Stocks Rise on Tame Inflation

Elena
31 Mar, 2006
New York City

Stocks opened higher as economic report on personal income and spending offset inflation worries and lifted market sentiment. The Commerce Department reported that personal consumption spending rose by 0.1% last month, the weakest gain in six months. The report also showed that personal income rose by 0.3% in February after rising by 0.7% in January.

[R] 9:45AM Stocks opened in the positive[/R]
U.S. stock advanced at opening as tame inflation data helped to offset recent concerns about higher interest rates. A report released by the Commerce Dept. showed that core consumer price rose by 0.1%in February after a 0.2% increase in January and core prices rose at an annual rate of 1.8% in February, unchanged from the previous month. Meanwhile, the market awaited data on consumer confidence and domestic manufacturing activity. In early trading, airline stocks posted significant gains, benefiting from a sharp decline in the price of oil. At the same time, the lower oil prices contributed to weakness among energy stocks. The Dow Jones industrial average was up 36.82 points, or 0.33%. The Standard & Poor's 500 Index was up 2.44 points, or 0.19%. The Nasdaq Composite Index was up 5.79 points, or 0.25%. Bonds extended their losses to a third session, with the yield on the 10-year Treasury note edging up to 4.87% from 4.86% late Thursday.


[R]9:15AM Stock futures pointed to a positive start on economic data.[/R]
U.S. stock futures looked poised for a positive started, rebounding from early losses as the Commerce Department released a report on personal income and spending which helped investors overcome inflation worries. On Thursday stocks made a mixed performance with the Dow and the S&P 500 closing in negative territory while the Nasdaq managed to hold onto a modest gain. Stocks lost ground on fourth-quarter GDP data, which raised some concerns about the possibility of further interest rate hikes. Friday marks the end of the first financial quarter. The S&P 500 and the Dow advanced more than 4% each, while the Nasdaq posted more than 6% growth for the quarter.

[R]Personal income and spending modestly rose.[/R]
The Commerce Dept. released a report on personal income and spending in the month of February. The report showed modest growth in both personal income and spending. The Commerce Dept. said that personal spending edged up 0.1 percent in February following a downwardly revised increase of 0.8 percent in January. Economists had expected spending to come in unchanged compared to the 0.9 percent growth originally reported for January. The report also showed that personal income rose by 0.3 percent in February after rising by 0.7 percent in January. The increase came in slightly below economist estimates of an increase of 0.4 percent. Based on this data, the personal savings rate was a negative 0.5 percent in February, unchanged from the previous month. This suggests that consumers are dipping into their savings in order to continue spending. The report also showed that the price index for consumer spending was unchanged in February after rising by 0.5 percent in January. Excluding food and energy prices, the index edged up by 0.1 percent in February after a 0.2 percent increase in the previous month. Additionally, the price index showed an annual rate of growth of 2.9 percent in February compared to the 3.1 percent year-over-year growth seen in January. Core prices rose 1.8 percent year-over-year, unchanged from January.

Crude oil prices retreated below $67 as Nigeria resumed normal oil production. Light sweet crude May delivery dropped 40 cents to $66.75 a barrel. London Brent climbed 14 cents to $66.60. European gold lost ground Friday, falling from a 25-year high. In London gold traded at $584 per troy ounce, down from $585.10. In Zurich the precious metal fell to $582.90 from $583.70. In Hong Kong gold surged $5.20 to $582.80. Silver climbed to $11.90 from $10.80. The U.S. dollar gained strength versus major currencies. The euro traded at $1.2108, down from $1.2161. The dollar bought 117.59, up from 117.29. The British pound was quoted at $1.7369, down from $1.7461.

Osteotech, Inc, ((OSTE)), reported that it incurred a Q4 net loss of 67 cents per share, down from a net loss of 27 cents per share in the prior year period. Revenues for Q4 grew 7% over Q4 of 2004 revenues of $20.4 million. Domestic revenues rose 8% in Q4 of 2005, while international revenues in Q4 of 2005 were relatively flat with international revenues in the Q4 of 2004.

Willis Lease Finance Corp, ((WLFC)), jet engine leasing company, reported that Q4 net income advanced 15.8% to 22 cents a share, on 16.3% revenue growth. The company added that the cost cutting and fleet rationalization efforts from the past few years are beginning to show solid results, especially here in the U.S.

Global Payments Inc, ((GPN)), payment processing company, reported that Q3 net income advanced 39% to 36 cents a share on 15% revenue growth, beating analysts’ forecasts for earnings of 34 cents a share. The company added that Q3 earnings reflect strength in its North American direct merchant channels.

Best Buy Co. Inc, ((BBY)), retailer of consumer electronics, reported that Q4 net earnings advanced to $1.29 per share, from $1.13 per share in the year-ago period, matching analysts’ forecasts. The company attributed its rise in profit on strong sales of flat-panel televisions, digital music players and laptop computers. Best Buy added that online sales soared by 50% and customers at its stores ran up larger bills, offsetting a slight drop in customer traffic.


[R]8:45AM India closes up 20% in the first quarter.[/R]
Sensex index in India fell 27 points to 11,280 on the last day of the week but rose 3% or gained more than 300 points for the week. For the first quarter of this year the index has jumped 1,882 or 20% from the 2005 year end close of 9,398. Strong fund flows from domestic and international investors managed to attract more than $120 million per day in new capital.

Auto manufacturers and light commercial vehicle makers rose on higher sales in the fist quarter of this year. Tata Motors, Bajaj Auto and Maruti Udyog rose 3%. 1.7% and 2% respectively. Bajaj Auto closed at Rs. 2,741 and Tata Motors closed at Rs. 936. Eicher Motors jumped 15% on better than expected sales for the current quarter. Metal makers rose for the second time this week as market expects a metal price hike of between 7% and 10% in April month by Tata Steel, stock rose 2.7%. Hindustan Zinc rose 4.5% as zinc prices have firmed in the international markets. IT companies stock fell on profit taking. TCS, Infosys and Wipro lost 2.7%, 1.9% and 0.8% on profit taking.


[R] 8:00 AM European averages declined at mid-day.[/R]
European markets rebounded from yesterday’s solid gains and traded lower at mid-day, taking their cue from weak close of U.S markets Thursday when most blue-chip stocks lost ground as higher interest rates concerns weighed. Technology stocks like Nokia and Ericsson failed to sustain recent gains. However, British hedge-fund manager Man Group bucked the downward trend, rising 3.1%. The German DAX 30 rose 0.4%, the French CAC 40 was up 0.4%, and London FTSE 100 also gained 0.4%. In the first quarter European markets advanced 8% on surging materials and utilities sectors.


[R]7:45AM Asian markets finished largely higher. South Korea led gainers.[/R]
Asian-Pacific benchmarks finished broadly higher. The Nikkei advanced 0.1% to 17,059.66, extending recent rally that sent the index to a multi-year high. The index closed the financial year above the key level of 17,000, supported by economic data, property and pharmaceutical stocks. NEC climbed 4.4%, Sumitomo Realty jumped 2.8%, Daiichi Sangyo rose 1.3%. South Korea’s Kospi surged to 1.6%, boosted by strength in the tech and financial sectors on expectations of solid earnings results. The biggest gainers were Kookmin Bank, rising 3.2% and Hynix Semiconductor, up 2.1%. Taiwan Weighted index rose 1% on strong buying interest in tech and financial stocks. China Shanghai Composite gained 0.3%, lifted by copper and gold stocks. Hong Kong’s Hang Seng was the most notable decliner across the region, falling 0.5%, led by losses in China Mobile and weak property stocks.