EMC and RSA in Merger

Elena
30 Jun, 2006
New York City

Stocks moved to the downside after the initial rise as investors turned to profit taking from Thursday''s rally. In corporate news, General Motors rose $1.57 to $29.01 after major holder Tracinda Corp. asked the auto maker to enter an alliance with Renault and Nissan. RSA Security agreed to be acquired by EMC Corp for $2.1 billion in cash.

[R]11:30AM Stocks reversed from earlier gains due to profit taking.[/R]
Profit taking helped stocks turn lower over the course of early trading on Friday, with the major averages pulling back well off their highs for the session and into negative territory. Computer hardware stocks posted significant weakness in morning trading, with Palm ((PALM)) helping to lead the sector lower after the handheld computer maker reported strong Q4 profit growth but forecast Q1 earnings and revenue below analyst estimates. The weakness in the sector was also contributed by a notable loss by Apple ((AAPL)) which fell down 3.7% after the company said it discovered some irregularities related to its issuance of stock option grants. Significant weakness was also visible in the semiconductor sector, dragged by KLA-Tencor ((KLAC)), Advanced Micro Devices ((AMD)), and Infineon ((IFX)). Housing stocks also came under pressure, rebounding from yesterday’s gains on the heels of the Federal Reserve announcement. The Philadelphia Housing Sector Index fell 0.7%. Meanwhile, gold stocks continued to benefit from a sharp rise by the price of gold. The biotechnology sector also showed strength, helped by gains for Cephalon ((CEPH)) and Vertex ((VRTX)). Some pharmaceutical stocks also moved to the upside, contributing to a 1.3% gain by the Amex Pharmaceutical Index. King Pharmaceuticals ((KG)), AstraZeneca ((AZN)) and GlaxoSmithKline ((GSK)) helped to lead the sector higher. In morning trading, the Dow fell 3.68, or 0.03%. The Standard & Poor's 500 index fell 0.76, or 0.06%. The Nasdaq composite index fell 7.09, or 0.33%. Bonds rose, with the yield on the 10-year Treasury at 5.19%, down from 5.20% Thursday.


[R]10:30 AM The Sensex ends trading with a surge.[/R]
The Sensex in India closed with a surge of 447.09 points, or 4.40%, at 10,609.25. The benchmark experienced a highly volatile session. The turnover on BSE was $730 million or Rs 3,301 crore, higher than Thursday’s turnover of Rs 2,866 crore. The market-breadth was strong with 1,695 shares advancing, 680 declining and 81 shares were unchanged.

India reported that its external debt in foreign currency rose to $125.2 billion at the end of the March 2006 from $119.2 billion at the ned of last year 2005. Reserve Bank of India also reported that the company’s current account in the first quarter of 2006 swung to surplus of $1.82 billion from a revised deficit of $3.83 billion in the last quarter of 2005. However, current account deficit in the fiscal year 2006 ending in the month of March rose to $10.6 billion from $5.4 billion a year ago. The current account deficit is now at its peak since economic reforms were started in the year 1990.

Metals stocks gained 6%, Capital goods stocks rose 5% and banking stocks rose between 2% and 3%. UTI Bank is in the process of issuing convertible debntures to meet its capital requirements and fund international expansion. Metals stocks led the gainers with Jindal Steel up 12%, Hindustan Zinc up 9%, SAIL up 8% and Sterlite up 7%.

Reliance Communication Ventures led the gainers among most active stocks with a gain of 12% to Rs 250.55 on volume of 4.2 million. The company’s promoters have been raising their stake through gradual acquisition in the past few days. Also, there are reports that the finance minister has allowed the telecom company to increase its foreign direct investment (FDI) limits to 74%.

Hindustan Lever surged 8.7% to Rs 229.20 on a high volume of 6.6 million shares. Maruti Udyog soared 8.5%, to Rs 796 on 0.8 million shares. News reports indicated that the company will make more than 100,000 cars for Japanese auto-giant Nissan motors. Large-cap Reliance Industries climbed 4.71%, as well, to Rs 1,056.70 on 2 million shares and surged to an intra-day high of Rs 1,062.

Hindustan Construction climbed for the third day in a row soaring nearly 13%, to Rs 118.60 as 0.6 million shares. From Rs 97.65 on 27 June, the stock has advanced 21% in the past three trading sessions.

Among large-caps, Ranbaxy was the lone decliner, slipping 0.83% to Rs 356.90. Jet Airways also dipped, striking a new 52-week low of Rs 585, following the ongoing uncertainty between Jet and Air Sahara merger. It finished 2.82% lower at Rs 592 on 67,031 shares.

Reliance Industries led the most active stocks on BSE with a total turnover of $50 million or Rs 225.78 crore, followed by Hindustan Lever with $32 million or Rs 144.74 crore and Tata Steel with $30 million or Rs 133.62 crore.


[R]9:45AM Stocks opened higher on GM news and upbeat economic data.[/R]
Stocks moved higher in early trading, reflecting upbeat inflation data on personal income and spending a day after a big rally gave the major indexes their largest gains in more than three years. The Commerce Department said that spending rose by just 0.4% last month after a 0.7% gain in April. Income growth also rose just 0.4%, reflecting weaker job growth. In company news, General Motors Corp. ((GM)) rose 8% after major holder Tracinda Corp. asked the auto maker to explore joining an alliance with France''s Renault and Japan''s Nissan Motor Co. Ltd. In early trading, the gold sector was one of the market''s best performances as the price of gold has moved sharply higher amid some recent weakness in the value of the U.S. dollar. The biotechnology sector sent the Amex Biotechnology Index up 1.6%, with Cephalon ((CEPH)) and Vertex ((VRTX)) turning in two of the sector''s most notable gainers. Cephalon received an approval letter from the FDA for its cancer pain treatment, while Vertex benefited from news that it had formed a partnership with Johnson & Johnson ((JNJ)) to develop its hepatitis C treatment. Some computer hardware stocks came under pressure, with Palm ((PALM)) and Apple ((AAPL)) posting notable losses. Palm dropped 10.5% after it forecast Q1 earnings and revenue below analyst estimates. In the first hour of trading, the Dow Jones industrial average rose 38.10, or 0.34%. The Standard & Poor''s 500 index rose 3.20, or 0.25%. The Nasdaq composite index rose 6.51, or 0.3%. Bonds were flat, with the yield on the 10-year Treasury at 5.20% Thursday.


[R]9:00AM Stocks futures pointed near the flat line.[/R]
U.S. stock futures were indicating some caution early Friday morning, following one of the biggest rallies in recent time, powered by the Fed''s policy statement on interest rates. The Dow climbed more than 200 points and the Nasdaq surged 3% advance. On Thursday the Federal Reserve announced its decision to raise interest rates by a quarter point for the seventeenth consecutive time. On the economic outlook, the Fed said that U.S. economic growth is moderating from the strong pace seen earlier in the year, adding that inflation expectations remain contained due in part to ongoing productivity gains. Of companies in focus, Apple ((AAPL)) said it started an investigation of executive stock options granted over a 4-year period, including a grant to Chief Executive Steve Jobs. Shares of Palm ((PALM)) may decline after posting strong Q4 profit growth but forecast Q1 earnings and revenue below analyst estimates. Research In Motion ((RIMM) is expected to rise after posting a 35% sales increase, meeting analyst expectations on top-line growth. On the deal front, RSA Security ((RSAS)) agreed to be bought for $2.1 billion in cash by EMC Corp. Dow Jones futures were recently 13 points lower, S&P 500 futures dropped 1.5 points, and Nasdaq futures dropped 5 points.


[R]Personal income and spending moderately advanced.[/R]
Friday morning, the Department of Commerce released its report on personal income and spending in the month of May. The report showed that personal income rose more than expected while personal spending growth came in line with economist estimates. The Commerce Department said that personal income rose 0.4 percent in May following an upwardly revised increase of 0.7 percent in April. Economists had expected personal income to increase 0.2 percent compared to the 0.5 percent increase originally reported for the previous month. The report also showed that personal spending increased by 0.4 percent in May after rising by an upwardly revised 0.7 percent in April. Personal spending was expected to increase by 0.4 percent compared to the 0.6 percent increase originally reported for April. Subsequently, the personal savings rate fell to a negative 1.7 percent in May from a negative 1.6 percent in April. This marked the twelfth consecutive month that personal spending exceeded disposable personal income. The report also showed that consumer prices rose 0.4 percent in April following a 0.5 percent increase in April. Excluding food and energy prices, consumer prices rose 0.2 percent in May, matching the increase seen in the previous month. Additionally, the Commerce Department said that consumer prices rose at an annual rate of 3.3 percent in May compared to the 2.9 percent increase seen in April. Consumer prices rose 2.1 percent year-over-year excluding food and energy prices, unchanged from the previous month.

AZZ Inc., ((AZZ)), maker of electrical products, reported Q1 earnings of 71 cents a share, up from a profit of 38 cents a share a year-ago on 17% revenue growth The company said its backlog jumped 42% to $92.1 million as of May 31. AZZ lifted its outlook for fiscal 2006 to earnings of $1.85 to $1.95 a share.

IMI Plc, ((IMI)), U.K. engineering group, announced that it expects first-half profit before restructuring costs and amortization to be in the range of 84 million pounds to 87 million pounds ($153 million to $158 million), higher than 69.6 million pounds last year. IMI also said that restructuring costs will increase to around 7 million pounds from 2.2 million pounds, in part because of the relocation of some if its U.S. fluid power operation. The company added that trading in its fluid control and indoor climate units has been strong, but its retail and beverage dispensing units have performed worse than last year

Hooper Holmes, ((HH)), risk assessment services company, reported Q1 net loss of 2 cents a share, down vs. earnings of 3 cents a share a year-ago. If not for non-recurring items, the loss would have been 1 cent a share, matching the analyst estimate. Revenue for Q1 dropped to $76.8 million from last year's $82 million, as weakness in its core paramedical business led to a decline in revenue at its Health Information Division.


[R]8:00AM BP Apple admits possible stock options could be mishandled.[/R]
Apple Computer Inc. acknowledged that some stock options awarded to employees might have been mishandled, a problem threatening to raise questions about the accuracy of past financial statements. The maker of personal computers and the iPod music player said that its own internal investigation had uncovered ‘irregularities’ in employee stock options issued between 1997 and 2001.

Apple said it had hired an outside lawyer to lead an investigation into its past stock options and had also notified the Securities and Exchange Commission of the problem. Subsequently, the SEC launched its own inquiry after other companies raised a red flag about their past stock options. Nearly half of the 57 companies that have disclosed stock option trouble are based in Silicon Valley and other parts of the San Francisco Bay area.

Most of the stock option investigations so far have revolved around a practice known as ‘backdating.’ Stock options become more valuable as the market price rises above the exercise price, so backdating fattens the recipient''s profit. Backdating stock options isn''t necessarily illegal, but it can cause a company to deduct employee compensation expenses improperly that could exaggerate profits and result in an underpayment of taxes. Apple didn''t say whether its stock option trouble involved backdating.


[R]7:30 AM Asian stocks rally in the wake of Fed’s decision on rates.[/R]
Asian markets finished higher on Friday. In Tokyo, the blue-chip Nikkei 225 index advanced 2.54% to settle at 15505.18. Auto stocks led the way, as Nissan Motor and Mazda Motor both surged 5% and Toyota Motor gained 4.18%. Oil-sector stocks were also buoyed as crude-oil prices advanced. Inpex Holdings soared 6.8% and Nippon Oil gained 2.8%. Hong Kong''s Hang Seng Index advanced 2.54% to16267.62. Cheung Kong Holdings advanced 3.7%, while Sun Hung Kai Properties climbed 2.6%. Sino Land rose 7.4% and Hang Lung Properties added 6.11%. In Seoul, the Korea Composite Stock Price Index, or Kospi, setttled up 2.5% at 1295.15. Financial shares bounced back, leading the gainers in the broader market. Kookmin Bank surged 3.9%, Hana Financial Group rose 3% and Industrial Bank of Korea jumped 4.6%. The Weighted Price Index of the Taiwan Stock Exchange gained 1.5% to 6704.41, while Sydney''s S&P/ASX200 index rose 1.53% to 5037.9.

[R]6:30 AM European stocks surge after Fed’s dovish statement.[/R]
European markets traded higher on Friday. The U.K. FTSE 100 index gained 1% at 5,851, the German DAX Xetra 30 index advanced 1.4% at 5,658, the French CAC-40 index rose 1.3% at 4,941. The advance was broad-based, but energy stocks were among the leaders after strong gains for their US peers as crude prices advanced above $73 a barrel, closing in on the $75.35 record set in April. Norway’s Statoil gained 2.5%, while France’s Total added 1.5% and Finnish refiner Neste Oil climbed 2.1% . Top gainers also included technology companies including Ericsson, up 2.1%, and automakers such as Renault, 1.3% higher. European movers included Germany''s Siemens and Bayer after they struck a deal over Bayer''s diagnostics division. Industrial conglomerate Siemens gained 1% after it announced late Thursday that it has agreed to buy Bayer''s diagnostics unit for 4.2 billion euros in an effort to expand its healthcare equipment and services business. Bayer shares surged 4.1% after the news.

Light sweet crude oil for August delivery gained 18 cents to $73.70 a barrel, while Brent crude futures on the ICE Futures exchange in London advanced 11 cents to $73.11 a barrel. Gold advanced to a two-week high of $602.30 an ounce before easing to $600.10/600.80 by mid-morning trading, up from $592.00/594.00 late in New York on Thursday. The dollar extended losses across the board after the Fed''s latest policy statement signaled a pause in the central bank''s long monetary-tightening campaign. The euro bought $1.2702 in morning European trading, up from $1.2644 in New York late Thursday. The British pound climbed to $1.8330 from $1.8260. The dollar also fell Friday against the Japanese currency, slipping to 114.74 yen from 115.26 yen.