Weak Data Power Rally

Elena
02 Jun, 2006
New York City

Stocks extended rally in opening hours, boosted by weaker-than-expected nonfarm payrolls data for May, which helped ease inflation concerns and raised hopes that the Fed Reserve will halt its interest-rate hikes.

[R] 9:45AM Stocks rallied at opening on weak jobs data.[/R]
Stock markets opened strong, extending rally after a sharp decline in jobs growth raised hopes that a slowing economy may soon bring an end to the Federal Reserve''s interest rate hikes. The Labor Department said monthly hiring fell by about half in May, with employers adding 75,000 jobs versus a 126,000 gain for April. A slight increase in wages also brightened the inflation picture. Average hourly earnings rose 0.1%, compared with estimates of 0.3%. Positive sentiment was also generated by merger-and-acquisition news, including the New York Stock Exchange''s planned acquisition of stock exchange operator Euronext NV.

Meanwhile, crude futures recovered from recent losses on continuous worries about tension over Iran''s nuclear arms program. A barrel of light crude rose 83 cents to $71.17 on the Nymex. In the first hour of trading, the Dow Jones industrial average added 6.24, or 0.06%. The Standard & Poor''s 500 index was up 3.34, or 0.26%, and the Nasdaq composite index gained 10.21, or 0.46%. Bonds surged on optimism about a possible end to the Fed''s rate tightening. The yield on the 10-year Treasury note tumbled to 5.02% from 5.1% late Thursday.


[R]9:00AM Stock futures indicated a string opening on economic data.[/R]
U.S. stock futures looked poised for a rally at market opening, as weaker-than-expected May employment statistics raised investors’ hopes that the Fed will halt its interest rate increases. The U.S. Labor Department reported that non-farm payrolls increased by just 75,000 in May, far below the 180,000 increase projected by economists. In addition, April''s employment growth was revised down to an increase of 126,000. The weaker-than-expected job growth indicated that wage inflation will not be a threat in the near future.

Kellwood Co. ((KWD)), apparel company, reported Q1 net earnings of 36 cents a share, down 22% from 43 cents a share in the year-ago period. The company said revenue came to $516.9 million vs. $553.5 million. Earnings on an ongoing basis totaled 20 cents a share, down from 54 cents a share in the year-ago period.

Hovnanian Enterprises, Inc., ((HOV)), home builder, reported a Q2 profit of $1.55 per share, a 4.9% decline from Q2 last year, hurt by a cooling housing market. Results still topped analyst estimates of $1.43 per share. In addition, the company reaffirmed guidance from May 2 for fiscal 2006 of $7.20 per share to $7.40 per share. Previous outlook had been for a profit between $8.05 to $8.40.

SeaChange International Inc, ((SEAC)), digital video systems company, reported Q1 operating expenses rose and the net loss broadened to 15 cents a share, from 2 cents a share in the same period in the previous year. The company added that quarterly revenue advanced to $33.2 million from $31.5 million. SeaChange announced that it expects the first half of the year will be better than the second half of last year.

Black Box Corp., ((BBOX)), technical services company, reported Q4 net earnings of 26 cents a share, up from breakeven a share in the year-ago period. Aside from items, the profit was 53 cents a share, up against 39 cents a share in the same period a year ago. Revenue advanced11% to $174.9 million from $157.2 million. For fiscal 2007, the company expects revenues of $1 billion.

Esterline Technologies Corp, ((ESL)), aerospace and defense products maker, reported Q2 net earnings of 68 cents a share, up 34% from 52 cents a share in the year-ago period. The company said revenue totaled $247.9 million vs. $211.6 million. The company added backlog at the end of the quarter was $633 million, nearly 30% higher than last year.


[R]8:00AM The NYSE agreed to acquire Euronext for $9.96 billion.[/R]
The NYSE agreed to acquire Euronext for $9.96 billion in cash and stock, trumping a larger rival offer from Deutsche Boerse AG. Euronext is Europe''s second-largest stock exchange, operating bourses in Paris, Amsterdam, Brussels and Lisbon. On approval of the deal, NYSE Euronext will manage about $2.1 trillion in stock trades each month and boast a market value of about $20 billion. If approved by regulators and shareholders, the consolidation of the NYSE Group Inc. and Euronext would create a single platform where traders could deal in stocks, options, futures, commodities and corporate bonds across two continents for up to 12 hours daily. The merger of NYSE and Euronext would top Chicago Mercantile Exchange Holdings Inc., worth about $15.6 billion. The merging of the two exchanges is expected to launch a wave of consolidation in global financial markets, one that might eventually arrive at a round-the-clock worldwide trading system. Under the proposal, each NYSE share would be converted into one share of common stock of the new combined company NYSE Euronext. Holders of Euronext ordinary shares would be offered the right to exchange each of their shares for 0.98 share of NYSE Euronext stock and 21.32 euros in cash. The acquisition is expected to generate about $375 million in savings. The board of a combined company would include 11 directors from NYSE and nine from Euronext.


[R]7:30AM Asian markets finished higher following US gains overnight.[/R]
Asian markets finished higher. Japan''s Nikkei 225 Index advanced 285.57 points, or 1.8%, to close at 15789.31 points. The benchmark finish swung an early drop sparked by reports that prosecutors were investigating the Murakami investment fund for possible securities law violations during a sale of Nippon Broadcasting System shares. Among the companies which advanced were Mitsubishi Estate, climbing 2.5% and Nomura Holdings, putting up 2.3%. Pharmaceutical stocks also rose, with Takeda Pharmaceutical reporting 1.5%. Hong Kong''s benchmark Hang Seng Index advanced 267.44 points, or 1.7%, to 15912.71. China Mobile, a key component of the blue-chip index advanced 4.3%. China Netcom added up 3.1% and China Netcom rose 3.6%. Singapore''s Straits Times Index closed up 32.72 points, or 1.4%, at 2419.42 points. Singapore Airlines gained 3.3% on profit-taking following declining oil prices. South Korea’s Korea Composite Stock Price Index, or Kospi, closed up 1.1%, or 13.95 points, at 1309.04. Stocks of the three largest shipbuilders, Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, all advanced, reflecting the $2.53 billion worth of orders for the building of supertankers. Australia''s S&P/ASX 200 advanced slightly to closed up 0.3%, or 16.6 points, to 5077.2, despite losses in the mining sector. BHP Billiton lost 0.6% and Rio Tinto dropped 0.5%.


[R]6:30AM European markets advanced on merger deal.[/R]
Markets in Europe were higher in early trade on Friday. Other factors, aside from the merger, were the disappointing purchasing managers’ data and a slightly higher initial claims report, taken as proof of slowing economic growth and a probable relief of inflationary concerns. The telecom sector performed strongly again, following news that a consortium of companies were about to announce a bid for Portugal Telecom. KPN advanced 1.2% after securing a better position by buying Demon Netherlands from Thus. Telefonica added 0.9% following its upgrade by Bernstein and JPMorgan’s lifting its price target on the Spanish operator and reaffirming the “overweight’ rating. Porsche, sports car manufacturer, advanced 3.6% on US sales. Raiffeisen International, Austrian banking, rose 4.8% on an improved rating by Deutsche Bank.

Light, sweet crude oil for July delivery advanced 53 cents to $70.87 a barrel and July Brent on rose 17 cents to $69.56 per barrel. Gold opened Friday at a price of $626.30 a troy ounce, lower from $630.60 late Thursday. The euro rose slightly against the dollar. In morning trading, the euro bought $1.2803, higher than $1.2797 on Thursday in New York. The British pound dropped to $1.8627 from $1.8643, while the dollar advanced to buy 112.75 Japanese yen from 112.68 the day before.