Nasdaq Opens 1% Lower

Elena
01 Aug, 2006
New York City

Stocks opened lower following a government report which helped renew concerns about the pace of inflation and interest rates. The Commerce Department released a report showing that consumer prices, excluding food and energy prices, rose at an annual rate of 2.4% compared to the 2.2% rate seen in the two previous months. Core personal consumption expenditures rose 0.2% in June.

[R]9:45AM Stocks opened in the negative.[/R]
U.S. stocks started trading in the negative following a government report which showed a rise in core consumer prices, reviving worries about further increases in interest rates. The Commerce Department released a report showing that consumer prices, excluding food and energy prices, rose at an annual rate of 2.4% compared to the 2.2% rate seen in the two previous months. According to the report core personal consumption expenditures rose 0.2% in June. The early weakness was also contributed by mixed earnings reports and the violent conflict in the Middle East.

Transportation stocks posted significant weakness in early trading due in part to an increase by the price of oil. Expeditors ((EXPD)) dropped 10%, helping to lead the sector lower after reporting Q2 earnings that came in below analyst estimates. Technology stocks also moved notably to the downside. Meanwhile, the coal group continued to show strength on the belief that the recent heat wave would spark energy use. The HMO group also advanced. Among other stocks, hotel operator Wyndham Worldwide Corp. said on Tuesday it will formally separate from Cendant Corp. ((CD)) and begin trading as an independent, publicly traded company. Shares of Cendant soared 16%. Eastman Kodak Inc. ((EK)) slid 9.8% after it posted its seventh consecutive quarterly loss. Verizon Communications Inc. ((VZ)) fell 2.2% after reporting a 24% drop in Q2 earnings that nonetheless beat expectations. Investors were disappointed with the company's full-year forecast. In early trading, the Dow Jones industrial average fell 30.98, or 0.28%. The Standard & Poor's 500 index lost 4.28, or 0.34%, and the Nasdaq composite index dropped 15.20, or 0.73%.

[R]Personal income and spending rose in line with estimates.[/R]
Tuesday morning, the Commerce Department released its report on personal income and spending in the month of June. The report showed increases in personal income and spending that came in line with economist estimates. The Commerce Department said that personal income rose 0.6 percent in June following an unrevised increase of 0.4 percent in May. Economists had been expecting personal income to increase by about 0.6 percent. The report also showed that personal spending increased by 0.4 percent in June after an upwardly revised 0.6 percent increase in May. Spending had been expected to increase by 0.4 percent compared to the 0.4 percent increase originally reported for the previous month. With regard to inflation, the report showed that consumer prices rose at an annual rate of 3.5 percent in June compared to 3.4 percent in May. Excluding food and energy prices, prices rose at an annual rate of 2.4 percent, up from 2.2 percent in the two previous months.


[R]9:00AM Stock futures pointed to a flat to lower start.[/R]
U.S. stock futures signaled a flat to slightly lower opening Tuesday, reflecting cautiousness before a number of economic reports and a speech by newly installed Treasury Secretary Henry Paulson. In addition to economic data, July auto sales reports are expected. Fighting between Israel and Hizbollah guerrillas in Lebanon also weighed. A heat wave in the eastern United States will also have investors closely watching natural gas prices.

On the earnings news front, Verizon Communications ((VZ)) reported Q2 earnings declined but came in above analyst estimates, while revenue rose on strong growth in its wireless business. Verizon reported Q2 earnings of $1.6 billion, or 55 cents a share, down from $2.1 billion, or 75 cents a share last year, citing charges and merger integration costs. Eastman Kodak ((EK)) said Q2 loss widened to $282 million, or 98 cents per share from $155 million, or 54 cents per share a year ago on restructuring charges and rising silver prices. TXU ((TXU)) posted higher Q2 earnings, helped by power prices. International Paper Co. ((IP)) also posted higher Q2 profit, helped by better pricing. Also on the earnings front, Hilton Hotels ((HLT)), Loews ((LTR)) among companies scheduled to report quarterly results. Before the opening bell, shares of Whole Foods Market ((WFMI)) fell about 8%a day after the organic foods retailer said profit rose but sales were below estimates. Morgan Stanley cut its price target for Whole Foods to $70 from $80. Shares of Hot Topic Inc. ((HOTT)) fell 13% on Inet after the apparel retailer cut its earnings outlook. S&P 500 futures were down 1.10 points, a shade below fair value. Dow Jones industrial average futures fell 17 points, and Nasdaq 100 futures dropped 4 points.

Global Imaging Systems, ((GISX)), technology solutions company, reported Q1 net income advanced 6.6% to 61 cents a share, from 58 cents a share in the year-ago period on revenue growth to $195.7 million from $182.5 million. The company missed analysts’ forecast earnings by a penny. For Q2, the company sees split-adjusted earnings of 32 to 34 cents a share.

Loews Corp, ((LTR)), commercial property and casualty insurance company, reported that Q2 net income on a per share basis, attributable to Loews'' common stock of 85 cents a share, beating analyst estimate for earnings of 79 cents a share. Consolidated Q2 earnings were $568.7 million, up from a equivalent profit of $435.6 million a year-ago. The consolidated results include the results of Loews Group and Carolina Group, a tracking stock, that primarily consists of the company''s Lorillard tobacco unit. Carolina Group''s total net income for Q2, including the profit attributable to its intergroup interest with Loews, was $187.2 million, up from $142.1 million a year ago.

Pinnacle Entertainment Inc., ((PNK)), entertainment company, said it swung to a Q2 profit, helped by strong results at Boomtown New Orleans. For Q2, it reported a net profit of 93 cents a share, up from 10 cents a share in the year-ago period. Revenue rose to $228.8 million from $151.5 million. The company beat analyst estimate for earnings of 31 cents a share.

International Paper Co, ((IP)), paper and packaging company, reported its Q2 net income rose to 24 cents a share, from 16 cents a share in the year-earlier period. Sales at company rose 7% in Q2 to $6.27 billion from $5.86 billion. IP announced it recorded earnings from operations before special items of 41 cents a share in Q2. The company missed analysts’ forecasts for earnings of 33 cents a share.

Electronic Data Systems Corp, ((EDS)), provider of information technology services, reported Q2 earnings of 20 cents a share, up from a profit of 5 cents a share a year-ago. On a pro forma basis, the company posted a profit of 20 cents a share. The pro forma results exclude an after-tax loss of $5 million from discontinued operations and a pre-tax reversal of $4 million in previously recognized restructuring costs but include the impact of stock option expensing. Revenue advanced 3.9% in Q2 to $5.19 billion from $5 billion in the same period a year earlier. The company beat analysts’ estimate for a profit of 16 cents a share.


[R]8:00AMNorthwest flight attendants rejected a second contract with the company.[/R]
Northwest Airlines Corp. ((NWACQ)) flight attendants rejected Monday their second tentative labor contract with the company, a move that will likely lead the bankrupt airline to unilaterally impose a new, cost-cutting contract on the union. The airline''s 9,300 flight attendants warned that any attempt by the airline to enforce new work rules will lead to random mini-strikes aimed at hampering the carrier''s operations.

For the second time a bargaining group failed to broker a deal for the flight attendants, who dismissed the Professional Flight Attendants Association after it negotiated a tentative labor contract on their behalf in March that fell far short of what they would accept.

Before Monday, Northwest already had permission from a bankruptcy judge to impose the terms of an earlier tentative agreement that 80% of flight attendants rejected in June. On Monday night the union asked a bankruptcy judge to limit Northwest to imposing the terms rejected on Monday, rather than the terms rejected in June. Both would save Northwest $195 million a year, and both include pay cuts of roughly 21%. The union said the reduction amounted to 40% once health care costs and other givebacks were included. Northwest sought Chapter 11 bankruptcy protection in September, 2005, hit by soaring fuel prices, costly retirement and benefit plans for employees, and stiff competition.


[R]7:30AM Asian markets close lower on profit-taking pressure.[/R]
Asian markets ended lower on Tuesday. Japan''s Nikkei 225 Average after three consecutive sessions closing higher, shed 0.1% to 15,440.91. Blue-chip electronics shares such as Sony and Canon shed 0.97% and 1.11% respectively. Hitachi, the largest electronics conglomerate of Japan, dropped 2.2%. Electronics maker Pioneer bucked the trend and gained more than 8% after reporting an unexpected quarterly profit on plasma TV sales and cost reductions. Auto makers traded mixed, with Toyota shedding 1.16% while Honda advancing 0.26%. Toyota is to report strong results on Friday. Honda announced a record profit last week.

In Hong Kong, stocks ended slightly down on declines in China-related companies, as investors attention moved back to interest rates ahead of next week U.S. Federal Reserve meeting. The Hang Seng Index slipped 0.4% to 16911.37, ending six sessions of advances. HSBC Holdings finished flat despite its report Monday that first-half net profit soared by 15%.

South Korean shares ended lower as profit-taking in banks and shipbuilders erased gains in technology shares. The Korea Composite Stock Price Index, or Kospi, declined 0.8% to 1287.36. Bank shares, sharply declined as investors took profits. Kookmin Bank lost 5%, despite announcing a better-than-expected rise in second-quarter net profit Monday.

Elsewhere in the Asian region, Australia''s S&P/ASX 200 Index shed 0.09%, New Zealand''s NZSX-50 Index eased 0.06% and Taiwan''s Taipei Index dropped 0.20%.


[R]6:30AM European stock markets overcome early weakness to turn higher.[/R]
European markets traded higher by mid morning. The U.K. FTSE 100 index advanced 0.2% at 5,941 and the French CAC-40 index added 0.1% at 5,016, with only the German DAX Xetra 30 index dipping 0.1% at 5,676. In early trading Deutsche Bank reported a 30% increase in second-quarter net profit on stronger commission income. The bank, however, stated that income from trading financial assets was weaker-than-expected in the wake of recent market volatility and the shares shed 2%. Ryanair was also off 2.3% after its statement that it maintains a cautious outlook for the rest of the year.

Positive results from KPN and Man AG counterbalanced the news from Deutsche Bank and Ryanair. Dutch telecommunications operator KPN rose 5 per cent to €9.33 after reporting a stronger-than-expected 10 per cent rise in core earnings and an improving outlook. German truckmaker and printing machine manufacturer Man AG gained 2.6% after it revealed that its second-quarter net profit more than doubled to 198 million euros ($252 million), from 97 million euros a year earlier.

Crude oil bounced back after the U.S. National Hurricane Center said Tropical Storm Chris, the third named storm of the Atlantic hurricane season, had formed in the Caribbean southeast of Puerto Rico and was likely to strengthen. Crude oil for September delivery was up 14 cents to $74.54 a barrel on the New York Mercantile Exchange at 11:02 a.m. in London. Brent crude oil for September settlement gained 22 cents to $75.36 a barrel on the ICE Futures exchange in London.

Gold in London traded at US$632.00 per troy ounce, down from US$632.58 on Monday. The U.S. dollar was mixed against other major currencies in early European trading Tuesday. The euro was quoted at $1.2739, down from $1.2768 late Monday in New York. The British pound was traded at $1.8651, down from $1.8678 and the dollar bought 114.77 Japanese yen, up from 114.56.