EMC Income Slides 5%

Elena
14 Jul, 2006
New York City

U.S. stocks opened the Friday session in a lackluster fashion as weak June retail sales fed speculation the Fed Reserve might stop raising interest rates, but stocks dropped following a weaker-than-expected data on consumer sentiment in July. EMC Corp. added to investors

[R]9:45AM Stocks traded in a lackluster fashion at opening.[/R]
U.S. stocks opened the Friday session in a lackluster fashion as weak June retail sales fed speculation the Fed Reserve might stop raising interest rates. Some traders appeared reluctant to continue selling stocks, and others were unwilling to go bargain hunting amid growing concerns about rising tensions in the Middle East and the impact of record oil prices of $78 a barrel. In economic news, retail sales fell unexpectedly in June by 0.1%, vs. the expected 0.4% sales increase. Excluding gasoline sales, June retail sales fell 0.2%.

EMC Corp.((EMC)) added to investors’ worries over corporate profits as the software maker said earnings slid 5% last quarter, after warning earlier this week of a possible miss. Housing stocks came under pressure, with D.R. Horton ((DHI)) falling 9.7% and leading the sector lower after it forecast Q3 and full year earnings below analyst estimates. Transportation stocks continued to move to the downside, as crude continued to set new all-time highs. Airlines were particularly hard hit in the early sell off, with AMR ((AMR)) and Continental ((CAL)) standing among the worst performers in the group, with losses of 3.2% and 2.4%, respectively. On the other hand, the gold sector posted strength as the price of gold extended a recent upward move. In the first hour of trading, the Dow Jones industrial average fell 9.28, or 0.09%. The Standard & Poor's 500 index fell 0.89, or 0.07%, and the Nasdaq composite index fell 6.75, or 0.08%.


[R]9:00AM Stock futures pointed to a lower opening on weaker retail sales.[/R]
U.S. stock futures pointed to a weaker opening Friday after a government report showed retail sales unexpectedly dropped in June. The Commerce Department said retail sales declined by 0.1% last month, compared with expectations of a 0.4% rise. In earnings news, shares of General Electric ((GE)) moved lower in pre-market trading even though the industrial, financial services and media conglomerate reported Q2 earnings that came in line with analyst estimates. Standard & Poor''s 500 futures were down 0.2 point, but still above fair value. Dow Jones industrial average futures were down 11 points, and Nasdaq 100 futures were down 0.5 point.

General Electric, ((GE)), industrial conglomerate, reported a 4% rise in Q2 earnings to 47 cents a share, in line with analysts’ estimates. It also reaffirmed its guidance for 2006. Sales at the company rose 9% to $39.9 billion, after organic sales grew 8%. General Electric said the results reflect strong top and bottom-line growth at its commercial finance unit, demand for products and services at its infrastructure division and strong profitability at healthcare, consumer finance and industrial operations.

Regions Financial Corp, ((RF)), financial holding company, reported Q2 net income advanced to 75 cents a share, from 53 cents a share in the year-ago period, beating analysts expectations for earning of 64 cents a share. Net interest margin grew 4.24%.

Sensient Technologies Corp, ((SXT)), synthesizer of flavors, fragrances and colors, reported that Q2 income advanced to 40 cents a share, from 34 cents a year ago on revenue growth. The company forecast fiscal 2006 earnings at $1.38 to $1.42 a share.

Popular Inc, ((BPOP)), financial-services provider, reported that Q2 net income dropped 26% as net fell to 34 cents a share, from 48 cents in the year-earlier period. The return of the company on assets narrowed to 0.8% from 1.16% in the quarter while return on equity shrank to 10.72% from 17.06%. The net interest margin narrowed to 3.23% from 3.35%. The company said it must continue restructuring its mortgage business in the U.S. and increase deposits and new loans in all its markets.


[R]8:00AM Bank of Japan raised interest rates for the first time in six years.[/R]
For the first time in six years, Japan''s central bank raised interest rates Friday, ending an era of zero percent interest. The decision boosts the Bank of Japan''s key overnight call rate to 0.25% from 0.069%, giving a clear signal that the world''s second-largest economy has pulled out of a decade-long slump. Raising rates signifies that deflation has been overcome and that the economic recovery is gathering speed. ‘Today''s decision will contribute to ensuring price stability and achieving sustainable growth in the medium and to long term,’ the BOJ said in a statement released after the policy board''s unanimous 9-0 vote to raise rates at the end of a two-day meeting.

The move which was widely anticipated by analysts and investors, puts Japan in line with monetary policy in the United States and Europe, where central banks are also tightening their money policy. In June, the European Central Bank raised its key interest rate to 2.75%, while the Federal Reserve has lifted the fed funds rate 17 times straight to 5.25%.

Japan lowered rates to zero in 2001 in an attempt to jump-start the beleaguered economy and wipe out a destructive trend of deflation, which eroded corporate earnings and workers'' paychecks.


[R]7:30AM Tokyo falls on interest-rate rise and Middle East tensions.[/R]
Asian markets declined on Friday. Japan''s benchmark Nikkei Stock Average ended down 1.7% to 14,845.24. Electronic and industrial exporters fell on concerns that high energy costs will slow consumption in the key U.S. market, and that a rate rise will boost the yen, making Japanese goods more costly overseas. Shares of Toshiba fell 2.1%. Canon closed down 1.9%. Conglomerate Sony dropped 1.2%.

South Korean shares plunged to their lowest level in more than two weeks. The Korea Composite Stock Price Index, or Kospi, settled down 2.33% at 1255.13. Shares in technology company Samsung Electronics shed 2.7%, after the company said that net profit fell 11% in the second quarter due to weak demand for its mobile phones.

In Hong Kong, the benchmark Hang Seng Index shed 1.04% to 16135.71. Chinese shipping-container company China Merchants, was the biggest blue-chip decliner, dropping 5.4%. Its peer Cosco Pacific lost 4% on oil-price worries. Shares of phone company PCCW were off 1% as investors remained jittery towards the growth prospect of the company.

Elsewhere in the region, the Weighted Price Index of the Taiwan Stock Exchange shed 2.1% to 6428.03, its lowest closing level since June 21. And Australia''s benchmark S&P/ASX 200 index was down 2.3% to end at 4966.1.


[R]6:30AM Europe plunges due to oil price rise and geopolitical tensions.[/R]
European markets traded lower by mid-morning session. The U.K. FTSE 100 index lost 0.5% at 5,733, the German DAX Xetra 30 index sank 1.1% at 5,468 and the French CAC-40 index shed 0.9% at 4,809. Oil hit auto investors, as Volkswagen came off 1% while BMW lost 0.8% and Peugeot also fell 0.8%. Renault attracted early focus in light of its prospects for an alliance with General Motors with a meeting between the two carmakers scheduled for Friday. Renault declined 1% in Paris.

Chipmaker Infineon Technologies lost 1.3% after 34 U.S. states were expected to file a lawsuit on Friday against seven makers of DRAM memory chips, alleging that price-fixing from 1998 to 2002 forced up the prices of computers that use them.

Energy price boosted, oil and gas companies bucked the trend, with BP Royal Dutch Shell and Total all higher on the back of the rising oil price. Stada Arzneimittel of Germany also advanced, up 1.3% after it said it has agreed to buy Serbian generic drugmaker Hemofarm for 485 million euros ($617 million) in cash. Food equipment maker Enodis surged 9.2% after it said its board is considering a takeover proposal from the Manitowoc Co.

Oil prices topped $78 per barrel Friday, near record highs, as mounting tensions in the Middle East raised concerns of a possible disruption of oil supply. Light sweet crude for August delivery was up $1.35 to $78.05 a barrel. The Brent contract for August at London''s ICE Futures exchange, which expires at the close of trading Friday, surged $1.16 to $77.85 per barrel. Gold opened Friday at a bid price of $660.60 a troy ounce, up from $645.50 late Thursday.

The dollar gained against the euro and the yen Friday after Japan''s central bank hiked interest rates for the first time in almost six years. The U.S. dollar was trading at 116.05 yen, up from 115.24 yen late Thursday in New York. The euro fell to $1.2657 on Friday, down from $1.2692 in late New York trading. The British pound also slipped to $1.8366, from $1.8442.