PPI Down 0.3%; U.S. Stocks Follow

Arthi Gupta, Mayank Mehta and Sanjay Barot
16 Jun, 2010
New York City

U.S. stocks tumble after PPI falls 0.3% and housing starts plunge 10% in May. Abbott and Neurocrine agree to develop and commercialize Elagolix. FedEx quarterly profit rises.

[R]10:00 AM New York – U.S. stocks tumble after PPI falls 0.3% and housing starts plunge 10% in May. Abbott and Neurocrine agree to develop and commercialize Elagolix. FedEx quarterly profit rises.[/R]

U.S. stocks decline on disappointing PPI and housing starts data, Asian markets rose spurred by higher commodity and oil prices, and European markets fell after Nokia reduced its Devices & Services outlook for the second quarter.

The Producer Price Index decreased 0.3% in May on a seasonally adjusted basis after falling at a 0.1% rate in April and declining 0.7% in March. On an unadjusted basis, prices of finished goods increased 5.3% Core prices, which exclude the volatile food and energy sectors, rose 0.2%.

The rate of U.S. housing starts slumped badly in May, signaling problems for the housing market following the April 30 expiration of the government''s homebuyer tax credit.

Housing starts plunged 10% in May to a seasonally adjusted annual rate of 593,000, down from a downwardly revised 659,000 in April. The decrease to a 2010 low represented the largest percentage drop in housing starts since March 2009.

Housing permits in May fell 5.9% from April or 4.4% a year-ago month to 574,000 but housing completion in May fell 7.2% from April or plunged 15.4% from a year-ago month to 687,000.

President Obama told a national audience on Tuesday night that he will direct BP to establish a fund to compensate workers and business owners hurt by the Gulf of Mexico oil leak and pay for its cleanup.

In his first prime time address from the White House, Obama said he will meet with BP CEO Tony Hayward this week and order the company to ""set aside whatever resources are required to compensate the workers and business owners"" harmed by the spill.

Obama said the fund would be administered independently.

""Make no mistake. We will fight this spill with everything we''ve got for as long as it takes,"" said Obama. ""We will make BP pay for the damage their company has caused. And we will do whatever''s necessary to help the Gulf Coast and its people recover from this tragedy.""

Obama also said stopping the oil leak ""has tested the limits of human technology,"" adding that there are 30,000 personnel working on the spill in four states, and that he has authorized the National Guard to assist.

Obama said he has named Navy Secretary Ray Mabus, a former Mississippi governor to head a team to develop a long-term Gulf Coast restoration plan as quickly as possible.

Obama also used the Gulf spill to push for major changes in U.S. energy policy. Calling on Congress to ""seize the moment,"" Obama said ""the tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now.""

Abbott Labs, the diversified healthcare provider and biopharmaceutical company Neurocrine Biosciences, Inc. announced today a collaboration agreement to develop and commercialize elagolix for the treatment of endometriosis-related pain.

On an upfront payment of $75 million, Abbott would receive exclusive worldwide rights to develop and commercialize elagolix and all next-generation GnRH antagonists for women''s and men''s health. Abbot has also agreed to sponsor all ongoing development activities.

Neurocrine would be eligible for additional milestone payments of about $500 million, conditional upon certain development, regulatory and commercial milestones. Neurocrine is also entitled for certain internal collaboration expenses; plus royalty payments on any future product sales.

Kevin Gorman, president and chief executive officer, Neurocrine Biosciences, said, ""Abbott shares our long-term vision for elagolix, and, together, we look forward to bringing this important new treatment option to endometriosis and uterine fibroid sufferers.""

Abbott Labs ((ABT)) finished Tuesday''s regular trade at $48.17 on the NYSE.

Neurocrine Biosciences, Inc. ((NBIX)) closed Tuesday''s trade at $4.70. Neurocrine reached as high as 30% in early morning trade.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2302 and increased against the Japanese yen to 91.65.

Crude oil decreased $0.19 to $76.75 a barrel for a front month contract, natural gas edged higher $0.06 cent to $5.19 per mBtu and gasoline decreased 1.330 cents to 210.82 cents.

Gold increased $2.00 in New York trading to close at $1,236.40 per ounce, silver closed higher $0.002 to $18.58 per ounce and copper for the front month delivery decreased 0.250 cents to $3.15 per pound.

Yields on 10-year U.S. bonds increased to 3.29% and on 30-year U.S. bonds traded at 4.20%.

Stock Movers

Allergan, Inc., the multi-specialty healthcare company fell 0.4%.

Coca-Cola Enterprises Inc., the soft-drink bottler rose 0.9% to Rs 26.51.

HealthTronics, Inc. fell 0.6% after the provider of urologic services and devices announced that its wholly-owned subsidiary, Endocare, Inc., has received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for Endocare''s Cryocare CS® Surgical System, including Endocare''s variable cryoprobe, known as the V-Probe®.

PDL BioPharma, Inc., the developer of antibodies used in cancer treatments increased 4.2%.

Earnings Review

Clarcor Inc. ((CLC)). the filter and packaging producer said second quarter sales rose 12.4% to $257.9 million from $229.4 million a year ago. Net income in the quarter rose 42.3% to $23.9 million or 47 cents per diluted share compared to net income of $16.8 million or 33 cents per share a year ago.

FedEx Corp. ((FDX)), the package delivery giant reported total revenues for the quarter rose 20% to $9.43 billion from $7.85 billion in the prior-year quarter. Net income was $419 million or $1.33 per share, compared to a loss of $876 million or $2.82 per share in the same quarter last year.

FedEx attributed the quarterly profit to the stronger shipment growth in international express and continued growth at FedEx Ground.

For fiscal 2011, FedEx projects earnings to be between $4.40 and $5.00 per share.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 179.26 or 1.81% to 10,067.15. ASX 200 index in Australia increased 54.00 or 1.20% to 4,559.00. The FTSE Bursa KL Composite index in Malaysia closed higher 4.76 or 0.37% to 1,303.13. The markets in Hong Kong and China were closed today.

The Kospi Index in South Korea increased 15.30 or 0.91% to close at 1,705.33. SET index in Thailand closed higher 6.27 or 0.80% to 786.64 and JSE Index in Indonesia increased 28.49 or 1.01% to 2,858.66. The Sensex index in India increased 50.04 or 0.29 % to 17,462.87.

Europe Markets Review

In London FTSE 100 Index closed higher 17.29 or 0.33% to 5,235.11, in Paris CAC 40 Index increased 14.52 or 0.40% to 3,676.03 and in Frankfurt DAX index traded higher 14.30 or 0.23% to 6,189.35. In Zurich trading SMI increased 2.52 or 0.04% to 6,487.25.