Gold and Silver Retreat

Elena
24 Apr, 2006
Metals

The three U.S. equity indices moved further down with the Nasdaq standing out as the leading decliner. Stocks declined on weakening U.S. dollar and a mixed batch of Q1 earnings reports. Declining profits at copier maker Xerox Corp. and a reduced 2007 forecast from online brokerage TD Ameritrade Holding Corp. overshadowed positive results from Dow component Caterpillar Corp. Gold and energy stocks declined, following a drop in prices.

[R]10:30AM The Nasdaq posted a notable decline.[/R]
The major U.S. averages declined in early trading with the Nasdaq posting a notable decline, underperforming the Dow and the S&P 500. The gold sector rebounded from Friday’s gains to turn in one of the market''s worst performances, with the Amex Gold Bugs Index currently down 2.6%. The weakness in the sector was caused by a decrease in the price of gold, with gold for June delivery currently down $13.00 at $622.50 an ounce. Other metal prices also lost ground, contributing to weakness throughout the metal sector. Brokerage stocks also came under pressure, contributing to a 2% loss by the Amex Securities Broker/Dealer Index. TD Ameritrade ((AMTD)) helped to lead the sector lower despite reporting strong Q2 profit growth. A notable loss shown by the tech-heavy Nasdaq was partly due to weakness in the semiconductor sector. Semiconductor stocks continued their downward trend started Friday, helped by Broadcom ((BRCM)) which posted a notable loss. Energy stocks moved to the downside on profit taking, following a decrease in the price of oil. Meanwhile, the decline in oil prices contributed to some strength in the airline sector, with the Amex Airline Index currently up 1.7%. In morning trading, the Dow dropped 30.42, or 0.27%. The Standard & Poor's 500 index was down 6.02, or 0.46%, and the Nasdaq composite index declined 14.25, or 0.61%. Bonds built on last week's gains, with the yield on the 10-year Treasury note slipping to 4.99% from 5.01% late Friday.


[R] 9:45AM Stocks opened in the negative.[/R]
Although stock futures pointed to a flat start, stock markets began the trading session in the negative on concerns about record oil prices and mixed earnings reports from major companies. Lower earnings at Dow Jones industrial American Express Co. and Xerox Corp. overshadowed increased profits at Catepillar Corp. and TD Ameritrade Holding Corp. Traders were also digesting a possible sale of Cendant Corp.''s travel ticketing businesses. In early trading, gold stocks posted significant weakness, following a notable drop in the price of the precious metal. Brokerage stocks also came under pressure, contributing to a 2% loss by the Amex Securities Broker/Dealer Index. TD Ameritrade ((AMTD)) helped to lead the sector lower, despite the company reporting strong Q2 profit growth, above expectations. The company reported Q2 earnings of $124.35 million or 22 cents per share, up from $71.01 million or 17 cents per share in the prior-year period. Ameritrade also raised its fiscal 2006 earnings per share outlook. Semiconductor and energy sectors also stood out among decliners. In the first hour of trading, the Dow dropped 24.00, or 0.21%. The Standard & Poor''s 500 index was down 4.82, or 0.37%, and the Nasdaq composite index declined 12.38, or 0.53%. Bonds built on last week''s gains, with the yield on the 10-year Treasury note slipping to 5% from 5.01% late Friday.


[R]9:00 AM Stock futures indicated a flat market opening.[/R]
The futures were sitting below the flat line, following lackluster trading at the end of last week when a heavy sell-off in technology stocks caused the Nasdaq to end 20 points lower. U.S. stock futures predicted a flat start as record-high oil prices and weakness in Japanese stocks overshadowed expectations of strong quarterly earnings with investors worried that soaring energy prices may hurt consumer spending and corporate profit as well as lead the Fed Reserve to continue raising interest rates. Japan''s Nikkei average dropped 2.8% below the key-level 17,000 on sharply higher yen versus the dollar. Oil retreated below $75 a barrel on profit taking from last week''s surge to a record high. Despite several major companies reporting quarterly results, oil is expected to be the main stock driver. In earnings news, heavy equipment maker Caterpillar Inc. ((CAT)) reported a 48% increase in Q1 profit, beating expectations due to strong sales to mining and energy companies. Watsco ((WSO)) also exceeded expectations, posting Q1 net income rise to 47 cents a share on 14% revenue growth. Novartis ((NVS)) reported Q1 net income rise of 32% to $1.96 billion on 13% revenue growth. Xerox Corp.((XRX)) reported a drop in quarterly profit. Credit card company American Express Co. ((AXP)) and computer maker Sun Microsystems ((SUNW)) are among other companies expected to report earnings on Monday. S&P 500 futures were down 1.8 points, but were about even with fair value. Dow Jones industrial average futures were down 14 points and Nasdaq 100 futures were down 0.25 point.

Crude oil prices eased back on profit taking, after recent record highs on concerns about Iran’s nuclear program and declining gasoline stocks. Light sweet crude June delivery slipped 70 cents to $74.47 a barrel. London Brent dropped 53 cents to $73.97. European gold further extended gains over $600. In London gold rose to $634 per troy ounce from $625. In Zurich the precious metal rose to $632.65 from $625.10. In Hong Kong gold climbed $144 30 to close at $634. Silver opened at $13.10, up from $12.60. The U.S. dollar dropped vs. major currencies. The euro traded at $1.2374, up from $1.2334. The dollar bought 115.20 yen, down from 116.67. The British pound was quoted at $1.7893, up from $1.7808.

Caterpillar Inc, ((CAT)), machinery maker, reported that Q1 net income advanced to $1.20 a share, from 81 cents a share in the year-ago period. Sales in Q1 grew to $9.39 billion from $8.34 billion. The company beat analysts’ forecasts for earnings of $1.05 a share. Caterpillar raised its 2006 profit guidance to $4.85 to $5.20 a share, up from a previous outlook of $4.65 to $5 a share.

Rohm and Haas, ((ROH)), specialty materials firm, reported that Q1 net income advanced 30% to 93 cents a share owing to 3% revenue growth. The company added that a favorable product mix and higher selling prices offset higher raw material and energy costs. The company expects 2006 earnings between $3.15 and $3.30 a share on revenue growth of 3% to 5%. Rohm and Haas beat analysts’ forecasts for earnings of 90 cents a share for Q1.

Xerox Corp, ((XRX)), document equipment, software, solutions company reported Q1 net income of $200 million, or 20 cents a share, slightly down from $210 million, or 20 cents a share a year earlier. Total revenue slipped 2%. The company said negative foreign currency factors contributed to the decline on revenue, which otherwise would have come flat against the year-earlier period. Xerox missed analyst estimate by a penny. The company expects Q2 earnings in the range of 22 cents to 24 cents a share, which includes a 1 cent per share charge related to its recent termination of its 2003 credit facility.

Carpenter Technology, ((CRS)), specialty metals producer, reported Q1 net income advanced 72% to $2.32 a share, from $1.38 a share in the year-earlier period. Sales advanced to $426 million from $342.1 million. The company beat analysts’ forecasts for earnings of $1.82 a share.

Weatherford International, ((WFT)), mechanical solutions company, reported Q1 earnings of 57 cents a share, up from 27 cents a share in the year-ago period. Revenue advanced to $1.54 billion from last year''s $857.7 million. The company topped analysts’ expectations for earnings of 51 cents a share.

Watsco Inc, ((WSO)), distributor of air conditioning and heating products, reported Q1 earnings of 47 cents a share, up from a profit of 33 cents a share a year-ago on 14% revenue growth, topping analyst estimate for a profit of 43 cents a share in Q1.

Kimberly-Clark Corp, ((KMB)), household products company, reported that its Q1 net income dropped to 60 cents a share, from 93 cents a share in the year-earlier period. If not for items, earnings in Q1 were 93 cents a share. Sales at company grew 4.2%. Excluding items Kimberly-Clark topped analysts’ views by a penny.

Ethan Allen Interiors, ((ETH)), furniture seller, reported Q3 earnings of 59 cents a share, up from 50 cents a share in the year-ago period on revenue growth, beating analysts’ expectations for earnings of 56 cents a share. Same-store sales advanced 15%.

Check Point Software Technologies, ((CHKP)), Internet security company, reported that Q1 net income dropped 16% to 25 cents a share due to 3% revenue decline. If not for equity based compensation expenses and acquisition related charges, the company would have earned 31 cents a share. The company missed analysts’ expectations for earnings of 31 cents a share.

Arkansas Best, ((ABFS)), a transportation holding company, reported Q1 net income dropped 42% to 24 cents a share, from 41 cents a share a year ago. If not for an after-tax accounting charge of 20 cents a share the company would have reported 4 cents a share in Q1. Revenue soared to $450.6 million, a per day rise of 8%, the company added.

B/E Aerospace, ((BEAV)), aircraft interior maker, reported that Q1 more than tripled to $13.8 million, or 18 cents a share, from $4.1 million, or 7 cents a share in the year-earlier period. The company raised its 2006 earnings outlook and said it expects earnings of $1.17 a share, vs. earlier guidance of $1.12, adding that stronger-than-expected bookings and robust industry conditions have boosted its confidence for 2007 and 2008. The company beat analyst estimate for earnings of 16 cents a share.

Novartis AG, ((NVS)), pharmaceutical company, reported Q1 net income advanced 32% to $1.96 billion on 13% revenue growth. Pharmaceutical sales went up 5% on anti-hypertension medicines Diovan and Lotrel and its Gleevec/Glivec leukemia drug, and at generics unit Sandoz, sales advanced 78% on the acquisition of Hexal and Eon Labs. Analysts were beaten, expecting earnings between $1.51 billion and $1.81 billion. Novartis is set for high single-digit net sales growth excluding the Chiron acquisition for 2006 in local currencies, with a record level of operating and net profit.


[R]8:15AM European averages declined at mid-day.[/R]
European markets lost ground at mid-day as weaker U.S. dollar put key auto and tech stocks under pressure. Dollar-sensitive shares were leading decliners with automaker DaimlerChrysler and tech company Philips Electronics moving lower. The yen and euro surged after the world’s riches countries urged China to allow further strengthening of the yuan. However, 3.2% rise for Deutsche Telekom helped limit losses. The company gained after private-equity firm Blackstone agreed to make an investment in the telecom. The German DAX 30 dropped 0.2%, the French CAC 40 slipped 0.4%, while London FTSE 100 edged down 0.04%.


[R]7:45AM Asia declined. The Nikkei sharply dropped.[/R]
Asian-Pacific benchmarks finished broadly in the negative with the Nikkei leading regional decliners, making the biggest point drop for the year. The Japanese index plunged 2.8% to 16,941.40 as weaker dollar against the yen dragged export-related auto and electronics stocks. Honda Motor slipped 3.7%, Toyota Motor declined 2.8%, Sony dropped 2.8%, and Canon lost 2%. Banking and telecom shares also moved lower. Stocks lost ground as oil and yen surged, following the Washington meeting of the Group of Seven. The financial chiefs of the world’s largest economies issued a statement, expressing the need of greater flexibility in exchange rates. Across the region, South Korea’s Kospi slipped 1.4% after hitting a historic high Friday, Hong Kong’s Hang Seng dropped 1.2%, while Taiwan Weighted Index rose 0.5%, and Australia’s All Ordinaries gained 0.4% on strong mining stocks.