Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:53 AM EST
S&P 500: -4.90; 1,537.60
NASDAQ 100: -8.25; 2,000.25
Dow: -25.00; 13,715.00
NIKKEI 225: -0.05%; 18,252.67 (-9.31)
HANG SENG: +0.30%; 22,885.84 (+68.41)
SHANGHAI SE COMPOSITE: -0.78%; 3,853.02 (-30.20)
BSE SENSEX 30: -0.24%; 15,009.88 (-35.85)
FTSE 100: -0.60%; 6,672.70 (-40.00)
CAC 40: -0.91%; 6,049.13 (-55.53)
XETRA-DAX: -0.90%; 8,004.89 (-72.50)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.29%; $71.98 (-$0.21)
Gold: +0.29%; $664.40 (+$1.90)
Natural Gas: +2.09%; $6.54 (+$0.13)
Silver: +1.01%; $12.95 (+$0.13)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Apple To Convert iPod Nano To Mobile Phone In 4Q -- Analyst
JP Morgan analyst Kevin Chang issued a report saying Apple will convert the iPod Nano into a mobile phone, likely in the fourth quarter of this year. Sales of 30-40 million units in FY2008 "is achievable" according to Chang, based on current Nano and Motorola RAZR sales. Chang, who quotes unnamed supply chain sources, as well as a patent Apple recently filed with the U.S. Patent and Trademark Office, believes "iPod Nano will be converted into a phone because it's probably the only way for Apple to launch a lower end phone without severely cannibalizing iPod Nano." Chang suspects the phone will go for a maximum of $300 and will have "rather limited functionality" compared to the more expensive iPhone. The phone would also be likely to be available globally much more quickly than the iPhone, according to Chang.
Sources: Reuters, MarketWatch, Apple Insider
Commentary: iPhone: A Look Inside • Apple iPhone Makes Strong Debut • Apple's iPhone: True Innovation
Stocks/ETFs to watch: Apple Computer Inc. (NASDAQ:AAPL), AT&T Inc. (NYSE:T).
Competitors: Nokia Corp. (NYSE:NOK), Motorola Inc. (MOT), Ericsson ADR (NASDAQ:ERIC), Palm Inc. (PALM), Research In Motion Ltd. (RIMM). ETFs: Internet Architecture HOLDRs (NYSE:IAH), PowerShares QQQ (QQQQ), Technology Select Sector SPDR (NYSEARCA:XLK)
Conference call transcripts: Apple F2Q07 (Qtr End 3/31/07) Earnings Call Transcript
Pepsi Bottling Beats Street, Raises Guidance, Shares Up 6% in Pre-Market
Shares of Pepsi Bottling Group [PBG] were last up 5.7% to $36.40 in thin pre-market trading, on news of a seven cent EPS beat and upward revised full year guidance exceeding analysts' estimates. PBG's Q2 net income rose 9.5% to $162m, or $0.70/share, on a 7% increase in sales to $3.36b. Analysts were expecting sales of $3.28b. Full year EPS is now projected between $2.02 - $2.07, up from its earlier guidance of $1.90 - $1.98. Analysts were expecting EPS in a range of $1.92 - $2.02, or $1.98 on average. PBG's president and CEO commented on highlights of the quarter, including 10% growth in operating income in the U.S. and Canada, as well as "outstanding" top-line growth in Russia. PBG fell 0.3% to $34.43 on Monday.
Sources: Press release, Bloomberg, Marketwatch
Commentary: Pepsi Is Losing Some Fizz • Super Fizzy Soda Stocks
Stocks/ETFs to watch: Pepsi Bottling Group Inc. (PBG). Competitors: Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), Coca-Cola Enterprises Inc. (NYSE:CCE)
D.R. Horton Says Home Orders Plunged 40%; Will Post Q3 Loss
Number-two U.S. homebuilder D.R. Horton said Tuesday Q3 new home orders fell 40% from a year ago, and that it will post a Q3 loss due to significant asset impairment charges. Orders fell to 8,559 homes from 14,316, while the value of houses ordered fell an even-steeper 47% to $2 billion. "Inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging," said CEO Donald Horton. He said the company expects a loss for both Q3 and the nine months ending June 30; analysts had expected it to earn $0.07/share in the quarter. Cancellations climbed to 38%, up from 32% in Q2. Historically, cancellations are 16-20%. During its previous earnings call, the company blamed growing cancellations on buyers who bought on condition of selling a previous home, which they were unable to do, and people simply changing their minds. Also, banks have begun implementing stricter lending guidelines, resulting in fewer eligible borrowers. In a note Monday, Banc of America Securities said it expects homebuilders will on average report a 20% drop in net orders. In Q2, D.R. Horton saw profits plunge 85%. Shares are down 25.3% YTD.
Sources: Press release, MarketWatch, Bloomberg, Wall Street Journal
Commentary: D. R. Horton Valuation Too Good to Pass Up • D.R. Horton's 37% Decline In New Orders: Bad News For Housing • D.R. Horton Posts 85% Plunge in Q2 Earnings; Misses Street
Stocks/ETFs to watch: D.R. Horton Inc. (NYSE:DHI). Competitors: Lennar Corp. (NYSE:LEN), Pulte Homes Inc. (NYSE:PHM), KB Home (NYSE:KBH), Toll Brothers Inc. (NYSE:TOL), Centex Corp. (CTX). ETFs: streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (BATS:ITB)
Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Stocks generally advanced yesterday, but it was a cautious session as the Q2 earnings expectations kept many buyers on the sidelines.
Traditionally the first Dow component to report is Alcoa (NYSE:AA), but it didn't do so until after the close Monday, when it said that even though its net income for the three months ending in June fell compared to a year ago, it still met analysts' forecasts of 81 cents a share.
Several blue chips had a strong day including Boeing (NYSE:BA), as it unveiled its new 787 Dreamliner to the enthusiasm of the press and industry. And Intel (NASDAQ:INTC), General Motors (NYSE:GM) and Caterpillar (NYSE:CAT) -- all Dow stocks -- had a strong day. Johnson & Johnson (NYSE:JNJ) gained more than 1% as a result of its announcement to buy back up to $10 billion of its stock.
But with the exception of semiconductor stocks, the technology stocks retreated on profit-taking with Lexmark (NYSE:LXK) and Hewlett-Packard (NYSE:HPQ) leading the decliners. Intraday, the Dow Industrials and the S&P 500 got within range of breaking to new highs -- the Dow missed it by six points and the S&P by just below eight.
At the close yesterday, the Dow Industrials gained 38 points at 13,650, the S&P 500 added just more than a point at 1,532 and the Nasdaq made another new closing high of this year, up 3.51 at 2,670.02. Volume on the New York Stock Exchange was light at just 1.3 billion shares while 1.9 billion traded on the Nasdaq. Breadth was at about 8-to-7 positive on both exchanges.
Crude oil (August contract) fell by 62 cents yesterday at $72.19 in a round of profit-taking following last week's 3% run-up. But the Amex Energy SPDR (NYSEARCA:XLE) set another new high by gaining 61 cents to $72.15.
Gold also continued its winning ways with another big day -- up $7.70 to $662.50 per troy ounce-- and a further continuation tomorrow would change the gold chart to near-term up from intermediate-term down. The Philly Gold and Silver Index [XAU] gained $1.56 and, by closing at $146.56, broke from its 12-month chart pattern. However, it still must close above September's high of $151.80 in order to reverse the intermediate-term trend.
What the Markets Are Saying
As noted, the tone of the market yesterday reflected the caution that normally precedes quarterly earnings announcements, and so it is fruitless to draw conclusions from it. Sentiment indicators are somewhat overbought, as are the internal indicators (i.e., stochastics, Moving Average Convergence Divergence), but not nearly as overbought as at previous highs.
For now, then, the ball is in the hands of the bulls. And with the NYSE Composite, our favorite broader-based index, breaking to new highs -- and with the others just points away from doing the same -- it looks like the bulls may have it their way. Therefore, we will remain buyers.
Today's Trading Landscape
According to Thomson Financial, earnings for Q2 are expected to rise 4.1% vs. last year. There are just a few earnings to be issued today, but more companies will be reporting toward the end of the week.
Today look for reports from Acuity Brands (NYSE:AYI), Audiovox (NASDAQ:VOXX), Chattem (CHTT), Emmis Communications (EMMSP), Greenbrier (NYSE:GBX), Helen of Troy (NASDAQ:HELE), Meade Instruments (NASDAQ:MEAD), Pepsi Bottling Group (PBG) (read above) and Sealy (ZZ).
May wholesale Inventories is the only economic report due, so today the focus will be on earnings, the bond market and Fed Chairman Ben Bernanke's talk at 1 p.m.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Fall From a Record, Led by Toyota and CSL, on Dollar Weakness Asian stocks declined, led by exporters, after the yen strengthened and the Australian dollar traded near an 18-year high.
• Dollar Weakens Against Yen, Euro Before Bernanke Speaks on Inflation The dollar weakened against the euro and yen before a speech on inflation by Federal Reserve Chairman Ben S. Bernanke, who may reiterate concern about rising prices.
• Hynix Is Behind Schedule in Raising Chip Production, Chief Executive Says Hynix Semiconductor Inc., the world's second-largest memory chipmaker, is struggling to keep pace with demand from consumer products including Apple Inc.'s iPhone as the company shifts to a new manufacturing process.
European Headlines (via Bloomberg.com)
• European Stocks Fall; Wolseley, Taylor Wimpey Lead Decline by Homebuilders European stocks dropped for the first time in three days after Home Depot Inc. (NYSE:HD), the world's largest home-improvement retailer, cut its profit forecast, reinforcing concern the U.S. housing market is dragging on the economy.
• ABN Amro Gets NYSE Inquiry About Trading Before Barclays Merger Statement ABN Amro Holding NV (ABN), the target of the biggest banking takeover, said the New York Stock Exchange is examining trading in the company's shares before Barclays Plc (NYSE:BCS) made its offer four months ago.
• Marks & Spencer Has Slowest Sales Growth in 18 Months on Unseasonable Rain Marks & Spencer Group Plc, the U.K.'s biggest clothing retailer, said British sales rose at the slowest pace in six quarters after the wettest June on record and higher interest rates eroded sales of summer fashions.