4-Year-High Bond Yields

Elena
13 Apr, 2006
New York City

U.S. stocks started trading down, reflecting interest rate worries on strong retail sales and four-year high bond yields. The 10-year treasury yield climbed above 5% for the first time since June of 2002. Rate-sensitive housing and utilities stocks came under pressure. Quarterly results from General Electric also weighed as the company posted Q1 net income rise in line with expectations.

[R] 9:45AM Stocks opened in the negative.[/R]
U.S. stock markets opened lower on concerns about further interest rates increases, raised by a rebound in retail sales and four-year-high bond yields. Quarterly results from General Electric ((GE)) which came in line with expectations also weighed. Energy stocks posted significant weakness in early trading, with the oil service sector showing a notable decline of 1.5%, while the oil and natural gas sectors were both down more than 1 %. The losses by energy stocks came as the price of oil further declined. Gold stocks were also under pressure, reflecting a decrease in the price of the precious metal. Rate-sensitive housing and utilities stocks also moved to the downside on concerns about an increase in treasury yields. Meanwhile, gains by some technology stocks bucked the downward trend. SanDisk ((SNDK)) gained 4% on news that it will be added to the S&P 500 after the close of trading on April 19. Bonds fell, with the yield on the 10-year Treasury note rising to 5.02% from 4.98% late Wednesday. In the first hour of trading, the Dow Jones industrial average fell 16.73, or 0.15%. The Standard & Poor's 500 index fell 3.64, or 0.28 %, and the Nasdaq composite index fell 2.94, or 0.13%.

[R]Jobless claims climbed.[/R]
The number of people filing for first-time unemployment benefits jumped in the most recent week, according to government data released Thursday. The advance was more than expected. The U.S. Labor Department revealed that initial jobless claims came in at 313,000 for the week ended April 8. This was up 12,000 from the previous week''s revised total. Economists had expected the measure to hold closer to the 300,000 mark. Originally, jobless claims for the April 1st week were reported at 299,000 - below the closely-watched 300,000 mark. However, the result was revised up in the latest report to a level of 301,000. The 4-week moving average for initial claims came dipped to 307,500 for the week ended April 8. This was down 1,500 from the previous reading. Meanwhile, claims for people receiving ongoing unemployment benefits - a measure known as continuing claims - also showed a decline. For the week ended April 1, the most recent week for which the government has data, continuing claims dropped by 4,000 to 2.424 million.


[R]9:15AM Stock futures indicated a flat opening.[/R]
The stock futures pointed to a mixed opening of Thursday session, following a slew of economic reports and a new batch of earnings releases. Sales at U.S. retail stores rose modestly in March, helped by stronger sales at new-car dealers, while imports prices unexpectedly dropped due to a decrease in the prices of petroleum imports. In corporate news, shares of General Electric ((GE)) fell in pre-market trading on Q1 financial results. The company reported earnings growth in line with estimates. Advanced Micro Devices ((AMD)) was also under pressure on warning that Q2 sales will come down slightly from the Q1. Shares of SanDisk ((SNDK)) rose 4% on news that the company is joining the S&P 500 to replace Chiron. The S&P Futures were down 1 point, the Dow Futures were at the unchanged level and the Nasdaq Futures were up 1.20 points.

[R]March retail sales growth exceeds expectations..[/R]
The Commerce Department said that retail sales rose 0.6 percent in March following a revised 0.8 percent decline in February. Economists had expected sales to increase 0.5 percent compared to the 1.4 percent drop originally reported for the previous month. The sales growth was partly due to a rebound in sales of motor vehicles and parts, which rose 1.6 percent in March after falling 2.8 percent in February. Notable growth was also shown by building material and garden supplies dealers and non-store retailers. Excluding the increase in auto sales, sales rose by a more modest 0.4 percent in March compared to a revised 0.3 percent decrease in February. The growth came in slightly below economist estimates of 0.5 percent.

[R]Import prices unexpectedly dropped.[/R]
The Labor Department released its report on import and exports prices in the month of March, showing that imports prices unexpectedly fell due in part to a decrease in the prices of petroleum imports. The report said that import prices fell 0.4 percent in March following an unrevised 0.5 percent decrease in February. The drop in prices came as a surprise to economists, who had expected import prices to increase 0.1 percent. The drop in import prices was partly due to a 0.7 percent decline in prices of petroleum imports, which continued lower after falling 0.2 percent in February. Excluding petroleum imports, prices still fell 0.3 percent in March. The report also showed that export prices rose 0.2 percent in March following a 0.1 percent increase in February. Excluding a 0.2 percent drop in agricultural exports, exports prices still rose 0.2 percent.

Crude oil prices slightly retreated, although prices in London remained close to $70. Light sweet crude May delivery fell 47 cents to $68.15 a barrel. London Brent dropped 37 cents to reach $69.49. European gold retreated as lower oil prices decreased the appeal of the precious metal. In London gold for immediate delivery fell $1.70 to $596.67 per troy ounce. The U.S. dollar traded lower versus major currencies. The euro traded at $1.2113, up from $1.2104. The dollar bought 118.49, down from 118.57.

General Electric Co, ((GE)), diversified industrial company, reported Q1 net income of 41 cents a share, up from 37 cents a share in the year-ago period. GE reported earnings of 39 cents a share from continuing operations, after accounting for proceeds from its sale of insurance businesses, matching analysts’ expectation. Total revenue advanced about 10% to $37.82 billion, slightly topping analyst forecast of $37.36 billion.

Tribune Co, ((TRB)), media group, reported that Q1 net profit dropped 28.5% to 33 cents a share, due to a 1.3% decline in operating revenue. The company added that its earnings figures included a net 9 cents a share in charges, including from stock option expenses and severance payments. The company missed analysts’ expectations for earnings of 36 cents a share. Tribune announced that newspaper advertising revenue was flat for the quarter, with strength in classified ads offset by a downturn in national and retail advertising.

Journal Register Co, ((JRC)), media company, reported Q1 adjusted earnings of 13 cents a share, down from a profit of 18 cents a share a year-ago. Including a non-cash write-off of deferred debt issuance costs, the company gained 4 cents a share in Q1. Results last year included no special items. Revenue dropped to $129.6 million from $132.5 million in the year-ago period. The company topped analyst forecasts by a penny.

GTSI Corp., ((GTSI)), provider of government information technology products, reported a Q4 loss of 61 cents a share, down from a profit of 29 cents a share a year-ago. Sales at company dropped 14.8% in Q4. The company added its annual report includes a going concern opinion from its independent public accounting firm Ernst & Young. GTSI announced that it''s received a commitment for a $125 million senior secured revolving credit line and that it expects to close on this line by May 31.

MGIC Investment Corp., ((MTG)), seller of private mortgage insurance, reported Q1 net income of $1.87 a share, down from $1.90 a share in the year-earlier period on 4% revenue decline, beating analyst estimate of $1.62 a share. The company added that results benefited from positive joint venture returns and an expected seasonal decline in delinquencies, which somewhat offset the decline of insurance in force and associated revenue.

Phazar Corp., ((ANTP)), manufacturer of antenna systems, towers and communications accessories, reported Q3 net earnings of 2 cents a share, down from 11 cents a share in the year-earlier period on revenue decline. Operating income came to $36,798 against $360,724.

Lam Research Corp, ((LRCX)), semiconductor processing equipment manufacturer, reported a Q3 profit of 60 cents a share, up from 42 cents a share in the prior year period on revenue growth, missing analyst estimate of 62 cents a share.

Polaris Industries Inc ((PII)), maker of snowmobiles, all-terrain vehicles and motorcycles, reported Q1 earnings of 27 cents a share, down from a profit of 39 cents a share a year-ago. The company added that Q1 results incorporate or a penny per share, from accounting for stock-based compensation, and a loss of $100,000 from the company''s discontinued marine products business. On a continuing operations basis, the company gained 26 cents a share in Q1. Sales from continuing operations dropped 7%. The company beat analysts’ forecasts for a profit of 26 cents a share. For Q2, Polaris predicts earnings from continuing operations of 50 to 54 cents a share, down from analysts'' forecasts for a profit of 68 cents a share.

New York Times Co, ((NYT)), media and broadcasting company, reported that Q1 earnings dropped to 24 cents a share, from 76 cents a share in the year-earlier period despite 3.3% revenue growth, missing analysts’ views of a profit of 27 cents a share. Q1 results incorporate a charge of 4 cents a share for costs associated with a staff reduction program announced in September 2005. Q1 of 2005 results incorporated an after-tax gain of 46 cents a share from the sale of the company''s current headquarters.

Advanced Micro Devices Inc, ((AMD)), personal computer chips maker, reported Q1 profit of 38 cents a share, reversing from last year net loss of 4 cents a share on its money-losing memory business that it no longer counts on its books. Sales totaled $1.33 billion, lifted by sales of chips used in servers, in line with analysts’ expectations of sales of $1.33 billion. The company topped analyst views for earnings of 30 cents.


[R] 8:15 AM European averages traded in the negative at mid-day.[/R]
European markets turned to the downside at mid-day trading, reflecting weakness among oil companies and sharply higher bond yields. Positive news from Carrefour failed to offset the negative mood. Shares of the world''s second-biggest retailer jumped 4.4% after the company reported first-quarter sales growth of 6% at constant exchange rates and 8.3% at current exchange rates. The German DAX 30 was the biggest decliner, falling 0.3%, dragged lower by sharp declines for DaimlerChrysler. The U.K.’s FTSE lost 0.1% after oil companies like Bp and Royal Dutch Shell posted losses on lower oil prices. The French CAC 40 edged down 0.04%


[R]7:45AM Asian markets slightly recovered.[/R]
Asian-Pacific benchmarks rebounded from recent declines to close slightly higher. The Nikkei erased early losses to finish up 0.2% at 17,199.15, supported by technology and bank issues which gained ground after three weak sessions. The market recovery followed a decision by UBS to raise its year-end Topix target on strong corporate results. Gainers included Tokyo Electron, up 3.1%, Canon, up 1.1%, and Sony rising 1.7%. Across the region Taiwan Weighted index closed at a two-year high of 0.7% on strong tourism and construction shares, boosted by expectations of improved trade relations with China. Hong Kong’s Hang Seng rose 0.7% helped by tech stocks. South Korean Kospi rallied 1.6%, while China Shanghai Composite sharply dropped by 2