U.S. Earning Outlook Powers 3-day Rally; Pepsi Up 3%, Liz Claiborne Soars

Nichole Harper
12 Oct, 2011
New York City

Wall Street opened higher following the gains in Europe and on positive domestic earnings expectations. PepsiCo, Inc gained 3% after it met lowered earnings outlook and Alcoa Inc fell 3% on an earnings miss. The Nasdaq index trimmed its losses for the year to 1.3% and the S&P 500 index to 3.5%.

[R]12:10 PM New York – Wall Street opened higher following the gains in Europe and on positive domestic earnings expectations. PepsiCo, Inc gained 3% after it met lowered earnings outlook and Alcoa Inc fell 3% on an earnings miss. The Nasdaq index trimmed its losses for the year to 1.3% and the S&P 500 index to 3.5%.[/R]

Stocks in New York trading opened higher following the optimism in Europe as investors looked beyond the ‘no’ vote in Slovakia.

Wall Street focused on domestic earnings ahead this week, on rising commodities prices and on surging production in the euro zone. However the Street is also bracing for weak earnings from brokerage houses and declining earnings from banks.

Alcoa reported weaker than anticipated earnings on weak sales in Europe and PepsiCo Inc also met lowered earnings expectations. In addition, Liz Claiborne soared more than 30% after the company sold certain brands to raise cash and lower its debt burden.

The market indexes gained more than 1% in New York trading and gold, silver and copper advanced. The euro gained to $1.381 after politicians offered more promises to quicken the bank recapitalization plan but offered no details.

The indexes S&P 500 and Nasdaq extended gains for the third day in a row and trimmed losses for the year. The S&P 500 index has bounced between 1,100 and 1,200 in the last eight weeks of trading and is now down 3.5% in the year.

The Nasdaq cut its losses for the year to 1.3% and has bounced in the last eight weeks between 2,300 and 2,620.

Across the Atlantic, the European markets rebounded after industrial production in August was higher than expected and German chancellor Angela Merkel expressed confidence that Slovakia will approve the expansion of the euro zone rescue fund.

Industrial production in August increased 1.2% from the previous month and soared 5.3% from a year ago, according to the data released by the eurostat. Capital goods production increased 12.2% from a year ago and durable consumer goods output increased 2.8%.

Output in Germany declined 1% from a month ago but soared 7.8% from a year ago. Even Ireland undergoing severe austerity measures showed production increase of 4.4% from the previous month and a surge of 10.1% from a year ago.

German bunds fell 60 ticks after German auction of €1.625 billion 30-year bonds drew a weak response and fell short of the offered amount.

The European Central Bank said only six banks accessed its emergency credit facility and lent $1.35 billion, significantly lower than most market watchers expectations.

Yesterday, after the market close, Slovakian parliament rejected the measure to expand the €440 billion rescue fund but the measure is expected to pass in the second vote as early as this week.

UK unemployment hit the highest last seen in 1994. The unemployment rate in three months to August increased to 8.1% and the number of unemployed increased 114,000 to 2.57 million.

The unemployment among the young increased to 991,000 and for the people between 16 and 24 years of age surged to 21.3%.

Stock Movers

Alcoa Inc. ((AA)) decreased 4.3% or 45 cents to $9.85 after the aluminum producer reported third quarter revenues soared 21% to $6.4 billion from $5.3 billion in the same quarter last year. Net income in the quarter surged to $172 million or 15 cents per diluted share compared to $61 million or 6 cents per share a year ago.

Host Hotels & Resorts, Inc. ((HST)) increased 3.7% or 42 cents to $11.78 after the real estate investment trust said fourth quarter total revenues increased 14% to $1.14 billion from $1.0 billion in the same quarter last year. Net loss in the quarter narrowed to $33 million or 5 cents per diluted share compared to $58 million or 9 cents per share for the year-ago quarter.

Liz Claiborne, Inc. ((LIZ)) surged 32.3% or $1.65 to $6.75 after the specialty retailer agreed to sell its Liz Claiborne and Monet brands to J.C. Penney Company, Inc. and Kensie brand to Bluestar Alliance and completes the sale of Dana Buchman brand to Kohl''s for total cash of approx $328 million. The transactions are expected to close in fourth quarter of 2011.

The company said after closing of these transactions expects year end net debt to be in the range of $270 to $290 million.

PepsiCo, Inc. ((PEP)) gained 3.1% or $1.91 to $62.86 after the beverage company reported third quarter net revenues grew 13% to $17.6 billion from $15.5 billion in the same quarter last year. Net income in the quarter increased 4% to $2 billion or $1.25 per diluted share compared to $1.9 billion or $1.19 per share a year ago.