Bonds Rise, Stocks Fall

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

Market averages for the most part remained dormant as investors mulled conflicting reports on job markets. May payroll gained 75,000 less than expected 170,000 and hourly wages in May rose 0.1% but unemployment dropped to 4.6%. Market did not trade with a clear direction and remains in a wait-and-see mode. Bausch & Lomb rose on analyst upgrade. Retail stocks continued their climb on same-store sales report. Emerging markets in Brazil, Russia, Mexico and India rebounded sharply.

[R]4:30PM Market trading remains in an uncertain zone.[/R]

-Dow closed down 12.41 points, Nasdaq down 0.45 and S&P up 2.51.
-Yield on 10-year bond closed at 5.00% and 30-year bond at 5.1%.
-Crude oil gained $1.99 to close at $72.33 per barrel.
-Gold advanced $7.90 to close at $635.50 per ounce.

-Asia markets closed higher led by 4% in India, 2% in Indonesia and 1.7% in Thailand.
-European markets closed mostly higher led by a rise of 2.5% in Norway.
-Latin American markets closed higher led by 1.6% gain in Mexico and 0.9% in Brazil.

Market averages managed to close higher but only by a fraction. For the week Dow and Nasadq registered gain of 0.4% and S&P 500 gained 0.5%. Market for the most part was focused on the employment report. The Labor Department reported that 75,000 new jobs were added in May, far lower than what most economists had predicted between 170,000 and 180,000. Unemployment rate fell to 4.6% from 4.7% in May and average hourly earnings rose 0.1% a decline from 0.6% rise in April. The course of interest rate direction, investors’ biggest worry on Wall Street, remains uncertain after these conflicting reports.

Market sectors for the most part did not move much. Bonds moved higher and with that financial services stocks rose. Tech stocks traded mixed with IBM ((IBM)) declining $1.17 to $79.39 at close of regular trading. Recently battered auto stocks lost some more today as General Motors, Ford Motor and Daimler Chrysler declined at close. Ford Motor ((F)) is trading at 10-year low of $7.10 down 13 cents for the day.

Bausch & Lomb ((BOL)) gained $2.02 to $51.32 on an upgrade from Goldman Sachs. The analyst report suggested that the market share loss from the recent product recall related to defective lens solution is contained in the U.S. and will have limited impact in Japan and Europe. Candle maker Blyth Inc. ((BTH)) fell $2.06 to $19.92 on first-quarter loss and declining revenue. Black Box Corp lost 18% or declined $9.51 to $44.42. The company reported earning of 26 cents on revenue of $174 million missing internal and analysts estimates. The company had to restate Italian operations earnings from 2003 to 2006. The company believes that collusion and fraud engaged by some of its employees resulted in a charge of $7.5 million.

[R]3:00PM Emerging markets rebound on the back of New York.[/R]
Emerging markets staged a mild recovery after losing between 20% and 25% in the last three weeks of trading. Volatility continued albeit at a lower volume. Russia, Turkey, India and Brazil were among the biggest losers as investors dumped stocks around the world. Falling commodity and crude oil prices also helped markets in Russia and Brazil to lose values. Markets in Asia recovered on the back of steady rise in New York trading on Thursday. Asian markets advanced led by 4% rise in India and 2% in Indonesia and 1.7% in Thailand. India gained on the strength in auto and industrial stocks. Tata Motors ((TTM)) reported May auto sales jumped 45%.

Markets in Europe recovered as well in today’s trading. Norway and South Africa gained 2.5% and 1.5% respectively. Gold after falling more than 10% staged a mild rebound helping South African market. Rise in crude oil price supported a gain in Norway and rise in Russia’s main index of 5.2%. Energy stocks Lukoil and Sibneft rose more than 5% and Tatneft rose 11%. RTS main index is still 10% blow the peak in the early May.

Markets in Latin America region advanced near close. Mexico gained close to 1.5% on a rebound of 35 stock index IPC. The index lost more than 4.6% in the first three days of trading. American Movil rose 2%, Cemex ((CX)) rose 2.2% and Telmex ((TMX)) rose 1.1%. Brazil index gained 0.9% after falling more than 10% in the last two weeks. Several large and small cap stocks came under heavy selling pressure in the last three weeks of trading. Petrobras ((PBR)) lost 20% in the three weeks of trading but rebounded 1% and recently listed airlines TAM gained 3%.


[R]12:30PM European markets closed mixed on U.S. jobs data.[/R]
European markets finished mostly in the positive as disappointing U.S. payrolls data helped offset concerns about weaker dollar. The euro climbed to $1.2925 from $1.2805 sending some exporter-related issues lower, including chip-equipment maker ASML Holdings, microchip maker STMicroelectronics, and mobile phone maker Nokia. The French CAC 40 gained 0.3%, London FTSE 100 rose 0.3%, while the German DAX fell 0.4%.

Oil rose over $1, reflecting renewed supply concerns on news that eight foreigners working on a drilling rig off the coast of Nigeria had been abducted. Light crude July delivery rose $1.26 to $71.60 a barrel. London Brent crude gained 50 cents to $69.80. Gasoline rose 4 cents to $2.17 a gallon. The dollar sharply dropped in European trading. The euro traded at $1.2928, up from $1.2729. The dollar bought 111.44 yen, down from 112.68. The British pound stood at $1.8847, up from $1.8643. European gold prices advanced. In London the precious metal traded at $632.60, up from $630.60 per ounce. In Zurich gold rose to $633.75 from $629. Silver closed unchanged at $12.


[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%.

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%.

[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 and $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 advanced 11% 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 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.