Tech Stocks Survive Market Sell-Off

123jump.com Staff
30 Nov, -0001
New York City

Large Cap stocks sold off on weakening consumer sentiment. Morning's report on lower import prices and declining inventories failed to impress the broader market. Overnight earnings report from Dell powered the rally in tech stocks but in the afternoon tech stocks weakened significantly but managed to gain 0.5% in Nasdaq.

The Manufacturing and Inventory report this morning from Commerce Department failed to spark the market.

The report stated that March inventories were up 0.4%, smaller than expected, and up 7.9% from a year ago. While market generally ignores this report, the lower growth in Inventory, better-than-expected retail sales and lower deficit will certainly force most economists to revise their Q2 GDP growth rate projections.

The total business to inventories ratio is now estimated to be at 1.30 and it is hovering near ten-year low.

According to the University of Michigan report consumer sentiment dipped from 87.7 to 85.3 indicating that future retail sales may be flat for the year.

Major averages trade in divergent fashion. Yesterday’s weakness in metals and energy stocks is continued today on U.S. dollar strength. Major miners such as Rio Tinto, BHP, Phelps Dodge and Brazilian miner CVRD and oil companies such as Exxon Mobil, Stat Oil, Norsk Hydro, British Petroleum, Royal Dutch Shell traded lower.

Technology shares and semiconductor shares are trading higher on the strength in Dell earnings report. Intel, AMD, SanDisk, Maxim Integrated, Texas Instruments traded higher.

Sell-off continued in the large cap stocks towards the end of the session. Shares of Alcoa, DuPont, ExxonMobil sold off at the end of the day. Shares of Las Vegas Sands, Wynn Resorts, Phelps Dodge, Chiquita Brands, Peabody Energy, and DreamWorks Animation suffered more than 2% loss.

Toro Corp, Pacific Sunwear, Nortel, eBay, Maxim Integrated and SanDisk jumped more than 3%.

According to the selection panel for WTO Chief, France's Mr. Pascal Lamay is likely to be conferred to the job. If so, developing nations may find it harder to work with in the upcoming world-wide talks on trade. Mr. Castillo of Uruguay has asked his country to withdraw his candidacy.

South American markets closed lower, with losses in Brazil and Chile exceeding 1%, Mexico down 0.82% but Argentina closing higher by 3.75%.

In Other News

Australian share index closed lower by 0.4% on weaker metals and oil prices in Europe and NY. Shares of BHP and Rio Tinto were hit hard.

Indexes in Tokyo and Hong Kong lower by 1.0% and indexes in Sydney, Singapore and Mumbai were down. Taiwan bucked the trend in the region and was up mildly. Shares in Hong Kong were hit hard by the China’s attempt to curb property speculation.

Russia's offer of $15 billion pre-payment was accepted by Paris Club of sovereign donors. The recent run up in oil prices have helped the world's second largest oil exporter to build foreign exchange reserve of $145 billion, almost unthinkable in 1998 when Russia defaulted on $45 billion on foreign debt. Russia has $95 billion of foreign debt.

Mexican state oil firm Pemex said that it is likely to raise $1.75 billion in Asia, once a year, to diversify its investor base and on the recent fund raising success in the region.

Earnings Headlines


Tiffany, fine jewelry and china retailer, reported 1Q earnings of 27 cents vs. 25 cents a year ago. The strong sales in the U.S. helped to shadow the weakness in Japan. Total sales were up 12% from a year ago.

Delphi, auto parts maker reported 1Q loss of 74 cents vs. loss of 9 cents a year ago on 7% revenue decline.

Lawn maker Toro forecasted 2Q profit to top analysts’ expectation to $1.28-$1.33 from $1.15-$1.20. The company plans to release earnings on May 24th.

Pacific Sunwear, surf and hip hop apparel retailer reported 1Q profit of 23 cents vs. 19 cents a year ago 14% rise in sales. Same-store sales jumped up 3%.

WCI communities, luxury home developer in Florida raised its full-year earnings outlook to $3.50-$3.80 from $3.10-$3.50.

AmeriTrade, online broker, reported that its daily trading volume in April declined by 30% and now sees its current quarter earnings of 16-21 cents vs. 18-23 cents of earlier forecast. The Company opened 34,000 new accounts and closed 19,000 new accounts and had 3.7 million accounts at the end of April 2005.

Shares of Getty Images were trading 4% higher on its acquisition of Photonica West for $51 million from Japanese company Amana.

Intelsat, global satellite communication provider, reported 1Q revenue of $293 million and net loss of $151.7 million including one time impairment charges.

Transmeta, wireless computing chip maker, reported 1Q loss of 14 cents vs. 11 cents a year ago on revenue jump of 30%.

American Science & Engineering reported 1Q profit of $1.04 vs. 24 cents a year ago on 10% revenue growth to $27 million. The current quarter included one-time gain of 52 cents resulting from asset sale.

The transcript of the Commerce Department Import and Export price indexes for April is attached below.

The U.S. Import Price Index increased 0.8 percent in April, the Bureau
of Labor Statistics of the U.S. Department of Labor reported today. The advance, the fourth in a row, followed a 2.0 percent increase in March, and was again led by rising petroleum prices. Export prices rose 0.6 percent in April after increasing the same amount in March.

Import Goods

Prices for overall imports increased 0.8 percent in April after rising 3.5 percent over the first three months of 2005. Petroleum prices rose 3.1 percent in April after a 12.3 percent jump in March and increases of 5.0 percent and 2.2 percent, respectively, in February and January. The price index for import petroleum advanced 43.1 percent over the past year. Prices for non-petroleum imports also increased in April, rising 0.4 percent, following a 0.3 percent advance in March. Nonpetroleum import prices have declined only once in the past 12 months and increased 3.0 percent over that period. Overall import prices rose 8.1 percent for the year ended in April.

The price index for nonpetroleum industrial supplies and materials rose 2.1 percent in April. Higher natural gas prices led the increase, although rising prices for metals, chemicals, and paper also helped to more than offset lower prices for import building materials. Nonpetroleum industrial supplies and materials prices rose 11.5 percent over the April 2004-2005 period. Automotive vehicle prices also advanced in April, increasing 0.2 percent for the month. Although the index has not recorded a decline since September 2003, the April rise was the first increase in four months. Prices for automotive vehicles rose 1.4 percent over the past 12 months.

In contrast, the price indexes for capital goods and for consumer goods declined 0.1 percent in April. The drop in capital goods prices was the third in a row and, like the previous two months, was led by decreasing computer prices. Capital goods prices decreased 0.5 percent over the past year. The decline in consumer goods followed a 0.3 percent decrease in March, but despite the recent declines, the index increased 1.1 percent for the year ended in April.


Export Goods

Prices of exports rose 0.6 percent for the second consecutive month in April, as both agricultural and nonagricultural prices increased. The price index for agricultural exports advanced a modest 0.3 percent following a 3.8 percent jump in March. Despite the recent increases, agricultural prices were down 9.6 percent over the past year. Prices for nonagricultural exports rose 0.5 percent in April. The increase followed a similar advance of 0.4 percent in March, and continued an upward trend over the past year and a half. In contrast to agricultural prices, nonagricultural prices increased 4.4 percent for the year ended in April. Overall export prices advanced 3.1 percent over the same period.

A 2.0 percent rise in nonagricultural industrial supplies and materials prices led the April advance in nonagricultural prices. The increase was attributable to higher prices for fuels, metals, and chemicals. Nonagricultural industrial supplies and materials prices rose 14.9 percent over the past 12 months. Increasing prices for consumer goods and for automotive vehicles also contributed to the rise in overall nonagricultural prices. The price index for consumer goods increased 0.3 percent in April and 1.5 percent over the past 12 months. Automotive vehicle prices rose 0.2percent last month, and advanced 1.2 percent for the year ended in April.

A 0.3 percent decrease in the price index for capital goods, which accounts for almost 40 percent of exports, partially offset the increase in overall export prices. The decrease in capital goods prices followed a modest 0.1 percent drop in March and was the largest monthly decline since June 2004. Prices for capital goods recorded no change over the past year.


Imports by Locality of Origin

Import prices from Canada increased 1.2 percent in April as a 5.7
percent rise in non-manufactured goods more than offset a modest 0.2 percent decline in manufactured goods. The April increase was largely attributed to higher fuel prices and followed a 2.6 percent advance in March. Prices of imports from Canada rose 10.3 percent over the past 12 months.

Higher fuel prices also contributed to increases in the price indexes for imports from the European Union and from Mexico. Import prices from the
European Union rose 0.2 percent in April and 5.5 percent over the past year.
Prices of imports from Mexico advanced 0.3 percent last month and 7.2 percent for the year ended in April.

The price indexes of imports from China and from Japan rose 0.2 percent and 0.1 percent, respectively, in April. Despite last month’s increase, import prices from China declined 0.4 percent over the past 12 months. Prices of imports from Japan increased 1.1 percent for the April 2004-2005 period.


Import and Export Services

Import air passenger fares rose 6.3 percent in April, the first increase since December and the largest monthly advance since June 2004. Air passenger fares from each of the major import regions increased in April, although the 8.4 percent rise in European fares had the largest impact on overall prices. The price index for import air passenger fares increased 5.1 percent for the year ended in April.

In contrast, export air passenger fares decreased 1.8 percent in April following a 1.3 percent increase in March. Lower European and Asian fares both contributed to the overall decline. Despite the April drop, export air passenger fares increased 8.2 percent over the past year.