pain due to diabetes and shingles. It was Pfizer's first $1 billion drug since Viagra. "Pfizer needs the fibromyalgia indication to stimulate Lyrica growth," said Bear Stearns analyst John Boris. Lyrica sales were $1.2 billion in 2006; analysts say they may reach $3.4 billion by 2012. Lyrica works by interfering with damaged, pain-causing nerves. News of the approval was welcome news for Pfizer, which on Wednesday had the FDA delay approval of an HIV drug, and cancelled development of a lung-cancer drug. In a study of 750 patients, 30% had a pain reduction using the drug's highest dosage (600 mg.), 27% on the middle dose (450 mg.), 24% on the lowest dose (300 mg.) -- vs. 15% on placebo. Pfizer shares are flat YTD, vs. a 4.3% gain in the SPDR Pharmaceuticals ETF.
Sources: Press release, TheStreet, Wall Street Journal, Bloomberg
Commentary: Pfizer's New HIV Drug -- So What? • Barron's: Value Investor Cliff Hoover's Quality Picks • Pfizer's a Sell: Shrinking Top Line, No Blockbusters In the Pipeline
Stocks/ETFs to watch: Pfizer Inc. (NYSE:PFE). ETFs: Pharmaceutical HOLDRs (NYSEARCA:PPH), iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE), SPDR Pharmaceuticals (NYSEARCA:XPH)
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
After a weaker opening Thursday morning due to concerns over Wednesday's hedge fund collapses, the market stabilized and, except for a brief spate of selling around noon, rallied for the rest of the day. Some of the buying seemed to be related to the extreme nature of Wednesday's sell-off and the resulting bargains that became available.
Even another dip in bond prices, with the 10-year Treasury bond down 8/32, was ignored with buyers concentrating more on a Philly Fed report that showed unexpectedly higher growth numbers in June vs. May.
More good economic news by the Labor Department showed that, despite jobless claims rising, the final number was well within expectations. The best-performing sector yesterday was technology, and semiconductors were among the top gainers as well, with the Philly Semiconductor Index up almost 3%.
At the close yesterday, the Dow Jones Industrial Average had gained 56 points to 13,546, the S&P 500 gained 9 to 1,522 and the Nasdaq rose 17, closing at 2,617. Volume on the NYSE totaled 1.6 billion shares and 2 billion shares traded on the Nasdaq, with gainers outpacing losers by a close factor of just 8-to-7.
August became the spot month for the futures market yesterday, and the crude oil contract fell 21 cents to $68.65 a barrel after trading as high as $69.85. The Amex Energy SPDR (NYSEARCA:XLE) rose by $1.33, closing at $70.40.
Meanwhile, gold (August contract) fell $5.40 to $654.60 per troy ounce, thus extending its downtrend. If the $650 fails to hold, gold could extend its losses and decline sharply. The Philly Gold and Silver Index [XAU] rose by $1.42, closing at $139.96 and still holding within the consolidation that started late last year. The XAU is bounded by a high of $145 and a low of about $130.
What the Markets Are Saying
Yesterday morning, we noted that some of our favorite sentiment indicators, like the Investors Intelligence poll and the put/call ratios, are showing an overbought market. And yesterday's American Association of Individual Investors' sentiment survey showed that small investors are now over 43% bullish vs. 34% bearish -- and that's a big change from just two weeks ago when the bullish number was just 29% vs. 54% bearish.
So now, the important sentiment numbers are telling us that at least a mild pullback is likely to develop. History shows that, in the last 30 years, the period of May through October has yielded few successes. So far this year, the charts of the major averages are showing mildly bearish patterns as well, with the Dow Industrials, the S&P 500 and the NYSE Composite all tracing out double-tops.
Perhaps it is time to go to the beach and forget the market for a couple of weeks. But before you leave, you might enter some buy orders below current levels in order to grab some bargains while soaking up the rays since this bull is just resting before his next romp.
Today's Trading Landscape
There are no economic reports or earnings announcements today, so the focus will again be on interest rates, further possible problems in the hedge fund arena, and foreign markets. And investors will be watching a new offering, the Blackstone Group (NYSE:BX) -- which was priced yesterday at close to the high of its expected range -- to see whether it can advance on its offering price.
Asian Headlines (via Bloomberg.com)
• New Zealand Dollar Advances to 22-Year High as Traders Test Central Bank The New Zealand dollar climbed to a 22-year high versus the U.S. currency as investors were lured to the nation's relatively high yields.
• Taiwan's Jobless Rate Falls to 3.95 Percent on Financial Services Hiring Taiwan's unemployment fell to 3.95 percent in May, close to the lowest rate in six years, as financial services companies including Chinatrust Financial Holding Co. hired extra workers.
European Headlines (via Bloomberg.com)
• European Stocks Decline After Ifo Report; BHP Billiton, Julius Baer Fall European stocks dropped for a second day after German business confidence fell more than economists forecast in June.
• Maersk Names Carlsberg's Andersen Chief as Soederberg, Two Executives Quit A.P. Moeller-Maersk, the world's largest shipping company, replaced its chief executive officer with Carlsberg A/S's Nils Smedegaard Andersen and said two other top executives quit.
• German Business Confidence Slides More Than Forecast, Ifo Institute Says German business confidence fell more than economists forecast in June after a rebound in oil prices and higher borrowing costs raised concern growth in Europe's largest economy may have peaked.
• Airbus Wins Singapore Airlines Order for 20 A350s Valued at $3.7 Billion Airbus SAS won a $3.7 billion order from Singapore Airlines Ltd. for A350 long-range jetliners, as the world's biggest commercial planemaker aims to catch up with Boeing Co.'s competing 787 Dreamliner model.
• BP May Agree to Sell Kovykta Field Stake to Gazprom, Russian Ministry Says BP Plc may lose control of a Siberian gas field big enough to supply Asia for five years, a government official said, as Russian President Vladimir Putin ends foreign ownership of the nation's biggest energy assets.