US Indices Settle, Personal Income Rises

Arthi Gupta, Mayank Mehta and Sanjay Barot
28 May, 2010
New York City

U.S. and world stocks advanced on optimism about global economic recovery. Most Asian and European markets soared after China calmed market nerves. U.S. personal income rises 0.4% in April. Prudential seeks lower terms for AIG

[R]9:35 AM New York – U.S. and world stocks advanced on optimism about global economic recovery. Most Asian and European markets soared after China calmed market nerves. U.S. personal income rises 0.4% in April. Prudential seeks lower terms for AIG’s Asia unit. Shell acquires East Resources Inc. for $4.7 billion.[/R]

U.S. stocks rise after China''s State Administration of Foreign Exchange quelled rumors that it will be selling its stake in euro-bonds and reiterated that it remains a long-term investor in Europe. U.S. personal income rises 0.4% in April. Novell, J. Crew Group, Guess? post rising quarterly profits.

Prudential renegotiates with AIG on AIA takeover terms. Shell acquires East Resources Inc. for $4.7 billion.

April personal income increased 0.4% and disposable personal income increased 0.5%. Personal consumption expenditure increased less than 0.1% in the month. In March personal income increased 0.4%, DPI rose 0.4% and PCE increased 0.6% on revised estimate.

Royal Dutch Shell plc announced today that it has agreed to buy East Resources Inc., a privately-held U.S. natural-gas explorer, for $4.7 billion in cash. Anglo-Dutch oil giant agreed to buy the subsidiaries, which own the business of Pennsylvania-based company from its private equity investor Kohlberg Kravis Roberts & Co.

Prudential Seeks Lower Price From AIG

British insurer Prudential Plc confirmed today that it is renegotiating with American International Group Inc. regarding purchase terms of AIG''s Asian insurance unit, American International Assurance Co. Ltd.

Prudential sought lower price from AIG after 20% of the shareholders rejected the $20 billion rights offering.

Prudential needs approval of 75% of the shareholders for the AIA deal. Institutional investors with more than 15% of the company stock and private shareholders with almost 5% holding to oppose the deal.

Toys """"R"""" Us Public Offering

Toys """"R"""" Us, the toy retailer plans to go public again by raising as much as $800 million in an initial public offering.

The retailer of toys and other products for infants and children says in a securities filing that it will use the proceeds from the offering to pay off some of its debt and for general corporate purposes. It did not say how many shares it will sell.

Toys """"R"""" Us Inc., based in Wayne, N.J., was acquired for $6.6 billion and taken private in 2005 by a group of investors led by Bain Capital, Kohlberg Kravis Roberts and Vornado Realty Trust.

Novell Inc., the software solutions provider said that its second-quarter profit increased 25% from last year, despite lower revenues. Adjusted earnings for the quarter declined from last year, reflecting weak performances in all segments.

J. Crew Group, Inc., the apparel retailer said that its profit more than doubled in the first quarter, as margins improved helped by a drop in markdowns and promotional selling, coupled with strength in same-store sales.

Guess?, Inc., the international fashion house said that its first quarter profit rose 55% from last year, helped mainly by strong growth in Europe and Asia.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2412 and increased against the Japanese yen to 91.16.

Crude oil increased $0.71 to $75.26 a barrel for a front month contract, natural gas edged higher $0.04 cent to $4.34 per mBtu and gasoline increased 0.830 cents to 204.72 cents.

Gold increased $1.20 in New York trading to close at $1,215.60 per ounce, silver closed higher $0.097 to $18.56 per ounce and copper for the front month delivery increased 1.800 cents to $3.17 per pound.

Yields on 10-year U.S. bonds increased to 3.32% and on 30-year U.S. bonds traded at 4.23 %.

Stock Movers

Ener1, Inc., the maker of lithium-ion batteries for electric cars surged 15.0%.

J.Crew Group, Inc., the clothing retailer gained 4.1%.

Novell, Inc., the software solutions provider fell 0.5%.

Earnings Review

Guess?, Inc. ((GES)), the wholesaler and retailer said first quarter revenues rose 22% to $539.3 million from $441.2 million a year ago. Net income in the quarter rose 54.8% to $50.3 million or 54 cents per diluted share compared to net income of $32.5 million or 35 cents per share a year ago.

J.Crew Group, Inc. ((JCG)), the catalog retailer said first quarter revenues rose 19.7% to $413.9 million from $345.8 million a year ago. Net income in the quarter rose 119% to $44.7 million or 68 cents per diluted share compared to net income of $20.4 million or 32 cents per share a year ago.

Novell, Inc. ((NOVL)), the networking software maker said second quarter revenues fell 5.4% to $204.0 million from $215.6 million a year ago. Net income in the quarter rose 28% to $20.0 million or 6 cents per diluted share compared to net income of $15.6 million or 5 cents per share a year ago.

OmniVision Technologies, Inc. ((OVTI)), the semiconductor image sensor devices maker said fourth quarter revenues rose 76.4% to $157.2 million from $89.1 million a year ago. Net income in the quarter was $3.5 million or 7 cents per diluted share compared to net loss of $20.1 million or 40 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 123.26 or 1.28% to 9,762.98, Hang Seng index in Hong Kong increased 335.34 or 1.73% to 19,766.71 and CSI 300 index in China lower 9.68 or 0.34% to 2,850.30. ASX 200 index in Australia increased 78.30 or 1.79% to 4,457.50. The markets in Malaysia were closed today.

The Kospi Index in South Korea increased 15.28 or 0.95% to close at 1,622.78. The markets in Thailand and Indonesia were closed today. The Sensex index in India increased 196.66 or 1.18% to 16,863.06.

Europe Markets Review

In London FTSE 100 Index closed higher 26.66 or 0.51% to 5,221.83, in Paris CAC 40 Index increased 6.70 or 0.19% to 3,532.01 and in Frankfurt DAX index traded higher 101.10 or 1.08% to 5,957.63. In Zurich trading SMI increased 43.01 or 0.68% to 6,348.19.