Retailers Sparked Rally

123jump.com Staff
30 Nov, -0001
New York City

Mixed economic data kept investors guessing for more data but retail stocks were the choice of the day. Retailers, consumer stapes, health care and casino stocks rallied. GM and Mylan rallied as both companies put shareholders interest first. GM is reported to be in talks with union to lower health-care costs and Mylan declares $1.25 billion buy-back and doubles the quarterly dividend.

Market remained stuck in the trading range throughout the session. Oil traded up and down but stocks remained for the most part in the positive range. Before the market opened lower-than-expected fall of 0.5% in May retail sales and wholesale price fall of 0.6% offered a mixed set of data to investors.

Retails stocks rallied but then the rally broadened to health care sector and consumer staples and casino stocks.

The Producer Price Index for Finished Goods fell 0.6 percent in May, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This decline followed a 0.6-percent increase in April and a 0.7-percent advance in March. At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.7 percent in May, after rising 0.8 percent in the preceding month, while the crude goods index moved down 2.0 percent, following a 2.7-percent jump in April.

Over three fourths of the downturn in the finished goods index can be traced to prices for energy goods, which fell 3.5 percent in May after posting a 2.1-percent increase in April. Prices for finished consumer foods also turned down -- declining 0.3 percent following a 0.1-percent advance in the prior month. The index for finished goods other than foods and energy went up 0.1 percent in May, compared with a 0.3-percent gain in April.

Prices for materials for durable manufacturing fell 1.4 percent in May, after showing no change in April. The index for hot rolled steel sheet and strip declined 8.4 percent, following a 1.1-percent decline in the previous month.

Prices for aluminum mill shapes, cold rolled steel sheet and strip, and unprocessed filament yarns increased less than they did in the prior month. The flat glass and original equipment automotive stamping indexes turned down compared with increases in April.

By contrast, the index for semi-finished steel mill products rose 0.1 percent, after dropping 10.3 percent in April. The hot rolled steel bars, plates, and structural shapes; cold finished steel bars; copper and brass mill shapes; and hardwood lumber indexes also moved up in May, after falling in the prior month.

Prices for intermediate foods and feeds advanced 0.4 percent in May, after posting a 0.4-percent rise in April. In May, increasing prices for beef and veal, prepared animal feeds, fluid milk products, and flour out-weighed decreasing prices for natural, processed, and imitation cheese; shortening and cooking oils; refined sugar and byproducts; processed young chickens; confectionery materials; liquid milk products; and butter.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $343.6 billion, a decrease of 0.5 percent from the previous month, but up 6.4 percent from May 2004.

Total sales for the March through May 2005 period were up 7.1 percent from the same period a year ago. The March to April 2005 percent change was revised from +1.4 percent to +1.5 percent.

Retail trade sales were down 0.5 percent from April, but were up 6.3 percent above last year. Gasoline station sales were up 13.4 percent from May 2004 and sales of non-store retailers were up 11.9 percent from last year.

Retail stocks are trading higher on the back of this news. Shares of Best Buy, Circuit City, J C Penney, Wal-Mart, Target, Home Depot and other are traded higher.

BancWest announced that its Bank of the West has agreed to acquire Commercial Federal Corp for $1.36 billion for $34 a share and 50 cents special dividend at the closing.

Mylan Labs shares jumped 10.45% on the news of company share buy back of $1.25 billion and increasing its quarterly dividend of 100% effective the quarter ending June 30.

General Motors traded higher by 4% on the reported news that Union has been asked to agree on a meeting to cut health care costs for the retired employees.

Wyndham International, international hotel operator, agreed to be acquired by Blackstone Group for $3.2 billion in cash or at $1.15 per share. The stock jumped 20% in the morning trading hours to $1.15.

Investment Brokerage house Lehman Brothers reported 2Q earnings of $2.26 vs. $2.01 a year ago on 12% rise in revenue. The Investment banking revenue for the quarter jumped 6% reflecting second highest quarterly debt-underwriting revenue for the company. Capital markets revenue jumped 12% for the quarter. The stock is up 93 cents or 1%.

On a related note, Morgan Stanley CEO Phil Purcell announced that he will retire before the next annual meeting. In recent months the company has seen a steady stream of high-level resignation. The company may spin-off certain financial divisions and un-bundle the financial supermarket that Purcell built and tried to defend. The company is also battling declining earnings.

Best Buy reported 1Q profit of 51 cents vs. 28 cents a year ago on total sales increase of 12% and same-store sales growth of 4.5%. The company also raised its fiscal 2006 earnings guidance by 15 cents per share. The stock is up $7.20 or 12%.

Factory Card & Party, party retailer, posted 4Q 20% earnings rise of 10 cents per share vs. 9 cents last year. The favorable results are due to higher gross margin and lower advertising costs. Same-store sales declined 4.3%.

Great Wolf Resorts, indoor water parks operator, lowered its 2Q earnings outlook, citing strong competition and a holiday shift. The company expects a loss of 2 cents excluding special items. The full-year earnings are seen between 12 and 18 cents per share.

Knight Ridder, newspaper publisher, expects flat with last-year’s 2Q earnings of $1.08 on charges and weak operation results. Analysts forecast $1.05 per share. Stocks fell 45 cents to $61.89 in early trading on the NYSE.

West 49, specialty retailer, reported 4Q net income loss of 3 cents per share vs. 2 cents lat year when the company was private. Net sales rose 30% to $18.9 million. Comparable store sales increased 10.3%.

Royal Ahold, food retailer, reported 1Q earnings drop of 55% on weak U.S. dollar and divestments. Sales declined less than 1%. The company keeps targeting next-year sales increase and operation margin. Shares jumped by 8% to $7.90 in early European trading.

Six Flags, theme park operator, said that it backs its 2005 guidance of adjusted earnings before taxes, interests and amortization of $300 million. The company is worried that the temporary shutdown of a roller coaster could affect attendance.

On the second day of Paris Air show Indian airlines, Jet Air and Kingfisher air stole the headlines with announcements of $7 billion purchase from Airbus and Boeing. Separately Brazil’s Embraer said that it has sold five aircraft for regional air travel to Paramount Airways with a list price of $80 million.

In the metals market gold, copper, platinum and palladium traded lower but silver traded 1.25 cents higher. Volatility in the crude oil trading continues and closed down 62 cents to $55 after trading close to $56 per barrel.

Brazilian Real firmed but stock market closed up 2.73% after losing as much in the trading session as country listened to the testimony of the ruling coalition partner to Congressional ethics committee. Chile, Mexico and Argentina closed higher.

South Korea's now defunct conglomerate, Daewoo, Kim Woo Choong, was arrested upon return to South Korea after hiding from authorities for more than six years.

European stocks ended down as oil kept trading above $55 a barrel putting oil-sensitive shares like automakers and airlines under pressure. Mixed corporate news also dragged the markets downwards. Averages in Germany declined 0.2%, in France dropped 0.1%, in U.K. edged down 0.1%. The euro and the pound regained some ground against the dollar, trading at $1.2116 and $1.8094 respectively.

Asian benchmarks closed mixed on higher exporter issues supported by the strong U.S. dollar. In Japan the Nikkei 225 Stock Average gained 0.2% on the dollar’s advance vs. the yen whereas Shanghai’s stocks lost early gains on textile sector being under pressure. The greenback bought 109.41 yen compared with 109.50 in yesterday late trading.