Summary of selected articles from this morning's Wall Street Journal with comments on related stocks. Links are to the original WSJ article, which requires a paid subscription. Use this summary as a starting point for research; check the summary against the original before trading:

Foreign Markets Extend Decline As Rate Fears Curb Risk Appetite

• Summary: Emerging markets stocks buckled yesterday due to fears of slowing economic growth and rising interest rates. Yesterday the European Central Bank raised rates to 2.75%, and earlier this week rates were raised in South Korea, Thailand, Turkey, India and South Africa. Japan is also expected to raise rates soon, for the first time in years. "Emerging-market bonds have also suffered, as the yields on the J.P. Morgan Emerging Market Bond Index Plus rose yesterday to 2.2 percentage points over U.S. Treasurys from 1.76 percentage points only a month ago". Those losses are compounded by emerging market currencies weakening against the dollar as investment funds flow back into the US.
• Comment on related stocks/ETFs: While most commentators focus on emerging market equities, this article is right to mention the impact of the sell-off on emerging market bonds. How to play that asset class? There's no emerging market bond ETF, but there are a few closed-end funds (click on the ticker symbol to view chart and articles): the Morgan Stanley Emerging Markets Debt Fund (MSD), the Templeton Emerging Markets Income Fund (TEI), the Salomon Brothers Emerging Markets Income Fund (ESD), the Salomon Brothers Emerging Markets Income Fund II (EDF), and the Salomon Brothers Emerging Markets Floating Rate Fund (EFL).

NYSE Probes Whether Short Sellers Fueled Steep Decline in Vonage Shares

• Summary: The NYSE has sent letters to broker-dealers asking them to provide information about short sales in Vonage's stock, as concern grows that Vonage was victim to naked shorting (shorting a stock without borrowing it or knowing who it could be repurchased from on settlement). Over 5 million shares were sold short the first day the IPO traded, and Vonage's stock has appeared on the NYSE's list of stocks that have failed to settle on time..
• Comment on related stocks/ETFs: The risk of a short squeeze in Vonage (VG) could create more volatility in the stock. But in the long term, it's still a dog.

White House Raises '06 Forecasts For Economic Growth, Inflation

• Summary: The White House rised its forecast for 2006 economic growth to 3.6% in 2006 (up 0.2 percentage points from the previous forecast) and forecast 2007 growth at 3.3%. Inflation is now expected to be 3% in 2006 (up 0.6 percentage points from the previous forecast) and 2.4% in 2007.
• Comment on related stocks/ETFs: There's no new data here -- the information is already priced into the market. And nobody believes the White House forecast anyway.

Ford's Debt Rating Is Downgraded Two Notches

• Summary: Fitch Ratings downgraded Ford's credit rating two notches, put it on negative outlook, and "analyzed how creditors might fare in the event of a bankruptcy-court filing" although Ford's liquidity is currently strong. Fitch based its downgrade on Ford's weak product line-up and inablity to cut costs, rising commodity prices, and impending pick-up truck competition from GM and Toyota. Ford's F Series pickup accounts for 25% of Ford's US sales volume, but sales of the F Series are flat this year while overall large pickup truck sales have fallen 4.3%. A Bear Stearns analyst says housing starts and pickup truck sales are correlated, and housing starts recently slowed.
• Comment on related stocks/ETFs: Ford's stock (F) has been thoroughly battered (see chart), but it might still make sense to short the stock and go long the debt after the downgrade.

HEARD ON THE STREET: For Tribune, A Breakup Offers No Guarantees

• Summary: Tribune's board is considering a spinoff of the company's TV stations. But Viacom's (VIA) spinoff of its radio and TV unit as CBS Corp. (CBS) shows that restructurings don't always lift stock prices. CBS is flat and Viacom is down 15%.
• Comment on related stocks/ETFs: According to the article, Tribune's largest shareholder, Ariel Capital, thinks the stock would be worth $44 to $46 in a breakup sale.

Japan Yields Low-End Production to China

• Summary: Japanese companies are ceding production of low-end products to China.
• Comment on related stocks/ETFs: The article states that Sony (SNE) and Toyota (TM) still manufacture many products in Japan. That's actually bullish for those stocks: lots of potential cost savings in future.

Telecom Measure Passes in House

• Summary: The House passed a bill that allows phone and cable companies to bypass local governments when seeking to offer pay TV service, and the White House expressed support for the bill last night. But the Senate committee hasn't yet agreed on a draft bill.
• Comment on related stocks/ETFs: Incrementally positive for AT&T (T) and Verizon (VZ). Also positive for fiber supplier Corning (GLW), some of the telecom equipment stocks, and the optical component manufacturers, though expectations for RBOC fiber build-outs are already priced in. You can find excellent discussion of these stocks by Andrew Schmitt.

Sanofi Suspends Trial Enrollment For Drug Ketek

• Summary: FDA drug-safety reviewers have linked Sanofi-Aventis' Ketek drug to 12 cases of liver failure, including four deaths. The company is now suspending pediatric trials of the drug, which was being tested for treatment of tonsillitis, ear infections and pneumonia.
• Comment on related stocks/ETFs: Sanofi-Aventis, though French, has depositary shares that trade in the US (SNY). $120 billion market cap, good liquidity; more here.

FDA to Order Tracking of Medicines

• Summary: In an attempt to crack down on counterfeit drugs, Federal regulators will require wholesalers to supply a record (or "pedigree") of any middleman that handled a drug at any point from the manufacturer to the wholesaler's purchase. "Authorized distributors", who get that designation from the manufacturers, won't need to supply a pedigree.
• Comment on related stocks/ETFs: McKesson Corp (MCK), Cardinal Health (CAH) and AmerisourceBergen (ABC) are the three large US drug distributors, and will certainly be designated as "authorized distributors". They can also refuse to provide documentation to secondary distributors, and thus stand to take market share as smaller distributors are squeezed out.

SMALL STOCKS: Jos. A. Bank, LTX, Parlux Fall; Luby's Earnings Help Lift Shares

• Summary: Menswear retailer Jos. A. Bank (JOSB) fell 29% after missing estimates. Semiconductor equipment manufacturer Kulicke & Soffa (KLIC) fell 9.4% after reporting that customers weren't willing to commit to long-term capacity plans. Houston restaurant operator Luby's (LUB) rose 9.7% on strong earnings. Volt Information Sciences (VOL) rose 10% on strong earnings. Parlux Fragrances (PARL) fell 13% on an analyst downgrade.
• Comment on related stocks/ETFs: Barry Gitarts believes the downgrade of Parlux Fragrances (PARL) is a buying opportunity. He may be right, but his reasoning may be wrong (see the comment).

A question for readers: "One Page Annotated WSJ Summary" seems a rather dry title, no? I'm considering "The Kernel from the Journal", but that might not be descriptive enough. I'd love to hear readers' views on the best title for this daily feature.

Seeking Alpha update: The most recently published conference call transcripts are: Take-Two Interactive, National Semiconductor, BMC Software.

• Tactical Asset Allocation, Part II  »
• Trolling for Investments: Norwegian Fisheries  »
• Stewart Enterprises: Alive and Well   »
• Michael Page International: Stock Down on Market Weakness  »
• The Omaha Principle: Tyco Undervalued  »

David Jackson

• Bio & more articles
• David's ETF Investment Guide