Market Averages Decline

123jump.com Staff
20 Jul, 2006
Mumbai

It is earnings season on Wall Street. Traders reacted to earnings reports and set aside the interest rate worries. Market averages declied but stock specific trading dominated. Apple surge 12% on the earnings new of 54 cents, Motorola gained 5%, Nokia advanced 3% on earnings news. Intel dropped 7.5% on weaker margins. Railoroads, CSX and Union Pacific declined. Google and Microsoft gained in the after-market trading.

[R]4:30PM Market averages fall after surging in the previous session.[/R]

Market averages settled lower after a day of rally. Several analysts on Wall Street questioned and forecasted that market may face selling in the coming weeks, despite rising earnings. Flood of earnings continued on Wall Street affecting trading sentiment. Apple ((AAPL)) after reporting a strong rise in earnings surged 12% but Intel ((INTC)) lost 7.5% on weaker than expected earnings. Railroad companies CSX((CSX)) and Union Pacific ((UNP)) fell on the earnings news. Ebay ((EBAY)) dropped 5% on 14% fall in earnings.

European markets traded higher for the second day. Fed Chairman inspired rally faltered as market focused on earnings. German software developer SAP reported a sharp rise in earnings. The second quarter profit increased to euro 1.35 from 93 European cents per share largely due to a lower tax rate. The sales rose only 8%, weaker than forecasted by most analysts.

Brazilian stocks fell on the lower than expected current account surplus. The Central Bank reported June surplus of $614 million missing the target set by various local economists of at least $1.5 billion. Leading Brazilian stocks declined. C.V.R.D ((RIO)), largest iron ore mining company in Brazil, declined 4% to $22.35 in New York trading. Banco Bradesco ((BBD)) closed down 2% to close at $30.30. Discount airlines TAM International ((TAM)) and GOL ((GOL)) lost 2% and 3% respectively. In Mexico City, Mexico stock market index IPC declined 1.34%. Cement giant Cemex ((CX)) declined 2% and American Movil ((AMX)) lost 3%.

[R]12:30PM European markets closed slightly up.[/R]
European markets ended slightly higher amid speculations that the U.S. Fed Reserve might put an end to interest-rate hikes. Media stocks like French JC Decaux and Spanish Sogecable led advancers today. Another notable gainer was Swiss drug maker Roche which rose 3.5% after posting a 37% first-half profit rise to SFr4.5 billion ($3.6 billion) on 16% sales growth. The German DAX 30 edged up 0.1%, the French CAC 40 rose 0.4%, while London FTSE 100 lost 0.1%.

Oil prices climbed back again on strong gasoline and petrol demand during the busy driving season. Light crude August delivery rose 21 cents to $72.87 a barrel. London Brent rose 36 cents to $74.26. The dollar declined versus major currencies, following Ben Bernanke’s comments on monetary policy. The euro traded at $1.2604, up from $1.2599. The dollar bought 116.78 yen, down from 116.80. The British pound stood at $1.8463, up from $1.8431. European gold prices traded mixed. In London the precious metal traded at $642.90, up from $639.75 per ounce. In Zurich gold traded at $640.70, down from $642.15. Silver closed at $10.98, up from $10.91.


[R]11:30AM Stocks turned lower on weak tech and banking stocks.[/R]
Reversing from earlier strength, stocks moved to the downside and the three major averages pulled below the flat line. The Nasdaq posted a notable decline, reflecting weakness in the technology sector, with semiconductor stocks posting heavy losses. Intel ((INTC)) dropped 4.9% helping to lead the semiconductor sector lower after the chip maker reported lower Q2 earnings and revenue and forecast Q3 revenue below estimates. Among tech stocks, Citrix Systems ((CTXS)), infrastructure software developer, sharply dropped by 12.1% after the company reported Q2 profit growth but gave disappointing guidance.

Quarterly earnings reports failed to support the financial sector. Comerica ((CMA)) rose 2.6% after the bank said Q2 net income rose 3% to $1.22 a share from $1.18 a share a year ago, but Wachovia ((WB)) fell 2% after the bank reported 14% profit growth to $1.89 billion on stronger investment and general banking income. Shares of Fifth Third ((FITB)) traded fractionally lower after the bank said net income was $382 million, or 69 cents a share, compared with $417 million, or 75 cents a share, last year. Meanwhile, Washington Mutual Inc. ((WM)) fell 2% after the company reported a 9% drop in Q2 net income to $767 million. Some biotechnology stocks showed weakness, contributed by MGI Pharma ((MOGN)) which dropped 31.4% after the biopharmaceutical company reported a Q2 loss versus a year ago profit.

Oil service stocks came under pressure as the price of oil turned lower to $72.60 a barrel. A decline by the price of gold sent gold stocks to the downside. The airline and housing sectors reversed from yesterday’s gains to post losses on profit taking. Meanwhile, the computer hardware sector continued to post strength, supported by 11% gain for Apple ((AAPL)) on better-than-expected Q2 results. The Nasdaq Stock Market Inc. ((NDAQ)) rose 1.7% after the exchange reported a 19% quarterly increase in net income. Online broker E-Trade Financial Corp. ((ET)) rose 1.9% on 52% net income increase. In late morning trading, the Dow declined 4.78, or 0.04%. The Standard & Poor''s 500 index was down 0.81, or 0.06%, and the technology-laden Nasdaq lost 14.72, or 0.71%. Bonds extended the prior session''s advance, with the yield on the 10-year Treasury note falling to 5.04% from 5.06% late Wednesday.


[R]10:30AM Sensex rise in India may be short-lived.[/R]
Rise in markets in New York, Europe and Asia supported a strong advance in the trading in Mumbai. Mumbai Stock Exchange advanced 3.45% or 345 points to close at 10,352 points. The index has traded lower for the last two weeks. Rally in mid-cap and small-cap led the broader advance in the market. In the day’s trading, 1,402 stocks advanced, 989 declined and 75 were unchanged. Every stock in the Sensex index of 30-stocks advanced.

Reliance Industries Limited reported quarterly earnings. The revenue in the quarter gained 37.8% and earnings rose 10.2%. Operating profit rose 18.8%. The company reported revenue of $5.5 billion (Rs 24,552 crores) and earnings of $560 million (Rs 2,547 crore). The petroleum refining margin for the quarter was $12.40 per barrel. The company stock rose 1.3% to close at Rs 994.

Ranbaxy, generic drug maker, reported earnings gain of 20%. The compay reported second quarter earnings of $25 million (Rs 121 crores) on revenue rise of 7% to $287 million (Rs 1,440 crores). The drug maker recently acquired generic drug business of Glaxo SmithKlein in Spain. The company also acquired the largest drug maker in Romania. India, U.S. and Romania are now three largest markets for the company products. Ranbaxy stock surged 8.5% on the news to close at Rs 353.

Banking stocks rallied led by 5.3% rise in ICICI Bank to Rs 492, 5% rise in State Bank of India to Rs 750 and 4.5% rise in HDFC Bank 730.

Asian markets surged in sympathy with the rise in the U.S. markets. Almost all markets gained at least 2% and Japan, India and South Korea advanced more than 3%.


[R]9:45AM Stocks opened slightly higher on Apple and Honeywell.[/R]
U.S. stocks moved slightly higher at opening as better-than-expected earnings from companies such as Apple Computer Inc. ((APPL)) and Honeywell International ((HON)) boosted investor optimism and overshadowed a $123 million quarterly loss at Ford Motor ((F)). The car maker reported heavy quarterly losses amid falling sales and restructuring costs. Pfizer Inc. ((PFE)) also posted a lower profit.

Some technology stocks came under pressure, with shares of Intel ((INTC)) down 4.9$% after the company reported sharply lower Q2 earnings and projected Q3 revenue below analyst estimates. However, 11.5% gain for Apple ((APPL)) helped lift other tech stocks. Some disk drive and networking stocks also posted notable gains. Airline stocks reversed from solid gains yesterday to move steeply down as an increase by the price of oil inspired traders to cash in on the strength in the airline sector. Despite the increase by the price of oil, oil service stocks showed some early weakness, with Weatherford ((WFT)) helping to lead the sector lower. In the first hour of trading, the Dow Jones industrial average gained 18.17, or 0.17%.

Investors had little reaction to a drop in weekly unemployment claims. The Labor Department said that jobless claims fell to 304,000 from a revised 334,000 last week, vs. expectations of a more modest decline to 325,000. The Standard & Poor''s 500 index was up 1.78, or 0.14%, and the Nasdaq composite index added 0.40, or 0.02%. Bonds slipped after the prior session''s advance, with the yield on the 10-year Treasury note edging up to 5.07% from 5.06% late Wednesday

[R]Initial jobless claims dropped more than expected.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended July 15. The report showed that jobless claims fell more than economists had been expecting. The Labor Department said that jobless claims fell to 304,000 from a revised 334,000 in the previous week. Economists had expected a more modest decline to 325,000 from the 332,000 originally reported for the previous week. The report also showed that the four-week moving average fell to 316,750 from the previous week''s revised average of 318,000. The decrease by the less volatile moving average comes after it increased in the two previous weeks. The Labor Department added that continuing claims in the week ended July 8 rose to 2.505 million from the preceding week''s revised level of 2.420 million.


[R]9:00AM Stock futures pointed to a higher opening on strong earnings.[/R]
U.S. stock futures advanced, following a session of solid gains and strong earnings releases. On Wednesday stocks rallied after comments by Fed Reserve Chairman Ben Bernanke suggested the central bank may not further raise interest rates, while on Thursday morning investors were focused on better-than-expected earnings from companies like Apple Computer Inc., Motorola, and Pfizer.

Shares of Pfizer Inc. ((PFE)), the world''s largest drug maker, rose 1.1% to $23.55 before the opening bell after the company said Q2 earnings from continuing operations rose on higher sales of its prescription drugs. Apple Computer Inc. ((AAPL)) climbed 10.7% after reporting 48% higher quarterly profits, above analyst estimates. Shares of Motorola Inc. ((MOT)) advanced 9% after the world''s second-biggest cell phone maker said its Q2 earnings and revenue increased. Honeywell International Inc. ((HON)) gained 1.2% before the opening bell after the diversified manufacturer reported quarterly earnings that topped estimates. The world''s largest chip maker Intel Corp. ((INTC)) bucked the trend, posting a sharply lower Q2 profit, sending its shares down 2.1%. Ford Motor ((F)) also disappointed, posting a Q2 loss of $123 million, or 7 cents a share vs. profit of $946 million, or 51 cents a share last year. Earnings from more top companies, including Microsoft Corp. ((MSFT)), are expected later Thursday. Standard & Poor''s 500 futures were up 3.10 points but were about even with fair value. Dow Jones industrial average futures were up 7 points, and Nasdaq 100 futures were up 11.50 points.

Investors also awaited the publication of FOMC meeting minutes and Bernanke''s semi-annual monetary policy report before the House Financial Services Committee. Standard & Poor''s 500 futures were up 3.10 points but were about even with fair value. Dow Jones industrial average futures were up 7 points, and Nasdaq 100 futures were up 11.50 points.

D.R. Horton Inc. ((DHI)), home builder, posted fiscal third-quarter earnings decline of 21% on an 8.6% increase in revenue. For the latest quarter the company recorded net of $292.8 million or 93 cents a share vs. $371.7 million, or $1.17 last year. Revenue climbed to $3.59 billion from $3.31 million. The company completed 9% more home sales in Q3 than a year earlier. The backlog of homes under contract at the end of the most recent quarter grew 4.3% to 24,956 homes with the value of homes amounting to $7.4 billion vs. $7 billion last year.

Ford Motor Co. ((F)) posted a second-quarter loss of $123 million, or 7 cents a share vs. profit of $946 million, or 51 cents a share a year ago. The company posted a loss of $125 million, or 7 cents a share on a continuing operations basis, down from the prior-year profit of $943 million, or 43 cents a share. Excluding items, Ford loss amounted to $48 million, or 3 cents a share in the second quarter. Total sales and revenue declined to $41.96 billion from $44.55 billion last year. Automotive sales slid to $37.75 billion from $38.69 billion a year earlier. The management plans to take additional actions to improve results within the next 60 days.

Union Pacific Corp. ((UNP)), railroad operator, posted second-quarter earnings of $390 million, or $1.44 a share, up from a year-earlier profit of $233 million, or 88 cents a share. Revenue increased 17% in the most recent quarter to $3.92 billion. The management attributed the increase in profit to the growing demand and better operational performance.

Wyeth’s ((WYE)) second-quarter net income rose to $1.1 billion, or 78 cents a share, compared with $977 million, or 72 cents a share a year ago. Revenue increased 9% to $5.16 billion, with the pharmaceutical sales contributing $4.29 billion to the growth.

International Game Technology ((IGT)) third-quarter net income declined to $114.1 million or 33 cents a share, from $114.7 million, or 32 cents a share a year ago. Total revenue increased to $612.4 million from $579.6 million last year.

The Nasdaq Stock Market Inc. ((NDAQ)) posted a 19% growth in second-quarter net income to $16.6 million, or 13 cents a share, from $14 million, or 13 cents a share in the year-ago comparable quarter. The latest quarter results include charges of $13 million, or 9 cents a share. The company boosted its 2006 profit outlook to $68 - $78 million, including the charges tied to its cost reduction program and losses associated with the extinguishment of debt.

Continental Airlines Inc. ((CAL)) posted second-quarter net income of $198 million, or $1.84 a share vs. $100 million, or $1.26 a share a year ago. Excluding charges, the carrier company would have earned $1.93 a share. Revenue increased to $3.51 billion from the last-year''s $2.86 billion. Operating income more than doubled to $244 million from $119 million a year ago.

Pfizer Inc. ((PFE)), drug maker, said second-quarter earnings dropped to $2.42 billion, or 33 cents a share versus $3.46 billion, or 47 cents a share, a year ago. Excluding non-recurring items, earnings would have risen to 50 cents a share from the prior-year''s 45 cents. Revenue inched up 3% to $11.74 billion, helped by a 9% growth in sales of the company’s Lipitor drug. The company expects adjusted 2006 earnings of $2 a share, up from the present guidance of $1.93 a share.


[R]8:00AM Toyota has no interest in joining or blocking GM’s tie-up with Nisan and Renault.[/R]
As a response to growing speculations that Toyota may be considering proposing to General Motors a tie-up, Toyota’s president announced Thursday that the automaker has no interest in joining or blocking the proposed tie-up between General Motors and the Renault-Nissan alliance. U.S. automaker General Motors Corp. has been in one-week talks about a possible partnership with an alliance between Renault SA of France and Nissan Motor Co.

Toyota Motor has been in partnership with the U.S. automaker for long years, as both companies operate an auto plant in Fremont, California. The 50-50 partnership, called New United Motor Manufacturing Inc., or NUMMI, was set up in 1984. Watanabe said NUMMI and other friendly ties with GM will continue unchanged, but he said he does not foresee new tie-ups involving major stakes for his company.

Joining together GM, Renault and Nissan would produce a mega-alliance, spanning the three big auto markets of the world, Europe, Japan and the U.S., with a combined annual production of 15 million vehicles.

General Motors has been battered by staggering health-care costs for its workers as it fights to maintain market share eroded by rivals, especially Japanese automakers. Toyota has been boosting global sales, and some analysts expect Toyota to acquire GM as the world''s biggest automaker in the next few years.