Domestic Auto Makers Lose Market

123jump.com Staff
01 Jun, 2006
New York City

Rising fuel prices and interest rates are weighing on auto sales. Domestic auto makers reported decline in auto sales as reported by GM, Chrysler and Ford. Nissan sales dropped 7% but sales at Toyota rose 17% bucking the trend. Sales of cars and trucks declined across the board. Ford F-Series truck reported flat sales. Toyota stock rose less than 1% in trading in New York.

[R]3:30PM Familiar pattern of auto sales are repeated in May.[/R]
Auto sales of domestic car makers continue to slide as reported by auto companies. Sales declined 16% at General Motors, 11% at Chrysler and 1.9% at Ford. Analysts had expected a decline of 11% at General Motors, 8.6% at Chrysler Group and 7.6% at Ford. Toyota reported a sales rise of 17% and unit volume rise of 25%. Ford reported 7% decline in SUV sales and flat sales for the best selling F-series trucks. Ford has initiated an aggressive plan to discount vehicles and General Motors Chairman and Chief Executive Rick Wagoner said on Thursday that there are no plans for discounting vehicles but did not rule out the possibility of doing so in the coming months. Nissan reported 7% decline in sales in the month. Ford Investors did not react to the release of sales data except that Toyota Motors ((TM)) stock rose $1.20 in the afternoon trading in New York to $108.58.

[R]12:30PM European markets rebounded on U.S. data.[/R]
European markets reversed from earlier declines to close in the positive territory. The upward move was largely contributed by U.S. economic data, which helped ease inflation and interest-rate concerns. Strong results from Man Group sent the stock up 3.4%, providing support to the market sentiment. Among other advancers, French media company Vivendi rose 1.5% after settling a tax dispute with the Internal Revenue Service on the sale of DuPont in 1995. Technology stocks like Nokia and Deutsche Telekom also moved higher. The German DAX 30 gained 0.3%, the French CAC 40 rose 0.4%, and London FTSE 100 climbed 0.5%.

Oil rose above $71 ahead of OPEC meeting. Light crude July delivery rose 51 cents to $71.80 a barrel. London Brent crude gained 40 cents to $70.81. The dollar gained some ground in European trading. The euro traded at $1.2807, down from $1.2814. The dollar bought 112.55 yen, down from 112.59. The British pound stood at $1.8675, down from $1.8689. European gold prices declined. In London the precious metal traded at $630.60, down from $645.90 per ounce. In Zurich gold fell to $629 from $664.75. Silver closed unchanged at $12


[R]11:30AM Major averages moved notably higher.[/R]
Over the course of morning trading, stock markets have advanced, lifted by easing inflation and interest-rate concerns. The strength in the market came on the heels of the Labor Department''s revised report on Q1 productivity, which showed an upward revision to productivity growth as well as a significant downward revision to labor costs. The three major averages rose well above the unchanged line after showing a lack of direction earlier in the session. The airline sector moved notably higher due to a decrease in the price of oil to $70.50 a barrel. The Amex Airline Index rose 1.4%. Networking stocks showed strong performance, with shares of Ciena ((CIEN)) up 2.3% after reporting a narrower Q2 loss on higher revenue. Retail stocks also posted strength as retailers reported generally strong May sales results in spite of higher gasoline prices. The S&P Retail Index advanced 1.1%. Federated Department Stores Inc. ((FD)) added 80 cents to $73.63 on its sharply better-than-forecast May sales. JC Penney Co.((JCP)) rose $2.78 to $63.54 on strong sales. Food producer H.J. Heinz Co. ((HNZ)) posted a 19% drop in quarterly profit and said it plans to slash 2,700 jobs and close 15 plants to cut costs. Heinz rose 36 cents to $42.71. Significant declines in metals prices, inspiring profit taking, sent gold and other metal stocks lower. Disk drive stocks showed some weakness, with M-Systems ((FLSH)) posting a steep loss of 15% after the company initiated an internal review of its prior stock option grants.

[R]Construction Spending unexpectedly declined.[/R]
The Department of Commerce released its report on construction spending in the month of April on Thursday, showing that spending unexpectedly fell compared to the previous month. The report showed that construction spending fell 0.1 percent in April following an unrevised 0.9 increase in March. Economists had been expecting construction spending to increase by 0.2 percent. The decrease in construction spending reflected a 0.1 percent drop in spending on private construction as well as a 0.2 percent decrease in spending on public construction. The report showed that residential construction fell 1.1 percent in April while non-residential construction spending rose 2.5 percent.


[R]10:30AM Indian Sensex falls on political strife about oil price hike.[/R]
Sensex in India lost 327 points, or 3.1%, to finish at 10,071.42. The turnover on BSE came to $725 million or Rs 3,265 crore, lower than Wednesday’s $760 million or Rs 3,531.80 crore. The market witnessed a very weak breadth, as 2,015 stocks lost while 426 that advanced. Auto shares fell in spite of the optimistic sales for May 2006. Maruti Udyog dipped 7%, to Rs 683. The company announced on Thursday it sold 53,396 vehicles in May, 26% higher than 42,286 units sold in the same period last year. Hero Honda lost 8.5% to Rs 705. Hero Honda Motors reported it sold 3,03,666 units in May, a surge of 34% from 226,072 sold in the same period last year. Bajaj Auto plunged 6.7%, to Rs 2,559 and Tata Motors declined 5.6% to Rs 745. Tata Motors has not reported its sales figures for May 2006.

Metal shares were battered. Hindustan Zinc plummeted 15%, to Rs 607, Hindalco plunged 7.5%, to Rs 164.50, Sterlite Industries lost 6.9%, to Rs 400, and Nalco closed down 4.2%, to Rs 214. The steel sector also declined with Tata Steel shedding 6%, to Rs 485. Reliance Energy lost 8.5%, to Rs 451. Engineering & construction company L&T dived 6.5%, to Rs 2,165.70. The stock has fallen 11.6% over the past two trading sessions from Rs 2,450.50 on 30 May. Cellular services company Bharti Tele-Ventures also dipped 5%, to Rs 347, and Hindustan Lever declined 5%, to Rs 221.90. Cipla plunged 4.9%, to Rs 218 and Dr Reddy’s Lab lost4%, to Rs 1,303. Large cap Reliance Industries dropped 2.8%, to Rs 926 on 2.6 million shares. Refinery shares saw selling pressure on delay in oil price hike. BPCL shed 7.6% to Rs 367, HPCL was down 6% to Rs 287 and Indian Oil Corporation (IOC) edged 4% down to Rs 438.50.


[R] 9:45AM Stocks traded in a lackluster fashion at opening.[/R]
Stock markets lacked direction in early trading on Thursday, with investors looking ahead to the release of the May employment report on Friday. Retail stocks were in focus, posting advance in May, despite soaring gasoline prices. Federated Department Stores Inc.((FD)) added 76 cents to $73.59 on its sharply better-than-forecast May sales. JCPenney Co. ((JCP)) also saw strong sales, lifting its stock $2.26 to $63. The gold sector showed significant weakness in early trading as gold for August delivery dropped $20 at $629 an ounce. Energy stocks were also weak, moving lower along with the price of oil, down 94 cents at $70.35 a barrel, extending recent decline. Shares of Exxon Mobil Corp. ((XOM)) fell 1.3% to $60.13. Meanwhile, the price decrease contributed to some strength in the oil-sensitive airline sector. Some networking stocks showed strong performance, with Ciena ((CIEN)) up 4.7% after reporting a narrower Q2 loss. Among other socks, shares of biotechnology company Gilead Sciences Inc. ((GILD)) rose 1.2% after J.P. Morgan Securities raised its rating on the stock. U.S. telephone company AT&T Inc. ((T)) gained 2.2% after CIBC raised its rating on the company. In the first hour of trading, the Dow Jones industrial average lost 6.24, or 0.06%. The Standard & Poor''s 500 index was up 0.54, or 0.04%, and the Nasdaq composite index rose 4.74, or 0.22%. Bonds steadied after Wednesday''s dive, with the yield on the 10-year Treasury note down to 5.12% from 5.13% late in the prior session.


[R]9:00AM Stock futures indicated a flat opening on economic data.[/R]
U.S. stock futures pointed to a flat opening with the Nasdaq and S&P 500 slightly higher after economic data eased interest-rate concerns, showing that weekly jobless claims rose unexpectedly and labor cost pressures were much better contained in the first quarter. S&P 500 futures were up 0.10 point, even with fair value. Dow Jones industrial average futures were down 8 points, and Nasdaq 100 futures were up 1 point.

In corporate news, retail stocks are expected to be actively traded as a number of big name retailers reported generally strong May sales. Nordstrom ((JWN)) and Limited Brands ((LTD)) posted same store sales growth of 7.8% and 7% respectively, exceeding analyst estimates. Sun Microsystems ((SUNW)), server and software maker, announced plans to cut 4,000 to 5,000 jobs over the next six months, expecting to save $480 to $590 million, with the full impact expected to take effect by the Q4 of 2007. The company added that the plan will result in restructuring charges of $340 to $500 million.

[R]Productivity growth was revised up 3.7%.[/R]
Thursday morning, the Department of Labor released its revised report on first quarter productivity, showing that productivity growth was revised up slightly less than economists expected. The report also showed a significant downward revision to labor costs. The Labor Department said that productivity growth was revised up to 3.7 percent from the 3.2 percent growth originally reported for the quarter. Economists had been expecting productivity growth to be revised up to 3.8 percent. The productivity growth in the first quarter came as output increase by 6.5 percent while hours worked increase by 2.7 percent. Productivity had increased by a more modest 0.2 percent in the fourth quarter. The report also showed that the growth in unit labor costs was revised lower to 1.5 percent from the 2.5 percent previously reported. The 3 percent increase in labor costs previously reported for the fourth quarter was also revised sharply lower to a 0.6 percent drop. The revisions to productivity and unit labor costs are likely to help offset recent concerns about inflation, which may help to ease worries about the outlook for interest rates.

[R]Initial jobless claims climbed unexpectedly.[/R]
The Department of Labor released its report on initial jobless claims in the week ended May 27 on Thursday, showing that jobless claims unexpectedly increased. The report showed that jobless claims rose to 336,000 from the previous week''s unrevised figure of 329,000. Economists had expected jobless claims to fall to 320,000. The less volatile 4-week moving average also increased, rising to 333,500 from the previous week''s revised average of 330,750. This marked the sixth consecutive increase by the moving average. The report also showed that continuing claims in the week ended May 20 rose to 2.433 million from the preceding week''s revised level of 2.414 million. The unexpected increase in jobless claims may raise concerns about the strength of the May employment data due to be released on Friday. Economists currently expect the report to show that the U.S. economy added 180,000 jobs in May.

Brown-Forman Corp, ((BFB)), liquor and luggage maker, reported its fiscal Q4 net income advanced to 63 cents a share, from 50 cents a share in the year-ago period. The company added its Q4 earnings from continuing operations amounted to 61 cents a share. The company beat analysts forecast for earnings of 54 cents a share

Gymboree Corp, ((GYMB)), retailer, reported retail sales in the four weeks ended May 27 advanced 19% to compared with the same period a year ago. The company expects Q2 comparable store sales to rise in the mid-to-high single digits and affirmed its guidance for a loss of 7 cents to 9 cents a share, stock-based compensation inclusive. For 2006, Gymboree forecast earnings of $1.37 to $1.40 a share, following the impact of stock-based compensation.

Abercrombie & Fitch Co, ((ANF)), retailer, reported that May same-store sales advanced 3% and total sales climbed 17% to $185.7 million. The company topped analysts forecast for same-store sales growth of 2.9%.

Dollar General Corp, ((DG)), general merchandise retailer, reported Q1 earnings of 15 cents a share, down from a profit of 20 cents a share a year-ago. Net sales advanced 8.8% in Q1 to $2.15 billion, from $1.98 billion in the year-earlier equivalent period and same-store sales climbed 1.6%. The analysts’ estimate was for a profit of 16 cents a share. Looking ahead, the company forecast earnings of $1.09 to $1.16 a share for fiscal 2006, including stock option expensing of a penny per share. For Q2, the company expects earnings of 18 to 22 cents a share. Dollar General added that it plans to spend about $375 million on capital expenditures.

Cato Corp., ((CTR)), retailer, reported same-store sales declined 2% in May from the year-ago period. The company was expected to report a 2% increase in same-store sales for the period.


[R]8:00AM Delta Air Lines concession deal got approval from a bankruptcy judge.[/R]
Delta Air Lines Inc. and its pilots, who were hit with two major pay cuts in two years, achieved reconciliation, ending a battle that brought the nation''s third-largest carrier close to a devastating strike. Delta and negotiators for the pilots union reached the deal in April. A week later, union leaders ratified the deal, paving the way for the rank-and-file pilots to do the same. Before the agreement being reached, Delta had asked an arbitration panel to reject its pilot contract so it could unilaterally impose the cuts it wanted. The pilots had threatened to strike if the contract was voided. A bankruptcy judge approved the $280-million-a-year concessions deal Wednesday, hours after 61% of the airline''s rank-and-file pilots voted for the pact. Court approval came despite an objection by the government''s pension insurer, which insisted that a $650 million note and $2.1 billion unsecured claim that the company promised the pilots should belong to the agency if the pilots'' pension is terminated as expected. The deal includes an initial 14% pay cut for pilots and assurances the pilots union won''t fight any company effort to terminate the pilots'' pension.

The agreement, which runs through 2009, takes effect Thursday. As part of the settlement, Delta agreed to provide retired pilots an administrative claim of $9 million to cover a portion of certain pension benefits. Delta also said in a filing with the bankruptcy court that it lost $27 million in April. Excluding items, it would have earned $22 million in the 30-day period. As of April 30, Delta had $2.5 billion of unrestricted cash. It has posted losses of more than $14.4 billion since January 2001. Delta said it planned to file thousands of pages of disclosure documents with the court detailing its finances and its obligations. The Pension Benefit Guaranty Corp. said that it was reviewing its options, including the possibility of an appeal.


[R]7:30AM Japanese shares finished higher, other indices fell.[/R]
Asian markets finished mixed. Tokyo''s Nikkei 225 index closed higher, advancing 36.41 points, or 0.24%, to close at 15503.74 points. Auto stocks were among the gainers. Toyota Motor advanced 1.5%, real estate shares also added with Sekisui House gaining 2.2% and bank stocks recovered as well, as Mitsubishi UFJ Financial Group rose 1.3%. Hong Kong’ Hang Seng Index closed 212.62 points lower, or 1.3%, to 15645.27, despite Bank of China''s 15% gain. South Korea’s stocks plummeted, following banks shares, brokerage firms and auto makers. Kookmin Bank, dropped 3.1%, and Woori Finance Holdings shed 4.1%. Daewoo Securities fell 6.8% and Samsung Securities was down 3%. Hyundai Motor lost 3.5% to its lowest point since August 5, 2005. Australia''s benchmark S&P/ASX 200 advanced 1.2% to 5060.6. BHP Billiton advanced 1.5% and Rio Tinto gained 1.9%.


[R]6:30AM European stocks fall on banks and commodity prices.[/R]
European markets fell in early trading. After an hour of trade, London’s FTSE 100 shed 0.4% to 5,698.5, the Xetra Dax declined 1% to 5,636.86 and the CAC 40 lost 0.6% to 4,902.84.On the corporate front, some gainers included Spain’s Cepsa gained 1.3%, Neste Oil added up 0.7%. The decliners were more. Among them were gas and water facilities, with RWE off 2.2%, Eon down 2.4%, Gaz de France slipping 1.3% and Suez down 1%. Despite a strong start, the telecoms slid. The only gainer was Belgacom, rising 0.4%, but Telia Sonera dropped 0.5%.

Light, sweet crude oil for July delivery lost 36 cents to $70.93 a barrel and July Brent at London''s ICE Futures exchange shed 31 cents to $70.10 a barrel. Bullion shed more than 2% Thursday to a one-month low as gold''s fall intensified on a firming dollar. Spot gold dropped to $629.80 an ounce, the lowest since April 27, before slightly recovering to $632. The dollar advanced against major currencies on Thursday after minutes from the Federal Reserve''s latest policy meeting buoyed expectations that the interest rates will be hiked. The greenback was trading at 112.55 yen, down 0.04 yen from late Wednesday in New York. The euro dropped to $1.2779, from $1.2814. The British pound fell to $1.8634 from $1.8689 in New York.