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Pre-Market: Philips Earnings Disappoint; Novartis, Glaxo, and Eli Lilly Ink $28 Billion Deal

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Yum Brands will report earnings after the closing bell.

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Stock futures pointed to a flat open on Tuesday. Before the opening bell, Dow Jones (INDEXDJX:.DJI) futures rose 0.01% to 16,373. Futures on the S&P 500 (INDEXSP:.INX) were down 0.01% to 1,864.20. Nasdaq (INDEXNASDAQ:.IXIC) futures moved higher, rising 0.13% to 3,555.75.

Stocks

Philips (NYSE:PHG) saw its first-quarter sales, earnings, and margins all move lower in several divisions. The world's largest lightbulb maker said revenues were down 4.8%. Its profit margins slimmed due to restructuring costs. Among the company's major divisions, lighting sales were flat while health-care equipment and services fell 2%. Shares of Philips fell 7.03% in pre-market trading.

Novartis AG (NYSE:AG), GlaxoSmithKline Plc (NYSE:GSK), and Eli Lilly and Co (NYSE:LLY) have revealed a series of deals totaling $28.5 billion. Novartis will sell most of its animal-health division to Eli Lilly for $5.4 billion and most of its vaccines division to GlaxoSmithKline for $7.1 billion. Novartis agreed to buy cancer drugs from both for as much as $16 billion. Shares of Novartis were up 1.22% in pre-market trading. GlaxoSmithKline rose 4.16% while shares of Eli Lilly fell 3.06%.

Investors await earnings from McDonald's (NYSE:MCD) and Comcast (NASDAQ:CMCSA) this morning. McDonald's is expected to release a new breakfast strategy in response to Taco Bell launching a breakfast menu and competitors like Starbucks (NASDAQ:SBUX), Dunkin' Donuts (NASDAQ:DNKN), and Burger King (NYSE:BKW) overhauling their early morning offerings.

The world's largest pork company, China's WH Group Ltd., has significantly cut the proposed size of its initial public offering set to price next week. WH Group will now see fewer primary shares, although the extent of the downsize has not been confirmed.

After the bell, Yum Brands (NYSE:YUM), AT&T (NYSE:T), Amgen (NYSE:AMGN), and VMware (NYSE:VMW) among others report earnings. Yum Brands, which was downgraded by both UBS (NYSE:UBS) and JPMorgan (NYSE:JPM) this week, has been forecast to post earnings of $0.84 per share. AT&T is expected to report earnings of $0.70 per share. Pre-market shares of Yum Brands and AT&T were both trading up slightly this morning.

The Economy

ICSC-Goldman Retail store sales saw a slight gain of 0.4% in the week ending April 19, but are still soft on a year-on-year measure of only 1.9%. Redbook chain stores sales will be released at 8:55 a.m. At 9:00 a.m. the FHFA House Price Index will show the rise or fall in the price of single family homes. Existing home sales data will be released at 10:00 a.m. as will the Richmond Federal Reserve's survey of manufacturing activity. At 1:00 p.m. the results of the $32 billion 2-year note auction will arrive.

Global Markets

Asian stocks erased earlier gains, ending Tuesday's session lower led by industrial companies. Chinese shoemaker Yue Yuen Industrial Holdings, which supplies companies including Nike (NYSE:NKE) and Adidas (OTCMKTS:ADDYY), will increase factory worker compensation after prolonged strikes. Japan overhauled its public pension plan, the world's largest, in line with Prime Minister Shinzo Abe's goal for a more aggressive investment strategy. Meanwhile, President Obama departs today for a one-week trip to Southeast Asia to help rebalance relationships in the region.

Stocks gained in Europe, led by the $28 billion deal between Novartis, GlaxoSmithKline, and Eli Lilly, while nickel prices climbed higher on Ukraine tensions. Germany's Finance Ministry reported the country had a strong first quarter thanks to industrial expansion and construction activity but expects growth to slow in the second quarter.

Twitter: @brokawbrokaw
No positions in stocks mentioned.
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