Earnings and Techs Drive Averages

123jump.com Staff
11 Jul, 2006
New York City

Earnings and techs were in limelight. Alcoa revenue miss kept market averages under check in the morning trading. In the afternoon, news on KLA-Tencor supported a reversal in tech stocks led by a sharp gain in semiconductor stocks. Oil rose. Gold jumped $17 on the news of seven bomb blasts in Mumbai, India. European stocks closed lower, on the weakness in tech stocks. Mexico declined 0.6% but Brazil and Argentina gained.

[R]4:30PM Earnings jump back in focus.[/R]

-S&P 500 closed up 5.18 points, Dow up 31.22 and Nasdaq up 11.94.
-Yield on 10-year bond closed at 5.09 and 30-year bond closed at 5.136%.
-Crude oil traded up 55 cents to close at $74.16 per barrel.
-Gold traded $17 up to close at $643.10 per ounce.

-Asian Markets closed lower led by 0.7% decline in India, Japan, Taiwan and Australia.
-European Markets declined across the region. Germany, France and Spain led the loser with a loss of more than 1.4%.
-In Latin American trading Argentina and Brazil rose in trading by 1% but Mexico fell 0.6%.

With the beginning of the earnings season, market has begun to pick winners from the loser. The guessing game was in full-swing today as market averages reversed the trading in the afternoon. Semiconductor stocks rebounded on the news that equipment maker KLA-Tencor ((KLAC)) guided during investor conference that orders in the fiscal fourth quarter could beat the earlier guidance by as much as 15%. The stock rose 8% and lifted other semi stocks including Intel ((INTC)), Advanced Micro Devices ((AMD)) and Applied Materials ((AMATA)). In other tech news, Lucent ((LU)) and Alcatel ((ALA)) fell near 4% on the news that the company may miss the revenue target in the quarter ending June 30 on the weakness of sales in China.

Pepsi Bottling Group ((PBG)) rose 5% on the news that the operating income rose to 69 cents from 59 cents a year ago. Apparel retailer Talbots ((TLB)) rose 22% on the company guidance that the loss in the quarter will be narrower than earlier expected and raised guidance for higher sales in the second-half of the year.

Seven bomb blasts on commuter trains in Mumbai, financial capital of India put investors on guard on Indian ADRs. More than 140 people dies and 250 people are reported to be injured. Infosys ((INFY)), Cognizant ((CTSH)), Satyam Computer ((SAY)) and Tata Motors ((TTM)) sold-off between 3% and 5% on the news. The bomb blast believed to be carried out by Kashmir based Lashkar-e- Taiba, terrorist group supported by Pakistan. Similar bomb blasts were carried out in Srinagar, Kashmir in the morning hours.

In European trading stock declined as oil and gold traded higher. Tech stocks in the region declined on the sales warnings from Lucent and depressing the merger partner in France, Alcatel. Other telecoms in the region, Ericsson, Philips and STM Micro declined on the news. Tech heavy German DAX index lost 1.6%. French construction and cement firm lost 2.3% after the news that its American unit was under investigation for certain government contracts.

Investors in Mexico are still nervous, but traders are focusing on earnings and economic data. American Movil ((AMX)), Telmex and Walmart de Mexico rose a fraction. Investors are still not sure what to make of recent Presidential election but Calderon victory may be difficult to over turn, according local sources.

[R]12:30PM European markets closed steeply down.[/R]
European markets finished steeply down, reflecting an advance in oil prices and weakness in the technology sector. Lucent Technologies dragged its future owner Alcatel after the telecom gear maker issued a Q3 sales warning. French telecom equipment maker Alcatel dropped 5.9%, followed by its peer Ericsson, down 3.4%. Mobile phone giant Vodafone dropped 1.7% after it was downgraded to neutral from buy at UBS. Front crude oil futures moved higher, sending auto stocks like Renault and Volkswagen lower. The German DAX 30 tumbled 1.6%, the French CAC 40 slipped 1.4%, and London FTSE 100 lost 0.7%.

Oil prices advanced on supply concerns as Iran expressed determination to finish its nuclear program, despite the strong opposition. Light crude August delivery rose 39 cents to $74 a barrel. London Brent rose 52 cents to $73.41. The dollar traded mixed versus major currencies. The euro traded at $1.2748, up from $1.2732. The dollar bought 114.21 yen, up from 114.10. The British pound stood at $1.8417, up from $1.8402. European gold prices advanced. In London the precious metal traded at $633.80, up from $627.20 per ounce. In Zurich gold traded at $633.75, up from $626.20. Silver closed at $11.39, up from $11.14.


[R]11:30AM Stock markets traded down. Blasts in Mumbai weighed[/R]
The major averages moved firmly into negative territory as disappointing earnings news from Alcoa and Lucent contributed to the market weakness. Dow component Alcoa ((AA)) dropped 4.8% as it reported weaker-than-expected Q2 revenues.
Shares of Lucent ((LU)) declined 4.3% after the company issued a Q3 sales warning which also raised concerns about the strength of earnings. The news contributed to significant weakness in the networking sector. The Amex Networking Index fell down 2%, while Alcatel ((ALA)), which agreed to merge with Lucent, dropped 5.5%. The airline sector stood out as one of the market''s worst performances as Merrill Lynch downgraded Continental ((CAL)), AMR ((AMR)), and U.S. Airways ((LCC)) to Neutral from Buy, citing concerns about valuations following the recent strength in the sector. The Amex Airline Index currently dropped 4.1%.

Housing stocks also came under pressure, led by Champion Enterprises ((CHB)), with the homebuilder down 5.4%. The financial, internet, and retail sectors also showed weakness, while oil service stocks bucked the downtrend, supported by the price of oil. Some negative sentiment was also generated by news of a series of explosions that hit commuter trains in Mumbai, India. The blasts occurred during rush hour in the financial hub and have reportedly killed up to 100 people. In late morning trading, the Dow dropped 63.71, or 0.57%. The S&P 500 was down 6.16, or 0.49%, and the Nasdaq composite index lost 18.31, or 0.86%. Bonds rallied, with the yield on the 10-year Treasury note slipping to 5.09% from 5.13% late Monday.


[R]10:30AM Auto and steel shares push the Sensex down in volatile trading.[/R]
The Sensex in India ended lower by 69.95 points, 0.65%, on 10,614.35. The turnover on BSE was $500 million or (Rs 2,404 crore), up from the turnover on Monday of Rs 2,242 crore. The market-breadth was negative on BSE, as 1,169 stocks advanced, 1,203 declined and 74 stocks were unchanged.

Market trading was dominated by earnings expectations and news. Hero Honda fell on lower than expected earnings. However, banking stocks traded at a higher than normal volume. UTI Bank and HDFC Bank are expected to release earnings this week. Followed by State Bank of India and ICICI Bank earnings next week. UTI and HDFC are expected to report at least 15% rise in earnings but State Bank of India is expected to report 18% decline.

Top decliners in trading were Hero Honda, Tata Motors, Tata Steel, Hindalco and HLL. Hero Honda led the decliners, plunging 6.50% to Rs 717.10. The stock plummeted soon after it reported disappointing results. The company repoted revenue rise of 20% and earnings growth of 16% but indicated that operating margins had declined. The company also guided lower sales in the current quarter. Industry analysts feared that the company had lost market share.

Other auto stocks also declined. Tata Motors dipped 3% to Rs 759, Maruti Udyog lost 1.6% to Rs 792, Mahindra & Mahindra slipped 1.9% to Rs 603, Ashok Leyland lost 1.5% to Rs 36.20, and Eicher Motor was off 1.6% to Rs 267.

Tata Steel declined 2.56% to Rs 513.10 on a volume of 2.67 million shares while large-cap HLL sank 2.16% to Rs 235 on heavy trading volume of 2.4 million. Hindalco was down 2.20% to Rs 168.30. HDFC Bank shed 2.04% to Rs 763 while HDFC advanced 0.20% to Rs 1,200. IT large-cap Infosys also shed 1.10% to Rs 3,155.

Top advancers on Tuesday were pharma stock Cipla, Gujarat Ambuja, Grasim, Satyam and Wipro. Pharma stocks Dr Reddy’s Lab advanced 1% to Rs 1,327 and Cipla gained 3.43% to Rs 221.35 on buying momentum. Cement companies advanced, as ACC gained 0.83% to Rs 817 and Gujarat Ambuja Cement added 2.13% to Rs 105.4 after mid-afternoon session of trade on expectations of firm prices.

Reliance Industries advanced 0.60%, to Rs 1,049.30. Reports circulate that the company will launch 3 news channels by the end of the year and is in talks with BBC and a Delhi-based television software company for an equity alliance. Reliance Industries was also the top-traded stock on BSE with a turnover of Rs 166.47 crore or $40 million.


[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 disappointing 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.