Banks and Insurers Advance

Elena
02 Jun, 2006
New York City

Stocks turned mixed reversing from the initial strength as signs of weak jobs growth offset optimism for a pause in interest rate increases by the Fed Reserve. Interest-rate sensitive companies like banks and insurers advanced. J.P. Morgan Chase & Co. rose nearly 1%, while Wal-Mart Stores, a stock vulnerable to weaker consumer spending, lost 1.2%.

[R]11:30AM Stocks turned mixed on jobs data.[/R]
After posting some early strength, stock markets moved lower with the three major averages trading mixed. Market sentiment lost ground as signs of weak jobs growth for May offset investors' optimism for a pause in interest rate increases by the Federal Reserve. The weaker-than-expected jobs growth raised hopes that the Federal Reserve might stop raising interest rates, but traders also said the data could portend a slowdown in the economy, which would hurt corporate profits. Shares of interest-rate sensitive companies, including banks and insurers, rose. J.P. Morgan Chase & Co. ((JPM)) rose nearly 1% . But Wal-Mart Stores Inc. ((WMT)), which is among the stocks that would be vulnerable to weaker consumer spending in an economic slowdown, lost 1.2%.

The gold sector was one of the market's best performances as the price of gold rebounded from significant weakness in recent sessions. The Amex Gold Bugs Index climbed 1.9%. Energy stocks also advanced, as the price of oil rose, with crude for July delivery up $1.31 at $71.65 a barrel. At the same time the oil price increase contributed to significant weakness in the airline sector, sending the Amex Airline Index up 1.8%. Significant weakness emerged in the housing sector, with Champion Enterprises ((CHB)) and Pulte Homes ((PHM)) posting notable losses. The Philadelphia Housing Sector Index fell 1.3%. The Dow Jones industrial average was down 17.22 points, or 0.15%. The Standard & Poor''s 500 Index was up 0.26 points, or 0.02%. The Nasdaq was up 0.20 points, or 0.01%.


[R]10:30AM Indian Sensex finishes up despite negative market breadth.[/R]
The Sensex in India finished with a 380 point, or 3.77% hike, on 10,451.33, reaching a high of 10,477.35 in the late afternoon session of trade, while its low hit 10,011.45. The turnover on BSE came to to $770 million (or Rs 3,455 crore), up from Thursday’s turnover of $720 million (or Rs 3,275 crore). The market breadth remained in the negative. Only 631 shares gained, 1,777 lost and 48 shares were unchanged. The gainers included Maruti Udyog advancing the most, up 12.93% to Rs 769.90 on a volume of 1.4 million shares. Hindalco soared 9.30% to Rs 182 on 4.5 million shares while large-cap HLL surged 7.31% to Rs 240.10.

Wipro rose 6.80% to Rs 474 on 3.78 lakh shares after agreeing to acquire Enabler, a Europe-based retail solutions provider for 41 million euros. Tata Motors advanced 6.70% to Rs 790 after reporting 45% vehicle sales growth in May, to 44,357 units from 30,593 units a year earlier. ONGC climbed 6% to Rs 1,140 on 4.41 lakh shares while Reliance Industries (RIL) advanced 3.63%, to Rs 959 on 23.70 lakh shares. Among bank stocks, HDFC surged 7% to Rs 1,189.90, ICICI Bank added up 2.85% to Rs 552.50, and HDFC Bank added 3.9%, to Rs 764.80. Among the decliners was Reliance Energy dipping 1.90% to Rs 475 and Tata Power sliding 1.55% to Rs 461. Light commercial vehicle maker, Swaraj Mazda, plummeted 10% to Rs 269.25 following reports of poor results.


[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 strong 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.

[R]Non-farm payrolls rose less than expected.[/R]
Employment rose by much less than expected n the month of May, according to a repot from the Department of Labor, although the unemployment rate still fell to its lowest level since the summer of 2001. The Labor Department said that non-farm payrolls rose by 75,000 in May following a downwardly revised increase of 126,000 jobs in April. Economists had expected payrolls to increase by 180,000 compared to the increase of 138,000 originally reported for April. The relatively modest increase in jobs reflected an expansion in employment service-providing industries, but the gains were partly offset by lost jobs in the retail and manufacturing sectors. As mentioned above, the report also showed that the unemployment rate unexpectedly fell to 4.6 percent, it lowest level since July of 2001. Economists had been expecting the unemployment rate to remain at 4.7 percent. Workers'' average hourly earnings edged up by $0.01 to $16.62 in May. The modest increase, which followed a sharp rise in April, helped to offset concerns about inflation.

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.