Alcoa, Lucent Weigh on Sentiment

Elena
11 Jul, 2006
New York City

Stocks started the trading session in the negative after a disappointing revenue report by Alcoa and a profit warning by Lucent Technologies. In released earnings news, Pepsi Bottling Group, producer of Pepsi-Cola beverages, reported Q2 net income of 61 cents a share, against 59 cents last year on 10% higher revenue. LG.Philips LCD reversed to a loss in Q2 of 322 billion won compared with a profit of 41 billion won in the same period last year.

[R]9:45AM Stocks opened lower on news from Alcoa and Lucent.[/R]
U.S. stocks started the trading session in the negative after a disappointing revenue report by Dow component Alcoa Inc. ((AA)) and a profit warning by telecommunications-equipment maker Lucent Technologies Inc. ((LU)) raised concerns about the strength of corporate earnings. In early trading, the airline sector posted considerable weakness, with AMR ((AMR)) and Continental ((CAL)) turning in two of the sector''s worst performances. The Amex Airline Index dropped 3.2%. Disappointing news from Lucent helped telecommunication and networking stocks move to the downside as the company forecast weaker-than-expected Q3 results. At the same time, the energy and gold sectors showed some strength as the prices of oil and gold moved higher in early trading. In early trading, the Dow dropped 16.81, or 0.15%. The S&P 500 was down 1.14, or 0.09%, and the Nasdaq composite index lost 6.01, or 0.28%. Bonds edged higher, with the yield on the 10-year Treasury note slipping to 5.12% from 5.13% late Monday.


[R]9:00AM Stock futures pointed to a lower start.[/R]
U.S. stock futures posted weakness early Tuesday morning, with the Nasdaq standing out as the worst performer. On Monday market averages finished mixed as the Dow moved moderately higher, while weaker technology on profit warnings from EMC ((EMC)) and Advanced Micro Devices ((AMD)) sent the Nasdaq lower. The early decline Tuesday is contributed to concern that profit and sales figures from aluminum giant Alcoa ((AA)) and telecommunications-equipment maker Lucent Technologies ((LU)) may be a harbinger of a disappointing second-quarter earnings season. Lucent Technologies announced after market close that it will rake in $300 million less in quarterly revenue than analysts expect. Shares of Alcatel, which will soon acquire the company, dropped 5% in Paris. Another piece of disappointing earnings news came from Alcoa which reported a 62% profit jump in Q2 but a slower-than-forecast 19% sales rise. Alcoa shares dropped over 4% in light Frankfurt trade on Tuesday. LG.Philips LCD ((LG)) continued the trend of negative news in the flat-screen television market after swinging to a $341 million quarterly loss. It also lowered its capital expenditure guidance. Dow Jones futures were recently lower 31 points, S&P 500 futures fell 2.5 points, and Nasdaq futures weakened 6.2 points.

Lucent Technologies Inc, ((LU)), communications networks developer, reported it expects Q3 per-share income of 2 cents, down from 7 cents in the year-earlier quarter, missing analysts expectations for per-share income of 4 cents. The company added that it also anticipates Q3 revenue of $2.04 billion, compared with $2.34 billion during the same period in the previous year. As for the declines, the company cited lower sales to North American mobility customers, as well as decreased revenues in China. The company has agreed to merge with Alcatel.

Alcoa Inc ((AA)), producer of aluminum, reported Q2 net income of 85 cents a share, up from 52 cents a share a year ago on revenue growth. Income from continuing operations amounted to 86 cents a share, matching per-share analysts’ expectations.

Pepsi Bottling Group Inc, ((PBG)), producer of Pepsi-Cola beverages, reported flat Q2 net income on 10% higher revenue. The stronger-than-expected net was 61 cents a share, against 59 cents, in the year-earlier period. Shares outstanding dropped 4% to 241 million from 252 million. On an adjusted basis, the company earned 69 cents. The net figure reflects charges of more than 4 cents from stock-option expense and more than 3 cents from the devaluation of the Turkish lira. The company met analyst estimate of 59 cents for the quarter. Revenue reached $3.14 billion from $2.86 billion, strengthening in all geographic regions.

LG.Philips LCD Co., ((LPL)), maker of liquid-crystal displays, reported it reversed to a loss in the Q2 as high inventories drove average selling prices sharply lower. The company added it lost 322 billion won ($340 million) in current period, compared with a profit of 41 billion won in the same period last year. The result was slightly worse than expectations, as analysts’ forecast the company to post a net loss of 319.5 billion won. Sales advanced 0.3% to 2.32 trillion won ($2.49 billion), compared with analysts'' forecast of 2.31 trillion won. LG.Philips LCD, like other flat panel display makers in Asia, was hit by sharp price declines as sales of TVs using the technology during the World Cup soccer tournament failed to meet expectations.


[R]7:30AM Asian investors indulge in profit-taking ahead of bank’s meeting.[/R]
Asian markets finished lower on Tuesday. Japan’s Nikkei 225 Stock Average shed 0.5% to 15473.82. Nomura Holdings, brokerage house, shed 2.6% on reports of intensifying competition in the online retail-trading sector. Internet-brokerage firm Kabu.com plummeted 5.2%. Industrial shares were generally down, with Sumitomo Metals losing 0.21%. Mitsubishi Heavy Industries declined 1.2%. Among techs, computer maker Fujitsu pulled back 1.9%, while Toshiba Corp slipped as much as 2.8%.

In Hong Kong, the Hang Seng Index also shed 0.7% to 16490.13. Shares of PCCW slipped after the company''s chairman, Richard Li, reported he would sell his controlling stake in the company to a Hong Kong financier, instead of pursuing a more lucrative but difficult deal to sell the company''s core assets to a foreign bidder. Hong Kong''s major fixed-line phone operator ended 8.1% lower.

South Korea Composite Stock Price Index, or Kospi, bucked the trend, advancing 0.1% to 1300.44. Chip makers led the broader Kospi gain with a stable second-half outlook. Samsung Electronics advanced 0.3% and Hynix Semiconductor added 2.6%. LG.Philips LCD, which reversed to a second-quarter loss, advanced 2.6% on bargain-hunting following its recent fall.

Elsewhere around the region, Taiwan’s Weighted Price Index of the Taiwan Stock Exchange shed 0.6% to 6639.13., shares listed in China, Shanghai and New Zealand gained slightly. Australia and Singapore finished lower.


[R]6:30AM European stocks fall weighed down by technology sector.[/R]
European markets traded lower by mid-morning. The U.K. FTSE 100 index declined 0.2% at 5,885, the German DAX Xetra 30 index lost 0.6% at 5,673 and the French CAC-40 index slipped 0.3% at 4,968. Lucent Technologies Inc. reported that revenue for the quarter ended in June will be about $300 million less than analysts expected, with earnings per share also below estimates. France’s Alcatel which recently agreed to buy Lucent for $13.45 billion, declined 4.2% in European trading.

Engine and mobile-phone maker Safran plunged 7.2% after it said that its operating margin is set to drop in 2006. Rolls Royce, a rival to Safran for engine making, shed 1.2%. Nokia, which competes against Safran in producing mobile phones, lost 1.5%. Reinsurance company Swiss Re advanced 0.5% announcing that it intends to cut up to 2,000 positions worldwide operations by the end of 2007.

Oil prices fell for a fourth day Tuesday as concerns about North Korea''s missile tests and Iran''s nuclear program eased. Light, sweet crude for August delivery fell 22 cents to $73.39 a barrel. August Brent at London''s ICE Futures exchange, which expires at the end of this week, was down 24 cents at $72.65 per barrel.

Gold rebounded on Tuesday as buying interest from investors appeared at lower levels, but traders said the market lacked impetus to break free from the current range. Gold struck a low of $621 an ounce on profit taking from last week''s one-month high of $637, but later climbed to $628.70. It was at $627.50/629.00 by 0942 GMT, against $624.00/625.50 in New York late on Monday.

The euro was down slightly against the dollar on Tuesday, and still off the mark it hit last week on the expectations of higher interest rates and disapponting U.S. economic figures. The euro bought $1.2725 in morning European trading, down from $1.2732 in New York late Monday. The British pound slipped to $1.8404 from $1.8407. The dollar also advanced to 114.17 Japanese yen from 114.10 yen.