Nasdaq Up 5.2%, Dow Up 2.7%

123jump.com Staff
18 Aug, 2006
New York City

For the day and for the every day of the week, market averages rose. For the week Nasdaq gained 5% and Dow rose 2.65%. Earnings disappointments from Gap and Dell did not sway buyers. Dell fell 9% at opening but managed to recover at close. Ruling on tobacco case helped Altria to gain 4%. Gap lost 3% on earnings news and traded near one-year low.

[R]4:45PM Earnings disappointment failed to stem market rise.[/R]

-Yield on 10-year bond closed at 4.85% and 30-year bond closed at 4.98%.
-Crude oil rose $1.08 to close at $71.14 per barrel.
-Gold traded down $3.50 to close at $615.80 per ounce.

-Asian Markets closed higher for the day and for the week. Japan and Singapore closed up 0.5% and Indonesia gained 1%. Philippines dropped 0.65%.

-European Markets closed near unchanged level but for the week paced ahead. UK registered a gain of 0.05% on tobacco and defense stocks but Germany and Switzerland lost 0.3%. For the week European markets gained more than 2%.

-Latin American Markets closed higher for the week and for the day led by 1.54% rise in Argentina and 0.33% rise in Mexico. Bovespa in Brazil was up a fraction after gaining 6% for the week.

Market averages registered healthy gains this week and today’s trading contributed to rise of the week. Day’s trading was driven by earnings news from computer maker Dell, Microsoft $40 billion buyback, ruling on tobacco case and Ford Motor restructuring.

Earnings disappointment from Dell and Gap failed to keep buyers from looking at other stocks. Dell fell close to 9% at the opening but managed to close lower 2.8% only. Semiconductor stocks turnaround in the afternoon trading lifting other tech stocks. Dell ((DELL)) stock in the last twelve months has corrected 50% from its peak in July 2005. Gap dropped to $16.52, down 4%, on earnings disappointment, and it raced near the 52-week low of $15.90.

Ford Motor Co. ((F)) announced a sharp cut in production for the rest of the year as it struggles to stem losses in its North American operation. The company reported that it plans to cut production in the fourth quarter by 168,000 units, or 21% lower than a year ago, and in the third quarter by 78,000 units compared to a year ago. For the entire year the company plans to produce just over 3 million vehicles. On the news of production cut, bond rating agency Fitch, lowered its debt further in to junk level. The stock fell 2% at close.

Microsoft ((MSFT)) said that only $3.8 billion worth of shares were offered in the “Dutch auction” when it was prepared to spend $20 billion by the end of Thursday. The company said that now plans to add the remaining $16.2 billion to its long-term plan to repurchase stocks by the end of June 2011. This wills nearly double its plan to repurchase up to $36.2 billion worth of stocks. The company has $34.16 billion cash at the end of its fiscal year 2006 on June 30th. The company managed to repurchase 155 million stocks at an average price of $24.75 a share, near the upper end of its purchase limit in the “Dutch Auction”, nearly 1.5% of the total outstanding shares.

[R]12:30PM European markets finished modestly down.[/R]
European markets closed with modest losses Friday with little economic and corporate news to give direction to the market. Yet, London FTSE 100 finished up 0.05%, supported by gains for the tobacco and energy sectors. U.K. tobacco companies advanced after a U.S. federal judge imposed a broad range of restrictions on tobacco companies. Imperial Tobacco gained 2.3% and British American Tobacco rose 0.4%. BAE Systems also supported the index with an advance of 2.6% after securing a $19 B deal to provide Saudi Arabia A rebound by the price of oil boosted energy stocks, with Royal Dutch Shell rising 1.7%. The German DAX 30 lost 0.28%, while the French CAC 40 fell 0.18%.

Oil price hit a two-month low on easing supply concerns and receding tensions in the Middle East. Light crude September delivery to $69.60 a barrel before recovering to $70.05. Gasoline gained 2 cents to $1.9550 a gallon, while heating oil added 1 cent to $1.9760. Natural gas dropped 11 cents to $6.590 per 1,000 cubic feet. London Brent October delivery rose 75 cents to $72.33. The dollar traded mixed versus major currencies. The euro traded at $1.2811, down from $1.2827. The dollar bought 115.79 yen, down from 115.90. The British pound stood at $1.8785, down from $1.8841. European gold prices dropped. In London the precious metal traded at $611.70, down from $624.80 per ounce. In Zurich gold traded at $613.70, down from $623.48. Silver closed at $11.89, down from $12.31.


[R]11:30AM Stocks moved to the downside.[/R]
U.S. market averages traded below the flat line as investors turned to profit taking after a streak of four winning sessions. The tech sector led decliners, with Dell dragging on the Nasdaq. The computer maker fell 7.15% after it reported sharply lower Q2 earnings and revealed that the SEC is investigating its revenue accounting. Weakness in the gold, housing, and brokerage sectors also contributed to the downward move. However, strong gains by Altria and Microsoft limited the downside for the Dow. Altria ((MO)) rose 3.7%, benefiting from a favorable court ruling, while Microsoft ((MSFT)) moved 2.2% higher after announcing that it increased its share buyback plan by about $16.2 billion.


[R]10:30AM Sensex finishes with slightly lower due to profit taking.[/R]
The Sensex declined 11.76 points, or 0.1%, to 11,465.72. It traded in the range of 99.06 points for the day from the low of 11,409.11 and high of 11,508.17. The market-breadth was slightly positive, as 1,262 shares advanced on BSE, and 1,217 declined and 64 shares were unchanged. The turnover on BSE was Rs 3,216 crore, lower than Thursday''s Rs 3,850 crore.

Refinery stocks led the advancers. HPCL soared 7% to Rs 272.30, BPCL advanced 7.7% to Rs 374 and Indian Oil Corporation gained nearly 3% to Rs 4,640. Refinery companies have sustained margin compression as rise in oil price has not been reflected in the petrol price at pump. This week crude oil has fallen $4 per barrel.

The auto stocks advanced on the fall in oil price. Maruti Udyog gained 2% to Rs 837, Hero Honda advanced 1.4% to Rs 702, and Mahindra & Mahindra edged up 0.5% to Rs 648. Tata Motors rose 1.4% up to Rs 849 after it has been reported that the company may roll out a new truck on Renault platform. The company is rumored to consider IPOs for its two subsidiaries, HV Axles and HV Transmission. Hindustan Motors soared nearly 11% to Rs 38.60 after the firm said it plans to sell about 314 acres (127.1 hectares) of excess land at its plant in West Bengal.

International pharmaceutical company stocks rose on the news that Central government has permitted a 10-year exemption from price control for any new drug molecule emerging out of indigenous research and development. Glaxosmithkline surged 6.5% to Rs 1,206, Pfizer gained 7.5% to Rs 797, Novartis was up 7% to Rs 472, Aventis added 7% to Rs 1,607, Merck rose 6% to Rs 552 and Wyeth moved up 3.9% to Rs 591.95.

Cement shares gained on intense buying on prospects of firm outlook for cement prices in the medium term. ACC advanced 1.5% to Rs 903, Gujarat Ambuja Cements rose 1.9% to Rs 110, JK Lakshmi Cement surged 6% to Rs 145.75, Mangalam Cement gained 3% to Rs 160 and JK Cement notched up 1.7% to Rs 168.90.

Reliance Industries declined 1% to Rs 1,053.80. Reliance said it would open its first retail store in September 2006 in Hyderabad. Initially, Reliance will limit itself to retailing food and vegetables.

Another large-cap, IT company Infosys, gained 0.4% to Rs 1,766. The stock advanced in late trading. State Bank of India ended flat at Rs 879. It raised interest rates on Friday on fixed deposits by between 25 to 50 basis points. Hindustan Lever advanced 1.1% to Rs 237.65.


[R]9:45AM Stocks opened mixed as Dell pressured.[/R]
Stock markets opened mixed Friday, pressured by disappointing earnings from Dell and an advance by the oil price. After four straight sessions of gains and little economic data, investors searched for motivation to extend the winning streak. Computer maker Dell ((DELL)) dragged the Nasdaq after reporting Q2 profit drop by 51% and revealing that the SEC has been investigating its accounting for the past year. The Dow advanced after Altria (MO), the parent company of cigarette maker Philip Morris, climbed by 3.7% and moved to a new high after a judge ruled that the tobacco companies deceived smokers about the health risks from smoking.

Microsoft Corp. ((MSFT)) announced it increased its share buyback plan by about $16.2 billion, boosting its total repurchase authorization to $36.2 billion through June 30, 2011. Shares of the company gained 1.3%. Another company in focus was Ford Motor Co. ((F)) after it said that it is planning to partially shut down plants in the U.S. and Canada in the fourth quarter due to reduced production in North America. The company said Q4 production would be down 21%, and Q3 production will be 20,000 units below previous forecasts. For the full year, Ford plans to produce about 9% fewer vehicles than last year. Company’s shares dropped 3.2%. In the first hour of trading, the Dow Jones industrial average rose 27.86, or 0.25%.The Standard & Poor's 500 index was up .83, or .06%, and the Nasdaq composite index fell 3.38, or 0.16%.


[R]8:30AM Stock futures pointed to a flat opening.[/R]
After four consecutive sessions if gains, U.S. stock equity futures indicated a flat opening, with gains from tobacco companies on a legal victory but losses for Gap Inc. and Dell Inc. due to disappointing quarterly results.

Of companies in focus, Altria Group ((MO)) and Reynolds American ((RAI)) are expected to rise after a judge's ruling held that tobacco companies including Altria's Philip Morris USA and Reynolds American violated federal racketeering laws. Apparel retailer Gap Inc. ((GPS)) posted Q2 profit drop of 53% on lower margins, and said it was paring its full-year forecast. Analysts at CIBC, Jefferies and Prudential downgraded the company's shares. Tech stocks are expected to fall after Dell Inc. ((DELL)) reported a 51% net income drop in the second quarter and revealed SEC probe regarding accounting issues. Goldman Sachs downgraded the stock to 'sell' from 'hold'. Company's shares dropped 6.7% in pre-market trading.

Chip maker Marvell Technology ((MRVL)) said its net revenue rose 47%t to $574 million, missing expectations for sales of $583 million. The company didn't report its net income or per-share figures because of an internal review of its stock-option accounting. Autodesk ((ADSK)), design software maker, didn't report its earnings for the same reason, but reported a 21% growth in quarterly revenue.

In other news, Ford Motor Co. ((F)) is planning to close more factories, cut jobs and benefits by 10% to 30%. Dow Jones futures were recently up 2 points, S&P 500 futures eased 1.7 points, and Nasdaq futures were off 1.5 points.

Alpha Natural Resources Inc, ((ANR)), coal producer, reported its Q2 net income fell to 36 cents a share, from 43 cents a share in the year-earlier period on 19% revenue growth, missing analysts' forecast for earnings of 44 cents a share.

The Wet Seal Inc, ((WTSLA)), retailer, reported Q2 net income advanced to 4 cents a share, from a loss of 87 cents a share in the year-ago period. Revenue grew to $129.5 million from $126.2 million. If not for items, net income rose to $3 million, or 3 cents a share, from $2.7 million, or 7 cents a share in the year-ago period. The company met analysts' forecasts for earnings of 4 cents a share and forecast Q3 net income of 6-7 cents a share, including $1.9 million or 2 cents a share for non-cash stock compensation.

J.M. Smucker Co, ((SJM)), maker of peanut butter and jelly, reported that Q1 income fell 50 cents a share, from 51 cents a year ago as results were hurt by restructuring charges related to the sale of the company's Canadian grain-based food service operations. If not for those charges, earnings would have been 59 cents a share. Sales rose 3% to $526.5 million from $510.3 million. The company missed analysts' expectations for earnings of 58 cents a share.


[R]7:30AM Asian markets end mixed, while Japan advances on exporters.[/R]
Asian markets closed mixed on Friday. Japan's Nikkei 225 Average ended the trading session up 0.53% to 16,105.98, its highest close since mid-May. Japanese exporters, depending heavily on sales in the U.S. market for profit growth, led the gainers. Sony Corp. gained 2.71% and Honda Motor advanced 1.28%. Japan Airlines Corp. moved up 4.15% after applying to regulators for permission to increase fuel surcharges, while All Nippon Airways advanced 1.32% on lower oil prices.

In Hong Kong, the Hang Seng Index closed down 0.24% to 17,330.70. Clothing retailer Esprit Holdings advanced 3.53%, while oil-related stocks including CNOOC and Petrochina fell, 2.02% and 1.9% respectively. South Korea's Kospi Index edged up 0.25% on strong blue-chips including Samsung Electronics and steelmaker Posco. Samsung Electronics advanced 2.17%, and Posco rose 0.43%.

The Shanghai Composite fell 0.3%. Air China's debut was disappointing on the Shanghai Stock Exchange Friday, closing unchanged from its IPO price of 2.8 yuan. It was the weakest opening day for a mainland IPO since new offerings resumed in June following a year-long suspension. Elsewhere around the region, Australia's S&P/ASX 200 edged down 0.07%, while miner BHP Billiton advanced 0.72% following its statement that it had shut down its Escondida mine in Chile.


[R]6:30AM European markets were mostly lower on profit taking.[/R]
European markets were lower by mid-morning on Friday. The U.K. FTSE 100 index added 0.2% at 5,911, while the German DAX Xetra 30 index lost 0.1% at 5,827 and the French CAC-40 index fell 0.1% at 5,140. BAE Systems advanced 3.5% after it stated that it hails the agreement between the governments of Saudi Arabia and the U.K. of the commercial principles that will initiate Saudi Arabia's purchase of Eurofighter Typhoon jets. Also, other major gainers included Imperial Tobacco up 1.3% and British American Tobacco rising 1.2%.

The Eurofighter is a joint project between Britain’s BAE Systems, Italy’s Finmeccanica, which rose 1.3% and EADS, Europe’s largest aerospace group, which gained 0.6%. Other defense groups were higher also. Thales, the French defense electronics group, is also in negotiation to supply to the Middle East and gained 1.4%

Oil prices advanced Friday after hitting the bottom at $70 a barrel a day earlier on a wave of good news in the Middle East and an Alaskan oil field. Late Friday morning in Europe, light, sweet crude oil for September delivery rose 68 cents to $70.74 a barrel in electronic trading on the NYME. At London's ICE Futures exchange, Brent crude for October was up 53 cents to $72.11 a barrel.

The U.S. Dollar traded mixed against other major currencies in European trading on Friday morning. Gold fell. Dealers in London fixed a recommended price of $614.75 at mid-morning, down from $624.80 Thursday. The euro traded at $1.2819, down from $1.2827 Thursday. The British pound bought $1.8840, down from $1.8841. The dollar purchased 115.60 Japanese yen, down from 115.90.