HP, Abercrombie and Applied Materials Earnings

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

Market averages traded in a narrow range as latest economic data indicated mixed economic picture. Apil wholesale inflation rose, housing starts declined but factory output rose. On the earnings front Wal-Mart delivered better than expected earnings, Home Depot falied to meet sales expectations. After the close HP reported net revenue rise of 5% to $22.5 billion and earnings of 51 cents vs. 33 cents a year ago. Applied Materials reported earnings of 26 cents vs. 18 cents a year ago.

[R]4:00PM Mixed economic picture kept averages in check.[/R]

-Dow closed down 8.56 points, Nasdaq down 9.39 and S&P down 2.41.
-Yield on 10-year bond closed at 5.1% and 30-year bond at 5.224%.
-Crude oil closed up 12 cents to $69.53 per barrel.
-Gold up $7.90 to close at $692.90 and silver rose 20 cents to $13.54.

-Asian markets in general closed lower with Japan down 2% and Korea declined 2.25%.
- European markets closed higher led by 0.4% rise in Swiss and 0.3% gain France.
-Latin American markets closed mostly higher led by a rise on 0.75% in Mexico.

Economic indicators never move in linear direction today’s batch of data were not different either. April wholesale inflation, new home construction and factory output all painted a mixed picture. The reported rate of April inflation was higher than expected, factory output was robust but decline in home construction level was steeper than forecasted. Market quickly took a cautionary outlook and traded in a narrow range.

Emerging markets in general rebounded around the world but most Asian markets remained in the negative territory. Mexico led Latin American markets with 0.75% gain at close. Telecom stocks advanced led by a rise of 0.8% in Telmex and American Movil adding 0.6%. In Russian trading main index closed lower 0.26% to 1,585. Russian oil companies Lukoil and Rosneft reported strong revenue rise. For the fiscal 2005 Rosneft reported nearly a five-fold rise in revenue of $17 billion and a profit of $1.1 billion. Lukoil reported revenue rise of 70% to $22.7 billion and profit of $2.4 billion, down 15% from a year ago. India gained 0.6% on the back of auto stocks, cement and tech stocks. Cement maker ACC rose 5% and two-wheeler scooter maker Bajaj rose 2.3%.

Earnings from several companies kept traders busy. Wal-Mart beat the estimates, Home Depot did not meet sales expectations and Deere & Co. reported 28% rise in earnings on 2% rise in sales. Wal-Mart rose 1.2%, Home Depot fell 5% and Deere rose 2%.


[R]2:00PM A parade of earnings drive stocks.[/R]
Wal-Mart, Home Depot, Deere & Company, Staples and Jack in the Box are few of the leading companies releasing earnings before the market began trading this morning. Wal-Mart ((WMT)) reported first quarter earnings of 63 cents vs. 55 cents a year ago on revenue growth of 12% to $80.47 billion. The company reported same-store sales rise of 3.8% across the board. The stock rose 1.2% in mid-day trading. Home Depot ((HD)) reported earnings of 70 cents vs. 57 cents on revenue rise of 13.1%. The stock in mid-day trading fell 3%. Deere & Co. reported second quarter earnings of $3.13 per share vs. $2.43 on revenue rise of 2% to $6.56 billion. Fossil Inc. ((FOSL)) reported first quarter earnings of 14 cents vs. 32 cents a year ago on revenue rise of 14% to $264 million. NCO Group ((NCOG)) rose 38% or $7.25 on the news that the company has received buy-out offer from its chairman and CEO.

Parent of American Airlines, AMR Corp ((AMR)) reported that the company has completed a stock offering of $400 million to pay for general and corporate expenses. Apple computer fell 3% after Creative Technology Ltd. ((CREAF)) reported that it has filed complaint with the U.S. International Trade Commission to investigate a tariff violation. The company also separately filed a lawsuit for patent violation against Apple. Carnival Corporation ((CCL)) lost 9% after it lowered earnings guidance to $2.65 to $2.75. The Wall Street had estimated fiscal 2006 earnings of $2.93. Higher fuel cost, dollar volatility and lower bookings all contributed to the lowered forecast.


[R]12:30PM European markets recovered at close.[/R]
European markets recovered from earlier losses to close positive, lifted by defensive healthcare giant companies. Pharmaceuticals GlaxoSmithKline shares and Sanofi added 1.7% and 2.4% respectively. At the same time, mining companies like Rio Tinto and BHP Billiton declined, sending the sector down 1%. The German DAX 30 rose 0.5%, supported by 1.5% gain for logistics and mail company Deutsche Post which released better-than-expected Q1 earnings. The French CAC 40 climbed 0.6%, with EADS falling 2.6% after making early gains on 26% Q1 profit growth. London FTSE 100 gained 0.6%, helped by catering company Compass Group, which rose 2.8% after it said it will buy back 500 million pounds of shares in the next 12 to 18 months and raised its interim dividend by 3% to 3.4 pence a share.


[R]11:30AM Stocks turned in a lackluster trading.[/R]
U.S. stocks turned in a choppy trading session with investors digesting three key economic reports. The major equity indices turned mixed in late morning trading, with the Dow posting a modest gain, while the Nasdaq and the S&P 500 slipped into negative territory. The Labor Department report helped to ease inflation concerns, saying that April wholesale prices increased 0.9% due to a sharp rise in energy prices and core producer prices rose by 0.1%. In a separate report, the Commerce Department showed a bigger-than-expected drop in housing starts which raised concerns about the strength of the housing market. Additionally, a report from the Federal Reserve showed that industrial production rose by 0.8% in April, above the expected growth of about 0.5%.

The weaker-than-expected housing data contributed to some weakness among housing stocks. The Philadelphia Housing Sector Index fell 1.1%. Airline stocks showed significant weakness on profit taking, with the Amex Airline Index falling 1.6%. Commodities stocks reversed from some early strength. Energy stocks moved lower, following a decline by the price of oil, while gold stocks turned lower even, despite the higher price of the precious metal. At the same time, health insurance stocks posted considerable gains, sending the Morgan Stanley Healthcare Payor Index up 2.8%. Pharmaceutical stocks also advanced. In late morning trading, the Dow Jones industrial average added 8.73, or 0.08%. The Standard & Poor''s 500 index was down 0.94, or 0.07%, and the Nasdaq composite index fell 5.99, or 0.27%. The 10-year Treasury note dropped to 5.12% from 5.16% late Monday.


[R]10:30AM The Indian Sensex back on the winning track.[/R]
Sensex in India advanced 51.53 points, or 0.55% to close at 11,873.73. The turnover on the BSE was Rs 5,229 crore today, up from Monday’s Rs 5,128 crore. The trading session witnessed high volatility as the Sensex fluctuated 1,800 points experiencing various highs and lows on the day. Sensex fluctuated 576 points between the low 11,379 and high 11,955 for the day. Cement stocks led the gainers. UltraTech Cement surged 10% to Rs 751.85, Gujarat Ambuja Cements advanced 8% to Rs 109.35, ACC added 5% up to Rs 905 and Grasim increased 3.7% to Rs 2,205. Among other advancing stocks were Reliance Industries rose 3% to Rs 1,052 on a high volume of 4.6 million shares, traded in the session. Infosys ((INFY)) advanced 0.4% to Rs 3,170 and Hindalco gained 1.8% to Rs 214 amid high volatility in the wake of the company’s decision to lift aluminium prices by Rs 10,000 per tonne immediately.

Automotive stocks also gained. Bajaj Auto gained 2.3% to Rs 3,109, Mahindra & Mahindra advanced 1.9% to Rs 681 and Tata Motors ((TTM)) shares were up 1% to Rs 929. Energy shares jumped on the bandwagon too. Public sector power equipment company Bharat Heavy Electric (BHEL) rose 3.3% to Rs 2,330 and power-generation company, NTPC, advanced 2.4% to Rs 132. Wipro Limited ((WIT)) also reported to be in a deal to acquire computer graphic company, Quantech Global Services, located in the U.S. and in India with a staff of 500 engineers in India. Quatech provides computer aided design services to companies in automotive and manufacturing industries. Quantech generated $12.7 million in revenue in 2005. The terms of deal were not disclosed.


[R]10:00AM Stocks opened slightly higher on tame inflation data.[/R]
Stocks opened slightly higher on rebounding commodity prices and easing inflation concerns after the Labor Department showed that core wholesale prices rose less than expected in April. Buying interest remained somewhat subdued, limiting the upside for the major averages. In the first hour of trading, the Dow Jones industrial average added 23.14, or 0.2%. The Standard & Poor''s 500 index was up 2.22, or 0.17%, and the Nasdaq composite index rose 3.61, or 0.16%. The yield on the 10-year Treasury note dropped to 5.13% from 5.16% Monday.

After some weakness in the opening hours, gold stocks moved back to the upside along with the price of the precious metal. Energy stocks also moved to the upside, as the rising price of oil inspired some bargain hunting. In earnings news, Home Depot Inc. ((HD)) posted 19% profit rise in Q1, although its sales came in below estimates. Home Depot fell $1.22 to $39.28. Wal-Mart Stores Inc. ((WMT)) posted 6%t rise in quarterly income, beating analysts'' target by 2 cents per share. Its sales rose 12%to match expectations. Wal-Mart was unchanged at $47.43.


[R]Industrial production grew by 0.8% in April.[/R]
Tuesday morning, the Federal Reserve released its report on industrial production and capacity utilization in the month of April. The report showed that production grew more than economists had been expecting. The Fed said that industrial production rose by 0.8 percent in April after growing 0.6 percent in March. Economists had been expecting more modest production growth of about 0.5 percent. The report showed that the increase in industrial production came as manufacturing production grew by 0.7 percent in April after increasing by 0.5 percent in March. Output for mining and for utilities both increased 0.9 percent. The Fed added that the capacity utilization rate rose to 81.9 percent in April from 81.4 percent in March. The increase came in above economist expectations of an increase to 81.6 percent.

[R]New houses construction fell more than expected.[/R]
The Department of Commerce released its report on housing starts in the month of April on Tuesday, showing that starts fell more than economists had expected. The report also showed a notable decline in building permits. The report said that housing starts fell 7.4 percent to a seasonally adjusted annual rate of 1.849 million units in April from a revised 1.996 million unit rate in March. Economists expected starts to fall to a 1.95 million unit rate from the 1.96 million unit rate originally reported for March. The drop in housing starts came as decreases in the South and West more than offset increases in the North and Midwest. The report also showed that building permits fell 5.4 percent to a seasonally adjusted annual rate of 1.984 million units in April from a 2.097 million unit rate in March. Building permits are seen as an indicator of future demand.

[R]Producer prices rose above expectations.[/R]
Tuesday morning, the Labor Department released its closely watched report on wholesale prices in the month of April. The report showed that prices rose more than expected amid a notable increase in energy prices. The Labor Department said that its producer price index rose 0.9 percent in April following a 0.5 percent increase in March. Economists had expected the index to increase by a slightly more modest 0.8 percent. The increase was largely due to a notable increase in energy prices, which rose 4.0 percent in April after rising 1.8 percent in March. The higher energy prices reflected a rebound by home heating oil prices as well as a faster rate of growth in gasoline and kerosene prices. The report also showed that core prices, which exclude food and energy prices, edged up by 0.1 percent in April, matching the increase seen in March. The increase came in slightly below economist estimates of an increase of 0.2 percent. The modest increase in core prices may help to ease recent concerns about inflation, although some traders are likely to remain worried about the prospect of higher energy prices being passed on in the costs of other goods.


[R] 9:00AM Stock futures were set to open flat ahead of inflation data.[/R]
U.S. stock futures were sitting near the flat line as investors awaited producer prices data, expected to show an increase in last-month inflation that could influence interest rates. Economists expect 0.8% pick-up in PPI, while core PPI, which excludes food and energy costs, is forecast to rise 0.2%.

In earnings news, Wal-Mart Stores Inc. ((WMT)) reported quarterly earnings above analyst estimates. The world’s biggest retailer said that its Q1 profit rose 6.3% which equals to $2.615 billion, or 63 cents per share, up from $2.461 billion, or 58 cents a year ago, beating estimates of 61 cents. Its overall revenue rose to $80.47 billion from $71.68 billion a year ago. Wal-Mart reported same-store sales rose 3.8% in the first quarter. Home Depot Inc. ((HD)) gained 1% in pre-market trading on better-than-expected quarterly earnings. The world''s largest home improvement retailer said its Q1 profit rose 19% to $1.48 billion, or 70 cents a share, compared with a profit of $1.25 billion, or 57 cents a share, for the same period a year ago. Analysts had predicted earnings of 67 cents a share. Office supply retailer Staples Inc. ((SPLS)) and teen apparel retailer American Eagle Outfitters Inc. ((AEOS)) both reported higher earnings. S&P 500 futures were down 0.4 point, slightly below fair value. Dow Jones industrial average futures fell 4 points, and Nasdaq 100 futures rose 1 point.

American Eagle Outfitters Inc., ((AEOS)), casual apparel retailer, reported Q1 earnings of 42 cents a share, up from a profit of 35 cents a share a year-ago. Q1 includes 2 cents a share in stock option expensing. Sales advanced 14% in Q1 to $522.4 million from $456.5 million in the same period a year ago. Same-store sales rose 9%. The company beat average analysts’ estimate by a penny.

Dick''s Sporting Goods Inc, ((DKS)), specialty retailer, reported Q1 earnings of 21 cents a share, up from a pro forma profit of 16 cents a share a year-ago. The year-ago pro forma results are connected with 6 cents a share for stock option expensing as if the company expensed stock options then and excludes merger integration and store closing costs. Sales advanced 13% and same-store sales rose 6.5% in the quarter. The company topped analysts’ estimate for a profit of 17 cents a share.

Saks Inc, ((SKS)), department store operator, reported Q1 earnings of 60 cents a share, up from a profit of 11 cents a share a year-ago. Q1 includes a net after-tax gain of 52 cents a share, primarily connected with the sale of its SDSG Northern Department Store Group assets, among other items. The year-earlier results include a net after-tax gain of a penny a share, mainly from the sale of assets related to certain Saks Fifth Avenue Enterprises stores. Sales dropped in Q1 to $1.04 billion from $1.55 billion in the same period a year ago. The average analysts’ forecasts were for a profit of 9 cents a share.

BJ''s Wholesale Club Inc, ((BJ)), warehouse club retailer, reported that Q1 income dropped to 23 cents a share, from 27 cents a year earlier. If not for items, the company would have reported earnings of 24 cents a share. Revenue rose to $1.92 billion from $1.81 billion, while same-store sales advanced 2%. The company topped analysts’ views for earnings of 19 cents a share.

Staples Inc, ((SPLS)), office products retailer, reported Q1 earnings of 25 cents a share, up from a profit of 20 cents a share a year-ago. The company sales advanced 9% in Q1 to $4.24 billion from $3.9 billion in the same period a year ago. The company topped analysts’ expectations for a profit of 23 cents a share. in the April period. The company said North American Retail same-store sales advanced 1% higher as a weaker performance in furniture and technology offset positive customer traffic and strong comps in core supplies categories and copy and print services.

[R]8:00AM BellSouth rejected an accusation of giving NSA phone records.[/R]
A report released by USA Today on Thursday identified BellSouth Corp., along with AT&T Inc. and Verizon Communications Inc., as companies that had complied with a National Security Agency request for millions of customer phone records after the terrorist attacks in 2001. Experts said the agency was likely seeking to detect calling patterns in the mountain of data. Critics denounced the phone companies for complying with the NSA surveillance request, while others approved of compromising privacy for national security.

BellSouth says it has no evidence it was contacted by a U.S. spy agency or gave the government access to any of its customers'' phone call records. The regional Bell, offering telecommunication services in nine Southeastern states, said Monday it had conducted a ‘thorough review’ and established that it had not given the National Security Agency customer call records. BellSouth''s customer service department had received only 26 complaints about reports that private phone records may have been relayed to the government.

Spokesmen for AT&T and Verizon said Monday night they had no comment on BellSouth''s statement. Verizon spokesman referred to a company statement Friday that said Verizon had complied with relevant laws and was ‘committed’ to customer privacy. San Antonio-based AT&T said it respects customers'' privacy but has ‘an obligation to assist law enforcement and other government agencies responsible for protecting the public welfare.’


[R]7:30 AM Energy stocks drag Asia down.[/R]
Asian markets declined Tuesday. Japanese benchmark finished 0.2% to close at 16455.69 points. Exporters were the biggest losers in the trading, as most automakers and electronics exporters fell. Toyota Motor dropped 1.28%, while electronics company Toshiba was down 1.36%. Honda Motor declined 0.90%. Earlier in the day, local media announced that Honda intends to invest $450 million in a new North American plant due in 2009. Hong Kong''s benchmark Hang Seng Index fell 0.62%, to 16,313.15 and the Shanghai Composite index didn’t buck the downtrend, shedding 3.05%. Singapore''s Straits Times lost 0.4% but Taiwan''s benchmark edged 0.1% up.


[R]6:30 AM Europe declined on commodity pressures.[/R]
European markets were lower by mid morning on Tuesday, reversing earlier advances, as investors came under pressure by commodity stocks to sell oil, mining and metal shares. Austria’s OMV was the biggest loser, as it stock lost 8.5%, accompanied by another company in the red, Norway’s Statoil fell down 0.8%. Luxury goods stocks also sank on consumer sentiment over energy costs. French perfume maker, Hermes International, was off 4.1% and the Swiss watchmaker, Richemont, dropped 2.1%. EADS, producer of Airbus, reported strong earnings, up 26%, beating analyst expectations despite a strong euro, hampering export.

Oil continued its fall on Tuesday morning on worries that high energy costs may slow down economic growth. Crude oil was traded 14 cents lower at $69.27 a barrel by 0719 GMT, London Brent fell 25 cents to $69.42. Gold in London was fixed at a recommended price of $681.00, down from $683.60 late Monday on NYME. The dollar was down against the euro. The euro bought $1.2807, down from $1.2809 late Monday in New York, the greenback was slightly up against the yen, buying 110.30 yen, up from 110.20 yen on Monday, and off from the British pound. One British pound was traded at $1.8803, up from $1.8793.