Market News: DJIA, SPX Hit New Highs After FOMC Decision; GE Leads Dow Gainers

• J&J to buy Synthes for $21.3B. In what will be the biggest acquisition in its 125-year history, Johnson & Johnson (JNJ) has agreed to buy Swiss-U.S. medical devices maker Synthes for $21.3B in cash and stock. Synthes holders will receive 159 Swiss francs ($181.68) a share – 8.5% above yesterday’s closing price – comprising 55.65 francs in cash and 103.35 francs in J&J stock. The purchase will give J&J almost 50% of the bone trauma market, filling a “gaping hole in [J&J's] orthopedic portfolio.”
• S&P slashes Japan outlook. S&P cut its outlook on Japan to Negative from Stable, and affirmed the country’s AA- rating, warning that the cost of last month’s earthquake will further hurt weak public finances unless divided politicians agree to raise taxes. Japan’s public debt, already double the size of its $5T economy, could increase even more to pay for reconstruction costs – estimated by S&P at ¥20-50T ($245B-$613B) vs. the government’s ¥16-25T estimate – if “there are no revenue enhancing measures.” The yen dipped shortly after the announcement. and was recently -0.7% vs. the dollar.
• An historic press conference? Ben Bernanke will this afternoon become the first-ever Fed Chairman to give a regularly scheduled news conference. The change is likely to shift the focus from hyper-parsing the FOMC statement to interpreting the Fed chief’s answers to follow-up questions. The Fed will likely keep rates at 0-0.25%, say it expects to keep rates unusually low for “an extended period,” and stick to its $600B bond-buying program. The FOMC will also release its quarterly growth and inflation estimates today rather than three weeks after the rate decision; it’s expected to cut its 2011 GDP estimate of 3.4-3.9% to somewhere around 2.9%.
• IPO filings hit 4-year high. Over 30 companies have filed for IPOs in April so far, making it the most active month since August 2007. More than 20 deals have been completed, raising an aggregate of $5.6B. The largest IPO was Arcos Dorados (ARCO), McDonald’s largest franchisee, which raised $1.2B. China-based Internet security firm Qihoo 360 (QIHU) leads in terms of performance, up 122%.
• Nokia outsources Symbian, slashes jobs. Nokia (NOK) intends to cut R&D spending by €1B ($1.46B) by outsourcing its Symbian software activities to Accenture (ACN), and as a result will lay off 4,000 people by the end of 2012, and outsource another 3,000 to Accenture. Nokia’s plans come after it inked a deal with Microsoft (MSFT) earlier this year to incorporate Windows on its phones. Investors appear to approve; shares are +1.5% premarket.
• Sony suffers massive data theft. Intruders who last week hacked into Sony’s (SNE) PlayStation Network, which generates roughly $500M/year in revenue, have stolen the names, addresses and possibly credit card data belonging to 77M user accounts. An expert at the SANS institute said the breach may be the largest theft of identity data information on record. The episode has led to concerns about security at Sony, and about why it took so long for the company to disclose details of the theft. Shares were -2% in Tokyo.
• Amazon spends its way to a miss. Taking the long view and ignoring Wall Street’s obsession with quarterly figures, Amazon (AMZN) spent ferociously in Q1 on building more data centers to power its growth, leading to a 33% drop in EPS to $0.44, well short of the $0.61 consensus. Revenue jumped 38% to $9.86B, beating forecasts of $9.52B. Given the strong sales, traders largely shrugged off the profit fall, sending shares down 1.2%. In the words of one analyst: “This is the right strategy longer-term, but it makes for a stressful stock to own.” (read AMZN’s Q1 earnings call transcript)
• Gulf disaster spills over to BP profits. BP’s (BP) Q1 net profit climbed 16% to $7.2B as gains from the sale of major assets to pay for the Gulf of Mexico oil spill and higher oil prices outweighed the continuing costs of the disaster. However, those divestments and the production halt in the Gulf led to an 11% fall in output and a 2% drop in replacement cost profit – the measure most closely watched for measuring an oil company’s health – to $5.48B. Revenue rose 18% to $88.3B. Shares +1.1% premarket.
• Barclays falls after profit slip. Shares in Barclays (BCS) have slumped 4.2% premarket after the U.K. bank reported Q1 net profit fell 5% to £1.01B ($1.66B), led by a 15% fall in revenue at its investment-banking unit. Barclays is also buying back a troublesome £6B portfolio of assets just a year and a half after it sold it to a fund dominated by former employees in an attempt to make its profits less volatile.
• Starbucks profit seen rising. Analysts expect Starbucks (SBUX) to report FQ2 EPS of $0.34 on revenue of $2.73B this afternoon, compared with $0.28 and $2.53B last year. Investors will be looking for any updates on rising expenses, with Starbucks warning last quarter that these could hit its performance. However, the company has already hedged against higher coffee costs by locking in prices for the remainder of the year.

Source: SeekingAlpha