Business Blog Posts

J.D. Power, which gathers sales data from almost 9,000 U.S. car dealerships, issued an unusual update to its monthly sales forecast on the eve of the Tuesday sales report, cautioning that consumers had pulled back from purchases ahead of the crucial end of the month.

Both Ford Motor Co (F.N) and Chrysler Group LLC also suggested industry-wide sales could fall short of the most bullish forecasts.

U.S. auto sales represent one of the first snapshots of consumer demand. A result at the low end of expectations could raise new caution at a time when some analysts have tamped down bullish expectations for the speed of the earnings growth for U.S. automakers and suppliers in 2011.

"The strength of retail sales from the beginning of the month has reversed during the past two weeks," said Jeff Schuster, J.D. Power's chief forecaster.

Schuster said the sudden slowdown in sales in January could reflect both the impact in winter storms and the absence of new sales incentives from major automakers. Those kinds of discounts, including cash-back offers, were down 12 percent in January from December, he said.

J.D. Power forecast a January sales rate of between 11.5 million and 12 million vehicles, down sharply from the outlook for 12.2 million it had given just 10 days before.

Automakers are set to report January U.S. auto sales on Tuesday.

Economists surveyed by Reuters had forecast sales for the month of about 12.5 million vehicles on the annualized and seasonally adjusted basis tracked by the industry.

That would be slightly higher than the 12.4 million sales rate that the industry averaged in the fourth quarter. It would also represent the best January sales result since 2008.

Of the 14 analysts surveyed by Reuters, forecasts ranged from a low of 12.1 million to a high of 13 million.

CHRYSLER, FORD CAUTIOUS

But on Monday Chrysler Chief Executive Sergio Marchionne said that industry-wide sales had fallen off in the final weeks of the month, which typically account for the bulk of sales.

"We've seen a softening of the U.S. market in the last couple of weeks," Marchionne told reporters on a conference call to discuss Chrysler's fourth-quarter results.

Marchionne forecast a sales rate of near 12.4 million to 12.5 million vehicles for the month. Chrysler is 25 percent owned by Italy's Fiat SpA. (FIA.MI)

Although the company said on Monday it is fixing the problem, it stopped shipments of the chip, which is used in PCs with its most advanced Sandy Bridge line of chips.

Intel cut its first-revenue forecast by $300 million. It expects the total cost to repair and replace the chip to be about $700 million.

"It was the result of a series of stress tests conducted on the chipset. It didn't show up under normal testing," Intel spokesman Chuck Mulloy told Reuters. "The problem wouldn't happen immediately but after two to four years."

Shares were down about 1.1 percent in midmorning trade.

For Intel, the world's largest chipmaker, the design flaw is another distraction at a time when it faces sluggish personal computer sales and a major challenge from the exploding popularity of mobile devices, a market dominated by Britain's ARM Holdings.

While Intel's processors are the brains in 80 percent of the world's PCs, the company has yet to make its mark in mobile gadgets used surf the Web and update their social networking profiles.

Some worries about Intel were eased earlier this month when it reported better-than expected revenue and margins for the fourth quarter and gave a rosy outlook for early 2011 [ID:nN13239448].

The company does not expect the problem with its so-called Cougar Point chip to hurt its full-year revenue. It will deliver an updated version of the chip in late February.

But since the flaw affected some of the chips shipped in the fourth quarter, Intel plans to take a charge that will reduce its gross margin by roughly 4 percentage points for that period.

It will also take a first-quarter charge that will cut its gross margin by 2 percentage points.

"This is a minor negative and not as big an issue as it seems," said Miller Tabak analyst Brendan Furlong. "It's obviously an embarrassment, rather than a major problem for the company."

Kevin Cassidy, an analyst at Stifel Nicolaus, added, "It's obviously a negative and a surprise. We think they can recover from this very quickly. This product was just being introduced and there's not many in the field."

He said investors should buy shares of Intel if the stock appears under pressure from the Cougar Point problem.

The chip issue, along with the two pending acquisitions, including the purchase of security software firm McAfee, prompted Intel to revise its overall outlook.

Helped by the deals, it expects first-quarter revenue of $11.7 billion, give or take $400 million, compared with its previous expectation of $11.5 billion, give or take $400 million.

Although the company said on Monday it is fixing the problem, it stopped shipments of the chip, which is used in PCs with its most advanced Sandy Bridge line of chips.

Intel cut its first-revenue forecast by $300 million. It expects the total cost to repair and replace the chip to be about $700 million.

"It was the result of a series of stress tests conducted on the chipset. It didn't show up under normal testing," Intel spokesman Chuck Mulloy told Reuters. "The problem wouldn't happen immediately but after two to four years."

Shares were down about 1.1 percent in midmorning trade.

For Intel, the world's largest chipmaker, the design flaw is another distraction at a time when it faces sluggish personal computer sales and a major challenge from the exploding popularity of mobile devices, a market dominated by Britain's ARM Holdings.

While Intel's processors are the brains in 80 percent of the world's PCs, the company has yet to make its mark in mobile gadgets used surf the Web and update their social networking profiles.

Some worries about Intel were eased earlier this month when it reported better-than expected revenue and margins for the fourth quarter and gave a rosy outlook for early 2011 [ID:nN13239448].

The company does not expect the problem with its so-called Cougar Point chip to hurt its full-year revenue. It will deliver an updated version of the chip in late February.

But since the flaw affected some of the chips shipped in the fourth quarter, Intel plans to take a charge that will reduce its gross margin by roughly 4 percentage points for that period.

It will also take a first-quarter charge that will cut its gross margin by 2 percentage points.

"This is a minor negative and not as big an issue as it seems," said Miller Tabak analyst Brendan Furlong. "It's obviously an embarrassment, rather than a major problem for the company."

Kevin Cassidy, an analyst at Stifel Nicolaus, added, "It's obviously a negative and a surprise. We think they can recover from this very quickly. This product was just being introduced and there's not many in the field."

He said investors should buy shares of Intel if the stock appears under pressure from the Cougar Point problem.

The chip issue, along with the two pending acquisitions, including the purchase of security software firm McAfee, prompted Intel to revise its overall outlook.

Helped by the deals, it expects first-quarter revenue of $11.7 billion, give or take $400 million, compared with its previous expectation of $11.5 billion, give or take $400 million.

Alpha Natural Resources said on Saturday it agreed to a $7.1 billion deal to buy Massey Energy Co, which was rocked by a deadly coal mining accident last year.

Massey shares jumped 12.5 percent in premarket trading to $64.40 while Alpha Natural slid 6.2 percent to $54.30.

Warehouse and distribution center owner AMB Property Corp and rival ProLogis said they would merge, one of the biggest real estate deals since the financial crisis.

But fears hung over the markets of political unrest spreading to oil-producing Middle East countries, driving up crude prices and threatening global growth prospects.

Protests to end the 30-year rule of President Hosni Mubarak continued over the weekend, heightening risk aversion for European investors already concerned by their own region's sovereign debt crisis and inflation.

U.S. stocks suffered their biggest one-day loss in nearly six months on Friday, preventing the Dow from notching its longest weekly winning streak since 1995.

"It appears the political situation is going to get worse before it gets better and during that short period of time anything could happen," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"It's a fear factor and until this thing is resolved one way or the other, it is going to cause the markets to be jittery. We could expect a bumpy ride, notwithstanding good economic news and good earnings."

Exxon Mobil Corp is set to release fourth-quarter earnings, with profits expected to rise more than 30 percent. [nN30169616]

Other companies due to report include Anadarko Petroleum Corp., Gannett, Illinois Tool Works Inc and Eastman Chemical Company.

Economic data on tap for Monday includes personal income and spending for December and the Institute for Supply Management-New York release of the January index of regional business activity at 8:30 a.m.. The Chicago PMI for January is due out at 9:45 a.m..

S&P 500 futures rose 4.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 22 points, and Nasdaq 100 futures rose 7 points.

In other M&A action, CNOOC Ltd will pay $1.3 billion in its second shale deal with America's Chesapeake Energy Corp, the latest move by China's top offshore oil producer in its aggressive drive for overseas acquisitions. [nN30170001]

* European shares fell in early trade on Monday on concern that unrest in Egypt could spread.

* In Asia, Japan's Nikkei share average finished 1.2 percent lower and at one point hit its lowest since early December over Middle East concerns.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

Alpha Natural Resources said on Saturday it agreed to a $7.1 billion deal to buy Massey Energy Co, which was rocked by a deadly coal mining accident last year.

Massey shares jumped 12.5 percent in premarket trading to $64.40 while Alpha Natural slid 6.2 percent to $54.30.

Warehouse and distribution center owner AMB Property Corp and rival ProLogis said they would merge, one of the biggest real estate deals since the financial crisis.

But fears hung over the markets of political unrest spreading to oil-producing Middle East countries, driving up crude prices and threatening global growth prospects.

Protests to end the 30-year rule of President Hosni Mubarak continued over the weekend, heightening risk aversion for European investors already concerned by their own region's sovereign debt crisis and inflation.

U.S. stocks suffered their biggest one-day loss in nearly six months on Friday, preventing the Dow from notching its longest weekly winning streak since 1995.

"It appears the political situation is going to get worse before it gets better and during that short period of time anything could happen," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"It's a fear factor and until this thing is resolved one way or the other, it is going to cause the markets to be jittery. We could expect a bumpy ride, notwithstanding good economic news and good earnings."

Exxon Mobil Corp is set to release fourth-quarter earnings, with profits expected to rise more than 30 percent. [nN30169616]

Other companies due to report include Anadarko Petroleum Corp., Gannett, Illinois Tool Works Inc and Eastman Chemical Company.

Economic data on tap for Monday includes personal income and spending for December and the Institute for Supply Management-New York release of the January index of regional business activity at 8:30 a.m.. The Chicago PMI for January is due out at 9:45 a.m..

S&P 500 futures rose 4.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 22 points, and Nasdaq 100 futures rose 7 points.

In other M&A action, CNOOC Ltd will pay $1.3 billion in its second shale deal with America's Chesapeake Energy Corp, the latest move by China's top offshore oil producer in its aggressive drive for overseas acquisitions. [nN30170001]

* European shares fell in early trade on Monday on concern that unrest in Egypt could spread.

* In Asia, Japan's Nikkei share average finished 1.2 percent lower and at one point hit its lowest since early December over Middle East concerns.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

Monday's move could limit BP's scope to increase its own dividend and overshadow its 2010 results on Tuesday, when the company is expected to reinstate its payout, which it canceled at the height of its Gulf of Mexico oil spill last summer.

The vote against the TNK-BP dividend also comes a day before a London court is due to hear TNK-BP's lawsuit seeking an injunction against the BP-Rosneft deal.

The dispute is with shareholders in the AAR consortium -- which owns the other half of BP's Russian TNK-BP venture -- who have reacted angrily to BP's artic exploration deal with rival Rosneft, unveiled earlier this month.

AAR wants TNK-BP to remain the prime vehicle of BP's operations in Russia and Ukraine. Its case will be heard in London on Tuesday, when Rosneft also reports full-year results.

BP said it needed its Russian TNK partners' approval to form the Rosneft joint venture but added it was still some way off incorporating the unit, suggesting that an injunction might have little practical impact.

BP still hoped to settle the dispute amicably. "We will sort this out between us and them in due course," a spokesman said.

AAR's board voted to withhold the payment of TNK-BP's fourth quarter dividend which had been due in February. But such a cut should not in the short term preclude BP restarting payments, analysts said, as its finances are in robust shape and the dividend is only half the level it paid out pre-disaster.

The company sold off a big chunk of assets after the U.S. spill and its underlying earnings are underpinned by oil prices at around $100/barrel.

However, a long-term cut to the TNK-BP payout could limit BP's scope for raising its own dividend over time. It relies on the Russian joint venture for a quarter of its production, although high Russian taxes mean the company only gets 10 percent of profits from TNK-BP.

Beyond blocking the BP-Rosneft deal, the motives of the AAR partners remain difficult to fathom. They may want a piece of the action in the Arctic or concessions from BP, such as access to upstream ventures outside Russia.

They may also be seeking to maximize the value of their investment if it is ultimately to be folded into the Rosneft-BP partnership, banking and industry sources suggest.

Shares in BP were flat at 487.1 pence at 1134 GMT, broadly in the line with London's blue-chip FTSE index.

ARBITRATION

"It's not surprising the Russian partners are upset, it's going to be an issue for some time and it's not clear how it's going to be resolved," said Dougie Youngson, analyst at Arbuthnot Securities.

Monday's move could limit BP's scope to increase its own dividend and overshadow its 2010 results on Tuesday, when the company is expected to reinstate its payout, which it canceled at the height of its Gulf of Mexico oil spill last summer.

The vote against the TNK-BP dividend also comes a day before a London court is due to hear TNK-BP's lawsuit seeking an injunction against the BP-Rosneft deal.

The dispute is with shareholders in the AAR consortium -- which owns the other half of BP's Russian TNK-BP venture -- who have reacted angrily to BP's artic exploration deal with rival Rosneft, unveiled earlier this month.

AAR wants TNK-BP to remain the prime vehicle of BP's operations in Russia and Ukraine. Its case will be heard in London on Tuesday, when Rosneft also reports full-year results.

BP said it needed its Russian TNK partners' approval to form the Rosneft joint venture but added it was still some way off incorporating the unit, suggesting that an injunction might have little practical impact.

BP still hoped to settle the dispute amicably. "We will sort this out between us and them in due course," a spokesman said.

AAR's board voted to withhold the payment of TNK-BP's fourth quarter dividend which had been due in February. But such a cut should not in the short term preclude BP restarting payments, analysts said, as its finances are in robust shape and the dividend is only half the level it paid out pre-disaster.

The company sold off a big chunk of assets after the U.S. spill and its underlying earnings are underpinned by oil prices at around $100/barrel.

However, a long-term cut to the TNK-BP payout could limit BP's scope for raising its own dividend over time. It relies on the Russian joint venture for a quarter of its production, although high Russian taxes mean the company only gets 10 percent of profits from TNK-BP.

Beyond blocking the BP-Rosneft deal, the motives of the AAR partners remain difficult to fathom. They may want a piece of the action in the Arctic or concessions from BP, such as access to upstream ventures outside Russia.

They may also be seeking to maximize the value of their investment if it is ultimately to be folded into the Rosneft-BP partnership, banking and industry sources suggest.

Shares in BP were flat at 487.1 pence at 1134 GMT, broadly in the line with London's blue-chip FTSE index.

ARBITRATION

"It's not surprising the Russian partners are upset, it's going to be an issue for some time and it's not clear how it's going to be resolved," said Dougie Youngson, analyst at Arbuthnot Securities.