U.S. Indexes Fall on Irish Bailout Package

Arthi Gupta
22 Nov, 2010
New York City

U.S. stocks declined after Ireland agreed to the EU-IMF rescue package. U.S. economic growth forecasted to be sluggish in 2011. Energy XXI agreed to acquire some oil fields from Exxon affiliates for $1 billion. Broadcom agreed to buy Gigle Networks for $75 million.

[R]9:35 AM New York – U.S. stocks declined after Ireland agreed to the EU-IMF rescue package. U.S. economic growth forecasted to be sluggish in 2011. Energy XXI agreed to acquire some oil fields from Exxon affiliates for $1 billion. Broadcom agreed to buy Gigle Networks for $75 million.[/R]

World markets fell after a solution for Ireland''s debt crisis failed to evoke any investor sentiment. Investors are still worried that banks may take larger losses and the debt contagion may spread to Portugal and Spain.

Investors are awaiting this week preliminary third quarter GDP estimates, personal spending and income data, existing home sales data and durable goods orders data and the weekly jobless claims data.

Ireland Confirms EU-IMF Rescue Deal

Ireland confirmed it requested a financial rescue package from the European Union and the International Monetary Fund to stabilize the country''s public finances.

Prime Minister Brian Cowen announced on Sunday evening that the deal will involve restructuring Ireland''s banking system and reducing the budget deficit to under 3% of output by 2014. Finance Minister Brian Lenihan said the rescue package will be smaller than €100 billion and not all of the money on offer would be drawn.

The bailout will be funded from the European Financial Stabilization Mechanism and the European Financial Stability Facility, with assistance from the IMF. The UK and Sweden have also offered to provide bilateral loans to Dublin.

U.S. Growth Prospects ''Still Sluggish''

The National Association for Business Economics'' survey of 51 analysts showed the outlook for the U.S. economy remains sluggish, with high unemployment and low inflation seen prevailing into next year.

The economists expect real gross domestic product to advance 2.7% in 2010, a slight increase from the October prediction of 2.6%. GDP is expected to grow 2.6% in 2011, unchanged from October''s forecast.

Joblessness is expected to remain high, with the unemployment rate persisting at over 9.5% or higher through the first quarter of 2011 before easing to 9.2% by the end of 2011.

Beijing Foreign Trade Deficit Surges

Beijing reported foreign trade for the 10-month period included exports of $45.4 billion, an increase of 16.9% from last year. Total import foreign trade was $197.8 billion, an increase of 49.3% from the similar period last year. Beijing''s trade deficit soared 62.7% to $152.4 billion as compared to the year-ago similar period.

Beijing''s trade with the U.S. advanced 26.7% to $15.81 billion as compared to the similar period last year.

China''s Guangdong Province generated foreign trade aggregating $627.28 billion for the first 10-months of the year, a 30.1% jump from the year ago period. Trade with the U.S. grew 22.2% to $80.28 billion from last year.

Energy XXI Acquires Some Oil Fields from Exxon

Energy XXI (Bermuda) Ltd., the independent oil and natural gas company agreed to acquire certain shallow-water oil and natural gas fields in the Gulf of Mexico from affiliates of Exxon Mobil Corp. for about $1.01 billion. The fields produce 20,000 barrels of oil equivalent per day of which 53% is oil.

The properties to be acquired include nine fields on the Gulf of Mexico shelf, with six largest fields accounting for 89% of the net production. The acquisition will see Energy XXI gain interests in seven of the top 11 oil fields on the Gulf of Mexico shelf, making it the third-largest oil producer in the region.

Broadcom Acquires Gigle Networks

Broadcom Corp. agreed to acquire Gigle Networks Inc., for about $75 million in cash for all of the outstanding shares of capital stock and other rights. Broadcom expects the acquisition to be dilutive by about $0.01 per share in 2011 and the transaction is estimated to close in the fourth quarter of fiscal 2010.

Rolls-Royce Secures Order from Air China

Rolls-Royce Group Plc said it won an order from Air China Ltd. for engines to power a total of 20 new Air China aircraft, comprising ten Airbus A350 XWBs and ten A330s.

The contract, worth $1.8 billion at list prices, includes long-term service agreement.

Earnings Review

Benihana Inc. ((BNHNA)), the operator of the nation''s largest chain of Japanese theme and sushi restaurants reported second quarter total revenues increased 4.1% to $72.2 million from $69.3 million last year on strong comparable store sales increase of 4.7%.

H.J. Heinz Company ((HNZ)), the sauces, ketchup and soup maker reported second quarter sales fell 1.2% to $2.61 billion, from $2.65 billion in the prior-year quarter, hurt by currency translation. Net income in the quarter rose 8.6% to $251.44 million or 78 cents per diluted share, compared to net income of $231.44 million or 73 cents per share in the same quarter last year, driven by strong organic sales growth in emerging markets and ketchup and margin improvement.

Hibbett Sports, Inc. ((HIBB)), the sporting goods retailer said third quarter net grew 14.8% to $167.42 million from $145.86 million in the year-ago quarter. Comparable store sales rose 12.5% from last year. Net income in the quarter surged 43.5% to $12.59 million or 44 cents per diluted share, compared to net income of $8.78 million or 30 cents per share in the same quarter of last year.

Kirkland''s, Inc. ((KIRK)), the specialty retailer of home decor and gifts reported third quarter net sales edged higher 0.4% to $92.73 million from $92.39 million in the same quarter last year, reflecting mainly a 2.4% decrease in comparable store sales compared to an 11.3% increase last year. Net income in the quarter plunged 59% to $2.28 million or 11 cents per diluted share, compared to net income of $5.57 million or 27 cents per share in the previous year.

Tech Data Corporation ((TECD)), the information technology products distributor reported third quarter net sales increased 9.2% to $6.16 billion from $5.64 billion a year ago. Net income in the quarter rose 17% to $50.46 million or $1.07 per diluted share, compared to net income of $43.14 million or 84 cents per share last year.

Tyson Foods, Inc. ((TSN)), the meat protein and food production company reported fourth quarter sales increased 3.2% to $7.44 billion from $7.21 billion in the comparable period a year ago. Net income generated in the quarter was $213 million or 57 cents per diluted share, versus a net loss of $457 million or $1.23 in the prior-year period.

Yingli Green Energy Hold. Co. Ltd. ((YGE)), the solar energy company said third quarter net revenues soared 47.6% to RMB 3.28 billion from RMB 2.23 billion in the same quarter of last year, helped by a 25.2% increase in PV module shipments.

Net income in the quarter surged 277.5% to RMB 456.1 million, from RMB 120.8 million in the prior-year quarter. Earnings per ordinary share and per American Depository Share surged to RMB 2.92 from RMB 0.79 in the comparable quarter of last year.