Market Loses Focus on Earnings

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

Market averages came under pressure on existing home sales and consumer confidence data. Existing home sales edged up in March to 0.3% and consumer confidence rose to four year high. A string of mixed earnings failed to excite traders. Burlington Northern reported earnings of $1.09, up 28% on revenue growth of 16%. The stock fell 8%. Amazon reported earnings of 12 cents vs. 18 cents a year ago on revenue growth of 20%. The stock rose 1.5% in the after-market.

[R]4:00PM A string of mixed earnings fails to excite the market.[/R]

-Dow down 53.07, Nasdaq down 3.08 and S&P down 6.37 points at close.
-Crude oil dropped 45 cents to close at $72.88 per barrel.
-Gold up $10.30 at $634.20, silver up 78.56 cents at $12.56 and copper up 21 cents to close at $3.32.
-Yield on 10-year bond rose to 5.08% and 30-year bond closed at 5.167%.

Broader averages lost grounds on the worries that economy may be too strong for the Fed not to raise rates. The large cap heavy Dow and S&P averages rose in the early morning trading only to fall at mid-day on consumer confidence and existing home sales data. The March home sales rose 0.3% to an annual rate of 6.92 million homes. Consumer confidence also rose to a four year high. Bonds fell on the news and yields on the short and long term bonds rose.

On the earnings fronts several large companies reported mixed earnings. Defense contractors Lockheed Martin and Northrop Grumman reported earnings that failed to excite the market. Grumman fell 3.5% and Lockheed dropped 1.8% at close. Lucent ((LU)) reported second quarter earnings of 4 cents vs. 6 cents a year ago on revenue declines in China and India. The company is in the process of merging with France based Alcatel. DuPont ((DD)) reported first quarter earnings decline of 16% to 88 cents from 96 cents a year ago on higher raw materials cost and stronger dollar. For the second time this year the company raised its earnings guidance. The company now forecasts earnings of $2.80 from a previous raised guidance of $2.70 from $2.60 per share.

In the metals market gold, silver and copper staged rebound after falling for two days. Copper and gold traded near elevated levels on geo-political worries and weakness in the dollar in Asian trading.

[R]12:30AM European markets closed mixed.[/R]
European markets erased earlier gains to close mixed as U.S. interest rates weighed in Germany and the U.K. Better-than-expected economic data on consumer confidence and existing home sales fueled interest-rate concerns and counteracted strong sales from carmaker Renault and food producer Nestle. The German DAX 30 finished flat, London FTSE 100 slipped 0.2%, reflecting weakness in oil giant BP and supermarket Tesco, while the French CAC 40 rose 0.3%.

Crude oil prices dropped after President Bush said that deposits to the U.S. strategic petroleum reserve should be temporarily suspended. Light sweet crude June delivery slipped $1.33 to $72 a barrel. London Brent dropped 70 cents to $72.30. European gold extended gains. In London gold rose to $629.60 per troy ounce from $623.70. In Zurich the precious metal rose to $629.65 from $621.35. In Hong Kong gold dropped $7.40 to close at $626.60. Silver closed at $12.40, up from $12.10. The U.S. dollar advanced vs. major currencies. The euro traded at $1.2403, down from $1.2405. The dollar bought 114.80 yen, up from 114.36. The British pound was quoted at $1.7873, down from $1.7894.

[R]11:30AM U.S. stocks traded lower on strong economic data.[/R]
U.S. stock markets turned lower over in late morning trading on concerns about higher interest rates, raised by economic data that showed stronger-than-expected improvement in consumer confidence and an unexpected increase in existing home sales. Rate-sensitive utilities stocks came under pressure, with the Philadelphia Utility Sector Index currently down 1%. Significant weakness was visible in the housing sector, despite the increase in existing home sales. The decline was attributable to traders’ worries about the impact of higher interest rates.

Oil and oil service stocks reversed from early strength, as the price of oil dropped 1% on news that President Bush plans to temporarily halt deposits to the U.S. strategic petroleum reserve. Shares of energy companies declined, with Exxon Mobil Corp ((XOM)) losing 0.6%. Meanwhile, gold stocks continued to post gains, as the price of the precious metal remained firmly positive. Networking stocks also stood out among notable gainers. Shares of heavy machinery maker Caterpillar Inc. ((CAT)) weighed on the Dow, falling 2.4% on analyst doubts about the company's forecast. Trucker YRC Worldwide Inc. ((YRCW)) rose 8% on strong quarterly results. Nasdaq was supported by shares of Sun Microsystems Inc. ((SUNW)), up 2% on revenue and corporate data

[R]10:30AM Stocks moved to the downside.[/R]
Stocks erased earlier gains and turned lower after reports about strong consumer confidence and existing home sales raised concerns that the Fed Reserve may continue to raise interest rates. The Conference Board reported that consumer confidence rose to 109.6, its highest level in almost four years, despite energy costs. In a separate report, the National Association of Realtors said sales of existing homes edged up 0.3% last month to a seasonally adjusted annual rate of 6.92 million units.

In mid-morning trading, significant strength was visible among gold and other metal stocks as metal prices rebounded from yesterday’s decline. Similarly, oil and oil service stocks benefited from a rebound by the price of oil. Some networking stocks made a strong performance, helped by Anixter ((AXE)) currently up 2.8% on stronger-than-expected Q1 earnings. Meanwhile, airline stocks returned to the downside after showing significant strength in the previous session. The Amex Airline Index dropped 1.6% after ending Monday's trading up 4%. Health insurance stocks also came under pressure, with Humana ((HUM)) and Health Net ((HNT)) moving notably lower. Defense stocks like Lockheed Martin ((LMT)) and Northrop Grumman ((NOC)) also posted weakness in early trading. In the first hour of trading, the Dow Jones industrial average dropped 18.89, or 0.2%. The Standard & Poor's 500 index fell 2.07, or 0.2%, while the Nasdaq composite index slipped 6.15, or 0.3%. Bond prices drifted lower, with the yield on the 10-year Treasury note edging up to 5% from 4.98% late Monday.

[R]Existing home sales advanced, vs. expectations of sales decline.[/R]
Tuesday morning, the National Association of Realtors released its report on existing home sales in the month of March, showing that sales unexpectedly increased compared to the previous month. The report showed that existing home sales rose 0.3 percent to a seasonally adjusted annual rate of 6.92 million units in March from a rate of 6.90 million units in February. Economists had expected sales to fall to a 6.7 million unit rate. The modest increase in existing home sales reflected increases in sales in the Northeast and the Midwest, which were partly offset by a drop in sales in the South and the West. NAR also said that total housing inventory levels rose 7 percent in March to 3.19 million existing homes available for sale. This represents a 5.5-month supply at the current sales pace. The report also showed that the national median existing-home price for all housing types was $218,000 in March, up 7.4 percent from March 2005.

[R]Consumer confidence index rose higher than expected.[/R]
Consumer confidence unexpectedly improved in the month of April, according to a report from the Conference Board that showed that its consumer confidence index rose to its highest level since May of 2002. The Conference Board said that its consumer confidence index rose to 109.6 in April from an upwardly revised 107.5 in March. Economists had expected the index to fall to 105.5 compared to the reading of 107.2 originally reported for March. The increase in consumer confidence reflected improvement in the assessments of current conditions and the outlook for the next six months. The Conference Board said its present situation index rose to 136.2 from 133.3 while the expectations index rose to 91.9 from 90.3. The report showed that consumer saying that jobs are ‘plentiful’ rose to 29.1 percent in April from 28.3 percent in March, while those claiming jobs are “hard to get” edged down to 19.6 percent from 20.4 percent. At the same time, the outlook for the labor market was mixed, as those expecting more jobs to become available increased to 15.7 percent in April from 13.7 percent in March, while those expecting fewer jobs remained unchanged at 16.4 percent.

[R] 9:45AM Stocks opened slightly higher.[/R]
U.S. stocks moved modestly higher at opening, reflecting strong results and outlooks from major companies like AT&T and DuPont. However, concerns about surging crude oil prices weighed on sentiment. After sinking $2 on profit taking Monday, oil prices resumed their upward trend amid strong demand from China and renewed worries over Iran's nuclear ambitions. Investors also awaited the release of consumer confidence data and readings on jobless claims and first-quarter economic growth later in the week. Shares of Dow component AT&T ((T)) rose 1.2% after the company's quarterly results beat analysts' expectations. Trucking company YRC Worldwide Inc ((YRCW)) jumped 7.2% on stronger-than-anticipated quarterly results. Some computer hardware stocks moved sharply higher in early trading, boosted by a 5% gain for Sun Microsystems ((SUNW)) after naming its president and chief operating officer Jonathan Schwartz to succeed Scott McNealy as chief executive officer. Commodities stocks showed some strength, recovering from yesterday’s decline when metals prices came under pressure. Weakness in the health insurance sector helped to limit the upside for the broader markets. In the first hour of trading, the Dow Jones industrial average rose 10.49, or 0.09%. The Standard & Poor's 500 index was up 1.72, or 0.13%, and the Nasdaq composite index fell 0.29, or 0.01%. Bond prices drifted lower, with the yield on the 10-year Treasury note edging up to 5.01% from 4.98% late Monday.

[R]9:00 AM Stock futures indicated a positive market opening.[/R]
U.S. stock futures predicted a positive start of Tuesday trading session, despite the increase in the price of oil. A batch of strong earnings reports from several major companies lifted market sentiment. Dow components AT&T ((T)) and DuPont ((DD)) were among the companies that reported strong quarterly results. AT&T reported Q1 earnings rise of 52 cents per share compared to 34 cents per share in the year ago quarter, beating estimates of 48 cents per share. DuPont reported Q1 earnings decline of 93 cents per share, down from 96 cents last year, but well above analyst estimates of 80 cents per share. Looking ahead, DuPont raised its full-year earnings outlook to $2.85 per share from previous guidance of $2.70 per share. Lockheed Martin ((LMT)) posted 60% profit jump in Q1 to $1.34 per share from 83 cents a year ago, beating estimates of $1.14 a share. Other big-name companies which released quarterly results before market opening included BP ((BP)), Lucent ((LU)), Northrop Grumman ((NOC)), Whirlpool ((WHR)), and U.S. Steel ((X)). S&P 500 futures were up 1.50 points, slightly above fair value. Dow Jones industrial average futures were up 8 points and Nasdaq 100 futures were up 1.25 points.

Crude oil prices hovered over $73, easing back on profit taking and ahead of weekly petroleum report. Light sweet crude June delivery slipped 12 cents to $73.21 a barrel. Gasoline futures fell 2 cents to $2.1488 a gallon, while heating oil fell marginally to $2.0290. Natural gas dropped 10 cents to $7.460 per 1,000 cubic feet. European gold gained ground. In London gold rose to $627.75 per troy ounce from $623.70. In Zurich the precious metal rose to $627.25 from $621.35. In Hong Kong gold dropped $7.40 to close at $626.60. Silver opened at $12, down from $12.10. The U.S. dollar advanced vs. major currencies. The euro traded at $1.2390, down from $1.2405. The dollar bought 114.58 yen, up from 114.36. The British pound was quoted at $1.7845, down from $1.7894.

Potlatch Corp, ((PCH)), forestland and produces lumber and panel products owner, reported Q1 earnings of $2.07 a share, up from a profit of 13 cents a share a year-ago. Q1 included a tax benefit of $1.72 a share, related to the company's conversion to a real estate investment trust on Jan. 1. If not for this gain, the company earned 35 cents a share in Q1. Potlatch attributed the earnings improvement to better results in its consumer products and resource businesses. Revenue advanced to $402.5 million from $336.9 million in the same period a year ago. The company beat analysts’ estimate for a profit of 24 cents a share.

Carlisle Cos, ((CSL)), manufacturing company, reported Q1 earnings of $1.33 a share, up from a profit of 90 cents a share a year-earlier. On continuing operations, the company reported earnings of $1.28 a share in Q1. Q1 includes stock option expensing of 4 cents a share. Sales advanced 16% in Q1 to $621.1 million from $537.7 million in the same period a year ago. The company beat analysts’ estimate for a profit of $1.01 a share. Carlisle raised its outlook for earnings from continuing operations for fiscal 2006 to earnings of $5 to $5.20 a share from a previous projection of $4.85 to $5.05 a share.

Rayonier, ((RYN)), timberland and other real estate owner, reported Q1 earnings of 30 cents a share, down vs. a profit of 45 cents a share a year-earlier. The results in the year-earlier quarter included a gain of 12 cents a share, related to a favorable settlement with the Internal Revenue Service. Revenue advanced slightly in Q1 to $277.2 million from $275 million in the same period a year ago. The company topped analysts’ estimate for a profit of 31 cents a share. in the March period.

Ceridian Corp, ((CEN)), information services company, reported Q1 net earnings advanced to 24 cents a share, up from 15 cents a share on revenue growth, beating analysts’ expectations for a profit of 23 cents a share. The company affirmed its forecast for the year of a range of $1 to $1.08 a share, including the impact of expensing stock options. 2006 revenue is anticipated to be between $1.57 billion and $1.61 billion.

Occidental Petroleum, ((OXY)), oil producer, reported that Q1 net income climbed 45% to $2.86 a share on a 13% rise in production and higher energy prices. Income from continuing operations came to $2.83 a share, topping analyst views for earnings of $2.73 a share. The company announced production advanced to 636,000 barrels of oil equivalent a day during the quarter, which it anticipates to advanced to 650,000 barrels in Q2.

Penn National Gaming Inc, ((PENN)), casino and race track operator, reported Q1 net income almost tripled to 49 cents a share, from 19 cents a share a year earlier. If not for charges for early extinguishment of debt and stock compensation, the company earned 60 cents a share, topping analyst estimate of 52 cents a share. The company’ revenue grew to $569.2 million from $289.3 million.

AT&T Inc, ((T)), communication services and products company, reported Q1 earnings of 37 cents a share, up from a profit of 27 cents a share a year-ago. The results reflect the completion of the merger of SBC Communications Inc. and AT&T Corp. on Nov. 18. Q1 includes certain items related to AT&T's portion of Cingular's merger integration and non-cash amortization costs, and costs from the merger of AT&T and SBC. If not for items, the company earned 52 cents a share in Q1. Revenue climbed 54.5% compared with the year-ago result. On that basis, the company beat analysts’ estimate for a profit of 49 cents a share.

JetBlue, ((JBLU)), discount airline, reported Q1 earnings loss of 18 cents a share, swinging from a profit of 4 cents a share in the year-ago period despite 31.4% revenue growth, topping analyst estimate for a loss of 20 cents a share. The company has developed a comprehensive plan to return to profitability that includes right-sizing capacity, revenue enhancements and cost reductions and is also deferring 12 aircraft deliveries and selling at least two, and up to five, existing aircraft.

Enterprise Products Partners, ((EPD)), natural gas and pipeline company, reported that Q1 net income advanced to 28 cents per share, from 25 cents per share in the same period a year earlier, topping analysts forecasts for earnings of 23 cents a share. The company added that revenue advanced 27% in Q1.

Smith International, ((SII)), oil services company, reported Q1 earnings of 53 cents a share, up from 32 cents a share in the year-ago period on revenue growth, beating analysts expectations for earnings of 48 cents a share.

Applied Industrial Technologies, ((AIT)), industrial-parts distributor, reported that Q3 net income advanced 22% to 65 cents a share, from 53 cents in the year-ago period on 11% higher sales, topping analysts estimate of 60 cents. Revenue came to $497.2 million versus $446.5 million. The company lifted its estimate of earnings for 2006 and now expects net to range $2.29 to $2.34 a share, up from the previous estimate of $2.10 to $2.20.

Banner Corp, ((BANR)), specialty finance company, reported Q1 net income surged 44% to 56 cents a share, up from 39 cents a share a year ago, due to improved net interest margin on 18% revenue growth. Loans rose 19% to $2.54 billion. Net interest margin advanced 53 basis points to 4.24%.

State Auto Financial Corp, ((STFC)), specialty insurance company, reported that Q1 net income fell to 97 cents a share, down from $1 a share a year ago on revenue decline.

Kinetic Concepts Inc, ((KCI)), medical-technology company, reported that Q1 net income advanced 31% to 66 cents a share, from 51 cents in the year-ago period on 14% higher revenue, topping analyst estimate of 62 cents a share. Kinetic Concepts affirmed its earnings estimates for the year.

[R]8:15AM European averages traded higher at mid-day.[/R]
European markets advanced at mid-day. Strong sales from carmaker Renault and food producer Nestle boosted European averages, although losses for oil giant BP limited gains. Stocks were off earlier highs as recovering crude oil prices erased some of the gains. The German DAX 30 gained 0.2%, the French CAC 40 rose 0.4%, and London FTSE 100 added 0.1%.

[R]7:45AM Asia closed mixed. The Nikkei recovered.[/R]
Asian-Pacific benchmarks finished mixed as strengthening Asian currencies against the dollar weighed on exporter issues and large industrial shares. The Nikkei slightly recovered from the steep decline Monday, helped by property stocks like Mitsubishi Estate, up 1.7% and Mitsui Fudosan, up 2%. Export-related stocks like Toyota Motor, Sony and Canon declined. Following the biggest single-day loss since January, the Japanese index advanced 0.3% to 16,970.23. Across the region, South Korea’s Kospi ended flat, reversing from earlier advance on GDP data as stronger won against the dollar hurt exporter stocks. Hong Kong’s Hang Seng dropped 0.8%, dragged by 6.5% loss for Sinopec. Shanghai Composite also fell 0.7%, followed by Singapore Straits Times, down 0.4%.