Market briefing --- Rhonda Schaffler (slow)
NYSE --- Deb (fast)
Interview: Lebanon Prime Minister
i’m rhonda schaffler recapping the day on wall street and a big rally with the dow, s&p and nasdaq all sharply higher and closing just off the best levels of the session. the dow gaining 1.75% on the day. the nasdaq up close to 2% on the session. deborah kostroun is at the new york stock exchange with more on all the action today.
>> thank you, rhonda. it was a broad rally today. 493 stocks in the s&p 500 were higher, so what you did see, 91% of the stocks in the s&p 500 advancing on the day. very broad-based rally. stocks rising on the fact―we started the day higher but really it was the fed minutes that helped things out as the fed was talking about an end to the interest rate increases and in fact bob basel with citigroup said you would think the higher energy prices would put a lid on stocks, but the market is going higher and people seem to be more satisfied today with that interest rate outlook than concerned about higher energy prices. that was the main story in today’s session, is that the interest rate issue was overriding the talk about energy prices. crude oil once again at a record, now above $71 a barrel. a lot of the oil stocks were doing well and also interest-rate-sensitive stocks doing well such as real estate and utilities. let’s face it, about 23 of the 24 degree industry groups were higher in the s&p 500. homebuilders with a good day in today’s session. what homebuilders have been doing over the past couple of weeks, they haven’t been performing all that well. but what we saw in today’s session, homebuilders higher. d.r. horton, reporting second-quarter earnings rising at the slowest pace in five years because of higher mortgage rates cooling off the housing market . mortgage rates are at a four-year high right now, slowing some of those home sales. in addition, one of the other things that we did get in today’s session, that was housing starts. housing starts declined 7.8%. that was more than economists expected and in fact that was the fewest houses being built, the fewest number since march. that’s really on the fact that we have those rising mortgage rates and also record inventories. i was talking about in today’s session where you saw energy, coal, everything seemed like it was higher. however, what we did see, the s&p healthcare index just a little bit lower. united healthcare released earnings, first-quarter profit, although it rose 21%, a lot of concern about their earnings forecast. rhonda, back to you.
>> thanks so much. we have technology earnings to pass along. yahoo numbers coming in better than expected for the first quarter. company earning 15 cents a share. analysts were expecting the company would report 11 cents a share. that is up from a year ago. you can see how yahoo performed throughout the day and now you’re seeing after-hours, the stock ticking up two cents. we also have texas instruments out with its numbers after the bell, here. texas instruments coming in with a report that was better than expected on both the earnings and revenue lines. here’s a look at what the stock did during the day. earnings came in at 33 cents a share. expectations were for 32 cents a share. now, as far as revenue goes, texas instruments reported $3.33 billion in revenue. the analysts’ estimates were $3.29 billion and you can see texas instruments after hours with a big move there. again, some of the numbers coming off the bloomberg. we’ll fill out details for you later when we speak with an analyst on texas instruments. president bush met with lebanon’s prime minister fouad siniora earlier today. on the agenda, democracy in lebanon, middle east policy and the murder last year of his predecessor. now we go live in washington where the prime minister sits down with bloomberg executive editor al hunt.
>> thank you, rhonda. mr. prime minister, thank you for being with us today. you met with the president today. duall see eye-to-eye on the middle east?
>> yes. i had a very good meeting with the president. and the assistants and before that with the secretary who was present in the meeting, as well. and we went over so many of the issues, the mutual bilateral relations as well as matters that have to do with what’s been going on in lebanon for the past 18 months. and what developments have been taking place since the assassination of prime minister harari and how many went to the streets to express their commitment tohave a free and democratic country and we have in common in terms of the values with what the united states really believes in.
>> we want to turn to the questions about your country. three years after the invasion of iraq, is the middle east more stable or more dangerous?
>> no, it’s less stable.
>> it’s less stable.
>> yes. i think, for sure, that the objective of really achieving more democracy in the region is very valid and very important objective. but i believe that in the middle east there is a problem that is so influential in every facet of life in the region, which is the palestinian problem. and i think every effort that is done in order to achieve real peace and to avoid the circle of violence―because violence breeds violence―achieving real peace in the region, and which really is based on what has been agreed upon in madrid, agreement for peace, really to have the israeli state and the palestinian state living side by side in peace together. this is the real slution. that does not only affect the situation in palestine. the importance of the effort to be exerted towards achieving peace in palestine, a just and comprehensive one, is that it affects everything. wherever you go in the arab world―in the muslim world.
>> it affects iraq?
>> it affects very much iraq, very much iraq.
>> you endured a horrible civil war in lebanon for 15 years. is what we’re seeing in iraq today similar to lebanon in the late 1970’s?
>> well, it has some resemblance into that. and the best thing, probably, is to repropose something. as much as we are moving forward on the various tracks and most important, the palestinian track, to propose something like what we have done in lebanon, which was the agreement and which was sponsored by the arab countries, basically saudi arabia, syria, nigeria, in which we arrived at some sort of agreement which became very binding to all. i think in iraq probably something has to be done in order to bring in the arab countries input into this so that we bring back iraq into one piece, united iraq, and in which everybody, whether an arab, shiite or sunni or kurd, all together, they can come together to live side by side in a peaceful situation because the situation as it is now, degenerating into a conflict among the various iraqi factions. it’s not really helpful.
>> there have been reports of a sunni attempt to assess assassinate a leading shiite in your country. do you have any sense the violence in iraq is spilling over into other countries, including lebanon?
>> what was termed to be a plot to assassinate―there was actually something which is now in the hands of the court. and i think we’ll have to wait until we get the results. we can’t really speak about an assassination of a very senior shiite leader who is a national leader at the same time so i think we better not speak about about this until we have the results of the investigation.
>> would you think a specific time table for american withdrawal in iraq would be beneficial or would it be harmful to the region?
>> i think it’s not a matter of really stating whether we want to set the time table. definitely this is something that would have to be done by the administration. i want really to look at things from a constructive point of view. we want to really end the hostilities in iraq because it’s not in the interest of any, it’s not in the interests of the arab world and it’s not in the interests of the relationship with the west. we want to achieve peace in iraq. we have to really create a better, let’s say, platform for people to get engaged in real dialogue. among themselves so they can really resolve all these issues. this is what happened in lebanon. at one time, people considered it’s not possible for the lebanese to come to terms and discuss the very difficult issues. now it’s high time to really bring in and to have an involvement from the arab countries.
>> as you know, another trouble spot in the region is iran. what would be the implications for your country and your neighbors if the americans were to engage in military action to prevent iran from having nuclear weapons?
>> first of all, let me express my position from lebanon, in line with the position of the arab countries, which we are against any presence of weapons of mass destruction in the middle east, as well as no nuclear weapons in the middle east. this is the position that we take and we believe this is something very important to really have this region, not to have any type of these weapons and at the same time not to justify the existence of a very large arsenal of nuclear weapons in the hands of israel. this is something we want to put in the right perspective.
>> if iran won’t go along with the international community and america were to launch a military strike, what would be the implications?
>> we have to look at it but, i mean, i, personally, in today’s discussion, i encouraged to carry on with firm diplomatic, let’s say, discussion. and this diplomatic offensive is very important in order to achieve the results because the region does not really―or cannot take an additional war in the present time.
>> america has pushed for more democracy in the middle east and you and after your session with president bush today expressed your appreciation for the u.s. support for democracy in lebanon. but washington has been alarmed by some of the results in other places―the success of the muslim brotherhood and egypt, of hamas and the palestinian territories, even hezbollah in your country. what does that tell us about the future democracy in the middle east?
>> i strongly believe that democracy is the road that we should take, all of us, so that to really have everybody to participate in a process whereby the decision-making process will be to the benefit of all. so this thing definitely is a costly process and we have to accept it and we have to really understand that people who won the elections probably they won the elections like hamas. they have to be given time in order to convince their various echelons and adapt to the new situation so we should not really give them the excuse for their failure.
>> we’re going to take a quick break, now. rhonda, i’ll toss it back to you. in the next hour, we’ll have more with the prime minister on lebanon, on syria and on the israeli-palestinian issue.
>> thank you very much. at this point, we are about 20 minutes away from bloomberg “money & politics.” michael mckee joins me from washington to tell us what’s on tap.
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>> rhonda, lots in washington of interest to wall street today e.al will continue his interview. meanwhile, the shakeup at the white house continues. rob portman is the new budget director, susan schwab, the new trade representative. we’ll tell you what those moves will mean and have reaction to the fed minutes released today that sent stocks soaring. also, as yahoo releases earnings on the eve of chinese president hu jintao’s visit to washington, we’ll ask whether yahoo, google and other internet companies are contributing to censorship in china. one member of congress thinks so. all that coming up on “money & politics.”
>> we have earnings reports continuing to be released. bob bowden joins me to break down the number. bob?
>> let’s go. beginning with texas instruments as we said a moment ago, reporting 33 cents a share, that against the 32-cent analysts’ estimates. you see there, they beat on earnings. revenue exceeded estimates, $3.33 reported and $3.29, the estimate. notably, up 23% from the same period a year ago. also, the company gave a forecast that was bullish. it sees t.i.c.’s second-quarter earnings in a range of 38 to 43 cents. you see that entire range, the low end included, exceeds the 36 cents that analysts were looking for for the current-quarter earnings for texas instruments. checking in the extended hours’ trading, not surprising that the stock is up when they beat on earnings, beat on revenue and the forecast exceeds estimates. you see 85 cents, up on that stock. yahoo also reporting after the bell, 15 cents reported. that beating the 11-cent analysts’ estimates, but there’s a bit of a snafu on the revenue forecast. the company sees revenue for the current quarter in a range of $1.08 billion to $1.16 billion. math in your head tells you 1.12 would be the midpoint of the range, falling below the analysts’ estimates. so revenue a little shy but not bothering investors in the after-hours, we see the earnings reaction for e.u. shares -- yahoo shares up $1.61 in after-hours.
>> we’ll focus more on texas instruments. we’ll do that with an analyst who joins us now. also, mike mcconnell will be talking to us about intel. he is with pacific crest securities and joins us from portland, oregon. thanks very much for spending time with us. let’s talk about texas instruments’ numbers, first. the company is confident enough to look at this quarter and predict that results will be better than expected. based on the numbers you’ve seen so far, what’s the most significant factor in the earnings report?
>> well, i think the e.p.s. guidance for q-2 clearly is the outlier. they’re not getting, we believe, very strong revenue drive from the wireless market in q-2. particular driver there is handset penetration into emerging markets , all of which are gsm-gpr-based, all texas instruments’ sweet spot. the real key in q-2 is on the margins. the low end above street consensus, we can extrapolate that gross margins will be moving higher. that’s very bullish with the fact that even though we’re getting more low-end mix in the handset chain, it’s having no effect on their margins and we do believe their analog sales are also very strong, as well. so all in all, a very outstanding report as well as outlook from texas instruments right after the close here.
>> what do you think this says to us about texas instruments’ competitive position against qualcomm at this point?
>> i think that is, frankly, not even an issue. i mean, everyone has been making a negative call on texas instruments, what qual qualcomm will do to them in 3g. i think investors need to look at the entire wireless market this year. handset units will be approaching a billion units this year and if you look at 3g, or the wcdma market , the market where qualcomm will compete against t.i., it’s a mere 95 million units, very, very small so if you look out to eventually 3g and the upgrade cycle, which we believe will occur, out of the gate, t.i., qualcomm and probably freescale will take share against some of the second-tier players and then at some point we are going to have to pick a winner between those three. but if you look at this year, the emerging markets are what’s growing and that’s g.s.m., g.p.s. and that’s all t.i.
>> quick thoughts on intel, what are you going to look for?
>> i think for intel, the worse they guide to for q-2, the better it will be for the stock. we expect them to guide significantly lower than consensus for q-2, potentially writing off inventories. it will be a very poor report, contrary to what we saw from t.i. so i think what investors will look for is the gross margin line, that’s usually the trigger for the stock. if gross margins are guided below 50% for q-2, investors will extrapolate out potential bottom for fundamentals, look out to the second half of the year and is thato bid up the shares. if it’s above 50%, investors will extrapolate out that it could be a slow bleed for the company and i believe the shares will actually be weaker.
>> michaelll, appreciate it. merrill lynch shares moved higher after a better-than-forecast report. tomorrow we’ll look at a report from j.p. morgan. here to preview those earnings, connell mcshane.
>> these are the stocks affected by the fed minutes, and they were both moving higher, extending gains after the minutes came out. the merrill lynch earnings, above analysts’ estimates, 28% jump in revenue, giving it a record sales number.
>> the surprise is a good one and it’s really revenue strength. we kind of saw it from the november fiscal year brokers a month ago and from citigroup, as well, yesterday. but it’s good to see merrill lynch fully participate. both underwriting and trading revenues were quite a bit stronger than we were looking for.
>> with that performance, you’ll see gains for the stocks. that is exactly what we saw in today’s trading. here’s how it performed in the session along with the rest of the market , extending the gains after the fed minutes indicated the end to interest rate increases may be near and we should point out when we talk about merrill lynch, merrill lynch is a passive minority investor in bloomberg lp, the parent of bloomberg news. you ask what is driving the strong profit and sales figures? you have trading, strong trading numbers reported by rivals like goldman and lehman, as well. merrill actually outdid both of those firms in this report. number two, the brokerage unit strong, 15% jump in fees reported there. that was driving things. and another thing is that pickup in mergers and acquisitions activity and that’s been strong across wall street, as well, bringing us to the report tomorrow from j.p. morganchase. analysts saying j.p. morgan may report a 29% gain in earnings from last year. those merger fees also forecast to be a driver like that. the other wall street firms trading is a big part of the picture. j.p. morgan stock, a 23% gainer over the course of the last year. that report is out tomorrow morning before trading opens in new york.
>> connell, thank you so much. still ahead, sandy weill says goodbye to citigroup shareholders. we’ll be right back.