Trader Talk: Is Schlumberger Gunning for Smith Intl.?
Bob Pisani is off; this post was written by CNBC producer Robert Hum.
Stocks were jittery following the Fed’s announcement that it is raising the discount rate — the rate that the Fed charges banks for loans. However, this move was expected following indications of a pending move by Federal Reserve Chairman Ben Bernanke during his Congressional testimony last week.
Following the Fed’s move, Asian markets fell 2 percent as the dollar continued its recent rise, with the Dollar Index now hovering at its highest levels since July 8.
Despite the notable losses in Asia overnight, European markets are mixed midday into their session, while U.S. stock futures are down, but significantly off their lows of the morning.
This comes as traders’ concerns eased that any monetary policy tightening by the Fed (via a hike in the Fed funds rate) is still far off — just as the Fed has indicated in its statements.
Still, in pre-market trading, commodity stocks are down 2 percent to 4 percent on the strength of the dollar. Eyes will be on bank stocks too, as it’s still uncertain how the higher discount rate will ultimately affect their bottom lines. While banks will have to pay more for loans made by the Fed, will their margins shrink or will they pass that increase on to their own customers?
Separately, one other piece of economic news that’s getting some attention this morning: terrible retail sales in the U.K. Cold and snowy weather was blamed, but the decline in Britain’s retail sales was the biggest since 1988. Falling 1.8 percent in January — much more than the 0.5 percent decline economists expected — that disappointing data point suggests that the consumer remains very cautious in spending.
JCPenney is up 4 percent after topping Q4 earnings estimates and strong guidance. Although sales were better than expected, same-store sales still fell 4.5 percent.
Guidance for the department store is good, with Q1 earnings in-line with expectations amid flat to slightly positive same-store sales. More impressive though, the company’s earnings outlook for the full year comes in notably above Street estimates ($1.55 vs. $1.45 consensus) as sales are seen rising low single digits.
Schlumberger is reportedly eyeing a bid for rival Smith International . The potential deal could value Smith around $9 billion and would create a giant in the oil services industry.
This comes as the industry faces more consolidation. Recall that oil servicer Baker Hughes agreed to acquire competitor BJ Services back in August (the deal’s closing is still pending).
Following the media reports, Smith International jumps 15 percent and Schlumberger is down 4 percent.
CBS falls 5 percent as its Q4 earnings were inline with Wall Street estimates. Revenues fell less than 1 percent as ad sales improved. Subscriptions in its cable operations (up 4 percent at Showtime and up 38 percent at CBS College Sports Network) helped boost that division’s sales by 8 percent in the quarter.
Furthermore, ad sales trends continue to improve with CEO Les Moonves noting that ad rates have been improving recently.
Penske Automotive reported better-than-expected Q4 earnings ($0.21 vs. $0.19 consensus) on a huge jump in car sales. The auto dealer saw same-store sales rising 15.5 percent, boosted by strong luxury car sales (up 20.4 percent) and robust sales in the U.K. (up 30 percent).
The company also announced a new $150 million stock buyback program.
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