Messy News Monday; IPOs Continue
Messy Monday on several pieces of news: 1) China's PMI fell more than expected (to the lowest since July 2010), 2) S&P cutting Italy's rating outlook to negative from stable (European bonds are lower), 3) the governing Spanish Socialist party lost badly in the elections to the center-right Popular Party, setting up more clashes over austerity.
Remember, unlike Greece, Ireland and Portugal, Spain has not sought a bailout.
The Shanghai Index fell about 3 percent. European bourses are down 1 to 3 percent.
Not surprisingly, the euro weakened. Commodity-based currencies, like Canada and Australia, are weaker against the U.S. dollar. Commodity-based stocks like Freeport McMoran and BHP Billiton are down two to four percent.
1) IPOs continue. There are unconfirmed reports that Yandex , the largest Russian internet company and often described as the "Google of Russia", has raised its IPO price to $24-$25 a share, from $20 to $22. They plan to price tonight for trading tomorrow on the Nasdaq.
At least Yandex is listing in the U.S. Several of the biggest IPOs aren't even listing here, including Glencore, which went public last week on the London Stock Exchange (with a small co-listing in Hong Kong) and now Prada and Samsonite, which are listing in Hong Kong.
The stock to watch may be another billion dollar IPO, a name we know well: Freescale Semiconductor , supposed to begin trading this Thursday at the NYSE, but I am hearing demand is weak for the offer, 43.5 million shares at $22 to $24. Semiconductor demand relatively poor, as Goldman Sachs noted last week.
2) IPO bashing: they don't give them much time, do they? We spoke at length last week about the differences and similarities between LinkedIn's IPO and the dot.com bubble in 1999. One point I made: this is not 1999, they will give all these companies with high valuations very heavy scrutiny, and will hammer them if they fail to produce a roadmap to profitability. Over the weekend, a bevy of news stories questioned everything from LinkedIn's security to its valuation.
3) More ugly news for Sony, down 5 percent pre-open. Following production slowdowns resulting from the massive earthquake and the debacle over the hacking of its PlayStation Network, the electronics maker now warns of a big fiscal year loss after it expects to write off a significant $4.4 billion in tax credits. Although it had previously hoped to return to profitability, the company now expects to lose $3.2 billion this year, in what would be its second biggest annual loss ever and its third straight year of losses.
4) Campbell Soup beat Q3 estimates ($0.57 vs. $0.52 consensus)as the company's heavy discounting initiatives eased a bit. U.S. soup sales continued to slump by 7 percent in the quarter. The one bright spot: a 10 percent rise in snack sales, led by volume and pricing strength of its Pepperidge Farm and Goldfish brands.
Guidance for the full year is now at the high end of a previous forecast ($2.40-$2.45 vs. $2.41 consensus) as sales are seen down 1 percent to up 1 percent.
5) Krispy Kreme jumps 11 percent after Q1 earnings and revenues handily beat estimates, headlined by a strong 5.8 percent rise in comps. Higher commodity costs remain a headwind for the remainder of the year, but the donut maker reaffirms its full-year outlook and hints that its strong Q1 will ultimately help it hit the high end of that range.
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