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Thusday Look Ahead: Earnings to Set Course

Some late day earnings news could spill into Thursday's session.

Apple shares rose after the company reported a 36 percent increase in profits to $1.05 billion. But the company guided third quarter below Wall Street estimates.

Starbucks , a company that's been struggling, said its second quarter earnings would be $0.15 per share, below the street estimate of $0.21. The company blamed the economy and weak consumer and said revenue growth would be 12 percent, below Wall Street expectations. Starbucks said it was impacted by a decline in store traffic and sales. Its stock was temporarily halted, and then battered in the late session.

Amazon.com , in another late day report, said its profits rose 30 percent to $143 million but its operating margins were 4.8 percent, flat with last year. Amazon stock took a hit as a result.

Earnings Central

Thursday's earnings reports include Conoco Phillips, 3M, PepsiCo, Aetna, Bristol-Myers, Dow Chemical, Ford, Motorola, Potash and Union Pacific. After the bell reports are expected from Microsoft, Amgen and American Express.

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Pfizer holds its shareholder meeting Thursday, as does Johnson and Johnson, Corning, Capital One and Merrill Lynch.

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Econorama

On the economic front, weekly jobless claims and durable goods data are released at 8:30am ET. New home sales are reported at 10am.

Wednesday's stock market was relatively quiet, with the Dow finishing up 42.99 at 12763, and the Nasdaq was up 28 at 2405. The S&P 500 finished up 3.99 to 1379.93. Oil meanwhile rose $0.23 per barrel to $118.30. Gasoline was up 1.1 percent at $3.0507, a new record. Gasoline rose after inventory supplies showed less inventory than expected.

Gold fell $16.10 per troy ounce, or 1.7 percent to $906.20. Most other commodities fell as the dollar rose. Rice hit record highs on supply worries but wheat and corn were weaker. The Reuters-Jefferies CRB Index, which tracks 19 commodity futures fell a half a percent after hitting a record high Tuesday.

"Squawk Box" Thursday will take a look at the impact of food inflation with special guests from the food industry, including Tyson and Sysco.

Mergers

If it seems that the only buyers out there in the world of M&A are strategic corporate buyers, that's because they are. We've been watching since the credit crunch for any sign of life among private equity buyers. We still see little action despite their piles of cash.

Strategic buyers are where it's at, but the activity is still at a trickle. On Wednesday, there were two deals with corporate buyers: Liberty Mutual offered $6.12 billion for auto insurer Safeco , at a 50 percent premium to its share price and just a hair above its 52-week high.

The Liberty deal follows closely on news of the much smaller, strategic acquisition of Sirtris by GlaxoSmithKline for $22.50 per share, or $720 million. Through the acquisition, Glaxo gets important access to Sirtris research efforts in the field of sirtuins, a class of enzymes believed to be involved in aging.

Thomson Reuters provided some data to show just how much U.S. merger activity there is and who the buyers are. Last quarter there were $177.3 billion dollars in strategic deals, down nearly $100 billion from the $271 .8 billion in the year earlier.

The percent of private equity deals currently totals about 8 percent of all merger activity, way below the 33 percent in the second quarter of 2007 when private equity deal volume peaked. The value of PE deals in the first quarter was $21.6 billion, down from $199.9 billion in the peak second quarter of 2007.

According to The New York Times, private equity has plenty of cash on hand and is able to raise more. The Times quotes Private Equity Intelligence as saying buyout funds around the world currently have a combined $820 billion in uninvested capital, and there is another $290 billion in the pipeline.

Questions? Comments? marketinsider@cnbc.com

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Featured

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

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