Before the bell: Sentiment improves on WaMu, Novarits deal; AA on tap
Posted by: in Latest NewsFiled under: Before the bell, International markets, Earnings reports, Deals, Market matters, Alcoa Inc (AA), Novartis AG ADS (NVS), Washington Mutual (WM), Economic data, Commodities, Oil, Federal Reserve
Stock futures were higher Monday morning as reports of a cash injection into WaMu as well as a large pharma deal hit the news. Also, Monday marks the beginning of earnings season as the first of the Dow companies, Alcoa reports after the close. Investors will be interested to see how corporate profits have fared in the first quarter of 2008 while many economists state the U.S. may have entered a recession during that time.
On Friday, U.S. stocks closed mostly higher despite a dismal March jobs report that showed payroll have declined for the third month in a row while unemployment jumped. Still, while the Dow industrials finished 16 points or 0.13% lower, it registered a weekly gain of 3.2%. The S&P 500 rose 1 point, or 0.08%, Friday for a 4.2% weekly increase, and the Nasdaq Composite added 7 points, or 0.32%, Friday, rising 4.9% for the week.
Without much economic news this day, investors will focus on corporate news:
If last week it was UBS and Lehman Brothers that announced equity deals and helped boost sentiment on Wall Street, this week it is Washington Mutual (NYSE: WM), which according to The Wall Street Journal, is close to a deal to get a $5 billion investment from private equity firm TPG and other investors. As of 6:58 a.m., WM shares are up over 15% in premarket trading.
Meanwhile, a massive $38 billion deal is brewing as Swiss pharmaceutical maker Novartis (NYSE: NVS) stated it will spend about that much in a two-step bid for a majority stake in U.S. eye-care company Alcon (NYSE: ACL). First, itr will initially pay Nestle SA $11 billion or a 25% stake, then have rights to Nestle’s remaining 52% stake, for about $28 billion. Such large deals tend to make Wall Street happy as it shows stability, the ability to borrow and confidence in the future.
Also in focus this day will be the kick off of the first quarter earnings season with Alcoa (NYSE: AA) reporting after the close. Analysts are expecting Alcoa to report earnings of 48 cents per share on revenue of $7.18 billion, compared with 75 cents per share on revenue of $7.9 billion in the same period last year. Despite the price of aluminum climbing 24.5% in the first quarter, Alcoa’s earnings would affected by weakness in the automotive and construction industries, a weaker dollar and higher energy costs.
Oil prices rose Monday as traders anticipate the Federal Reserve to cut rates following the poor U.S. jobs data released Friday. Light, sweet crude for May delivery rose 80 cents to US$107.03 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.
Overseas, stocks ended mostly higher in Asia and are rising in Europe mostly due to the resource sector. Goldman Sachs and Citigroup also wrote bullish notes on the sector.
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