Rate Worries Weigh

Elena
03 Aug, 2006
New York City

U.S. stock futures declined, following a surprising interest-rate increase by the Bank of England which raised concern about more global rate increases. Disappointing sales report from Starbucks weighed on consumer spending outlook. Gap Inc. forecast Q2 profit below estimates as it posted a 4% drop in July same-store sales.

[R]9:00AM Stock futures pointed to a lower start on rates worries[/R]
U.S. stock futures moved lower, following a surprising interest-rate increase by the Bank of England which raised concern about more global rate increases. Negative sentiment was also generated by disappointing sales report from Starbucks Corp. ((SBUX)), weighing on the outlook for consumer spending. Starbucks shares dropped 9.6% before the bell on the Inet.

The Bank of England on Thursday surprisingly hiked its key interest rate by a quarter point to 4.75%. That move was followed by the European Central Bank''s raising interest rates, also by a quarter point, to 3%. The Fed Reserve will meet on Tuesday to decide on rates.

Automaker Ford Motor Co. ((F)) on Wednesday said its Q2 loss was more than double what it previously reported due to higher pension-related costs. Ford shares dropped 4%. Medical device maker Medtronic Inc. ((MDT)) warned its quarterly revenue and earnings would fall short of expectations due to a decline in the U.S. market for its implantable devices. The stock dropped more than 9% on Inet. S&P 500 futures were down 5.30 points, below fair value. Dow Jones industrial average futures fell 36 points, and Nasdaq 100 futures were down 7.75 points.


Cooper Tire & Rubber Co, ((CTB)), manufacturer of replacement tires, reported its Q2 loss widened to 34 cents a share, from 11 cents a share, in the year-ago period. On a continuing operations basis, the company lost 10 cents a share in Q2. Sales advanced to $624.8 million from $510.9 million in the same period a year earlier. The company missed analysts’ estimate for a loss of 7 cents a share.

Patterson-UTI Energy Inc, ((PTEN)), provider of onshore contract drilling services, reported that Q2 net income more than doubled on 63% higher revenue. Net reached $1 a share, from 43 cents, in the year-earlier period. The company beat analysts’ expectations for earnings of 95 cents for PTEN. Revenue grew to $637 million from $390 million.

LaBranche & Co. Inc, ((LAB)), holding company, reported that it swung to a Q2 loss of 37 cents a share, from year-ago net income of 14 cents a share. Revenue fell to $53.2 million from $77.7 million. Included in the revenue figure was a pre-tax loss of approximately $30.3 million in connection with the decline of the estimated fair value of the restricted shares of NYSE Group, Inc. common stock held by LaBranche. If not for charges, LaBranche lost 9 cents a share in the latest period, missing on that basis analysts’ forecasts for earnings of 11 cents a share..

Investment Technology Group, ((ITG)), electronic trading firm, reported its Q2 profit rose 60% to 63 cents a share from 41 cents a share in the year-ago period. Total revenue for Q2 rose to $153.6 million from $102.2 million. The company beat analysts’ expectations for earnings of 55 cents a share.

Revlon Inc, ((REV)), mass-marketer of cosmetics brands, reported Q2 net loss more than doubled to 21 cents a share, from a loss of $ 10 cents a share in the year-ago period. Sales rose 1% to $321 million. Adjusted loss before interest, taxes, depreciation and amortziation narrowed to $20 million from $24 million. The company topped analysts’ forecasts for a loss of 23 cents a share.


[R]8:00AM Starbucks reported 16% profit rise and 6% same-store sales growth in Q3.[/R]
Starbucks ((SBUX)) reported it earned $145 million, or 18 cents a share in Q3, up from $125.5 million, or 16 cents, in the year-ago period, beating estimates of 17 cents a share. The 16% profit rise and 23% growth in revenue to $1.96 billion are due to new outlets, along with same-store sales gains. Same-store sales at the Seattle-based coffee chain rose 6%.

For the quarter, company-operated retail revenues rose 22% to $1.7 billion, largely on the back of 955 new stores and same-store sales growth. Starbucks added that its July revenue climbed 20% to $596 million on a same-store sales increase of 4%, vs. expectations of 6.4% and a 7% rise in July of 2005.

Starbucks forecasted earnings from 72 cents to 73 cents a share for the full year, up from 61 cents in fiscal 2005 and in-line with analyst estimates. Revenue growth of for the year will be about 20%, with same store sales up 3% to 7%. Starbucks also said it expects to open at least 2,000 net new stores on a global basis in fiscal 2006, an increase of 200 new stores than its previous target, leading it to boost its estimate of capital expenditures to $800 million from a previous $750 to $775 million.

Federated Department Stores ((FD)) posted same-store sales rise of 3.3%, slightly higher than forecasts of 3.2%. Total sales rose 61.3% to $998 million. For Q2 Federated said total sales rose 65.5% to about $6 billion. Federated expects same-store sales to increase by 3% to 4% in August.

Costco Wholesale ((COST)), warehouse-club store chain, reported that July sales rose 11%, while same-store sales rose 7%, slightly above estimate of a 6.8% rise.

Bebe Stores ((BEBE)), retailer, said same-store sales rose 10% in July, exceeding expectations of a 4% climb.

Limited Brands ((LTD)) said its July same-store sales rose 7%, beating estimates of 4.5%.

Mother’s Work ((MWRK)) said July same-store sales rose 3.9%, slightly beating analyst expectations of a 3.3% rise.

Chico-s FAS ((CHS)), retailer, said same-store sales rose 4.9% in July from the same period a year ago, but came in below the estimated figure of 5.6%.

Nordstrom ((JWN)), the pricey department-store retailer, said same-store sales climbed 5.3%, ahead of analyst forecast of a 4.6% gain.

Wal-Mart Stores Inc. ((WMT)), the world''s largest retailer, posted a 2.4% rise in July sales from stores open at least a year, matching forecast.

Gap Inc. ((GPS)), the apparel retailer, posted a 4% drop in July sales from stores open at least a year.


[R]7:30AM Asian markets ended mixed ahead of U.S. and Japan economic data.[/R]
Asian markets ended mostly mixed on Thursday. The Nikkei 225 Index gained slightly, advancing 0.04% to close at 15470.37. Retailers, seafood industry stocks, and some electronics issues climbed. Fast Retailing added 1.4%, and Nippon Suisan Kaisha jumped 6.3%. Among electronics stocks, Canon nudged 0.9% while Sony shed 0.4%. Marine transport stocks offset gains, with Mitsui O.S.K. Lines plunging 1.6%.

Hong Kong shares closed slightly higher as a gain in HSBC supported the benchmark index. The Hang Seng Index advanced 0.1% to 17048.42, though gains were limited due to the concerns over the FOMC meeting. Other advancers included China Construction Bank which climbed 2.4%, Bank of Communications rising 1.9% and Bank of China gaining slightly 0.6%.

South Korea’s Composite Stock Price Index, or Kospi, fell 0.2% to 1292.05, as shares closed lower on institutional selling and caution ahead of the Fed meeting, with bank and telecom shares leading the decline. Taiwan markets closed slightly while digesting news of slow progress in cross-strait relations. Shares in China were flat for the second day running, as advances in banks were offset by concerns about the impact of a wave of new initial public offerings. Shares in Australia, New Zealand and Singapore climbed.


[R]6:30AM Europe markets lower on expectation of ECB rate call.[/R]
European markets were lower Thursday morning. London’s FTSE 100 shed 0.6% to 5,898.2, while Frankfurt’s Xetra Dax slipped 0.8% to 5,638.20 and in Paris, the CAC 40 dropped 0.6% to 4,997.17. Earnings were again the focal point in Europe, and the oil sector suffered as French producer Total, reporting a 16% rise in second-quarter net profit, fell just shy of market expectations and its shares fell 1.5%.

Finnish refiner Neste Oil lost 6.2% unexpectedly reporting weak second-quarter operating profit. Numico sank 2.8% as better-than-expected second-quarter earnings were overshadowed by sales that sank just shy of expectations and Danone, posting record first-half sales on Wednesday, shed 0.9% while Swiss group Nestle shed 1.9%.

Financial stocks gained as Société Générale, said net profit in the second quarter climbed nearly 38%, topping forecasts on strong growth in its investment banking operations. The shares climbed 0.2% and the UK’s Barclays too said that booming investment banking growth led to a better-than-forecast 37% rise in first-half profits lifting its shares 1.1%.

Oil prices rose slightly Thursday morning after a jump the day before on news that U.S. crude and gasoline inventories had fallen, and a tropical storm was gaining strength in the Caribbean. Light sweet crude for September delivery was up 4 cents to $75.85. London ICE Brent crude was trading 22 cents lower at $76.67 by 0915 GMT on Thursday.

Gold traded at $646.50 an ounce, down $2.20 an ounce from Wednesday. The euro lost ground against the U.S. dollar ahead of Thursday''''s European Central Bank interest rate decision. The euro bought $1.2760 in early European trading, down from $1.2798 in New York late Wednesday. The British pound dropped to $1.8746 from $1.8779. The dollar also climbed to 114.76 Japanese yen from 114.55 yen.