JDfn Daily Digest - August 19, 2008
Richard Fisher, the president of the Dallas Federal Reserve, said the conventional wisdom that inflation may soon peak as oil prices drop and the economy slows may turn out to be wishful thinking. Fisher said the Fed should remain "poised" to hike rates if slowing growth fails to contain inflation pressure. Fisher said it was too early to tell the likely course of inflation.
According to the former IMF chief economist, Kenneth Rogoff, the worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s largest economy hits further troubles. He told a financial conference that the U.S. is not out of the woods. He said, “I think the financial crisis is at the halfway point. I would go even further to say the worst is yet to come.”
The Labor Department reported that the Producer Price Index shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected. The Core PPI, which excludes food and energy, rose 0.7 percent.
Home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years. The annual pace of housing starts at 965,000 barely beat Wall Street's expectations of 960,000. In June, housing starts increased 10.4 percent, revised up from the previously reported 9.1 percent. Building permits, an indicator of future construction, dropped to an annual rate of 937,000.
Lehman Brothers (LEH) has approached a number of potential bidders about selling part of its investment-management business, which includes Neuberger Berman. In addition to Neuberger Berman, the Lehman unit includes private-client, hedge-fund and private-equity components. Analysts have estimated the combined value of the business at $8 billion to $10 billion.
General Dynamics (GD) announced it will buy Jet Aviation for about $2.25 billion, expanding its corporate jet business. Jet Aviation, based in Switzerland, repairs and refurbishes executive jets and offers flight support and charter services.
The Air Transport Association of America expects Labor Day travel to drop by 5.7% this year, as rising airfares and schedule cuts keep travelers home. The group projected that 16 million paying passengers will fly globally on U.S. airlines between August 27th and September 3rd. That would be down 5.7% from the 17 million passengers during the same period last year.
U.S. consumers bought significantly fewer cell phones in the second quarter. The NPD Group said that 28 million cell phones were sold in the United States, a decline of 13 percent from the same quarter a year ago. That's the lowest number of phones sold in a quarter since NPD began tracking the category in 2005.
Scheduled U.S. Economic Reports (Wednesday)
None Scheduled
In Earnings News
Target Corp (TGT) reported a nearly 8 percent drop in quarterly profit. Target said profit was $634 million for its second quarter, down from $686 million a year ago. Earnings per share rose to 82 cents from 80 cents, boosted by fewer shares outstanding in the quarter. Analysts, on average, had expected it to earn 76 cents per share.
The Home Depot Inc. (HD) reported a 24 percent drop in second-quarter profit but beat Wall Street expectations. The company said that net income fell to $1.2 billion, or 71 cents per share. Analysts expected 61 cents.
Saks Inc. (SKS) reported a wider-than-expected loss for the second quarter as its affluent customers cut back on apparel amid a slowing economy. The retailer said it lost $31.7 million, or 23 cents per share. Analysts expected a loss of 19 cents a share.
Medtronic (MDT) posted a profit of $747 million, or 66 cents per share, compared with $675 million, or 59 cents per share, in the same quarter last year. Analysts expected a profit of 69 cents.
Staples Inc. (SPLS) warned that its second-quarter results, excluding its acquisition of Corporate Express, would be weaker than anticipated. The office supply company said revenue rose about 3 percent and earnings per share fell about 15 percent in the quarter, compared to a year ago.
Scheduled Earnings Reports (Wednesday)
JDS Uniphase, Bally Technologies, Tower Semiconductor, Hot Topic, Ross Stores, Limited Brands
Stocks in the News
Fannie Mae (FNM) traded lower after Barron's said it is ``increasingly likely'' the U.S. Treasury will recapitalize Fannie and Freddie Mac (FRE), which would ``wipe out'' shareholders.
Corel Corp (CREL) said Corel Holdings L.P., an affiliate of Vector Capital Corp., is withdrawing its offer to buy the part of Corel it doesn't own.
Shengda Tech (SDTH) reported second-quarter adjusted profit of 18 cents a share, beating analysts’ forecasts.
Teva Pharmaceuticals (TEVA) traded lower after Roche Holding AG sued Teva and three other companies to block U.S. sales of a generic version of Boniva, a once-a-month treatment for osteoporosis.
According to the former IMF chief economist, Kenneth Rogoff, the worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s largest economy hits further troubles. He told a financial conference that the U.S. is not out of the woods. He said, “I think the financial crisis is at the halfway point. I would go even further to say the worst is yet to come.”
The Labor Department reported that the Producer Price Index shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected. The Core PPI, which excludes food and energy, rose 0.7 percent.
Home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years. The annual pace of housing starts at 965,000 barely beat Wall Street's expectations of 960,000. In June, housing starts increased 10.4 percent, revised up from the previously reported 9.1 percent. Building permits, an indicator of future construction, dropped to an annual rate of 937,000.
Lehman Brothers (LEH) has approached a number of potential bidders about selling part of its investment-management business, which includes Neuberger Berman. In addition to Neuberger Berman, the Lehman unit includes private-client, hedge-fund and private-equity components. Analysts have estimated the combined value of the business at $8 billion to $10 billion.
General Dynamics (GD) announced it will buy Jet Aviation for about $2.25 billion, expanding its corporate jet business. Jet Aviation, based in Switzerland, repairs and refurbishes executive jets and offers flight support and charter services.
The Air Transport Association of America expects Labor Day travel to drop by 5.7% this year, as rising airfares and schedule cuts keep travelers home. The group projected that 16 million paying passengers will fly globally on U.S. airlines between August 27th and September 3rd. That would be down 5.7% from the 17 million passengers during the same period last year.
U.S. consumers bought significantly fewer cell phones in the second quarter. The NPD Group said that 28 million cell phones were sold in the United States, a decline of 13 percent from the same quarter a year ago. That's the lowest number of phones sold in a quarter since NPD began tracking the category in 2005.
Scheduled U.S. Economic Reports (Wednesday)
None Scheduled
In Earnings News
Target Corp (TGT) reported a nearly 8 percent drop in quarterly profit. Target said profit was $634 million for its second quarter, down from $686 million a year ago. Earnings per share rose to 82 cents from 80 cents, boosted by fewer shares outstanding in the quarter. Analysts, on average, had expected it to earn 76 cents per share.
The Home Depot Inc. (HD) reported a 24 percent drop in second-quarter profit but beat Wall Street expectations. The company said that net income fell to $1.2 billion, or 71 cents per share. Analysts expected 61 cents.
Saks Inc. (SKS) reported a wider-than-expected loss for the second quarter as its affluent customers cut back on apparel amid a slowing economy. The retailer said it lost $31.7 million, or 23 cents per share. Analysts expected a loss of 19 cents a share.
Medtronic (MDT) posted a profit of $747 million, or 66 cents per share, compared with $675 million, or 59 cents per share, in the same quarter last year. Analysts expected a profit of 69 cents.
Staples Inc. (SPLS) warned that its second-quarter results, excluding its acquisition of Corporate Express, would be weaker than anticipated. The office supply company said revenue rose about 3 percent and earnings per share fell about 15 percent in the quarter, compared to a year ago.
Scheduled Earnings Reports (Wednesday)
JDS Uniphase, Bally Technologies, Tower Semiconductor, Hot Topic, Ross Stores, Limited Brands
Stocks in the News
Fannie Mae (FNM) traded lower after Barron's said it is ``increasingly likely'' the U.S. Treasury will recapitalize Fannie and Freddie Mac (FRE), which would ``wipe out'' shareholders.
Corel Corp (CREL) said Corel Holdings L.P., an affiliate of Vector Capital Corp., is withdrawing its offer to buy the part of Corel it doesn't own.
Shengda Tech (SDTH) reported second-quarter adjusted profit of 18 cents a share, beating analysts’ forecasts.
Teva Pharmaceuticals (TEVA) traded lower after Roche Holding AG sued Teva and three other companies to block U.S. sales of a generic version of Boniva, a once-a-month treatment for osteoporosis.
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