Three-Day Rise

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

For the last fifteen days nervous investors have lowered market values around the world. For the third day in a row market averages rose as inflation, personal consumption and income data revealed that reported inflation is under control. Brokerage, industrial and hotel stocks rose. Las Vegas Sands rose 9% on winning a license to build casino in Singapore. UBS upgraded Goldmans Sachs and raised stcok price target to $180. Chicos, Toro Corp and Ralp Lauren reported higher earnings.

[R]4:00PM Market averages gained for three days in a row.[/R]

-Dow closed up 67.56 points, Nasdaq up 12.14 and S&P 500 up 7.28.
-Yield on 10-year bond closed at 5.05% and on 30-year bond closed at 5.16%.
-Crude oil gained 5 cents to close at $71.37 per barrel.
-Gold closed up $2.50 to $651 per ounce.

-Asian markets closed up close to 2% led by rise of 3.5% in Philippines and 1.8% in Japan. Thailand rose 2.4% and Korea rose 2.1%.
-European markets closed higher led by a rise in 4% rise in Norway and 2% rise in U.K.
-Latin American markets rose led by a steep rise of 6% in Argentina and 1% rise in Mexico and Chile. Brazil gained 2% on weaker inflation expectations in the U.S.

Market averages gained for the third day in a row after a period of weak sentiment starting May 10th. The lack of interest rate direction from the Fed left investors lurching from one economic report to the other for the last fifteen days and today was no different. After a steep fall in durable goods orders yesterday and fall in existing home sales, investors confronted inflation data. Core inflation for April was reported at 0.2% and after a rise of 0.3% in March. Inflation for the last 12-months came in at 2.1%. Fed has expressed that it is comfortable with core rate of inflation between 1% and 2%. Personal income rose 0.5% in April and consumption rose 0.6%. Market averages gained momentum in the last hour of trading and reached higher level.

The license for the casino-resort to be located in Singapore’s Marina Bay was awarded to Las Vegas Sands Corp ((LVS)). today. The company’s bid for the casino-resort totaled $3.16 billion, topping the previous world’s most expensive casino, the Wynn Las Vegas ((WYNN)), at $2.7 billion, which had been completed only last year. Sand’s expects to open the new casino in 2009. It also plans to involve competing rivals MGM ((MGM)) and Harrah’s Entertainment ((HET)). The casino is expected to be built on a 50.9 acre waterfront site near Singapore’s financial district.

[R]3:15PM Steel stocks gained on hopes.[/R]
Steel stocks rose after a merger plan between Arcelor and Russian steel maker Severstal was released. Arcelor, Luxembourg based steel maker, fighting hostile bid from Mittal ((MT)) Steel based in the Netherlands has agreed to merge with its long-time steel partner Severstal. Arcelor believes that the merger plan with Severstal creates better value for its shareholders and values the merger plan at euro 44 compared to deal proposed by Mittal Steel which is valued at euro 37.74. Arcelor and Severstal have been working together to produce steel for automobiles and other specialty steels for a while. Arcelor defending itself said that the merger between two specialty steel companies and transparent corporate governance will be better than its merger with Mittal. Mittal believes that this is a ‘second class’ deal. Fate of Arcelor will be decided by special meeting of shareholders. Steel stock rose as market forecasted that Mittal may now turn its eye on other steel makers. Corus ((CGA)) rose 2%, U.S. Steel ((X)) rose 4% and Nucor ((NUE)) rose 3%. Fate of Arcelor is far from certain, which merger plans will be favored by investors is not clear. Both merger plans have their merits. Mittal gained 2.5% in New York trading. Arcelor is valued at $27 billon while Mittal is valued at $25 billion.

[R]2:00PM Market averages maintained a positive bias.[/R]
Market averages maintained a positive bias in the afternoon trading as buyers showed enthusiasm on the third straight day. With more than two stocks advancing for every stock declining on NYSE three popular averages Dow, Nasdaq and S&P 500 clocked 0.5% gains. Financial brokerages, banks, airlines, hotels, casinos and industrial stocks led gainers. Tech, Internet and telecom stocks declined a fraction. It was hard to find a sector that was in a decline. Chico’s rose 2% or 60 cents to $30.54 on earnings. Chico’s FAS, Inc. ((CHS)) met analyst’s average expectations of 29 cents a share in Q1 compared to 26 cents a share a year ago. Net income rose to $52 million from $47 million in the year-ago period. Q1 revenues increased 19.8% to $392 million from $327 million, which the company reports is a record.

[R]12:30PM European markets rallied for a second straight session.[/R]
European stocks rallied for a second consecutive session, boosted mainly by resource stocks after Arcelor, fighting off a hostile bid from Mittal Steel, agreed to merge with Russian Severstal. Shares of Arcelor dropped 3%, while Mittal rose 2%, as well as other steelmakers like German Thyssenkrupp, up 4.8%, Corus, rising 3.4%, and Salzgitter, up 6.7%. A positive sentiment on Wall Street, generated by mild core inflation data, also provided support. Exchanges also advanced Friday after Credit Suisse upgraded Germany''s Deutsche Boerse and Euronext to outperform from under-perform. The German DAX 30 rose 1.4%, the French CAC 40 climbed 1.9%, and London FTSE 100 surged 2%.

Oil prices were steady ahead of the approaching U.S. driving season. Light crude July delivery gained 18 cents to $71.50 a barrel. London Brent crude lost 3 cents to $70.65. European gold was steady Friday. In London the precious metal fell slightly to $645.90 per ounce from $646. In Zurich gold traded unchanged at $643.70. London silver was unchanged at $12. The dollar advanced in European trading on economic data. The euro traded at $1.2712, down from $1.2793. The dollar bought 112.64 yen, up from 112.69. The British pound stood at $1.8707, down from $1.8717.


[R]11:30AM Stocks posted modest gains.[/R]
Although stock markets advanced Friday, stocks were unable to sustain most of the gains as buying interest remained subdued ahead of the holiday weekend. The Nasdaq and S&P 500 dropped below the flat line for a while, but soon after that moved upside again. Most of the major sector indices showed modest gains only. However, the airline sector showed a significant strength, helped by Frontier Airlines ((FRNT)) which rose 4.6% after the company reported a wider Q4 loss but said it expects to report a profit in the Q1. The Amex Airline Index was up 1.4%. The biotechnology sector was another notable mover to the upside, with Celgene ((CELG)) continuing to post a notable gain after the FDA granted accelerated approval to Thalomid for the treatment of blood cancer. Brokerage stocks led gainers in the financial sector amid upgrades of Charles Schwab, Merrill Lynch and Goldman Sachs. Shares of Goldman Sachs ((GS)) rose 2.3% after UBS upgraded its rating on the company''s stock to Buy from Neutral. Schwab ((SCHW)) gained 2.3% after an upgrade to buy at Bank of America. Merrill Lynch ((MER)) rose 1.9% after Wachovia upgraded the stock to outperform from market perform and cited a $4.4 billion goodwill transfer to BlackRock. Among other stocks, shares of Navistar ((NAV)) climbed 14.7% after MAN AG confirmed that it is considering taking a stake in the truck and engine company. The Philadelphia Gold and Silver Index moved down 1.2%, reflecting weakness among some metal stocks as metal prices turned lower after seeing some early strength.


[R]10:30AM Indian Sensex rebounds to close in an upbeat mood.[/R]
Sensex in India gained 143.03 points or 1.3% to close at 10,809.35. The Indian benchmark rose up to 11,050.77 in intra-day. The turnover on BSE came to $670 million or Rs 3,016 crore up from Thursday’s $830 million or Rs 3,750 crore. The market breadth was positive as 1,811 stocks advanced and 656 stocks that lost and 54 stocks remained unchanged. Automotive stocks led the gainers. Hero Honda soared 6% to Rs 848, TVS Motors advanced 5% to Rs 129, Bajaj Auto gained 4.4% to Rs 2,912 and Hindustan Lever rose 3.3% to Rs 245. Steel shares also gained. Tata Steel advanced 5% to Rs 539, SAIL rose 7% to Rs 83.30 and JSW Steel jumped 9.5% to Rs 281. Cipla surged 5% to Rs 234.60 on 0.7 million shares changed hands on BSE. Infosys advanced almost 3% to Rs 2,920.50 after its ADR in New York trading rose 5.3% on Thursday to $72.37. The stock though finished off its high of Rs 2,965.

Reliance Communication Ventures rose 6.6% to Rs 275 on the ruling that it can access to telephone switched and international landing junctions for telecom traffic in an International Court of Arbitration. The ruling permits Reliance to route international calls through VSNL telecom infrastructure. L&T advanced 3% to Rs 2,368 but the stock closed below its high of Rs 2,475. L&T’s board meets on 7 June to consider bonus issue. Metal shares closed higher as buyers hunted for bargains following a recent steep decline in their prices. Hindustan Zinc advanced 6% to Rs 698, Sterlite Industries rose 3.5% to Rs 408 and Nalco edged 3.4% higher to Rs 258. But Hindalco declined 0.3% to Rs 185.

Several construction companies advanced. Nagarjuna Construction soared 7.4% to Rs 350, IVRCL Infrastructures surged 6.5% to Rs 244.55, Tantia Construction rose 5.8% to Rs 178, Sadbhav Engineering added 5% to Rs 389.85. Indian Oil Corporation advanced 3.7% to Rs 469. The company posted today a strong Q4 March 2006 net profit to of $900 million or Rs 4,031 crore.


[R] 9:45AM Stocks advanced on personal income and spending data.[/R]
Stocks moved to the upside at opening after posting a significant strength in Thursday session. The early positive sentiment was generated by key economic data on personal income and spending which raised hopes that interest rates have risen enough to keep economic growth under control. The inflation component of the Commerce Department''s report on personal income and spending showed that consumer prices, excluding food and energy prices, rose 0.2% in April after a 0.3% increase in March. However, core prices rose at an annual rate of 2.1% in April compared to the 2% annual rate of growth seen in the previous month. The increase in April marked the fastest annual rate of growth since March of 2005.

The broker/dealer sector moved significantly higher, up 1.8%. The airline sector was another notable mover to the upside, up 1.2%, helped by a slight moderation in oil prices, ticked up by 1.2%. Gold and energy stocks posted weakness in the opening hours of Friday trading. In the opening minutes, the Dow Jones industrials climbed 32.02 points to 11,243.07, the Nasdaq Composite rose 8.41 points to 2,206.65, and the S&P 500 gained 2.54 points to 1,275.42. Bonds stayed flat despite the mild economic news, with the yield on the 10-year Treasury note unchanged at 5.07 percent from late Thursday.


[R]Personal income grew less than expected, while personal spending growth met expectations.[/R]
Friday morning, the Department of Commerce released its report on personal income and spending in the month of April. The report showed that personal income rose less than expected while personal spending growth met expectations. The Commerce Department said that personal income increased by 0.5 percent in April, matching the increase seen in the previous month. Economists had been expecting personal income to increase by about 0.7 percent. At the same time, the report also showed that personal spending rose 0.6 percent in April following a downwardly revised 0.5 percent increase in March.

The increase in personal spending came in line with economist expectations. Nonetheless, many traders were focused on the inflation component of the report, which showed that consumer prices, excluding food and energy prices, rose 0.2 percent in April after a 0.3 percent increase in March. The report also showed that April consumer prices, excluding food and energy prices, rose 2.1 percent year-over-year compared to the 2.0 percent annual rate of growth seen in the previous month. The increase in April marked the fastest annual rate of growth since March of 2005. The faster pace of inflation may raise some concerns about the outlook for interest rates, as the Federal Reserve has said that its upcoming decisions on rates will be heavily dependent on the outlook provided by incoming economic data.


[R]9:00AM Stock futures were mixed ahead of economic data.[/R]
U.S. stock futures were mixed Friday, ahead of the long holiday weekend and several economic data releases, including the April core personal consumption expenditure deflator and data on April personal income and personal consumption expenditure. On Friday steelmakers are expected to be in the spotlight after Arcelor agreed to merge with Russia''s Severstal. Other European steelmakers like Corus Group advanced after the deal on consolidation hopes. Brokerages may draw attention after three of them, Goldman Sachs, Merrill Lynch & Co., and Charles Schwab drew upgrades. General Motors ((GM)) was upgraded for a second time in three days, with Prudential raising its rating of stock to overweight. Large-sized women''s apparel company Chico''s FAS posted a 20% sales increase and Weight Watchers International''s $250-million buyback plan. Dow Jones futures were recently up 12 points, S&P 500 futures eased 0.7 of a point, and Nasdaq futures were down 0.8 of a point.

Rex Stores Corp, ((RSC)), consumer electronics retailer, reported Q1 earnings of 13 cents a share, down from a profit of 48 cents a share a year-ago. The company added that it incurred $600,000 in stock option expense in Q1. Sales declined to $86.1 million from $87.9 million in the same period a year ago while same-store sales inched 0.5% higher in Q1.


[R]8:00AM Lay and Skilling were found guilty on Enron-related charges.[/R]
On Thursday, chairman Kenneth Lay and former president Jeffrey Skilling of former Enron Corp., were found guilty on Enron-related charges. A jury capped a four-month-long fraud and conspiracy trial, returning guilty verdicts against the two executives. Kenneth Lay, Enron''s founder, was convicted of all six counts in the main trial, as well as of four charges of bank fraud and making false statements to banks in a separate non-jury trial before U.S. District Judge Sim Lake. Skilling was convicted of 19 counts of fraud, conspiracy and insider trading. About 5 years ago Skilling sold 500,000 shares of Enron stock for $15.5 million, for which he was convicted of insider trading. He was acquitted on the remaining nine insider trading charges.

Lake set Sept. 11 as sentencing date for Skilling and Lay. Skilling faces a maximum of 185 years in prison. For Lay, the fraud and conspiracy convictions carry a combined maximum punishment of 45 years. Jurors found out that the men, who received millions in pay and stock options, had repeatedly lied to cover up accounting tricks and business failures that led to the company''s 2001 destruction. The collapse wiped out more than $60 billion in market value, almost $2.1 billion in pension plans and 5,600 jobs.

Skilling remains free on $5 million bond, which restricts him to the continental U.S. Lay submitted his passport and posted a $5 million bond secured with property. The Enron founder also was ordered to stay in the Southern District of Texas or Colorado. The government''s victory caps a 4 1/2-year investigation that resulted in 16 guilty pleas from ex-Enron executives, including former Chief Financial Officer Andrew Fastow and former Chief Accounting Officer Richard Causey.


[R]7:30AM Asian stocks advance on positive overseas sentiment.[/R]
Asian markets finished higher. Japan’s benchmark Nikkei 25 Average advanced 1.77% to close at 15970.76 points. Among gainers in Tokyo were Toshiba Machine, advancing 2.8% and Nippon Steel, climbing 2.6%. Banking and other financial sector shares also recovered some of their losses Friday after Thursday’s sell-off. Resona Holdings soared 7.3% and Mitsui Sumitomo Insurance reported a 2.9% gain. Hong Kong stocks recouped, led by property and export companies. The Hong Kong’s Hang Seng Index advanced 1.3% to 15895.10. South Korea’s Composite Stock Price Index, or Kospi, finished up 2.1% at 1322.43, hitting a six-month low on Thursday. Kookmin Bank surged 7.4%, SK Telecom advanced 5.1% and Hyundai Marine & Fire Insurance rose 7.4%. Taiwan’s Weighted Price Index advanced 0.3% to 6879.51 and Shanghai Composite Index climbed 1.4% to 1613.89. The Shenzhen Composite Index advanced 2% to 404.43 and Australia''s S&P/ASX200 index gained 1.6% to 5053.7.

[R]6:30AM Europe advances in the morning on Arcelor and U.S. higher close.[/R]
European markets started higher in the morning session of trading. On the corporate front, Arcelor, still fighting a hostile takeover bid from Mittal Steel, announced that it had agreed to buy Russia’s Severstal. Despite the deal, Arcelor fell 4.1%, while its rival Mittal Steel gained 2.8%. Another steel maker, Thyssen Krupp, also added 4.2%. Natexis Banque Populaire, an investment bank soared 10% on hopes that the merger with Caisse d’Epargne’s IXIS can now proceed. Deutsche Börse jumped 3.9% and Euronext climbed 2.4% after being upgraded both by Credit Suisse to “outperform”.

Crude oil advanced 15 cents to $71.47 a barrel by 0247 GMT; London Brent crude gained 17 cents at $70.88. Gold bullion opened Friday at a bid price of $650.80 a troy ounce, higher than $643.75 late Thursday. The dollar gained against the euro. The euro bought $1.2785 in morning European trading, down from $1.2793 in New York late Thursday. The British pound remained virtually unchanged, moving up to $1.8718 from $1.8717. The dollar advanced to 111.92 Japanese yen from 111.76 yen.