Ultimate Market Recap: Wal-Mart Mexico Corruption, Netflix Flops 16%

Wall Street Watch: France’s Presidential Election, Wal-Mart’s Scathing Corruption

France held round one of its presidential election on Sunday and gave the greatest number of votes to President Nicolas Sarkozy and his left-wing challenger Francois Hollande. The two will now face off against one other in two weeks. Hollande, who is in favor of decreasing austerity measures, held a comfortable lead in the polls but he could face some potential trouble in the final results from the far-right National Front.

HSBC’s flash estimate of China’s PMI rose to 49.1 from March’s 48.3 number. April’s preliminary reading is the strongest one in four months and because it’s below 50, this indicates a contraction. If it is confirmed from the final May 2 reading, the contraction would represent the longest one since the global financial crisis and it may incite China’s government to cut banks’ reserve requirements for the third time since November, according to Bloomberg.

Wal-Mart (NYSE:WMT) is facing evidence of broad corruption in Mexico and has shut down an internal investigation while failing to inform neither Mexican nor U.S. officials, reported The New York Times. The company been responded by saying numerous allegations are more than six years old, and that it’s “working aggressively to determine what happened.” The allegations could affect Wal-Mart for years.

Nestle (NSRGY.PK) is ready to pay Pfizer (NYSE:PFE) $11.85 billion for the company’s highly sought after baby food unit. The deal ends months of investor anxiety about the fate of the unit.

Vodafone (NASDAQ:VOD) announced plans to to acquire Cable & Wireless Worldwide (CWW) for  BP1.04 billion ($1.7 billion) in cash. This will make Vodafone a leading player to both fixed-line and mobile telecom services for the U.K. Britain’s businesses; it could see cost savings by using CWW’s networks, both domestically and abroad. Vodafone Chief Executive Vittorio Colao said, “There is a good overlap between Cable & Wireless’ fiber network and our base stations which will significantly reduce the cost to us of managing the growth in data traffic.”

6 Early Buzzing Stocks: Wal-Mart Bribes Mexico, Kellogg Slashes Outlook

Wal-Mart Stores Inc. (NYSE:WMT) declined 4.5 percent in early trading. The retail giant is investigating its operations in Mexico for possible bribery actions. Wal-Mart acknowledged its case involved Mexico after the New York Times published an article on allegations of widespread bribery.

Shares of Xerox Corp. (NYSE:XRX) climbed 1 percent higher before the opening the bell. The company announced first-quarter earnings of $269 million, compared to $281 million a year earlier. “Services now represents more than half of our total revenue and will continue to be the growth engine of our company as we expand our BPO offerings and strengthen our leadership in managed print services,” said Ursula Burns, Xerox chairman and chief executive officer.

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ConocoPhillips (NYSE:COP) shares fell more than 2 percent Monday morning. The company reported a 3 percent decline in first-quarter earnings. Net income dropped to $2.94 billion, compared to $3.03 billion a year earlier.

Nestle SA shares declined 2.4 percent after announcing it agreed to purchase Pfizer Inc.’s (NYSE:PFE) infant-nutrition unit for $11.9 billion. “From a long-term perspective, it makes strategic sense as it will really strengthen Nestle’s position in Asia,” said Jon Cox, an analyst at Kepler Capital Markets, according to Bloomberg.

Kellogg Co. (NYSE:K) shares dropped 5 percent after warning its full-year earnings will be less than it previously expected. The company cited weakness in Europe and the United States. Kellogg now expects net sales to grow 2 percent to 3 percent, while earnings are expected to come in at $3.18 to $3.30 per share. “We are obviously disappointed with the performance,” president and CEO, John Bryant explained in a press release.

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Kellogg, BE Aerospace, Ardea Biosciences, Brinker, Check Point Attract Trading Demand April 23rd

Kellogg Company (NYSE:K): The company’s Q1 reported net sales declined by 1.3%. Internal net sales, which exclude the impact of foreign exchange translation and the impact of acquisitions and divestitures, were approximately unchanged from the level posted in Q1 of 2011. Earnings per share in Q1 of 2012 benefited by 5c from hedges related to the pending acquisition of the Pringles business. Shares of Kellogg Company are trading 4.48% lower today.

BE Aerospace, Inc. (NASDAQ:BEAV): Reports Q1 revenue $747.3M versus consensus $702.06M. Shares of BE Aerospace, Inc. are trading 3.1% higher today.

Ardea Biosciences, Inc. (NASDAQ:RDEA): AstraZeneca (NYSE:AZN) and Ardea Biosciences announced that they have entered into a definitive merger agreement, pursuant to which AstraZeneca will acquire Ardea, a San Diego, California-based biotechnology company focused on the development of small-molecule therapeutics. Ardea’s clinically most advanced product candidate, lesinurad, formerly known as RDEA594, is currently in Phase III development as a potential treatment for the chronic management of hyperuricaemia in patients with gout. Under the terms of the agreement, AstraZeneca will acquire Ardea for $32 per share which represents a total cash value of approximately $1.26B. This represents a premium on the value of Ardea’s stock of 50% based on the one month volume-weighted average price, or VWAP, and 54% based on the closing price on April 20. Through this acquisition, AstraZeneca would also add to its pipeline RDEA3170, a next-generation selective URAT1 inhibitor currently in Phase I development. The Boards of Directors of AstraZeneca and Ardea have unanimously approved the terms of the agreement, and Ardea’s Board has recommended that its shareholders approve the transaction. Subject to the approval of Ardea’s shareholders as well as other conditions including customary regulatory approvals, the transaction will close in Q2 or Q3 of 2012. Shares of Ardea Biosciences, Inc. are trading 51.44% higher today.

Brinker International, Inc. (NYSE:EAT): Brinker says sees commodity inflation decreasing in 2012. Says sees commodity inflation approx. 3% for the year. Says 45% hedged for commodities for CY12. Shares of Brinker International, Inc. are trading 7.2% higher today.

Check Point Software Technologies Ltd. (NASDAQ:CHKP): Sees FY12 adjusted EPS $3.10-$3.20 versus consensus $3.17, sees FY12 revenue $1.35B-$1.4B versus conesnsus $1.38B. Shares of Check Point Software Technologies Ltd. are trading 9.29% lower today.

Xerox, Hasbro, Otelco, Wolverine World Wide Among Active Stocks Monday

Wolverine World Wide, Inc. (NYSE:WWW): Wolverine Worldwide announced the formation of a joint venture with Tata International to market footwear and apparel in India. The new joint venture will initially be responsible for the wholesale distribution of Wolverine Worldwide’s Merrell and Caterpillar Footwear brands. The formation of this joint venture is a direct result of the efforts of Wolverine Worldwide’s International Group, which was formed in January 2011. Entering into a joint venture provides Wolverine Worldwide with a more meaningful ownership stake and near-term brand impact than its traditional licensee or distributor business model, and reflects the importance of this fast-growing market to the company. Wolverine Worldwide and Tata International will each hold a 50% stake in this new joint venture. Shares of Wolverine World Wide, Inc. are trading 4.14% lower today.

Xerox Corporation (NYSE:XRX): Reported Q1 revenue $5.5B versus consensus $5.45B. Shares of Xerox Corporation are trading 2.1% higher today.

Hasbro, Inc. (NASDAQ:HAS): Reported Q1 Girls Product revenue down 18% to $93M; Reported Q1 Games Product revenue down 9% to $182M; Reported Q1 Preschool Product revenue up 2% to $70M. Shares of Hasbro, Inc. are trading 3.51% lower today.

Otelco, Inc. (NASDAQ:OTT): Raymond James downgraded Otelco citing the loss of the Time Warner Cable contract and dividend suspension. Shares of Otelco, Inc. are trading 37.49% lower today.

What are the Key Themes in Gold?

The World Gold Council, the global authority on gold and its uses, recently released its overview of the first quarter of 2012. While there are many factors affecting gold these days, the report breaks down three key themes for gold that took place in the first quarter.

It was a challenging quarter for gold due to a pullback in March, but gold prices still finished 8.6 percent higher to reach $1,662.50 by the end of the quarter. Furthermore, gold continues to perform well against all fiat currencies. The WGC explains, “The average price for the quarter was marginally higher than Q4 2011 (+0.2 percent) and 22 percent higher on a year-over-year basis, as drivers of gold demand and supply continued to support its long-term trend. This performance was echoed in all major currencies.” Gold has been on the rise in all currencies, because central banks such as the Federal Reserve, Bank of Japan, Bank of England and the European Central Bank continue to paper over their insolvency problems. On Friday, the IMF officials agreed to nearly double its lending capacity to more than $700 billion. The funds will almost certainty be used for more bailouts in the eurozone in the coming months, as nothing has truly been solved in the debt crisis.

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Volatility is no stranger to the precious metals industry and the theme of higher-than-normal price swings continued in the first quarter. The WGC reports, “Gold’s annualized volatility measured 20.4 percent during Q1, higher than the long-run average of around 16 percent. However, more importantly and consistent with its historical profile, it was skewed to the upside, registering 21.8 percent on the upside and only 16.4% on the downside.” This means that gold prices typically fell less sharply than it rose. However, commodities in general had a negative volatility skew with upside volatility of 12.21 percent and downside volatility of 13.4 percent. Although gold is often labeled as a commodity, it does not perform as one. Instead, gold performs as an asset class in its own league.

The final theme relates to gold’s ability to trade as its own asset class. The WGC finds that the long-term correlation of gold to equities remains statistically insignificant. The report states, “ Despite higher than average short-term correlations to equities and other risk assets during the quarter, gold’s performance remains independent of risk asset performance. Regression analysis shows that gold may, at times, move in the same direction as equities, but these moves are almost always related to other macro factors, such as, gold’s negative correlation to the US dollar.” The report goes on to explain that gold may have a slight short-term positive correlation with the S&P 500, the long-term correlation remains near zero. This is a key characteristic of the safe-haven metal.

Although gold prices are currently trading down about .65 percent today, equities are trading more than 1 percent lower on renewed European fears. Volatility is likely to remain this year as speculation builds on even more central bank easing. However, gold’s ability to stem losses on the downside and trade separately from equities makes it a very attractive holding for any portfolio.

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Disclosure: Long EXK, AG, HL, PHYS

5 Late Stocks Hitting Radars: Netflix and Big Lots Plunge, Texas Instruments Jumps 3.8%

Shares of Netflix Inc. (NASDAQ:NFLX) plummeted more than 16 percent in late market trading. The media company reported a first-quarter loss of $4.58 million, compared to a profit of $60.23 million a year earlier. Furthermore, the company expects subscriber growth to slow in the current second quarter.

Texas Instruments Inc. (NYSE:TXN) shares jumped 3.8 percent higher after the closing bell. The company reported first-quarter income of $265 million (22 cents per share), compared to $666 million (55 cents per share) a year earlier. “As we expected, our business cycle bottomed in the first quarter, and early signs of growth began to emerge,” said Rich Templeton, TI’s chairman, president and CEO. “Orders were up 13 percent, and backlog is growing again. Particularly encouraging is the breadth of increased orders across geographical regions and markets, including the industrial sector.”

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Big Lots Inc. (NYSE:BIG) dropped 14 percent in extended trading after announcing it is reducing its first-quarter U.S. same-store sales expectations. The company said in a press release, “U.S. comp store sales were on plan for the first six weeks of the quarter. However, sales compared to plan began to slow in late March and trends have further softened as we move through the month of April.”

Despite closing 5.2 percent lower on Monday, LinkedIn Corp. (NYSE:LNKD) shares edged .60 percent higher in late trading. Pipar Jaffray initiated coverage on the company with an Overweight rating and a $130 price target. Shares currently trade near $100.

Rent-A-Center Inc. (NASDAQ:RCII) shares increased 3.5 percent late Monday. The company reported first-quarter net income of $51.9 million (87 cents per share), compared to $44.2 million (69 cents per share) a year earlier. “We delivered excellent results in the quarter, as we reported both record total revenues and earnings,” said Mark E. Speese, the Company’s Chairman and Chief Executive Officer. “Total revenue and same store sales benefited in the quarter from more customers than expected exercising their early purchase option. However, this does not create recurring revenue,” Speese continued.

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