Day Ahead: Facebook Buys WhatsApp

 | Feb 20, 2014 | 8:45 AM EST  | Comments
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A pair of momentum stocks has Wall Street's attention Thursday morning: Social network Facebook (FB) said it would buy mobile-messaging app WhatsApp for $19 billion, and Tesla Motors (TSLA) exceeded expectations for sales of its groundbreaking electric cars.

That did little, however, to ignite early market action. U.S. stock futures were pointing to a continued slide, weighed down by a January decline in Chinese manufacturing, after Wednesday's market reversal took stocks lower into the close. The China data also put pressure on European shares. Also souring the mood in Europe were Wednesday's revelations that the Federal Reserve discussed, but ultimately dismissed, the notion of raising interest rates. The Fed also said it would trim another $10 billion off its monthly bond purchases.

The number of Americans filing for first-time unemployment benefits fell by 3,000 last week to a seasonally adjusted 336,000, just short of meeting forecasts for 335,000 new claims. The consumer price index rose by 0.1% in January, as expected, vs. a revised 0.2% gain the prior month. The core number, excluding food and energy, also rose by 0.1%.

Still to come, the purchasing managers' manufacturing index is due at 8:58 a.m., and we'll see the Philadelphia Fed survey of regional business activity  as well as leading indicators at 10 a.m.

On the earnings calendar today, Wal-Mart (WMT) beat Wall Street earnings estimates by a penny per share and raised its dividend, but a 21% decline in profit and weak forward guidance sent shares 1% lower in premarket trading. Meanwhile, meat processor Hormel (HRL) missed analyst estimates by a penny per share on in-line sales.

Actavis (ACT), which struck a deal to buy rival drugmaker Forest Labs (FRX) earlier this week, surpassed EPS calls by $0.13. DirecTV (DTV) surprised on the top and bottom lines and announced a $3.5 billion share-repurchase program.

Look for a full slate of reports after the close from Con Edison (ED), Express Scripts (ESRX), Groupon (GRPN), Hewlett-Packard (HPQ), Intuit (INTU), Nordstrom (JWN), Priceline (PCLN) and WebMD (WBMD), among others.

As for the Tesla news, on late Wednesday the electric-car maker said fourth-quarter earnings beat views by $0.12 per share, and the company guided for 2014 Model S sales above expectations. That drove shares 12% higher in extended trading. Earlier this week, published reports indicated that Elon Musk, Tesla founder and CEO, met with an Apple (AAPL) representative to discuss a possible tie-up.

Also late Wednesday, Safeway (SWY) beat estimates by a nickel -- and, of more interest to investors, the firm also said it was open to exploring strategic alternatives. Shares were up about 5%. Elsewhere, Avis Budget (CAR) beat EPS estimates by $0.03 on in-line sales, and Marriott (MAR) met earnings expectations but fell short of revenue calls.

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