Home Sales Rebound

Elena
23 Mar, 2006
New York City

Stocks traded lower on disappointing guidance from software maker Adobe Systems and a report which showed an unexpected drop in jobless claims and raised inflation and interest-rate concerns. ConAgra Foods posted a Q3 loss of 6 cents a share from a profit of 32 cents a year-earlier. General Mills reported Q3 profit rise of 7% to 68 cents a share on 3% net sales growth, beating expectations.

10:30AM Stocks sharply declined on profit taking.
In the opening hours stocks traded in a lackluster fashion, with averages hovering near the flat line but for the last hour they have been deeply in the negative territory. Recovering from recent weakness, semiconductor stocks showed some strength with the sector posting 1.4% advance in early trading. Advanced Micro Devices ((AMD)) stood out among advancers with a notable gain of 4.5% on news that the company may benefit from Dell's ((DELL)) acquisition of Alienware. Oil service stocks also moved to the upside, following an increase in the price of oil with the whole sector currently up 1.9%. The transportation sector suffered some profit taking with the Dow Jones Transportation Index currently down 1.6%, reversing from Wednesday's gain of 1.3%. Airline stocks helped the sector down after a strong performance in the previous session. Health care stocks were also under pressure. HMO, biotechnology, and pharmaceutical sectors posted significant declines. Humana ((HUM)) and Aetna ((AET)) posted notable losses among HMO stocks. King Pharmaceuticals ((KG)) dragged the drug sector lower, falling 3.7% after the company announced a private offering of $400 million of convertible senior notes due 2026. Weakness also emerged in the defense sector, falling 0.8%, with DRS Technologies ((DRS)) and Raytheon ((RTN)) being the worst performers.


10:00AM Stocks opened lower on Adobe quarterly results and economic data.
Stocks opened in the negative on a disappointing earnings report and outlook from Adobe Systems and a government report that showed unemployment claims fell at a greater-than-expected rate. The report raised concerns over inflation and further interest rate hikes. In the first hour of trading, the Dow Jones industrial average fell 5.61, or 0.05%. The Standard & Poor''s 500 index fell 1.39, or 0.11%, and the Nasdaq composite index fell 2.84, or 0.12%. Bonds rose, with the yield on the 10-year Treasury note falling to 4.69% from 4.70% late Wednesday.

Existing home sales rose 5.2%.
The National Association of Realtors released its report on existing home sales in the month of February on Thursday, showing that sales rebounded following five months of declines. NAR said the increase indicates that a stabilization is taking place in the market. The report showed that existing home sales rose 5.2 percent to a seasonally adjusted annual rate of 6.91 million units in February from an upwardly revised 6.57 million unit rate in January. Economists had expected existing home sales to edge down to a 6.50 million unit rate. The increase in existing home sales reflected growth in the Northeast, the Midwest, and the West, while sales in the South fell 2.5 percent. The report also showed that the national median existing-home price rose to $209,000 in February, up 10.6 percent from February 2005 when the median was $189,000. NAR added that total housing inventory levels rose 5.2 percent to 3.03 million existing homes available for sale at the end of February. This represents a 5.3-month supply at the current sales pace, which is unchanged from January.


9:00AM Stock futures pointed to a lackluster start on disappointing outlook from Adobe.
U.S. stock futures indicated a flat to lower start Thursday, reflecting gains in Yahoo shares and a disappointing report from software maker Adobe Systems. The lackluster opening would follow a strong performance yesterday, when stocks recovered from early tech weakness to end higher with the Dow rising to a five-year high. Shares of Yahoo ((YHOO)) rose 1.8% before the bell on news that UBS raised its investment rating on the company. After gaining ground yesterday, tech stocks are expected to show weakness after Adobe ((ADBE)) shares fell 3.6% in pre-market trading on a disappointing outlook which came after news that Microsoft Corp. decided to delay its new operating system. Adobe reported Q1 net income of 32 cents per share, which beat analyst estimates of 29 cents per share, but the company released a disappointing Q2 guidance. Standard & Poor''s 500 futures were down 1.5 points, but were about even with fair value. Dow Jones industrial average futures were down 7 points, and Nasdaq 100 futures were down 2 points.

Crude oil prices moved higher Thursday, reflecting an unexpected drop in U.S. oil inventories. Light sweet crude May delivery rose 88 cents to $62.65 a barrel. London Brent trading was suspended by the ICE Future Exchange without reason provided.

Initial jobless claims unexpectedly fell.
The Department of Labor released its report on initial jobless claims in the week ended March 18, showing that jobless claims came in below economist estimates. However, the report also showed a continued increase by the less volatile four-week moving average. The Labor Dept. said that jobless claims fell to 302,000 from the previous week''s revised figure of 313,000. Economists had been expecting jobless claims to fall to 305,000 from the 309,000 originally reported for the previous week. As mentioned above, the report also showed that the four-week moving average rose for the fourth consecutive week, increasing to 303,500 from the previous week''s revised average of 297,500. With the increase, the moving average rose above the 300,000 level for the first time since the first week of 2006. The report also showed that continuing claims in the week ended March 11 rose to 2.472 million from the preceding week''s revised level of 2.434 million.


8:30 AM A batch of companies underperformed.
Fred''s Inc, ((FRED)), retailer, reported Q4 net income of 24 cents a share, down from 27 cents a share a year ago despite sales growth, missing analyst estimate for a profit of 27 cents a share. The company added that profits were hurt particularly by weakness in its pharmacy sales.

ConAgra Foods Inc, ((CAG)), packaged-food company, reported that it reversed to a Q3 loss of 6 cents a share, from a profit of 32 cents a year-earlier. If not for charges for restructuring and other items, earnings would have been 37 cents a share, beating analysts'' estimate for a profit of 34 cents a share.

General Mills Inc, ((GIS)), ice cream and Pillsbury products company, reported that Q3 earnings advanced nearly 7% to 68 cents a share, from 58 cents a share in the year-earlier period on 3% net sales growth, beating analysts’ expectations for a profit of 65 cents. The company added that profit growth was limited by higher input costs, higher employee benefits expense and increased advertising investment.

Apollo Group Inc, ((APOL)), education services company, reported Q2 earnings of 46 cents a share, down from a profit of 47 cents a share a year-earlier despite 12.6% revenue growth, due to expenses paid to its former CEO under a separation agreement lowered earnings in Q2 by 9 cents a share. The company was in line with analyst estimate for a profit of 46 cents a share.

Family Dollar Stores Inc, ((FDO)), discount retailer, reported Q2 net income of 35 cents a share, 48 cents a share in the same period last year. Q2 results include a litigation charge of 18 cents a share, connected with an adverse litigation judgment. Sales for Q2 were up 9.4% to about $1.74 billion and same-store sales advanced 3.2.

Scholastic Corp, ((SCHL)), children''s books publisher, reported that its Q3 net loss widened to $15.5 million, or 37 cents a share, down from $800,000 despite 1%revenue growth, missing analysts forecasts for a loss of 7 cents a share. The company added that staffing and promotional expenses had advanced as revenue from its educational publishing unit fell.


8:00 AM European averages made insignificant moves at mid-day.
European markets traded in a tight range at mid-day. Energy stocks like BP and Total were dragged down by five-week low oil prices to offset gains made on the back of higher Wall Street close and strong mining sector. The German DAX 30 inched up 0.1%, the French CAC 40 lost 0.2%, and London FTSE 100 was down 0.2%. The euro fell 0.2% to 41.2057.


7:45AM Asian markets broadly advanced on U.S. markets gains.
Asian-Pacific benchmarks closed broadly higher, supported by U.S. markets gains and improved confidence in the global economic growth. However, the Nikkei edged down 0.04%, reversing from early gains as investors locked in profit taking, selling steel, property and brokerage stocks, such as Tokyo Steel MFG and JFE Holding. Across the region, Hong Kong’s Hang Seng rose 0.8%, despite the negative impact of interest rate concerns ahead of FOMC meeting. South Korea’s Kospi gained 0.2%, lifted by Kookmin Bank. Australia’s All Ordinaries climbed 0.4% on mining and energy stocks.