Nasdaq down 2.1%

123jump.com Staff
11 May, 2006
New York City

Market Averages closed lower on Federal Reserve interest rate rise. Dow lost close to 1.2% and Nasdaq lost 2.1%. Gold, Silver, and Platinum trade at record levels. Emerging markets in Mexico, Brazil, and India are down 1% or more. Viacom reported earnings of 43 cents a share vs. year-earlier earnings of 47 cents a share. JC Penny reported net earnings of 89 cents a share in comparison to 62 cents a share last year. On average, analysts had been expecting earnings of 88 cents a share.

[R]4:20 PM Market averages down due to rise in interest rates.[/R]
- Dow closed down 142, Nasdaq down 48.84 and S&P down 16.98 points.
-Yield on 10-year bond closed at 5.17% and 30-year bonds at 5.25%.
-Crude oil rose to $1.19 to close at $73.32 per barrel.
-Gold up $15.80 to close at $721.50 and platinum up $35.90 to $1295.60.
-Emerging markets in India, Mexico and Brazil fell more than 1%.

Market averages are down this afternoon due to the rise in the U.S. interest rates and lack of direction from the Federal Reserve. The last interest rate rise marked the 16th consecutive quarter-point increase in the past two years. The U.S. Dollar substantially weakened against euro and the Japanese Yen. Precious metal prices rose once again today. This year Gold has gained 37%. Platinum has also risen to a record for a fourth day and it has gained 31 percent this year.

Google ((GOOG)) lost $14 today due to its meeting yesterday where it unveiled three new products. Most industry analysts believe they are not likely to generate revenue in the near future. Google had gained $20 two days before the meeting. Jacuzzi Brands, Inc. ((JJZ)) announced earnings of 05 cents; vs. year-ago earnings of 10 cents, missing estimate of 08 cents a share. Viacom, Inc. ((VIA)) media conglomerate reported it earnings-per-share at 43 cents vs. last year’s earnings at 47 cents, on a 12% rise in revenue to $2.37 billion.

Emerging markets, Mexico, Brazil, and India, declined after the Federal Reserve raised interest rates in the U.S. Brazil lost 2.2%, Mexico lost 1.6%, India lost 1.4%, and Argentina lost 2.5%.

[R]1:55PM Gold, dollar and interest rates.[/R]
Gold and silver came in the sharp focus of investor buying for two days in a row after the Fed raised rates by a quarter percentage points. Commodities traders are worried that recent Fed talk of possibility to pause in raising interest rates further may limit the attractiveness of the U.S. dollar relative to other currencies such as Japanese yen and euro. Dollar has lost more than 5% for the year and is likely to fall further unless U.S. trade and budget deficit decline. Gold ((GLD)) rose to an intra-day high of $728 today and settled in mid-day trading at $715 up $14. Silver also rose 52 cents to $15.05 and climbed as $15.20 per ounce. Silver ((SLV)) and gold are trading at 26-year high. Platinum rose to a new record high of $1,298.00. According to the web site of World Gold Council based in London, UK investment demand for gold has averaged between 4% and 6% of total demand, however for the year 2006 the demand is running at more than 7%. Gold is primarily bought for jewelry use and silver is bought for industrial use.

South Africa reported that its March gold production declined 9.3% and minerals production declined 5.2% from a year ago.

[R]12:30PM European markets erased early gains.[/R]
European markets failed to sustain early gains and closed down, pressured by weakness in the telecom sector, surging commodity prices and a steep decline in the Dow Industrial average. Deutsche Telekom fell 2.6% after announcing first-quarter results. European peer telecom stocks France Telecom and PT Group also moved down. The German DAX 30 dropped 1%, dragged by auto makers like Volkswagen. The French CAC 40 lost 0.3%, while London FTSE 100 slipped 0.7%, despite gains in miners and oil giants like Xstrata, BP, and Royal Dutch Shell.

Crude oil prices rose above $73 on renewed supply concerns after two foreign oil workers were reportedly kidnapped in Nigeria. Light sweet crude June delivery rose $1.04 to $73.17 a barrel. Gasoline rose 2 cents to $2.1895 a gallon, while heating oil was up to $2.0845. Natural gas gained about 2 cents to $6.920 per 1,000 cubic feet. London Brent added $1.33 to $73.77. European gold advanced, trading near a 25-year high on weaker dollar and global tensions. In London the precious metal rose to $707 per troy ounce, up from $701. In Zurich gold gained to $719.20, up from $701.70. In Hong Kong gold jumped $6 to $708.50. Silver closed at $14.80, up from $14.30. The U.S. dollar traded mixed in European trading. The euro traded at $1.2824, up from $1.2789. The dollar bought 111.39 yen, unchanged. The British pound was quoted at $1.8799, up from $1.8644.


[R]11:30AM Stocks traded in the negative.[/R]
Stocks moved notably lower in late morning trading with the major equity indices pulling back to new lows of the session. The tech-heavy Nasdaq dropped for a third consecutive session, reflecting significant weakness in the technology sector. Tech stocks came under pressure after disappointing guidance from Cisco ((CSCO)) and a warning from Dell ((DELL)). Disk drive stocks posted particularly steep losses, with Seagate Technology ((STX)) and M-Systems ((FLSH)) leading the sector lower. Weighing on the technology sector was a 2.6% drop in Apple Computer Inc.((AAPL)). Some networking, Internet, and semiconductor stocks also moved to the downside. The Dow fell 0.8%, dragged by American International Group Inc. ((AIG)), down 4.1% die to lower first-quarter earnings. Shares of General Motors Corp ((GM)) fell 3.6% amid worries about labor issues at its former auto parts unit Delphi Corp. Surging oil prices and renewed concerns about higher fuel costs sent airline stocks notably lower, as reflected by the 2.2% loss shown by the Amex Airline Index. The telecommunications, housing, and health insurance sectors showed considerable weakness. UnitedHealth ((UNH)) fell 2.8%, helping to lead the health insurance sector lower on news of an informal SEC inquiry into the company's stock options granting practices. Following a decline in oil prices, energy stocks turned lower with the Philadelphia Oil Service Index down 0.6%.
Gold and other metals gave back some ground after seeing some early strength, as metal prices retreated from their best levels of the day.


[R] 9:45AM Stocks opened lower on surging oil.[/R]
U.S. stock markets opened lower on worries that surging oil prices will hurt corporate profits and consumer spending. The three major averages moved to the downside, following a mixed performance yesterday when the Dow hit a six-year closing high. Technology stocks showed weakness in the early going, with the semiconductor and disk drive sectors down by about 1%. The slide added to recent weakness on cautious guidance from Dell ((DELL)) and Cisco ((CSCO)). The initial downward move was partly due to weakness among airline stocks. ExpressJet ((XJT)) was the worst performer in the group, dropping by nearly 7%. Continental ((CAL)) and AMR ((AMR)) showed losses of 3.3% and 2.3% respectively. The sector declined as a notable increase in the price of oil renewed concerns about the impact of higher fuel costs. At the same time, the surging price of oil, near $74 a barrel, contributed to some early strength among energy stocks. An upward move by gold stocks followed a higher price of the precious metal which extended recent gains to reach an over 25-year high of $724.50 per ounce.

[R]Initial jobless claims dropped less than analysts had expected.[/R]
The Department of Labor released its report on initial jobless claims in the week ended May 6 on Thursday, showing that jobless claims fell less than economists had been expecting. The report showed that jobless claims fell to 324,000 from the previous week's revised figure of 325,000. Economists expected claims to fall to 315,000 from the 322,000 originally reported in the previous week. At the same time, the four-week moving average rose to 317,250 from the previous week's revised average of 314,750. This marked the third consecutive increase by the less volatile moving average. The report also showed that continuing claims in the week ended April 29 fell to 2.392 million from the preceding week's revised level of 2.441 million.

[R]April sales rose below expectations.[/R]
Thursday morning, the Department of Commerce released its report on retail sales in the month of April, showing sales growth that came in slightly below economist estimates. The Commerce Department said that retail sales rose 0.5 percent in April following an unrevised increase of 0.6 percent in March. The sales growth came in below economist estimates of an increase of 0.7 percent. The increase in sales was partly due to higher sales at gas stations, which saw sales surge up 4.6 percent in April after coming in unchanged in March. Sporting goods, hobby, book and music stores also saw notable sales growth. The report also showed that sales at motor vehicle and parts dealers fell 0.4 percent in April after increasing 1.0 percent in March. Excluding the drop in auto sales, April sales rose 0.7 percent compared to a 0.5 percent increase in March. Economists had expected ex-auto sales to increase by 0.8 percent. While the weaker than expected sales growth may raise some concerns about the strength of consumer spending, it is likely to add to speculation that the Federal Reserve will leave interest rates unchanged at its June meeting.

[R]9:00 AM Stock futures indicated a positive market opening.[/R]
U.S. stock futures pointed to a positive opening, following a mixed close Wednesday after the Federal Reserve announced an interest rate increase for a 16th straight time, saying that it would keep raising rates if necessary to check inflation. Weakness in tech sector weighed sent the Nasdaq lower again, while a continued rally in GM ((GM)) and earnings-related strength in Disney ((DIS)) boosted the Dow. Dow component American International Group ((AIG)) reported after closing bell disappointing quarterly results as first-quarter profit declined on increased expenses. On Thursday, shares of oil and mining companies gained as oil prices rose toward $73 a barrel an copper, gold and platinum raced to new highs. Higher crude prices helped lift shares of energy companies in European trading, including Exxon Mobil Corp. ((XOM)) and ConocoPhillip ((COP)). Standard & Poor's 500 futures were up 0.70 point, above fair value. Dow Jones industrial average futures were up 3 points, and Nasdaq 100 futures were up 3 points.

Crude oil prices rose as renewed supply concerns overshadowed an increase in gasoline supplies. Light sweet crude June delivery rose 49 cents to $72.62 a barrel. Gasoline marginally rose $2.1710 a gallon, while heating oil was up to $2.0741. Natural gas gained about 2 cents to $6.919 per 1,000 cubic feet. London Brent added 43 cents to $72.87. European gold advanced, trading near a 25-year high on weaker dollar and global tensions. In London the precious metal rose to $707 per troy ounce, up from $701. In Zurich gold gained to $706.10, up from $701.70. In Hong Kong gold jumped $6 to $708.50. The U.S. dollar traded mixed in European trading. The euro traded at $1.2715, down from $1.2789. The dollar bought 111.24 yen, down from 111.39. The British pound was quoted at $1.8645, up from $1.8644.

O'Charley's Inc, ((CHUX)), full-service restaurant facilities operator, reported Q1 earnings of 31 cents a share, down from a profit of 44 cents a share a year-ago. Revenue advanced 5.5% and same-store revenue rose 0.6% at the company's namesake restaurants in Q1, while its Ninety Nine Restaurant and Pub locations increased 1.1% and its Stoney River Legendary Steaks operations saw a 5.1% jump. The company topped analysts’ estimate for a profit of 27 cents a share. The company noted interest expense was up in Q1 due to the impact of raised rates on its variable debt. The company sees earnings of 15 to 20 cents a share for Q2.

Jacuzzi Brands Inc., ((JJZ)), bath and plumbing products, maker reported Q2 net income dropped to 5 cents a share, from 10 cents a share in the year-ago period. The company added that sales dropped 4% in Q1. If not for items, Jacuzzi Brands estimated 2006 earnings of 44 cents to 46 cents a share.

K&F Industries Holdings Inc, ((KFI)), aircraft parts maker, reported Q1 net income reversed to 26 cents a share, from a loss of 45 cents a share in the year-earlier period. Revenue advanced to $91 million from $89 million. The company topped analysts’ estimates for earnings of 24 cents a share.

Mac-Gray Corp, ((TUC)), appliance maker and laundry facility manager, reported Q1 net income advanced slightly to $1.75 million, from $1.70 million in the year-ago period, or flat on a per share basis. If not for items, adjusted net income was 11 cents a share, down from 14 cents a share in the year-earlier period. Revenue advanced 8.5%.

Biovail Corp, ((BVF)), drug company, reported Q1 earnings of 40 cents a share, up from a profit of 7 cents a share a year-ago. Q1 includes a loss of 3 cents a share, from discontinued operations that reveals the performance of the company''s Nutravail unit and a write-down of assets connected with the purchase-and-sale agreement for the division. Revenue advanced 27%. The company beat analysts’ estimate for a profit of 36 cents a share. Biovail also added that its selling, general and administrative expenses dropped 24% in the quarter.

RemedyTemp Inc, ((REMX)), staffing firm, reported that it reversed to Q2 net income of 6 cents a share, up from a loss of 15 cents a year-ago despite revenue decline. The company said that it agreed to be acquired by privately held Select Personnel Services for about $169 million, or $17 a share, in cash. That represents a premium of 39% to RemedyTemp''s Wednesday closing price.

J.C. Penney Co, ((JCP)), department store operator, reported Q1 earnings of 89 cents a share, up from a profit of 63 cents a share a year-ago. On a continuing operations basis, the company earned 90 cents a share in Q1. Total sales advanced 2.5% in Q1 and same-department store sales rose1.3% higher in the period. The company topped analysts’ estimate by a penny

Top Tankers Inc, ((TOP)), oil tanker operator, reported its Q1 net income advanced to $1.06 a share, from 69 cents a share in the year-ago period. The company added that special charges for stock expenses, bonuses and other items equal to 12 cents a share were included in the net results. The company announced its fleet average time charter equivalent, a measure of revenue, advanced 25%.


[R]8:15AM European markets gained ground on commodities.[/R]
European markets gained ground Thursday, following U.S. interest-rate increase overnight and strongly supported by commodity stocks. The biggest gainers were copper miner Xstrata and oil company BP which advanced along with the price of oil, up $72 a barrel and copper price, up $9.65 to $378.45 a pound. The euro declined 0.3% to trade at $1.2712. The German DAX 30 rose 0.5%, the French CAC 40 climbed 0.8%, and London FTSE 100 gained 0.3%.


[R]7:45AM Asia closed mixed. The Nikkei declined.[/R]
Asian-Pacific benchmarks finished mixed Thursday. The Nikkei dropped for a third session in a row, pressured by strengthening yen versus the dollar and possible slowdown in Japanese corporate earnings as a result. The index fell 0.5% to 16,862.10 reflecting weakness in foreign-sales-dependent auto stocks and mixed banking shares. Toyota Motor announced 39% quarterly profit growth, but automakers declined as weaker dollar weighed. Shares of Toyota dropped 2.1%, while Nissan Motor lost 0.3%. Banking stocks lost some ground, despite 1.2% increase in Japan’s lending in April. China Shanghai Composite reversed from recent strength and dropped 0.5% as profit-taking overshadowed fund flows. Hong Kong’s Hang Seng ended up 0.4%, led by HSBC and China Mobil which recovered from recent weakness to advance 0.3% and 0.6% respectively. South Korea’s Kospi advanced 0.9% reaching a record-high, supported by blue chips like Samsung Electronics and Posco.