Stocks Gain on Upbeat Economic Data

Elena
17 Jul, 2006
New York City

Stocks opened modestly higher as strong manufacturing data helped offset market jitters about the escalating fighting in the Mideast and a series of bland earnings reports. Mattel, the world''s No.1 toymaker, swung to a Q2 profit with earnings of 10 cents per share versus a loss of 23 cents per share a year ago. Eaton, industrial products manufacturer, reported a 21% increase in its Q2 profit to $1.64 per share, up from $1.37 a year ago.

[R]9:45AM Stocks edged up at opening on strong economic data.[/R]
Stocks opened modestly higher in early trading Monday as strong manufacturing data helped offset market jitters about the escalating fighting in the Middle East and a series of bland earnings reports, the latest from Citigroup ((C)). The Fed Reserve reported that industrial production rose 0.8% in June, far better than the 0.4% growth economists had expected. Despite the ongoing violence in Israel and Lebanon, oil prices moved down, with a barrel of light crude quoted at $76.25, down 78 cents, on the Nymex.

The decrease by the price of oileased concerns about higher fuel costs, helping airline sector recover from recent decline and sending the Amex Airline Index up 0.7%. At the same time, energy stocks posted some weakness. The Philadelphia Oil Service Index fell 1.5%, while the Amex Oil Index was down 1%. Disk drive stocks moved notably to the upside in early trading, lifted by 7.7% gain for Adaptec ((ADPT)). The manufacturer of storage products and software gained after Morgan Keegan upgraded its rating on the stock to Outperform from Market Perform. Some early strength also emerged in the health insurance sector, with Sierra Health ((SIE)) and Coventry Health Care ((CVH)) posting notable gains. In the first hour of trading, the Dow Jones industrial average rose 28.34, or 0.26%.The Standard & Poor's 500 index added 0.81, or 0.07%, and the Nasdaq composite index climbed 6.88, or 0.34%.

[R]Industrial production rose more than expected.[/R]
Monday morning, the Federal Reserve released its report on industrial production and capacity utilization in the month of June. The report showed that production rose more than economists had been expecting. The report said that industrial production rose 0.8 percent in June following a 0.1 percent decrease in May. Economists had been expecting production to increase by a more modest 0.4 percent. The increase was partly due to a notable increase in output from mines, which rose 1.2 percent in June following a 0.3 increase in May. Output from utilities also increased, rising 0.7 percent in June after a 0.2 percent increase in May. The report also showed that manufacturing output increased 0.7 percent in June following a revised 0.1 percent increase in May. The originally reported showed that manufacturing output fell 0.1 percent in May. The Federal Reserve also said that capacity utilization increased to 82.4 percent in June from 81.8 percent in May. With the increase, the capacity utilization rate came in above economist estimates of 82.0 percent.


[R]9:00AM Stock futures pointed to a lower opening on geopolitical tension.[/R]
After a brief advance, U.S. stock futures moved to the downside, pointing to a lower market opening, as investors grew worried over the conflict in the Middle East. Earnings reports were pushed to the backseat, failing to provide a boost to the market.

Citigroup Inc. ((C)) the world''s largest bank by market value, reported a profit in line with the analysts'' estimates. The financial services institution posted Q2 profit growth of 4% to $5.27 billion, or $1.05 per share, up from $5.07 billion or 97 cents a share a year ago. Shares dipped 0.2%to $47.48 before the opening bell. Motorcycle maker Harley-Davidson Inc. ((HDI)) reported a 3% rise in quarterly earnings to $243.4 million or 91 cents per share versus $237.4 million, or 84 cents per share a year ago. Other companies due to report earnings Monday include Web search company Yahoo Inc. ((YHOO)) which will report after the market''s close.

Shares of Apple Computer Inc. ((AAPL)) rose 1.6% to $51.46 before the opening bell on reports that that the stock could rebound over the next year as interest in the company''s Macintosh computers picks up. Shares of General Motors Corp. ((GM)) could also be in focus on news that its board of directors will hold a conference on Monday to discuss a potential alliance with Renault SA and Nissan Motor Co. Standard & Poor''s 500 futures were down 3.2 points, just slightly below fair value. Dow Jones industrial average futures were down 18 points, and Nasdaq 100 futures were down 1.75 points.

Harley-Davidson Inc. ((HDI)), motorcycle maker, enjoyed double-digit increase of international sales and posted a 3% growth in second-quarter profit. Quarterly earnings totaled $243.4 million or 91 cents per share versus $237.4 million, or 84 cents per share a year ago. Revenue increased 3% from a year ago to $1.38 billion. The company’s domestic retail motorcycle sales surged 8.1%, while international sales climbed 17.3% in the quarter. Harley-Davidson''s worldwide dealer network sold 125,000 motorcycles, up 10% from the prior-year comparable period.

Eaton Corp. ((ETN)), industrial products manufacturer, reported a 21% increase in its second-quarter profit due to better sales across the company’s segments. Quarterly earnings rose to $253 million, or $1.64 per share, from $209 million, or $1.37 per share a year ago. Excluding acquisition-related charges, adjusted income was $259 million or $1.68 per share vs. $214 million, or $1.40 per share in the prior-year period. Revenue rose 13% from a year ago to $3.19 billion. Third-quarter EPS are expected in a range between $1.50 and $1.60. Excluding charges for acquisition integration, adjusted net income is forecasted in a range of $1.55 and $1.65 per share. Eaton backed its full-year earnings guidance in a range between $5.90 and $6.20 per share. Adjusted earnings are seen between $6.10 and $6.40 per share. The company is also raising its quarterly dividend 11% percent to 39 cents per share.

Citigroup Inc. ((C)), financial services institution, reported Q2 profit growth of 4% helped by better corporate and investment banking revenue. Net income was $5.27 billion, or $1.05 per share, up from $5.07 billion or 97 cents a share a year ago. Revenue advanced 10% from a year earlier to $22.18 billion. Corporate and investment banking revenue jumped 31% to $6.76 billion and revenue from global wealth management climbed 19% to $2.5 billion. Revenue in the global consumer division grew 5% from a year ago to $12.6 billion. Revenue declined in the company''s alternative investments and miscellaneous corporate category.

Despite the declining sales of its core brands, Mattel Inc. ((MAT)), the world''s No. 1 toymaker, swung to a second-quarter profit helped by lower tax expenses. The company reported quarterly earnings of $37.4 million, or 10 cents per share versus a loss of $94 million, or 23 cents per share a year ago. The most recent results include tax benefits of about $6.2 million, or 2 cents per share, related to an audit settlement with a state tax authority. Revenue climbed 8% from a year earlier to $957.7 million. Worldwide gross sales for its Barbie brand dropped 1% and Hot Wheels declined 7% from a year ago.

The world''s biggest fast-food restaurant chain McDonald''s Corp. ((MCD)) second-quarter results benefited from a strong performance by its European business and growing demand for its breakfast offerings. U.S. same-store sales in June rose 5.2%, while the U.S. same-store sales for the second quarter were up 4.2% from a year ago. Global same-stores sales rose 5.5% and in Europe the company enjoyed to a same-stores sales increase of 4.5% in June partly driven by promotions related to the World Cup. Europe same-store sales for the most recent quarter grew 6.3%. Same-stores sales in the Asia/Pacific, Middle East and Africa segment advanced 8.8% in June bolstered by the solid results of Japan and Australia. Earnings for Q2 are expected at 67 cents per share, including a 10 cents per share gain tied to the sale of part of McDonald''s stake in Mexican restaurant chain Chipotle Mexican Grill in that company''s IPO.


[R]8:00AM Oil prices climbed on escalating Mideast conflict.[/R]
Crude oil prices further advanced on Monday, reflecting more geopolitical uncertainty in the market on escalating fighting between Israel and militants in Lebanon. The fighting follows persistent oil market anxieties about the West''s nuclear standoff with Iran, threats of supply disruptions in Nigeria and the Gulf of Mexico hurricane season. Although the Mideast conflict had no direct effect on oil supplies, it pushed oil prices higher because it added more nervousness.

Light, sweet crude for August delivery gained 55 cents to $77.58 a barrel in Asian electronic trading on the Nymex, mid-afternoon in Singapore. September Brent crude futures on London''s ICE Futures exchange gained 41 cents to $77.99 a barrel. Gasoline futures rose 1.01 cents to $2.335 a gallon Monday while heating oil prices added 1.4 cents to $2.09 a gallon. Natural gas prices fell 16.7 cents to $6.180 per 1,000 cubic feet.

Fighting between Israel and militants in Lebanon escalated over the weekend, raising fears of a possible full-blown war. British Prime Minister Tony Blair and U.N. Secretary-General Kofi Annan called Monday for the deployment of international forces to stop the bombardment of Israel from southern Lebanon. Their comments came a day after world leaders forged a unified response at their G-8 summit to the crisis in the Middle East, blaming Hezbollah and Hamas for the escalating violence and recognizing Israel''s right to defend itself.