Consumer Confidence Strongly Improves

Elena
28 Mar, 2006
New York City

Stocks started trading near the flat line on cautiousness ahead of the Fed Reserve''s decision on interest rate hikes. Banks and insurers, which are interest rate-sensitive stocks, slipped. An increase in oil prices sent the energy sector 1.4% higher, but helped airline stocks move to the downside with the whole sectordown 1%. Strength in networking stocks boosted the Nasdaq, with Ciena and Tellabs standing out as the best performers.

[R]10:30AM Stocks moved to the downside. The Nasdaq showed modest gain[/R]
U.S. stocks were unable to find a definite direction and spent early trading moving up and down across the flat line. The three major averages showed weakness on better-than-anticipated data on consumer confidence, which built on concerns about further interest rate hikes. The data sent treasury yields considerably higher, which further added to concerns about interest rates. The 10-year treasury yield is currently up 5.6 basis points at 4.757, its highest level in over a week. Despite the lack of direction in the broader market, airline stocks posted considerable weakness, reflected by the 0.9% loss currently shown by the Amex Airline Index. AMR ((AMR)) and Continental Airlines ((CAL)) moved steeply to the downside on a sharp rise in the price oil. At the same time, the increase in the price of oil contributed to some strength in the energy sector. The oil service sector rose by 1.8%, while the oil and natural gas sectors were both up 0.7%.

[R]Consumer confidence in March rose above expectations.[/R]
Consumer confidence improved much more than expected in March, according to a report from the Conference Board showing that its Consumer Confidence Index rose much higher than economists had anticipated. The Conference Board said that its Consumer Confidence Index rose to 107.2 in March from an upwardly revised 102.7 in February. Economists had expected the index to edge up to 102.0 from the 101.7 originally reported for February. The report showed that consumers saying that conditions are good rose to 28.3 percent while those claiming conditions are bad fell to 14.7 percent. At the same time, the Conference Board said that labor market conditions remains mixed, with consumer saying jobs are plentiful rising to 28.4 percent while those claiming jobs are hard to get increased to 20.7 percent. The Conference Board added that consumers'' outlook for the next six months improved moderately in March, showing that those expecting conditions to worsen fell to 9.9 percent while those expecting conditions to improve rose to 18.0 percent.


[R] 9:45AM Stocks opened little changed on cautious trading.[/R]
U.S. stocks opened near the flat line Tuesday, reflecting cautious trading before a Federal Reserve policy statement on interest rates. The Dow Jones industrial average was down 3.12 points, or 0.03%. The Standard & Poor''s 500 Index was down 0.53 point, or 0.04%. The Nasdaq Composite Index was up 0.79 point, or 0.03%. In corporate news, shares of General Motors Corp. ((GM)) rose nearly 1% after the world''s largest automaker said it will cut a few hundred jobs on Tuesday. Among sectors, the oil service sector showed significant strength, reflecting a notable increase in the price of oil of nearly $65 a barrel. The sector advanced by 1.4%, extending recent gains. Networking stocks also moved to the upside, contributing to the gains of the tech-heavy Nasdaq. Ciena ((CIEN)) and Tellabs ((TLAB)) stood out as the best performers. The increase in oil prices brought some weakness among airline stocks, with the sector falling more than 1%. Gold stocks also turned to the negative, rebounding from recent gains. Interest-rate sensitive stocks, like banks and insurers, slipped. Shares of insurer American International Group Inc. ((AIG)) slipped 0.4%, while Citigroup ((C)) shares dipped 0.4%.


[R]9:00AM Stock futures pointed to a mixed start.[/R]
U.S. stock futures indicated a mixed opening with investors awaiting the U.S. Fed Reserve’s decision on interest-rate increase and further interest rate hikes. The FOMC is widely expected to boost interest rates for the fifteenth consecutive time to 4.75%. Trading activity is likely to remain light ahead of the Fed''s announcement. Banks and insurers, which are interest-rate sensitive stocks, are expected to be in the spotlight as investors try to gauge the effect of rising borrowing costs on their profits. In corporate news, General Motors Corp. ((GM)) may be in focus after the automaker said it will cut a few hundred jobs on Tuesday. Shares of Lexar Media Inc. ((LEXR)), which agreed to be acquired by Micron Technology, fell after the company warned it would post a quarterly loss. Level 3 Communications Inc.''s ((LVLT)) shares rose after the company raised its Q1 outlook. Standard & Poor''s 500 futures fell 1 point, about even with fair value. Dow Jones industrial average futures dropped 12 points, while Nasdaq 100 futures also shed 1 point.

Crude oil prices advanced with investors looking to oil inventory data Wednesday and worrying about potential supply disruptions in trouble spots like Nigeria, Iran. Light sweet crude May delivery rose 50 cents to $64.66 a barrel. Gasoline futures gained 1 cent to $1.8424 a gallon, while heating oil added 1 cent to $1.795. Natural gas climbed 5 cents to $7.113 per 1,000 cubic feet. European gold lost ground. In London gold traded at $563.75 per troy ounce, down from $565.70. In Zurich the precious metal fell to $563.30 from $566. In Hong Kong gold rose $3 to $563.30. Silver rose to $10.90 from $10.80. The U.S. dollar traded mixed versus major currencies ahead of Fed Reserve’s decision on interest-raising policy. The euro traded at $1.2064, up from $1.2012. The dollar bought 116.75 yen, up from 117.69. The British pound was quoted at 41.7483, down from $1.7464.

Lennar Corp, ((LEN)), homebuilder, reported that Q1 net earnings advanced 34% to $1.58 a share, on 35% revenue growth, beating analysts’ expectations for earnings of $1.55. The company added that its revenue was given a boost by an 18% rise in the number of home deliveries to 8,904, as well as a 12% rise in the average selling price to $326,000.

Tiffany & Co, ((TIF)), jewelry retailer, reported Q4 earnings of 97 cents a share, down from a profit of $1.48 a share a year-ago despite 6% sales growth and 6% same-store sales growth, beating analyst estimate for a profit of 84 cents a share. The results a year ago incorporated a pre-tax gain of $194 million related to the sale of a stake in Aber Diamond Corp., a charge of $15 million from asset impairment and a contribution of $25 million to a company foundation.


[R] 8:00 AM European averages traded mostly higher at mid-day.[/R]
European markets traded largely in the positive at mid-day, lifted by auto and tech stocks, recovering from yesterday’s sharp decline on weak oil sector and merger deals. However, bank stocks were weak as J.P. Morgan downgraded the European investment banking sector to underweight from neutral. The German DAX 30 rose 0.3% on data, showing improved confidence in economic growth, offsetting losses ahead of U.S. Fed Reserve’s decision on interest rates. The French CAC 40 gained 0.3%, while London FTSE 100 fell 0.1% on retail stocks.


[R]7:45AM Asian markets broadly advanced ahead of Fed reserve’s decision[/R]
Asian-Pacific benchmarks finished mostly higher, despite uncertainty about U.S. interest rate increases. The Nikkei erased early losses to rise 0.2% to 16,690.24, helped by technology, metals and retail stocks. Tech company Kiocera’s shares gained 1.5% and Advantest Corp. added 1.1%. However, bank and brokerage stocks declined, including Nikko Cordial, down 0.5% and Marusan Securities, falling 5%. Across the region, Taiwan’s Weighted index climbed 0.5%, Hong Kong’s Hang Seng rose 0.3% on continuous caution over interest-rate hikes, and Shanghai Composite gained 0.2%.Indian shares ended slightly higher leading the Sensex, the benchmark index of the Bombay Stock Exchange, to close at a record high of 11,086.03 points.