U.S. Stocks Cautions Ahead of Election, Rate Decisions

Arthi Gupta
02 Nov, 2010
New York City

U.S. stocks traded higher ahead of the two-day Fed meeting and midterm elections. Google sued the U.S. Interior Department over messaging-service contract. GE Capital agreed to sell stake in Garanti Bank to BBVA for $3.78 billion.

[R]9:35 AM New York – U.S. stocks traded higher ahead of the two-day Fed meeting and midterm elections. Google sued the U.S. Interior Department over messaging-service contract. GE Capital agreed to sell stake in Garanti Bank to BBVA for $3.78 billion.[/R]

U.S. stocks advanced on expectations that the Fed will announce between $50 billion and $500 billion in assets repurchase program. Asian markets traded mixed and European markets gained ahead of the midterm U.S. elections.

NYSE Euronext net rose marginally reflecting the impact of dampened transaction revenue due to slow overall trading volumes. BP profit declined after it took an additional $7.7 billion pre-tax charge related to the massive Gulf of Mexico oil spill.

The U.S. Commerce Department released a report on Monday showing that construction spending unexpectedly increased 0.5% in September following a revised 0.2% decrease in August due to a notable increase in spending on public construction.

The Institute for Supply Management released a report on Monday showing that economic activity in the U.S. manufacturing sector unexpectedly expanded at an accelerated rate in the month of October, with both new orders and production making significant gains.

The ISM said its index of activity in the manufacturing sector rose to 56.9 in October from 54.4 in September. The new orders index surged to 58.9 in October from 51.1 in September. The production index also surged up to 62.7 in October from 56.5 in September, indicating notably faster production growth.

The U.S. Small Business Administration approved a record number of small business loans in 2010, and is taking steps to set another record this year. Sean Greene, Associate SBA Administrator for Investment and Special Advisor for Innovation told that the agency approved $1.6 billion in loans last year, an all-time high for the agency''s 50-year history.

The Reserve Bank of India decided on Tuesday to hike its key interest rates for the sixth time this year in a bid to cool inflation. The repo, the rate at which the RBI lends, was raised to 6.25%. The reverse repo, the rate at which the central bank borrows from banks, was lifted to 5.25% from 5%.

The Reserve Bank of Australia unexpectedly raised its key interest rate on Tuesday. The board hiked the cash rate by 25 basis point to 4.75%, effective from November 3. The bank concluded that the balance of risks had shifted to the point where an early, modest tightening of monetary policy was prudent, RBA Governor Glenn Stevens said in a statement.

Google Inc. reportedly sued the U.S. Interior Department over a messaging-service contract worth $49.3 million over five years, alleging that the department favored Microsoft Corp. and did not provide Google a ""full and open"" competition.

The Interior Department sought a request for bids in August to acquire a single communications service for its 88,000 workers. In a complaint filed with the U.S. Court of Federal Claims on October 29, Google along with its licensed seller Onix Networking have sought an order restraining the department from using Microsoft''s software.

GE Capital, the financial services division of conglomerate General Electric Co. reached an agreement to sell an 18.6% stake in Turkey-based bank Turkiye Garanti Bankasi A.S to Spanish banking group, Banco Bilbao Vizcaya Argentaria, S.A. for $3.776 billion.

Following the deal, GE Capital will retain 2.25% of Garanti shares, which has a market value of $588 million at the close of trading on November 1.

R.R. Donnelley & Sons Co. said it has been awarded a multi-million dollar contract by Prudential UK to manage its document management operations to 2021.

Phoenix Technologies Ltd., the software company announced the receipt of a proposal from private-equity firm the Gores Group LLC to acquire all outstanding common shares of Phoenix for $4.20 per share in cash or about $152 million.

General Motors Co.''s upcoming initial public offering is expected to see the U.S. and Canadian federal governments pare their stakes in the car maker. The U.S. Treasury is set to cut its stake to below the controlling 50% to about 35% to 40% through the IPO.

According to reports, the Treasury is expected to sell $7 billion of its shares, the United Auto Workers healthcare trust $2 billion of its shares, and Canada and Ontario governments to sell around $1 billion of their shares.

The U.S. Securities and Exchange Commission is investigating whether JPMorgan Chase & Co. adequately disclosed to investors that it allowed a hedge fund to improperly select assets for a $1.1 billion deal backed by subprime mortgages, according to media reports on Monday.

The investigation by the SEC is part of a wider probe by the regulator into the sale by banks of complex mortgage securities as the housing market declined in 2007 and which were at the heart of the financial crisis. These mortgage-linked investments contributed to more than $1.8 trillion in losses and write-downs worldwide.

Earnings Review

Allergan, Inc. ((AGN)), the healthcare company reported third quarter revenues increased 6% to $1.21 billion from $1.14 billion in the comparable period. Net loss in the quarter was $670.5 million or $2.21 per diluted share, compared to last year''s profit of $179.0 million or 58 cents per share, reflecting hefty charges related mainly to the U.S. government''s probe into certain uses of Botox in the past.

Anadarko Petroleum Corporation ((APC)), the independent oil and gas exploration and production company stated third quarter revenues slipped 11% to $2.55 billion from $2.87 billion last year. Net loss in the quarter was $26 million or 5 cents per diluted share, compared to a net profit of $200 million or 40 cents per share last year, hurt by losses on derivatives and the absence of one-time payments related to the Deepwater Royalty Relief Act in the prior-year quarter.

BP plc ((BP)), the international oil and gas company reported third quarter total revenues grew 10% to $74.65 billion from $67.86 billion in the comparable period a year ago. Net profit in the quarter plunged 67% to $1.785 billion or to 9.38 cents per diluted share, compared to net profit of $5.34 billion or 28.18 cents per share in the prior-year period.

Dollar Thrifty Automotive Group, Inc. ((DTG)), the car rental company reported third quarter total revenues rose 1.1% to $443.54 million from $438.89 million a year ago. Net income in the quarter soared 63% to $49.17 million or $1.62 per share, compared to net income of $30.09 million or $1.29 per share last year, primarily reflecting increase in vehicle rentals revenues.

Forest Oil Corporation ((FST)), the oil and gas company said third quarter total revenues rose 18% to $210.39 million from $177.14 million in the same quarter last year. Net income in the quarter slumped 60% to $68.9 million or 60 cents per diluted share, compared to net income of $172.3 million or $1.53 per share for the year-ago quarter, mainly due to lower commodity prices.

MEMC Electronic Materials, Inc. ((WFR)), the manufacturer and seller of wafers reported third quarter net sales surged 62.3% to $503.1 million, from $310.0 million last year. Net income generated in the quarter was $17.6 million or 8 cents per diluted share, compared to a net loss of $64.9 million or 29 cents per share in the previous year.

NYSE Euronext ((NYX)), the global operator of financial markets and provider of trading strategies said third quarter total revenues declined 9.5% to $1.05 billion, from $1.16 billion in the prior year. Net income in the quarter rose marginally 2.5% to $128 million or 49 cents per diluted share, compared to net income of $125 million or 48 cents per share a year ago.

Pactiv Corporation ((PTV)), the hefty bag maker reported third quarter sales rose 12% to $944 million from $839 million, reflecting 11% higher volume and 1% higher pricing. Net income in the quarter slipped 14% to $81 million or 60 cents per diluted share, compared to net income of $94 million or 70 cents per share in the prior year, as higher costs more than offset a rise in revenues.

Pfizer Inc. ((PFE)), the biopharmaceutical company reported third quarter revenues increased 39% to from $16.17 billion, from $11.62 billion in the year ago quarter. Net income in the quarter plunged 70% to $866 million or 11 cents per diluted share, compared to net income of $2.878 billion or 43 cents per share in the same quarter last year.

Principal Financial Group, Inc. ((PFG)), the global financial services company reported third quarter operating revenues rose 1.3% to $1.99 billion from $1.96 billion. Net income in the quarter dropped 23% to $142.2 million or 44 cents per diluted share, compared to net income of $184.7 million or 57 cents per share in the same quarter a year ago.

Sanmina-SCI Corporation ((SANM)), the electronics contract manufacturer reported fourth quarter revenue increased 25% to $1.69 billion from $1.35 billion in the same quarter last year. Net income generated in the quarter was $31.4 million or 38 cents per diluted share, compared to a net loss of $32.7 million or 42 cents per share in the prior-year quarter.

Annual revenue increased 22% to $6.3 billion from $5.2 billion in the year-ago. For the full year 2010, net income was $122.4 million or $1.48 per share, compared to a net loss of $137.8 million or $1.67 per share in the previous year.

Vulcan Materials Company ((VMC)), the largest U.S. producer of construction aggregates said third quarter net sales fell 5% to $699.79 million from $738.66 million in the same quarter last year. Net income in the quarter plunged 76% to $13.2 million or 10 cents per diluted share, compared to net income of $54.2 million or 43 cents per share for the year-ago quarter, hurt by lower sales and weaker margins.