Filed under: Before the bell, Earnings reports, Deals, Google (GOOG), Apple Inc (AAPL), Starbucks (SBUX), General Motors (GM), Motorola (MOT), Exxon Mobil (XOM), Market matters, Walt Disney (DIS), Aetna Inc (AET), Altria Group (MO), Kellogg Co (K), MasterCard Inc’A’ (MA), Economic data, Unilever ADR (UL)

U.S. stock futures were mixed Thursday morning ahead of the government preliminary report of U.S. second-quarter gross domestic product to be released at 8:30 a.m. EDT. Compare to the first quarter, where GDP grew at an annual rate of 1%, analysts are expecting an annual growth rate in the second quarter of 2.3% according to Briefing.com. Another wave of earnings will also wash Wall Street over this morning, while it’s still digesting Wednesday’s ones. The market will likely take a clearer direction once GDP is out.

[Update: GDP grew at a 1.9% pace in the second quarter came in well short of the 2.3% forecast. Futures are declining on economy and the XOM miss. Wall Street will likely open significantly lower.]

Reporting/reported this morning:

• Exxon Mobil (NYSE: XOM) is expected to report second-quarter earnings before the open. If ConocoPhillips (NYSE: COP) and BP (NYSE: BP) results are any indication, XOM will likely post massive profits thanks to oil’s skyrocketing prices and even break the record it has set for largest profit by a U.S. company. Analyst on average expect Exxon Mobil to earn $2.52 a share on revenue of $144 billion, according to a survey by Thomson Financial.
• MasterCard Inc. (NYSE: MA) is expected to report earnings of $2.02 per share.
• Kellog (NYSE: K) is expected to post earnings of 81 cents per shares.

• Motorola (NYSE: MOT) shares are climbing 4.8% in premarket trading after it posted a small profit as revenue and phone sales beat estimates. Motorola reported a second-quarter profit of $4 million and broke even on a per share basis. Revenue fell to $8.1 billion.
• Aetna (NYSE: AET) shares are gaining 1% in premarket trading after the health insurer said its second-quarter profit rose 6.4% on membership growth and a hike in premium rates. The company posted 97 cents earnings per share on revenue of $7.83 billion (a rise of 15%). Analysts polled by Thomson Financial expected profit of 93 cents per share on revenue of about $7.87 billion, on average.
• Altria (NYSE: MO) shares are trading 2.7% higher in premarket action after the it said its second-quarter profit fell 58% as it separated its international cigarette unit. Excluding one-time items, profit rose to 46 cents per share. Revenue has risen 4% to $5.05 billion from $4.86 billion. Thomson Financial says analysts expected a profit of 45 cents per share on revenue of $4.17 billion.
• Unilever (NYSE: UN, UL) shares are down nearly 9% in premarket trading after the consumer product company said profit declined by almost a fifth while sales dipped 1%.
• Royal Dutch Shell (NYSE: RDS.A) reported profit growth of 33%.
• Deutsche Bank AG (NYSE: DB) reported bigger-than-estimated 2.3 billion euros ($3.6 billion) of debt writedowns in the second quarter, saying it remains cautious on the rest of the year.

Reported Wednesday after the close:

• Starbucks (NASDAQ: SBUX) shares are climbing 4.3% in premarket trading as it beat estimates.
• Visa (NYSE: V) shares are also climbing over 3.2% in premarket trading after it topped Street forecast. Visa seems to be counting on international transactions.
• First Solar (NASDAQ: FSLR) are up nearly 8% in premarket trading after the solar energy company crushed estimated across the board.
• Disney (NYSE: DIS) shares, on the other hand, are down over 2% in premarket trading despite beating estimates. The media conglomerate said it detected slowing growth.

According to the Wall Street Journal General Motors Corp. (NYSE: GM) will cut 5,000 North American white-collar jobs by November 1 as part the plan announced earlier this month to save $10 billion through 2009.

A day after Google Inc. (NASDAQ: GOOG) acquired Omnisio to interact with YouTube, for the Wall Street Journal reported it “is working on plans to start a venture-capital arm, according to several people briefed on the discussions.”

Despite claims of Rogers, sole carrier of Apple (NASDAQ: AAPL) iPhone in Canada it is getting weekly shipments from Apple, sales of the iPhone in Canada are still outpacing supply.

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Filed under: Rumors, Products and services, Employees, Gannett Co (GCI)

Back in the good ‘ol days of say 2004, Gannett Co. (NYSE: GCI) was one of the few newspaper publishers Wall Street liked. Part of the reason was that many of the papers were in smaller cities such as Wilmington, Delaware, and Poughkeepsie, NY, where competition was not as great for advertisers. These days the publisher of USA Today is up the creek with the rest of the industry.

With its shares down more than 50% this year, it should come as no surprise that Gannett is joining the ranks of publishers that are laying off staff. According to a memo leaked to the unofficial Gannett blog, about 1,000 positions will be eliminated across Gannett’s Community Publishing Division. Six hundred of those employees will lose their jobs, the memo says.

“Several GCI papers have already made recent job cuts, but at a higher rate: 5%,” the blog says. “The division’s dailies do not include USA Today, suggesting that any further reductions at Gannett’s flagship could be on top of the 1,000 jobs eliminated.”

Gannett investors — who must be the few, the proud like The Marines — must have been expecting the move. Shares of the publisher have soared 10% in the past month. About the only relief they are going to get is through a takeover by private equity companies. The publicly traded media companies have no interest in buying into an industry whose best days are behind it.

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Banks have dialed up the lending requirements in the face of the nearly half-trillion dollars lost in the mortgage mess to-date. The Federal Reserve reported that banks and lending institutions have tightened credit standards across all loan-types as losses mount and liquidity remains a key issue.

This should be seen as good news of course. Common sense lending disappeared for a long time, and now it seems like we’re making our way back to some place of balance. Of course, we’re sure to over-correct in the process; but we’re certainly not there yet.

From Bloomberg:

Most “domestic institutions reported having tightened their lending standards and terms on all major loan categories over the previous three months,” the Fed said today in its quarterly Senior Loan Officer Survey.

Banks may be reluctant to lend against housing collateral that is falling in value. Home prices in 20 U.S. metropolitan areas dropped 15.8 percent in May, the biggest decline since record keeping began in 2001, according to the S&P Case-Shiller Home-Price Index.

The economy is also faltering. The unemployment rate has moved up 1 percentage point during the past 12 months to 5.7 percent, while delinquencies on home loans to borrowers with weak or limited credit histories rose to 18.8 percent in the first quarter from 13.8 percent a year earlier.

“Large majorities of domestic respondents reported having tightened their lending standards on prime, nontraditional, and subprime residential mortgages over the previous three months,” the Fed said.

Of the 32 banks that originate non-traditional mortgage loans, about 85 percent reported tighter lending standards, up from 75 percent in the prior survey, the Fed said.

About 65 percent of domestic banks indicated they had tightened their lending standards on credit card loans over the previous three months, up “notably” from about 30 percent in the April survey, the Fed said.

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Source [blownmortgage]

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Portfolio.com asked it’s readers to vote on the least trustworthy Wall Street CEO. The results are not surprising and macabre in their own way. As we’ve thoroughly documented here, Wall Street CEOs have had a problem with drinking their own kool aid or lying throughout the housing, credit and mortgage bust.

Below are the results with their most choice quote about the strength of their company or the impact of the mortgage mess on their business.

The higher the percentage the less trustworthy. As Barry asks at The Big Picture, where’s Tangelo? And the answer

of course is, he’s no longer a CEO.

From Portfolio.com:

The Final Tally:

Alan Schwartz, Bear Stearns : “Capital … remains strong.” 26%

Martin Sullivan, AIG: Chance of a loss? “Zero.” 22%

Ken Lewis, BofA: There’s “value in Countrywide.” 12%

Ken Thompson, Wachovia: We’re in “a great market.” 11%

Dick Fuld, Lehman Bros.: “The worst is behind us.” 8%

John Thain, Merrill Lynch: “We have tackled the problem.” 8%

Vikram Pandit, Citi: We are “well-capitalized.” 7%

Kerry Killinger, Washington Mutual: “Profitability” in 2008. 4%

John Mack, Morgan Stanley: “Comfortable” with the risks. 3%

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Source [blownmortgage]

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Filed under: Analyst reports, Consumer experience, Apple Inc (AAPL), Sirius Satellite Radio (SIRI), iPhone

Bloomberg reports that CEO Karmazin said Sirius XM Radio Inc. (NASDAQ: SIRI) will eliminate executive positions to cut costs. No doubt, after the only two U.S. satellite radio companies merged, there are some redundancies. He also said the company could report $300 million in earnings next year excluding some items.

What’s more, Sirius XM will introduce new products. Perhaps these will include what the blogosphere is buzzing about today — a new Internet application that would stream Sirius XM to portable devices, namely the Apple Inc. (NASDAQ: AAPL) iPhone, as noted by Citigroup’s Tony Wible.

Apple’s iPod and iPhone products, as well as other digital music players, have been named as competitors to satellite radio by Karmazin himself. If these reports are true, could he be trying to transform them from competitors into boosting the company’s user base, creating a complementing, rather than competing, services?

Continue reading Sirius XM — time to reconsider?

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Via [bloggingstocks]

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Filed under: International markets, Earnings reports, Deere and Co (DE), Commodities

Kudos to my colleague Elizabeth Harrow for pointing out that shares of Deere & Company (NYSE: DE) may be heading for a fall. As today’s earnings report shows, her post was on the money.

Net income rose to $575.2 million, or $1.32 per share. Revenue soared 17% to $7.74 billion. Analysts had expected profit of $1.36 per share on revenue of $7.23 billion. Shares of the largest farm equipment maker had their biggest drop in two decades, according to Bloomberg.

What’s killing Deere is rising raw material costs. The company’s overall business is doing fine. Agricultural sales rose 35% in the quarter. Not surprisingly Commercial and Consumer revenue fell 1% and Construction and Forestry declined 7%.

Continue reading Is now the time to buy Deere?

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Filed under: Bad news, Industry, Scandals, Economic data, Politics, Housing, Recession

The Washington Post reports that the number of bank failures has been surprisingly low. But the crunch count is likely to grow as the problem bank list triples from 90 to 300 over the next three years. Meanwhile, the Federal Deposit Insurance Corporation (FDIC) could run out of money to pay off depositors of future failed banks unless it raises its deposit insurance rates from their current 5.4 cents per $100 deposits.

But the most interesting question is whether the White House is propping up banks that should fail so that it can push the biggest part of the cleanup into the lap of the next President. It is certainly bringing out all the biggest economic guns to delay the inevitable reckoning from the $8 trillion credit collapse. It spent $29 billion bailing out Bear Stearns, sent $160 billion worth of checks to taxpayers, cut interest rates from 5.25% to 2%, and seems belatedly to be enforcing regulations against manipulation of oil trading.

The Post quotes industry experts who think that the FDIC is propping up many banks. For instance, Bert Ely of Ely & Co., a bank consulting firm in Alexandria, VA, told the Post, “They are dragging their feet in forcing these banks to reserve realistically. Some of these banks could have been closed two or three quarters earlier.” And Ken Thomas, a lecturer in finance at the Wharton School at the University of Pennsylvania, told the Post that the FDIC’s foot dragging would only cost taxpayers more in the long run. Thomas said, “In some of these cases, I believe regulators should act sooner than later to prevent future losses to the fund.”

Continue reading Is the White House pushing bank failures onto the next administration’s plate?

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The California housing market is facing a major calamity. In April of 2007 California reached a peak median price of $597,640 only to see those gains erased in the following year. By June of 2008, the median price in California is hovering at $368,250, a drop of 38.38% with no signs of slowing […]
Related Posts:
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.
■Real Homes of Genius: Today we Salute you Santa Monica. 929 Square Feet for $969,000. And You Thought the Bubble was Over.
■Predicting the Housing Future: Los Angeles and Orange Counties. Using the Case-Shiller Index to Find a Bottom.
■Of Bubbles Past. Need a Map for Housing? Ask a Housing Perma-Bull and They’ll See the World Through Colored Glasses!
■Southern California Housing Numbers Exposed: The Bottom Falls out of the Housing Market, Again.

The California housing market is facing a major calamity. In April of 2007 California reached a peak median price of $597,640 only to see those gains erased in the following year. By June of 2008, the median price in California is hovering at $368,250, a drop of 38.38% with no signs of slowing down. This is data gathered from the California Association of Realtors. Seeing a statewide drop of nearly 40% in one year may be a tempting incentive for people to jump back in the market. I’ve recently gotten many e-mails about people asking about a market bottom and whether they should be buying today.

This bottom psychology has also taken hold on Wall Street. There seems to be a new campaign of getting people to jump back in with both fists with the idea that things are hitting a price bottom. This is a mistake. Just because something has become radically “cheaper” in relation to a peak price does not make it worth the current price. There has to be some underlying economic valuation that justifies the price. After all, the recent job report saw unemployment spike up to 5.7% and we also saw our 7th month of continued job losses:

Clearly there will be no second half recovery. In fact, here in California the Governor just signed an order to reduce the wages of 200,000 state employees to the minimum wage and laid off thousands of part-time employees. Do you think this is good for the California housing market? Who will be the future buyers of these homes? When we examine the data we realize that prices have further to come down. I’ll give you five reasons why prices will continue to fall in California:

(1) - State Budget Crisis means higher taxes and spending cuts (a combination of both).

(2) - $300 Billion in Pay Option ARMs set to recast in the state.

(3) - Declining price momentum - 3 measures show prices crashing

(4) - Market psychology. Why buy today when prices will be cheaper tomorrow?

(5) - Real estate prices do not always go up.

The combination of these factors is going to stunt any supposed recovery for the California real estate market. Yet for all the negative news on the economy and housing there will be a housing bottom at a certain point in time. When will housing actually hit a bottom? Some think we are already there. For those that are actually putting their money where their mouth is, there is the real estate futures market. And their bet is that housing for Los Angeles and Orange Counties will not hit a bottom until May of 2011.

For those of you really impatient to get into the market, it does seem that there will be a bottom forming as of the fall of 2009. I went ahead and took the available futures contracts on the Chicago Mercantile Exchange (CME) which are based on the Case-Shiller Index and constructed a chart adding the actual Case-Shiller data and the futures contracts:

What is fascinating by the chart is that most people that are betting on the futures markets do not see a bottom for the Los Angeles index which also includes Orange County until May of 2011. Yet the more fascinating trend is that some are actually betting on a minor summer bounce in 2009. Are people betting on a suckers rally? Maybe.

The index itself isn’t necessarily looking at price but looks at a single home through time in relation to the base year of 2000. So given the bottom number of 152 in May of 2011, the last time the Case-Shiller Index faced that number for LA was in May of 2003.

I’ve collected data for Los Angeles dating back until 2000 so we can then see what the actual median price of a home was at that point in time. According to DataQuick the median price of a Los Angeles County home in May of 2003 was $313,000. Is this far fetched? Not necessarily given that the median price of Los Angeles County is:

CAR data (June 2008): $396,560

DataQuick (June 2008): $415,000

Let us use the $313,000 bottom price and look at the current DataQuick price since it is data from the same measure. The current price of $415,000 would have to drop an additional 24.5% to reach the bottom price of $313,000. If we are to apply this same drop rate for Orange County we get the following:

Orange County Media Price

DataQuick (June 2008): $495,000
Bottom median price: $495,000 and 24.5% correction = $373,725

The rate of decline in price is a fair assessment since Orange County is actually out pacing Los Angeles County in the rate of sales declining and the rate in price change is nearly identical:

June 2008 data

Los Angeles County drop in sales year over year: 25.1%

Orange County drop in sales year over year: 26.9%

LA County year over year median price drop: 23.9%

OC year over year median price drop: 23.3%

Now my assessment is that we will see major abrupt movements to the downside once the pay option ARMs start recasting in fall and winter of this year. These loans are viciously toxic and will prove to be more destructive than people can imagine. If we are to take a look at the WaMu folder and look at recast dates here in California, we get a sampling of what is to come:

That right there is $26.3 billion of the overall $300 billion in loans that will start recasting. In addition, the state unemployment rate is already at 6.9% and given that the Governator just fired thousands of part-time workers, that number will jump. The way employment data is calculated, part-time workers are factored into the overall employment rate even if they are seeking full-time employment and are underemployed. This will bring them onto the books quickly. Now why is this going to prove to be more destructive? Take a look at the recent employment data released on August 1^st:

The only three sectors that saw job growth last month were government, health services, and leisure and hospitality (barely here). Clearly in California job growth via the government won’t be happening with the job cuts and also the Governor has put out hiring freezes. Lesirue and hospitality? Who will be spending when most sectors are contracting?
With this as the backdrop for Los Angeles and Orange Counties, there is no reason to believe that the market will reach a bottom anytime soon. I haven’t seen many articles attempt to pick a bottom but here you have it with actual price points. My guess is even after hitting a bottom, we may see a lost decade similar to Japan where prices simply move sideways for years. Given how our current government is trying to prop up institutions that should collapse, we are going to divert resources to organizations that clearly have mismanaged their own balance sheets. Money that can go elsewhere to improve the overall ability of our society to be competitive in research, infrastructure, and science. This money will now be spent on propping Fannie Mae and Freddie Mac and giving tax breaks for people to buy homes.

Should you buy a home today in Los Angeles County or Orange County? Look at the data above and tell me what you think.

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Post from: Dr. Housing Bubble Blog

A Lost Decade of Housing Equity: Los Angeles and Orange County will hit a Housing Price Bottom in May 2011 seeing May 2003 Prices.

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Related Posts:
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.
■Real Homes of Genius: Today we Salute you Santa Monica. 929 Square Feet for $969,000. And You Thought the Bubble was Over.
■Predicting the Housing Future: Los Angeles and Orange Counties. Using the Case-Shiller Index to Find a Bottom.
■Of Bubbles Past. Need a Map for Housing? Ask a Housing Perma-Bull and They’ll See the World Through Colored Glasses!
■Southern California Housing Numbers Exposed: The Bottom Falls out of the Housing Market, Again.

Via [DrHousingBubble]

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Filed under: Before the bell, Earnings reports, Analyst reports, Analyst upgrades and downgrades, Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Market matters, Netflix, Inc. (NFLX), Black and Decker (BDK), Merrill Lynch (MER), Clear Channel Commun (CCU), Chipotle Mexican Grill’A’ (CMG), Fortune Brands (FO), Morgan Stanley (MS), Wachovia Corp (WB), Washington Mutual (WM), Economic data, Juniper Networks (JNPR), Crocs Inc (CROX), Delta Air Lines (DAL), Lehman Br Holdings (LEH), Housing

U.S. stock futures were lower Friday morning, a day after a selloff triggered by housing data. Today investors are bracing for more housing data at 10:00 a.m. EDT after already hearing that foreclosures soared 121% during the second quarter. Other point of interest will be durable goods data reported an hour before the opening bell. Meanwhile, oil continued the steady climb that started Thursday as the dollar weakens, trading above $126 a barrel. It’s Friday, and no many earnings reports are due.

While there aren’t many earnings reports today, there are a few including Fortune Brands (NYSE: FO), Netflix (NASDAQ: NFLX) and Black & Decker (NYSE: BDK) among others.

Crocs (NASDAQ: CROX) shares are tanking over 44% to $5 after after it cut its earnings outlook significantly on softer demand for its plastic shoes. With all those knockoffs around, is it any wonder? Robert W. Baird downgraded Crocs from Outperform to Neutral, slashing the target price from $21 to $5.

Meanwhile, Juniper Networks (NASDAQ: JNPR) surged 12% in premarket trading after the company not only beat estimates when reporting quarterly results Thursday, but also increased its sales forecast for the third-quarter much higher than analyst estimates. Friedman Billings and Citigroup both upgraded Juniper to Outperform and Buy respectively.

In deal news, Clear Channel Communications (NYSE: CCU) shareholders on Thursday approved a $17.9 billion takeover by private equity funds Thomas H. Lee Partners and Bain Capital. This ends the 20-month long effort.

Chief Executive Steve Ballmer said Microsoft (NASDAQ: MSFT) will continue its internet push and that the company was “done” Yahoo (NASDAQ: YHOO) for now.

Meanwhile, Soleil upgraded internet search giant Google (NASDAQ: GOOG) from Hold to Buy.

Merrill Lynch also upgraded Delta Air Lines (NYSE: DAL) from Neutral to Buy and Chipotle Mexican Grill (NYSE: CMG) from Underperform to Neutral.

Financials:

Wachovia (NYSE: WB) said late Thursday that its CFO, Thomas Wurtz, was stepping down as soon as a replacement is found. That’s after two weeks ago, the company brought in a new chief executive. For now Wall Street is not jumping up and down with joy as WB shares are down about 1.5% in premarket trading.

CNBC reports that “Morgan Stanley (NYSE: MS), which currently employs only 8,000 brokers, is targeting the massive Merrill Lynch (NYSE: MER) brokerage sales force in a major recruitment drive.” Both MS and MER shares are up in premarket action.

Washington Mutual (NYSE: WM) shares seem to have stabilized after declining over 13% Thursday over an analyst note claiming creditors are pulling funds from the company. The company responded, saying that “WaMu funds all of its business through its banking operations and does not rely on commercial paper.”

CNBC also reports that Lehman Brothers (NYSE: LEH) may be weighing the sale of at least part of its Neuberger Berman asset management unit.

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