Market Awaits Rate Hike

Elena
27 Mar, 2006
New York City

Interest rates were in focus as traders turned their focus to the outcome of th Fed meeting on Tuesday. Fed has raised interest rates 14 times since June 2004 to 4.5% and is widely expected to raise rate by a 25 basis points to 4.75%. Tobacco stocks fell as Altria lost 1.2%. Emerging markets rose led by India gaining 1.2%. Brazil Finance Minister resigned.

[R]4:15PM MARKET AWAITS RATE HIKE.[/R]

Averages languished as traders directed their focus to the FOMC meeting chaired by new Fed Chairman. Market forecasters are looking for the rates to rise by 25 basis points to 4.75%. Fed has raised interest rates 14 times since June 2004 in equal increments of 25 basis points. Material sector stocks rose on Citigroup recommendation of Phelps Dodge ((PD)). The broker also revised the price targets for copper and aluminum. Healthcare and tobacco stocks were under pressure. Altria ((MO)) lost 1.2%. Walgreen missed the earnings estimate by a penny but managed to rise 1.5%. Brazilian Finance Minister Mr. Antonio Palocci resigned. Mr, Palocci was forced to resign after second witness linked him directly in the political graft scandal. Brazil main index rose .17% but the market in Mexico lost 0.58%. Argentina and added 1.2% while Chile lost 0.45%. Emerging markets in Asia rose as markets opened higher across the region and were led by a strong rise in India, Taiwan and Hong Kong by 1.18%, 0.71% and 0.63% respectively.

[R]12:30PM European markets finished in the red on merger deals. [/R]
European markets closed sharply down, extending earlier losses on takeover speculation. The French CAC 40 dropped 1.1% on weakness in pharmaceutical stocks with 2.2% drop of Sanofi-Aventis shares after the company agreed to buy part of Czech generics drug maker. Surging shares of electronics maker Thomson, up 5.6%, limited the downward trend. The German DAX 30 fell 1%. London FTSE 100 slipped 1.1%, dragged by weak oil shares and 1.1% decline in London Stock Exchange on bid rumors.

Crude oil prices retreated below $64 on easing supply concerns. Light sweet crude May delivery dropped 41 cents to $63.85 a barrel. Gasoline was steady at $1.825. London Brent for April delivery fell 7 cents to $63.44 a barrel. European gold advanced on weakness of the U.S. dollar ahead of FOMC meeting. In London the precious metal rose to $565.70 per troy ounce from $558.60. In Zurich gold traded at $566, up from $558.60. In Hong Kong gold surged $12.30 to $562.30. Silver closed at $10.80, up from $10.70. The U.S. dollar declined versus the yen on speculations the Fed Reserve will end its interest-raising policy. The euro traded at $1.2025, down from $1.2030. The dollar bought 116.50 yen, down from 117.46. The British pound was quoted at $1.7476, up from $1.7422.


[R]11:30AM Averages traded in a lackluster fashion. The Nasdaq showed strength.[/R]
Stocks traded in a lackluster fashion Monday morning as many traders stayed away from big moves ahead of the Federal Reserve''s announcement of its decision on interest rates on Tuesday. The Dow and the S&P 500 remained modestly below the unchanged line, while the Nasdaq holding onto a modest gain.
Despite the light trading gold stocks were conspicuous advancers with the sector up 3.8%, benefiting from a continued increase in the price of gold on weaker dollar ahead of Fed Reserve meeting.Housing stocks showed some strength, extending a recent upward move with Toll Brothers ((TOL)) boosting the sector after Wachovia upgraded the homebuilder to outperform from market perform. Positive comments from Bear Stearns helped airline stocks continue their strong performance, sending the Amex Airline Index up 1.5%. The airline sector has also benefited from a decrease in the price of oil, with crude for May delivery currently down $0.36 at $63.90 a barrel. The price decrease is partly due to news that Nigerian militants have released three kidnapped oil workers. Meanwhile, an oil prices decline contributed to notable weakness among energy stocks. Pharmaceutical stocks were under pressure with the whole sector falling 1%, dragged by AstraZeneca ((AZN)), currently down 2.9%. Biopharmaceutical company Encysive Pharmaceuticals ((ENCY)) tumbled 46.5% on news that the FDA requested additional clinical trial data before approving its drug Thelin.


[R]10:30AM Stocks moved to the downside. The Nasdaq showed modest gain[/R]
Stocks traded mixed ahead of Fed Reserve’s decision on interest rates. In the first hour of trading, the Dow Jones industrial average declined 9.12, or 0.1%. The S&P’s 500 index was down 0.53, or almost flat, while the Nasdaq composite index advanced 6.12, or 0.3%. Apart from widely expecting the 15th consecutive increase, traders were closely watching oil prices which retreated on eased supply concerns after three foreign hostages were released by Nigerian militants.
In early trading, the gold sector was among the best performers, benefiting from a continued increase in the price of gold. Airline stocks moved to the upside after Bear Stearns said that it expects airlines to see improvements in the Q1 of 2006. Continental Airlines ((CAL)) helped the sector go higher. Technology stocks showed strength in early trading, with some computer hardware and semiconductor stocks posting notable gains. Shares of Palm ((PALM)) and Apple ((AAPL)) gained over 2%. Meanwhile, drug stocks posted weakness, with the Amex Pharmaceutical Index falling 0.7%. AstraZeneca ((AZN)) and Bristol-Myers ((BMS)) stood out as the wors performers in the sector. Energy stocks also moved to the downside on profit taking after oil prices decreased.


[R] 9:45AM Stocks opened mixed ahead of FOMC meeting.[/R]
With traders focused on FOMC meeting and announcement on further interest rates increases, and no significant economic news due out Monday, trading activity is expected to be light. The Fed Reserve is expected to raise the fed funds rate for a 15th consecutive time by a quarter-percentage point to 4.75% from 4.5%. Blue-chip stocks declined at opening, while tech stocks were little changed. The Dow Jones industrial average was down 17.04 points, or 0.15%. The S&P''s 500 Index was down 1.42 points, or 0.11%. The Nasdaq was up 2.73 points, or 0.12%. Among companies reporting quarterly results, drugstore chain Walgreen ((WAG)) reported Q2 earnings rise but one penny below analyst estimates. Walgreen reported earnings of 51 cent per share on sales of $12.16 billion compared to earnings of 48 cent per share on sales of $10.99 billion in the year ago quarter. In corporate news, Goldman Sachs ((GS)) confirmed that it is part of a consortium considering a takeover of Associated British Ports at the value of 2.3 billion pounds. Circuit City shares jumped 2.3% after Lehman Brothers raised its rating on the stock to equal-weight from underweight.


[R]9:00AM Stock futures pointed to a positive start.[/R]
U.S. stock futures indicated a strong opening with focus on the Federal Reserve’s two-day monetary meeting and the decision on interest-rate increases. This FOMC meeting will be the first, presided over by the new Chairman Ben Bernanke and investors will scrutinize the wording of the Fed statement, expecting clues to be given about the future path of short-term interest rates in the world''s largest economy. The three major averages were near five-year highs in pre-market trading. Apart from drugstore chain Walgreen''s ((WAG)) fiscal Q2 results, no major U.S. company earnings are expected. The S&P 500 future was up 0.02%, the Dow Jones future was up 0.01% and the Nasdaq future was 0.12% higher.

Crude oil prices retreated below $64 after a positive development in Nigeria’s conflict eased supply concerns. Light sweet crude May delivery dropped 48 cents to $63.78 a barrel. Gasoline lost 2 cents to $1.8050 a gallon, while heating oil edged down a penny to $1.7813. Natural gas dropped 9 cents to $7.200 per 1,000 cubic feet. London Brent for April delivery fell 7 cents to $63.44 a barrel. Gold advanced ahead of FOMC meeting. Gold for April delivery gained $2.40 to $562.90. The U.S. dollar declined versus the yen on speculations the Fed Reserve will end its interest-raising policy. The euro traded at $1.2024, down from $1.2036. The dollar bought 116.90 yen, down from 117.46.

Alvarion Ltd, ((ALVR)), wireless broadband provider, reported that Q4 net loss was less than announced previously, in view of a favorable settlement with a former customer of inter WAVE Communications International, bought by Alvarion in December 2004. The Alvarion’s revised net loss for Q4 was $3.9 million as opposed to the previously announced $4.8 million.

Cal-Maine Foods Inc, ((CALM)), egg producer, reported Q3 net income of 34 cents a share, up from 10 cents a share a year earlier on sales growth and strong egg demand leading up to Easter.

Retalix Ltd, ((RTX)), global provider of enterprise-wide software solutions for food retailers, reported Q4 GAAP net income 32 cents per share, almost tripled from 11 cents per share for the prior-year period. Revenue rose 52% compared to the year-ago period and gross profit rose 46% in Q4 from the same period last year.

Buca Inc, ((BUCA)), Italian restaurants operator, posted a preliminary net loss of 32 cents a share, against a restated net loss of 90 cents a share in the same period a year ago on 5.3% sales growth. The company is restating results for fiscal 2001 through 2004 and the first three quarters of 2005. Buca Inc also added it has identified certain material weaknesses in its system of internal controls over financial reporting and will therefore provide more detail in its form 10-K for 2005, which it expects to file by March 27.


[R] 8:00 AM European averages traded lower on deal talk.[/R]
European markets lost ground at mid-day, hurt by takeover speculation. The French CAC 40 was the most notable decliner as pharmaceutical shares were dragged down by a 0.7% loss of Sanofi-Aventis shares after the company agreed to buy part of generics drug maker. Meanwhile electronics maker Thomson advanced 7.8% on bid speculation. The German DAX 30 fell 0.1% and London FTSE 100 fell 0.1%, dragged by weak oil shares and London Stock Exchange, down 1.6% on deal talk.


[R]7:45AM Asian markets broadly advanced. Australian shares hit a new high.[/R]
Asian-Pacific benchmarks finished mostly in the positive at the start of a week, heavily loaded with economic data. The Nikkei climbed 0.5% to 16,650.10, supported by property developers and consumer-related stocks, including Mitsubishi Estate, Sumitomo Realty, and Toyota Motor. Australia All Ordinaries hit a new high, rising 1% to 5,088.1, reflecting merger activity and strength among resource stocks like BHP Billiton and Rio Tinto. Among other regional markets, South Korea’s Kospi gained 0.7% on tech stocks, led by Samsung Electronics, Taiwan Weighted index rose 0.7%, and Hong Kong’s Hang Seng added 0.6%