Wall Street Breakfast: Must-Know News
- Open-source shocker. Mobile open-source got a very major new player this morning: Nokia (NOK) said is acquiring most of the 52% of smartphone software developer Symbian it doesn't already own for about $400M. The newly-formed Symbian Foundation - backed by Nokia, Sony Ericsson (SNE) (ERIC), Motorola (MOT) and NTT DoCoMo (DCM), who are joined by T, STM, TXN and VOD, Samsung and LG - will receive Symbian's Series 60 platform, Sony Ericsson and Motorola's UIQ, and DoCoMo's MOAP, and will it will make open source. With stiff competition from Apple (AAPL) and Google's (GOOG) upcoming Android smartphone OS, traditional handset makers are coming up with innovative ways to compete.
- UPS guides down. After the close, UPS (UPS -3.5%) lowered its Q2 EPS guidance to $0.83-0.88 from $0.97-1.04 because of slow U.S. economic growth and high fuel costs. UPS's fuel surcharges have not been able to keep up with soaring fuel prices. UPS previously lowered its 2008 EPS guidance to $3.90-4.20 from $4.30-4.50; it did not update its full-year outlook Monday. A week ago, rival FedEx (FDX) lowered its 2009 forecast.
- New Google will help advertisers reach target; threat to comScore, Nielsen. Google's new free internet usage tracking service, to debut as soon as today, promises to help marketers decide where to buy online ads - and is a serious threat to comScore (SCOR) and Nielsen Online, who charge for a similar service. Some are leery of having Google, who also sells internet ads, providing supposedly unbiased marketing data. ComScore is down 9.7% in pre-market trading. Separately, Google is also expected to unveil this week a tool that measures how web surfers respond to online ads.
- Steely nerves pay off. Rio Tinto (RTP) and BHP Billiton (BHP) secured an 85% increase in iron ore prices from Chinese steelmakers, topping the 65-71% Vale (RIO) accepted from ArcelorMittal (MT). The rise indicates global steel prices are likely to remain high, further fanning inflation concerns.
- Reputational damage. Growth at the wealth management units of UBS (UBS) and Merrill Lynch (MER) slowed substantially last year, to 8.8% from 13% for the former, and to 8.3% from 10% for the latter. Given the heavy subprime losses the two suffered this year, things might have been worse. UBS said Tuesday it agreed to buy Dutch ultra-rich wealth manager VermogensGroep, with €4B in assets and another €10B under management, for an undisclosed price. Shares of UBS are up 5% in the pre-market, on rumors of an $80B approach from HSBC (HBC).
- Nothing-down homes, take #2. While private lenders have largely eliminated zero-down home loans, they remain popular and readily available through down-payment assistance programs run by nonprofit organizations funded largely by homebuilders. Critics say the programs, which allow first-time buyers to sidestep the FHA's 3% minimum downpayment, will ultimately burden taxpayers.
- Energy speculation hotly debated. Speculation now accounts for 70% of all U.S. oil trading, up from 37% in 2000. Yesterday witnesses told a Congressional committee a law curbing energy market speculation could drop the price of gas to $2 within a month, and oil to $65-75/barrel. On the other hand, ICE (ICE) CEO Jeff Sprecher said the U.S. risks driving oil trading out of the country if it gets too heavy-handed in its regulation.
- Rate changes. Proposed SEC rule changes would reduce the roll of ratings firms (MCO, MHP, Fitch) across various markets, shifting the burden of responsibility to money managers and investors. While it's clear over-reliance on their ratings helped promote a false sense of security which exacerbated the subprime crisis and credit crunch, it's not clear individual investors have the necessary resources to perform their own due diligence.
- Won't you stay just a little longer? Verizon (VZ) was banned from trying to talk customers back on board while they wait for their phone numbers to be transferred to cable phone carries. Positive news for cable providers Comcast (CMCSA) and Time Warner Cable (TWC).
- Goldman's about-face on banks, consumer stocks. After touting financials and consumer stocks in May, Goldman analysts backtracked Monday. Analysts say they thought stimulus checks and bank recapitalizations would benefit the sectors. "Our thesis was clearly wrong in hindsight." Goldman suggests clients allocate 13% of their holdings to financials and 7% to consumer discretionary stocks, down from May's 15.1% and 8.3% respectively. Besides concerns that cash-strapped consumers are using their rebate checks for food and gas, they asked, "What sustains consumer spending after the tax rebate checks have been spent?" Fallout: F -9.1%. GM -6.4%. TOL -5.63%. HD -4.5%. C -3.9%.
- No love for I-banks. Shares of Merrill Lynch (MER) fell 3.9% after BofA analysts predicted a $3.5B Q2 writedown, and a $1/share loss (down from +$0.21). Analysts say they are concerned by the mortgage and CDO exposure of Merrill and other major I-banks. GS -2.8%. MS -3.15%. LEH -5.8%.
- GM announces production cuts and heavy incentives. GM (GM) said it would try to spur plunging SUV and pickup sales by offering 0% financing for 72 months, or cash rebates of up to $7,000. At the same time, it said it would raise prices on 2009 vehicles by about 3.5% to offset high steel and materials prices. GM also announced it was closing numerous assembly plants in the U.S., Canada and Mexico. The incentives are likely to spur Ford (F) and Chrysler to make similar offers.
- Blockbuster deal for Circuit City looks dead. Shares of Circuit City (CC) plunged 21.3% Monday, as investors seemed to signal they have lost all hope of a tie-up with Blockbuster (BBI +0.8%), which offered $6/share for CC in April.
- 950 pilots seek gainful employment. UAL (UAUA -14.9%) said it will slash 950 pilots jobs at the end of the summer, when it begins grounding planes en masse. It will also layoff another 1,600 personnel.
- The Chicago Fed National Activity Index improved to -0.96 from -1.23 in April, mainly due to strong industrial production. Still, 63 of the index's 85 indicators were negative. The Fed said it sees "low inflationary pressure" from economic activity over the coming year. The index's 3-month average was below 0.7 for the sixth straight month - increasing the likelihood we're in recession, it said.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
Today's Markets
- Asia Tuesday: Nikkei -0.06% to 13,850. Hang Seng -1.14% to 22,456. Shanghai +1.54% to 2,803. BSE -1.31% to 14,107.
- Europe at midday is down heavily: London -1.1%. Paris -1.41%. Frankfurt -1.62%.
- Equity futures indicate a much lower open: Dow -0.56%. S&P -0.59%. Nasdaq -0.77%. Crude +0.94% to $138. Gold +0.45% to $891.20.
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This article has 8 comments:
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Jon T
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329 Comments
Jun 24 08:03 AM-
madmilker
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54 Comments
My Website
Jun 24 08:07 AMhttps://mega.nu/ampp/corporate...
and jus before you say your prays tonight...
www.foundingfathers.in...
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tom1234
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174 Comments
Jun 24 08:44 AM-
leo123
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2 Comments
Jun 24 09:31 AM-
John Lounsbury
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623 Comments
My Website
Jun 24 09:36 AMWhy is Apple down? Try valuation. Expected 2008 earnings are $5.20; 5 year expected annual growth rate 24%; high volatility (Beta = 2.88). If I assign 5% annual growth starting in six years and continuing forever, fair value today for AAPL is $44.
By the way, I own Apple. However, I do put short position hedges on that holding at every pullback. The potential for Apple to double keeps me an owner. The potential for Apple to go down 50-75% keeps me guarded.
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Whidbey
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783 Comments
Jun 24 10:25 AMAlways worth the time. Thanks much
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brewer
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416 Comments
Jun 24 10:55 AMWhen other stocks lose ground, mutual fund managers have to sell the ones that have done well, such as Apple, to take up the slack and give the suckers their 2% interest for the year. Then they have other stocks such as MSFT, that never increase, but they stupidly refuse to sell based on religious reasons. :-) You have often heard of the Microsoft 'faithfull'? When will we? I think that would make a greeat story.
You could talk about Gate's reality distortion field, etc... it would be a good read.
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Right in San Francisco
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195 Comments
My Website
Jun 24 11:00 AM- The claim that speculation is doubling the cost of oil seems way out of line. Was this a reputable industry source, or a political one?
- The US continues to attack our successful industries. Much manufacturing is gone; pharma will be a target; now the financial industry - or at least the commodity exchanges. We need to attract $2 billion per day to cover our balance of payments deficit. Help!!!