10 Things You Need To Know Before The Opening Bell, May 7, 2014

10 Things Before Opening Bell

May 07, 2014

Good morning! Here's what you need to know.

Here Comes Alibaba. China's mega online retailer Alibaba filed its first IPO documents on Tuesday afternoon. In the filing, we learned that the company had $6.5 billion in sales during the nine months ending March 31, 2013. Net income during the period was $2.9 billion. Founder Jack Ma owns 8.9% of the company. Credit Suisse is the lead underwriter, along with Deutsche Bank, Goldman Sachs, J.P. Morgan, and Citigroup. The company did not identify how much it planned to raise, what its ticker would be, and on which exchange it would list.

Biggest IPO Ever? The company did not disclose how much it planned on raising. However, Renaissance Capital believes the final amount could be big. "We estimate the deal could raise as much as $20 billion," said Renaissance. "If it does, Alibaba would be the world's largest IPO ever, above ABC Bank's $19.2 billion IPO (excluding greenshoe option) in July 2010."

Disney Unfrozen. Disney blew away Q1 expectations, earning $1.11 per share during the quarter. Analysts were looking for $0.95. Studio entertainment revenues surged 35% year-over-year thanks to some huge blockbuster hits. "The increase in domestic home entertainment was due to higher unit sales, which reflected the success of Frozen and Thor: The Dark World in the current quarter compared to Wreck-It Ralph and no comparable Marvel title in the prior-year quarter," they said. "Higher international theatrical results reflected the strength of Frozen in the current quarter compared to Wreck-It Ralph and Oz The Great And Powerful in the prior-year quarter."

Whole Foods Crashing. Shares of the premium grocery chain are down over 15% in pre-market trading. Tuesday afternoon, we learned Q2 earnings came in at $0.38 per share, missing analysts' estimates for $0.41. Comparable store sales climbed by just 4.5% versus expectations for a 5.4% increase. Among other things, management blamed "a negative impact of approximately 50 basis points from Easter shifting from the second quarter last year to the third quarter this year."

Groupon Discount. Groupon shares are falling after the coupon companies Q1 earnings announcement. The company reported an adjust loss of $0.01 per share, which was narrower than the $0.03 expect. Revenue was also stronger than expected. "The company guided Q2 Adj. EBITDA below consensus, and local deal billings growth disappointed in both North America and EMEA," noted Morgan Stanley's Stephen Shin. "Local billings growth of 1% in North America and EMEA missed our estimate (8% and 15%, respectively)... While the company noted that it expected material improvement in North America local in the 2H of 2014 with billings growing by double-digits, Q2 local billings are trending similar to Q1."

Dotcom Meltdown. Deals website Zulily is down 17% after announcing disappointing Q1 financial results. TripAdvisor initially crashed by over 15% yesterday afternoon in the wake of its earnings announcement. But shares of TRIP have since turned around and are actually in the green. All of this volatility is sure to attract attention, especially after yesterday's 17% drop in Twitter shares.

Thailand PM Out. Thailand's Constitutional Court removed Prime Minister Yingluck Shinawatra after it found her guilty of abusing power when she removed the National Security Council secretary-general. "The risk of head-on confrontations over the coming days are high, with both government supporters and protesters threatening to stage large-scale rallies," warned Capital Economics' Krystal Tan. "The toll that the political upheaval is taking on the economy is also clearly apparent."

Markets Flat, But Japan Slammed. U.S. stock market futures are basically flat ahead of the opening bell. Britain's FTSE, France's CAC 40, and Germany's DAX are modestly lower. The Nikkei fell a whopping 2.9% overnight as the country continues to report disappointing data after a recent tax hike.

Janet Yellen Speaks. Federal Reserve Chair Yellen will testify on the economy before the Joint Economic Committee at 10:00 a.m. ET. From Credit Suisse: "We expect her to describe recent improvements in the economic data, in keeping with the FOMC observation that growth has picked up. But central to her message likely will be the need for continued accommodation in order to promote further job creation, which would be in line with her March 31 address in Chicago... Yellen may also reprise an important theme from her April 16 speech before the Economic Club of New York in which she described the Fed’s reaction function in Taylor Rule-like terms, re-establishing the notion that the FOMC will respond in a systematic way to deviations from the baseline forecast of inflation approaching 2% and continued progress toward full employment."

Light Economic Data. At 3:00 p.m. ET today, the Federal Reserve will publish its latest monthly report on consumer credit. Economists estimate balances increased by $15.5 billion in March. "As has been the case in recent years, we expect this to be driven largely by the nonrevolving component, though we do expect a modest boost from revolving credit growth as well," said Barclays economists.

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BONUS: Warren Buffett once characterized market cap-to-GDP as "the best single measure of where valuations stand at any given moment."

However, investors would probably be ill-advised to sell a country's market just because the ratio is high relative to others.

"There are many health warnings attached to Market Cap/GDP ratios," said UBS's Geoff Dennis. "They are not a measure of valuation, as such. The ratio also reflects many other factors such as: i) the evolution of financial markets relative to the underlying economy; ii) the share of corporate revenues derived from overseas v. from home; iii) the size of the local investor base; iv) the share of a market in sectors that trade at high relative multiples; v) various structural factors such as investability, liquidity and listing requirements."

market cap gdp