Ctrip Rises 9%

Elena
18 May, 2006
New York City

Stocks turned to lackluster trading in late morning as investors remained worried about inflation and interest-rate hikes. The negative sentiment was limited by gains for Hewlett-Packard and Shares Corp. Hewlett-Packard rose 2.3% after Morgan Stanley upgraded the stock. Shares of Sears rose 12.4% after the company reported a much bigger-than-expected quarterly profit. Among other gainers, Trend Micro rose 6.5%, while Ctrip climbed nearly 9% on strong full-year results.

[R]11:30AM Inflation weighed on market sentiment.[/R]
Stocks traded in the positive in morning trading, although the main equity indices were well off intraday highs, posting modest gains only. Stocks managed to overcome recent declines on bargain-hunting after the heavy sell-off yesterday. The airline sector was one of the market''s best performances, lifted by gains for Continental Airlines ((CAL)), AMR ((AMR)), and a continued decrease by the price of oil, which helped to ease concerns about higher fuel costs. The Amex Airline Index advanced 2.4%. On the other hand, the oil price decrease led to some weakness in the oil service sector.

Telecommunications stocks also showed strength, leading the Amex Telecom Index up 1% after a decline of 2.6 % Wednesday. Some technology stocks also moved higher. Significant strength was posted by computer hardware stocks like Hewlett-Packard ((HPQ)) which rose 2.3%, extending recent gains. BEA Systems ((BEAS)) climbed 12% after the company reported better-than-expected Q1 earnings and revenues. Retail stocks moved higher, as reflected by the 1% gain shown by the S&P Retail Index. Limited Brands ((LTD)) turned in one of the sector''s best performances after reporting stronger-than-expected Q1 earnings growth. Meanwhile, some health insurance stocks came under pressure, with shares of UnitedHealth ((UNH)) down 3.2% after the company received a subpoena from the U.S. attorney in New York for documents related to the granting of stock options.


[R]10:30AM Indian Sensex fell sharply on higher tax rate fears.[/R]
The Sensex in India plunged to 11,391.43, or 6.7% - its lowest level since April 17 2006. The turnover on the BSE was $1.1 billion or Rs 4,818 crore, up from Wednesday’s $900 million or Rs 4,116 crore. The market breadth was negative with 2,257 shares declined and only 266 advanced. Foreign investors were nervous as Finance Ministry issues a directive stating that a distinction will be made between companies acting as trading and investing firms. Currently foreign investment companies operating an investment fund are treated at rate of short or long term capital gains rate. Tax rate for short term capital gains is 10% and long term capital gains is tax free. If Ministry treats these investment funds as foreign investment companies then investment profits may be treated as business profit, regardless of long or short tem gains, which is taxed at 40% rate. Lack of clarity in guidelines from the ministry rattled market nerves in addition to the weakness in global markets.

Metal shares led decliners. Tata Steel lost 13% to Rs 531 on a high volume of 441 lakh shares. Other metal stock losers included Sterlite Industries, plunging 15% to Rs 438.50, Hindalco, down 12% to Rs 190.40. Reliance Industries was also hit severely, losing 7.7% to Rs 1,003 on a huge volume of 31.5 lakh shares traded. Automotive stocks were no exception. Maruti Udyog declined 11.5% to Rs 896 and Tata Motors was down 9.5% to Rs 870.50. Bajaj Auto lost 8% to Rs 2,999. Cement stocks also suffered heavy losses. ACC gave away 12% to Rs797, Grasim plunged 8.5% to Rs 1985 and Gujarat Ambuja Cements lost 8% to Rs 100. Infosys was also on the loserboard, down 5% to Rs 3,040. Among other major decliners were Reliance Energy, shedding 10.7% to Rs 532, MTNL, down 11.9% to Rs 176 and ONGC, lost 6.6% to Rs 1345.

[R]10:00AM Stocks opened in the positive on bargain-hunting.[/R]
At market opening investors turned to bargain hunting, lured by the beaten-down prices, and thus helping stocks to recover from the heavy losses posted yesterday. Telecommunications, housing, and gold stocks moved back to the upside after showing significant weakness Wednesday. Airline stocks also moved higher, benefiting from lower oil price. Significant strength was visible among networking, computer hardware, and semiconductor stocks. Software developer BEA Systems ((BEAS)) also posted a strong gain after reporting better-than-expected Q1 results.

The leading gainer was Sears Holdings Corp. ((SHLD)) which rose 12% to $154.62 on Nasdaq after reporting stronger-than-expected quarterly profit. The department store operator reported Q1 earnings of $1.14 a share, up from a loss of 7 cents a share a year-ago. Clothing retailer Limited Brands Inc. ((LTD)) rose 7.6% to $27.18 on the Nymex a day after it reported a jump in quarterly net income, driven by strength in its Victoria''s Secret stores. Women''s apparel chain New York & Co. Inc. ((NWY)) posted a lower Q1 profit and forecast Q2 and full-year earnings below forecasts. The stock dropped 5.5% to $14.51, also on the NYSE. Shares of UnitedHealth Group Inc. ((UNH)) dragged the S&P 500, falling 4.3% to $44.88 on the NYSE. The health insurer said on Wednesday it received a subpoena from the U.S. attorney''s office relating to the granting of stock options.

[R]Jobless claims unexpectedly climbed.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended May 13. The report showed that jobless claims saw a significant increase, surprising economists who expected a decline. The Labor Department said that jobless claims rose to 367,000 from the previous week''s revised figure of 325,000. Economists had expected claims to fall to 310,000 from the 324,000 originally reported for the previous week. The report also showed that the 4-week moving average rose to 333,250 from the previous week''s revised average of 317,500. This marked the fourth consecutive increase by the less volatile moving average. The Labor Department also said that continuing claims in the week ended May 6 rose to 2.389 million from the preceding week''s revised level of 2.381 million. After the start of trading, the Conference Board is scheduled to release its report on leading economic indicators in the month of April while the Federal Reserve Bank of Philadelphia is due to release its report on manufacturing activity in the mid-Atlantic region in the month of May.

[R] 9:00AM Stock futures indicated a higher start.[/R]
U.S. stock futures were sitting above the flat line, pointing to some recovery from sharp declines in the previous session when strong consumer prices data raised worries that the Fed Reserve would continue raising interest rates. On Wednesday stocks dropped with the Dow Jones industrial average making its biggest one-day fall in three years, down more than 200 points and the Nasdaq recorded its seventh consecutive day of losses.

In company news, Sears Holdings Corp. ((SHLD)) reported a much bigger-than-expected quarterly profit, sending its stock up 8.7% to $150 on the Inet electronic brokerage system. On Thursday, the tech-heavy Nasdaq might be influenced by earnings from top computer maker Dell Inc. ((DELL)), which are expected later in the session. Among other stocks, clothing retailer Limited Brands Inc. ((LTD)) may extend gains after rising yesterday following a jump in quarterly net income, driven by strength in its Victoria''s Secret stores. Limited shares were up 6.8% in pre-market trading. Gap Inc. ((GPS)) is also due to report quarterly results on Thursday. S&P 500 futures were up 6.7 points, above fair value. Dow Jones industrial average futures rose 49 points, and Nasdaq 100 futures rose 8.25 points.

Stein Mart Inc, ((SMRT)), retailer, reported Q1 net income dropped 55% to 17 cents a share, from 38 cents a share in the year-earlier period. The company added that sales dropped 4.2%. The company beat analyts’ forecast earnings of 15 cents a share.

Deb Shops Inc, ((DEBS)), teen apparel retailer, reported that Q1 income declined to 19 cents a share, a penny down from a year ago. Sales in Q1 rose to $81.5 million from $77.5 million. The company affirmed its guidance for fiscal 2007 earnings of $1.85 to $1.90 a share.

Casual Male, ((CMRG)), retailer, reported that Q1 net income advanced to 4 cents a share, from a loss of 5 cents a share in the year-earlier period. The company added hat revenue increased to $103 million from $97.3 million. The company topped analysts’ forecasts for earnings of 2 cents a share.

Finlay Enterprises, ((FNLY)), fine jewelry retailer, reported a Q1 profit of a penny per share, up from a loss of 31 cents a share a year-ago. On a continuing operations basis, the company lost 59 cents a share in Q1, wider than a year-ago equivalent loss of 44 cents a share. Sales advanced to $192.1 million from $170.5 million in the same period a year ago. Finlay predicts a loss from continuing operations of 45 to 50 cents a share for Q2 with same-store sales advancing between 3% and 3.5%. With items, it expects a loss of 60 to 70 cents a share in Q2. For fiscal 2006, the company expects earnings from continuing operations of 75 to 90 cents a share.

Sears Holdings Corp, ((SHLD)), department store operator, reported Q1 earnings of $1.14 a share, up from a loss of 7 cents a share a year-ago. Last year''s results incorporate a charge of $90 million related to a change in accounting for certain inventory costs. The company attributed the improvement in earnings to better profitability in both its Kmart and Sears Domestic operations, mainly due to reduced expenses. The company topped analysts’ estimate for a profit of 65 cents a share. Total revenue advanced in the latest three months to $12 billion from $7.63 billion a year ago, primarily due to the inclusion of Sears operations for the full 13-week period. Sears Domestic same-store sales dropped 8.4% in Q1, while Kmart''s comparable stores slid 0.2%.

[R]8:00AM Mittal officially launched $27 billion offer for Arcelor.[/R]
Mittal Steel Co. officially offered $27 billion in cash and stock for its rival Arcelor SA, expressing a strong belief that the offer is both attractive and generous. Mittal is offering Arcelor shareholders four Mittal Steel shares and $45.41 for every five Arcelor shares. A secondary offer consists of $36.34 for each Arcelor share. Merging the world''s top steelmakers would create a company with nearly a 10% share of global steel production and a market capitalization close to $40 billion.

The offer, launched in Luxembourg, France and Belgium will be open until June 29. Mittal said it will also launch a bid in Spain and the United States when market regulators clear the offer. Arcelor has so far rejected the offer as hostile, maintaining the view that the present management and plans of the company serve best the company''s shareholders’ interests. In a move that could help Arcelor defend itself, the company said it plans to spend up to $9.5 billion to buy back almost a quarter of its shares.

Arcelor CEO Guy Dolle said last week when both companies reported earnings that Mittal''s Q1 earnings were much weaker than Arcelor''s. He also likened Arcelor''s high-quality steel as perfume to Mittal''s cheaper eau-de-cologne.

Arcelor was formed in 2002 through the merger of Usinor SA of France, Arbed SA of Luxembourg and Aceralia Corp. Siderurgica SA of Spain. Shareholders include the governments of Luxembourg and Belgium''s Walloon region. The company''s board of directors was strongly supported by shareholders last month when they defended its moves to protect itself.

[R]7:30AM Asian-Pacific markets ended lower across the region.[/R]
Asian markets closed lower. Japanese benchmark Nikkei 225 shed 220.49 points to settle at 16087.18 points , its lowest closing since March 9. Decliners were led by Canon, down 2.3% and Honda Motor, falling 1.9%. Nippon Oil plunged 3.4% and Ebara, a machinery maker, fell 6.1%. Bank shares also declined, among them Mitsubishi UFJ Financial Group posting 3.5%. Korean index Kospi also fell 2.6%, finishing 36.32 points down, at 1365.15. Financial stocks and construction shares led the decliners. Kookmin Bank dropped 4.5% and Shinhan Financial Group lost 3.8%. Construction dived 6.3%. Hyundai Engineering & Construction plummeted 9.3%. Daewoo Engineering & Construction took a 6.3% dive. Hong Kong''s benchmark Hang Seng Index dropped 349.03 points to finish at 16266.52. Clothes producer Esprit was one of the biggest losers, ending 4.71% down. China stocks finished slightly lower, led by nonferrous-metal companies. Shanghai Composite Index, China’s blue-chip finished 0.5% lower at 1617.28. Australia''s index S&P/ASX 200 closed at 5119.3, off 1.9%, its biggest percentage fall since last October. Taiwan’s Weighted Price Index dropped 82.80 points, or 1.2%, to settle at 7034.03.

[R]6:30AM European markets fight back an early retreat.[/R]
The FTSE 100 gained 0.5 %, Xetra Dax traded in Frankfurt 0.5 % higher and the CAC-40 in Paris rose 0.4 %. On the corporate front, Societe Generale topped expectations, up 0.7%, on record-breaking first-quarter net earnings, while Air France beat the estimate only just, its stocks remained flat. Arcelor was among the decliners, shedding 2.6% in the wake of the takeover bid from Mittal Steel, which also fell 3.6%. Alstom lost 0.3% despite ING lifting its price target, after it reversed to profit. Man AG dropped 1.2% while Sandvik’s stocks advanced 1.5%.

Light crude oil was trading 14 cents down at $68.55 a barrel by 0742 GMT, continuing yesterday’s 84-cent loss. London Brent gained 3 cents to $69.07. Gold declined in early trade to $687.50 an ounce, down from $696.70, along with silver which also lost ground to$13.10 an ounce, down from $13.30 an ounce. The dollar fell against the euro. The euro bought $1.2792, up from $1.2741 late Wednesday. The British pound traded at US$1.8880, up from US$1.8816 and the yen was slightly stronger. The dollar traded at 110.65 Japanese yen, down from 110.96 yen.