Dow Weakens in Afternoon

123jump.com Staff
03 Apr, 2006
New York City

Market average gained in the morning hours on the construction industry report. Morning enthusiasm was not supported by a broad buying in the tech and stocks and other large and small caps. Construction equipment companies Catepillar, Deere, Terex, Manitowoc and Joy Global rose more than 3% at close. Emerging markets in India, Brazil and Mexico rose close to 2% and Japan, Hong Kong and Germany rose to five-year high.

[R]4:30PM Morning rise of more than 135 points in Dow fail to stick at close.[/R]

-Dow and S&P lost most of the gains. Dow up 35, S&P up 3 and Nasdaq lost 3 points.
-Gold up $7.60 to $589.40, silver up 24 cents $11.76 and copper 8 cents to $2.5475.
-Crude oil rose 11 cents to $66.74 but rose as high as $68 per barrel.

-Japan close six-year high and German and Hong Kong close five-year high.
-India and Indonesia closed at all-time high.

Market averages lost most of the gains by the end of the day. A rise of more than 135 points in Dow was sparked by the mixed economic reports and strong construction industry report. However by the end of the day momentum driven rally faded on lack of broad buying. Alcatel and Lucent deal cemented over the weekend worth $25 billion may lead to layoff of 8,500 people in the next two years. General Motors ((GM)) is reported to have finalized the deal to sell 51% in GMAC to a private equity group of Citigroup for $14 billion. General Motors will receive $10 billion on the close of the deal and $4 billion over a course of four years.

Oil rose 11 cents and closed below $68 but managed to trade at six-month high on the continued worries over future supplies. Traders seem to find endless reasons to drive crude oil higher, despite oil industry able to meet daily supply around the globe.

Mining and agriculture equipment companies registered a strong rise during the day. Terex ((TEX)), Gehl ((GEHL)), Manitowoc ((MTW)), Caterpillar ((CAT)) and Joy Global ((JOYG)) registered a rise of between 3% and 6%. Specialty retailers took a loss on worries on the same-store sales data this week. Abercrombie & Fitch ((ANF)), Chico’s ((CHS)), Urban Outfitters ((URBN)) and American Eagle ((AEOS)) lost between 2% and 4%.

[R]Emerging markets of India, Mexico, Brazil and Hong Kong lead gainers.[/R]
Asian market closed broadly higher on the first day of financial year in Japan and India. Japan closed up 1.6% sparking a wave of buying across Asian markets as India, Hong Kong and South Korea closed up 2.5%, 1.6% and 1.5% respectively. Hong Kong stocks were led by property and telecom stocks. Property index was up 2.1% on the rise of 5% in Hang Lung and 2.1% in Henderson Land. Shanghai Composite Index rose 1.6% to a 16-month high as retail and property stocks rose in Shanghai too.

Automobile and IT stocks drove the Sensex Index 2.5% higher in India on the first day of financial year 2007. Bajaj Auto, largest scooter maker in the world, and Maruti Udyog, maker of Suzuki brand of cars, reported 30% and 16% March unit sales growth. Infosys and TCS, two largest software exporters, rose 5% and 2% ahead of earnings season. Russia closed up 1.1% but the index in Turkey closed near unchanged. Taiwan shares rose for the seventh session in a row led by steel and chip sectors. United Micron, Taiwan Semiconductors and Advanced Semiconductor Engineering rose 3.2%, 1% and 3.4% respectively at close.

Brazil and Mexico rose 1.9% each as buyers keep hoping for better economic times in the region. Steady rise in oil price and commodities supported Brazil index as foreign investors keep pumping close to $40 million a day. Mining, telecom and banking sector stocks rose in Sao Paolo trading. Banco Itau, Bradesco and Unibanco gained 1.9%, 2.6% and 2.2% respectively. In Mexico American Movil rose 1.6% and Grupo Mexico rose 2.5% on strong copper prices. Cemex rose 1% in New York trading. The copper mine operated by Grupo is closed due to labor strike which is partly supporting rise in copper prices.

[R]2:30PM Terex and BHP Billiton lead the gainers.[/R]
Terex Corp, ((TEX)) construction equipment maker, raised its first quarter earnings outlook to $1.20 per share and raised its guidance for the year to $6.35 from $5.85 per share on better than expected revenue in the mining equipment section and aerial platform section. Canada based Vincor International, producer of wine and wine related products, agreed to be bought by Constellation Brands Inc. ((STZ)) for C$36.50 per share or C$1.3 billion.

General Motors has agreed to sell its financing arm to a private equity group Cerberus group, a division of Citigroup. Incyte Corp. ((INCY)) dropped 36% in value after it said that it will discontinue the formulation of drug known as DFC for HIV treatment. The drug showed higher level of inflammation in Pancreas. Watsco Inc. ((WSO)), Florida based distributor of air conditioning equipment, raised its dividend by 25% to 25 cents payable to holders on record of April 14th on April 28th. BHP Billiton ((BHP)) rose 6% after it said that it has repurchased 96 million shares and it will increase its buy-back program to $1.6 billion. Last quarter, in the conference call, company had rejected plans to increase the dividend or buy-back programs.

[R]12:30PM European markets posted solid gains.[/R]
European markets closed sharply higher on the first day of the second quarter, reflecting a broad rally in the Asian-Pacific region, eased concerns about interest-rate increases, and strong mining and auto stocks. Merger-and-acquisition activity also provided support with Alcatel in the spotlight after the company agreed to acquire Lucent Technologies for $14.45 billion in stock, a deal which will place the French mobile phone maker among the world’s two leading makers of communications equipment. The German DAX 30 reached a five-year high of 0.9%, the French CAC 40 advanced 0.7% and London FTSE 100 surged 1.1%.

Crude oil prices jumped above $67 on lingering tensions in major oil producers Iran and Nigeria and concerns about gasoline supplies. Light sweet crude May delivery gained $1.07 to $67.07 a barrel. London Brent climbed $1.54 to $67.45. European gold sharply rose Monday to lead a broad metals rally. In London gold advanced to $589.90 per troy ounce, up from $582.90. In Zurich the precious metal traded unchanged at $582.90. Silver closed at $11.70, up from $11.50. The U.S. dollar advanced against major currencies. The euro was quoted at $1.2105, down from $1.2115. The dollar bought 117.92, up from 117.71. The British pound stood at $1.7330, down from $1.7361.

[R]11:30AM Stocks extended gains.[/R]
The Nasdaq hit a new five-year intraday high after the three major averages further advanced, extending early-morning gains. The market sentiment was lifted by economic data which helped to offset lingering concerns about interest rate hikes. Gold stocks were among the market's best performers after the price of gold extended gains to reach a 25-year high. The sector climbed 2.5%. Energy sectors also posted significant strength, as higher oil prices increased buying interest. Some networking stocks posted strong gains. Shares of Alcatel ((ALA)) gained 5.5% after the company agreed to acquire Lucent ((LU)) for $13.4 billion. Meanwhile, General Motors ((GM)) dropped 1.4% after the company agreed to sell its 51% stake in GMAC. In late morning trading, the Dow climbed 119.02, or 1.07%.The Standard & Poor's 500 index was up 12.20, or 0.94%, and the Nasdaq composite index gained 14.82, or 0.63%. Bonds extended last week's losses, with the yield on the 10-year Treasury note rising to 4.87% from 4.86% late Friday.


[R]10:30AM Stocks posted gains.[/R]
Stocks moved further to the upside. The networking sector advanced on news that Alcatel ((ALA)) agreed to acquire Lucent ((LU)) in a deal valued at $13.4 billion, forming a telecommunications conglomerate with more than $25 billion in annual sales. Again in the sector, Verizon Communications sold its Caribbean and Latin American operations for $3.7 billion. General Motors Corp ((GM)) announced a plan to sell a 51% stake in its auto financing unit. The $14 billion deal boosted the shares of GM and eased concerns that the automaker would not be able to find a buyer for its GMAC. Gold stocks posted strong gains in early trading on notably higher gold price, helping the sector rebound from weakness at the end of the previous week. An oil price advance contributed to strength in the energy sector. A barrel of light crude rose to $67.15 on the Nymex. In morning trading, the Dow climbed 75.08, or 0.68%. The Standard & Poor's 500 index was up 7.04, or 0.54%, and the Nasdaq composite index gained 8.23, or 0.35%. Bonds extended last week's losses, with the yield on the 10-year Treasury note rising to 4.89% from 4.86% late Friday.

[R]Construction spending exceeded expectations.[/R]
The Department of Commerce released its report on construction spending in the month of February on Monday, showing that spending growth exceeded economist estimates. The increase reflected notable growth in spending on private construction. The report showed that construction spending rose 0.8 percent in February following a 0.4 percent increase in January. The growth exceeded economist estimates of an increase of about 0.5 percent. The increase in spending came as spending on private construction rose 1.2 percent in February, reflecting growth in spending on both residential and non-residential construction. At the same time, the report showed a decrease in spending on public construction, which fell 0.5 percent in February.

[R]Manufacturing activity slowed down in March.[/R]
The Institute for Supply Management released its report on business activity in the manufacturing sector in the month of March, showing that the pace of growth in the sector slowed unexpectedly. The ISM said that its purchasing managers index fell to 55.2 in March from 56.7 in February. While a reading above 50 indicates growth in the sector, economists had been expecting the index to increase to 57.5. The decrease reflected a slowdown in the pace of new orders growth, with the new orders index falling to 58.4 in March from 61.9 in February. The report also showed a slowdown in employment growth, as the employment index dipped to 52.5 in March from 55.0 in February. At the same time, the report showed an acceleration in the pace of price growth, with the prices index rising to 66.5 in March from 62.5 in February.

[R]10:20AM India adds 2.52% on the first day of the second quarter.[/R]
Robust buying in Indian stocks both from local and foreign institutions prompted heavy volume and index advance on the second day of trading. Sensex index rose 284.40 points or 2.52% to 11,579.10. The index has advanced 20% in the first quarter of the year. Total value turnover at the close on Bombay Stock Exchange was $900 million significantly lower from $2.2 billion on Friday. Sensex took 21 days to rise from 11,000 to 11,500 and added more than 300 points in the last seven trading days. Other markets in Asia rose too, when Hong Kong’ Hang Seng rose 1.64% and Nikkei rose 1.6% at close on Monday.

IT stocks jumped ahead of earnings from Infosys. The company stock jumped 5.54% and other IT leaders rallied in the buying. Satyam, I-Flex and TCS rose 4.45%, 2.9% and 2% at close respectively. Infosys closed at all time high of Rs. 3,146. Vehicle manufacturers rose on robust unit sales report. Maruti Udyog, maker of small Japanese car Suzuki, rose 4.22% on the news that the March unit sales rose 16%. Bajaj Auto added 2.8% to close at Rs, 2,824 on the news that its March unit sales rose 30% to 212,419. Third largest motorcycle maker, TVS, rose 12% to Rs. 156 on the news that March unit sales of two-wheeler scooters and motorcycles rose 31% to 84,000.

[R] 9:45AM Stocks opened in the positive.[/R]
Stocks showed a strong upward move at the start of the second quarter, with the positive sentiment generated by merger-and-acquisition activity and corporate news, involving Lucent Technologies which agreed to be bought by Alcatel and the General Motors-GMAC deal. GM ((GM)) announced a decision to sell a majority stake in GMAC for $14 billion over three years to investors led by Cerberus Capital Management. Also on the takeover front, Ameristar Casinos offered $2.25 billion for U.S. gaming operator Aztar, topping the offers of Colony and Pinnacle. The networking sector posted strength on news that Alcatel ((ALA)) agreed to acquire Lucent ((LU)) in a deal valued at $13.4 billion. Shares of Alcatel showed considerable move to the upside, up nearly 5%. Commodities stocks also moved to the positive territory. In the opening minutes, the Dow Jones industrial average is up 54.19 to 11,163.51, the Nasdaq Composite Index has gained 7.75 to 2,347.54 and the S&P 500 index is unchanged.

Crude oil prices advanced to $67 on strong buying interest from investment funds as tensions in major oil producers Iran and Nigeria continue. Light sweet crude May delivery gained 38 cents to $67.01 a barrel. London Brent climbed $1.09 to $67. Gold sharply rose Monday to lead a broad metals rally. Gold for June delivery advanced $4.80 to trade at $591.50 per troy ounce in electronic trading. Silver futures climbed 11 cents to $11.63 and copper rose to an all-time high of $2.525 a pound. The U.S. dollar hit a three-week high against the yen. The dollar bought 118.32, up from 117.78. The dollar advanced to $1.2069 from $1.2118.

Epicor Software Corp, software company, reported that it expects 2006 earnings to be between 69 cents and 70 cents a share, with revenue between $372 million and $377 million. If the company achieves the abovementioned goals, it will still be missing the analysts’ projections which stand 78 cents a share on revenue of $384 million.

Epicor Software also restated its figures for 2003 through to September 2005 to correct its revenue recognition policies with respect to allocating revenue derived from software licenses and maintenance agreements. Epicor Software added that the restatements negatively affected profit and revenue for those periods, but did not impact the total revenue or profit associated with the contracts in question over the lifetime of the contracts.

Sourcecorp Inc, ((SRCP)), business process outsourcing company, reported that its Q4 net loss was $1.48 a share, swinging from a net income of 11 cents a share in the year-ago period. The company added that quarterly pro forma per-share income came to 25 cents, compared with 15 cents in the previous year. Revenue for Q4 reached $98 million, up from $92 million in the previous year.

Imperial Industries Inc., ((IPII)), building products company, reported Q4 net earnings of 28 cents a share, up 58% from 19 cents a share in the year-earlier period on 31% revenue growth.

Progressive Gaming International Corp, ((PGIC)), provider of gaming technology and content, reported that Q4 net loss came to 22 cents a share, reversing from prior year net income of 9 cents a share, missing analyst expectations of a penny a share. Quarterly revenue was $19.2 million, down vs. $26.3 million in the prior year's period.

Enesco Group Inc, ((ENC)), home and garden decorative products supplier, reported that Q4 net loss came to 99 cents a share, up from a net loss of $2.80 a share in the year-ago period despite revenue decline, compared with the same period last year.

[R]8:15 AM European stocks rallied at mid-day.[/R]
European markets made a strong performance at the start of the second quarter, following a broad rally in the Asian-Pacific region. Merger-and-acquisition activity also provided support. The German DAX 30 reached a five-year high of 0.6% on news that Alcatel agreed to acquire Lucent Technologies for $14.45 billion in stock, a deal which will place the French mobile phone maker among the world’s two leading makers of communications equipment. The French CAC 40 advanced 0.6% and London FTSE 100 also gained 0.6%.

[R]7:45AM Asian markets finished higher, led by Japan and Hong Kong.[/R]
Asian-Pacific benchmarks sharply advanced Monday to reach multi-year highs. The Nikkei led gainers, reaching its highest level in six years of 1.6% to 17,333.31. The index rallied on business sentiment survey which showed broad economic recovery and strong buying interest in technology, banking and insurance stocks. Among the electronics makers, Toshiba rose 3.8% and Sony climbed 1.5%, while banking stocks Mitsubishi Financial Group gained 2.2% and Mizuho Financial Group rose 2.2%. Hong Kong’s Hang Seng hit a five-year high of 1.6% at 16063.75, lifted by 3.2% gain in China Mobile stock and improved demand for property blue-chip stocks, such as Hang Lung, up 5.1%. China Shanghai Composite also surged 1.6% and Taiwan Weighted index rose 0.7% on semiconductor and steel shares.