Upbeat GDP Lifts Sentiment

Elena
30 Aug, 2006
New York City

An upward revision to Q2 GDP boosted market indexes at opening as the Commerce Department measured that gross domestic product rose 2.9%, higher than the original estimate of 2.5% and roughly in-line with economists'' expectations of an increase by 3%. U.S. stocks also gained on comments by Federal Reserve official Richard Fisher which helped sooth inflation concerns.

[R]09:45AM Upbeat GDP data boosted indexes.[/R]
An upward revision to second-quarter GDP boosted market indexes at opening. The Commerce Department reported that gross domestic product rose 2.9%, higher than the original estimate of 2.5%, but below economists'' expectations of an increase by 3%. U.S. stocks also gained on comments from Federal Reserve official Richard Fisher which soothed concerns about inflation. However, within the first hour of trading stock markets turned mixed. Utility stocks contributed to the early slide. PSEG ((PEG)) dropped more than 4% on news that its merger with Exelon was now likely not to be completed. Transportation stocks also showed weakness in the early going, with low-cost air carrier JetBlue ((JBLU)) down more than 2.5% following an analyst downgrade. Trucking stocks also fell, including a nearly 2% slide in JB Hunt ((JBHT)).

However, gold and HMO stocks showed modest gains. The insurance sector also advanced. In the first hour of trading, the Dow Jones industrial average fell 5.60, or 0.05%. The Standard & Poor's 500 index dropped 0.86, or 0.07%, and the Nasdaq composite index fell 2.33, or 0.11 percent, to 2,169.97. The Dow Jones industrial average fell 5.60, or 0.05%. The Standard & Poor's 500 index dropped 0.86, or 0.07%, and the Nasdaq composite index fell 2.33, or 0.11 percent, to 2,169.97. Bonds continued their advance after continued economic news, with the yield on the benchmark 10-year Treasury note at 4.77% from Tuesday's 4.79%.


Bombardier Inc, ((CA:BBDA)), aerospace firm, reported that Q2 net income dropped due to year-earlier profit from discontinued operations. Net profit came to 3 cents a share, against 6 cents in the year-earlier period. The year-ago figure reflected $107 million from discontinued operations. Q2 earnings from continuing operations before special items were 3 cents versus 2 cents. Revenue fell 3.2% to $3.52 billion.

Layne Christensen Co., ((LAYN)), drilling services and related products company, said Q2 earnings rose to 47 cents a share, up from 35 cents a share a year earlier on 76% revenue growth, with sales from its water and wastewater infrastructure unit rising 94%, primarily due to the purchase of Reynolds Inc.

DSW Inc, ((DSW)), footwear retailer, reported Q2 earnings of 35 cents a share, up from a profit of 28 cents a share a year-ago. The year-ago results include $3.9 million of interest expense. Sales grew in Q2 to $301.3 million from $276.2 million in the same period a year earlier. Same-store sales increased 2.2%. The company topped analysts’ estimate for a profit of 30 cents a share. Looking ahead, the company reiterated its estimate for earnings of $1.24 to $1.27 a share for fiscal 2006 with same-store sales projected to rise between 3% and 5%. DSW also reaffirmed plans to open 30 stores in 2006.

Rex Stores Corp., ((RSC)), consumer electronics retailer, said Q2 earnings fell to 13 cents a share, from 70 cents a share a year earlier. Income from synthetic fuel limited partnership investments dropped to $700,000 from last year''s $10.4 million, as the buyer of the company''s partnership interest in the certain synthetic fuel investments, Progress Energy ceased production at its facilities on the increased likelihood that tax credits would be phased out due to higher oil prices. Revenue for Q2 fell to $82.1 million from last year''s $82.5 million, while same-store sales increased 3.5%.

Natural Foods Inc, ((UNFI)), food distributor, reported Q4 earnings of 30 cents a share, up from a profit of 28 cents a share a year-ago on 14.1% sales rise The company matched analysts’ estimate for a profit of 30 cents a share. Looking ahead, company said it expects earnings of $1.25 to $1.30 a share, excluding items, on revenue of between $2.7 billion and $2.8 billion in fiscal 2007.


[R]9:00AM Stock futures gained on strong GDP data.[/R]
Stock index futures slightly advanced after government data showed U.S. Q2 growth came in-line with economists'' estimates. The government''s second estimate of GDP was revised upward to 2.9%, near the 3% revision analysts were expecting. S&P 500 futures were up 1.5 points, slightly above fair value. Dow Jones industrial average futures rose 13 points, and Nasdaq 100 futures were up 2.75 points.

[R]The U.S. Gross domestic product rose 2.9%.[/R]
The U.S. economy grew faster than previously estimated in the second quarter, according to a report released by the Department of Commerce on Wednesday. However, growth was revised up slightly less than economists had expected. The report showed that the U.S. gross domestic product rose at an annual rate of 2.9 percent in the second quarter. While this represents an upward revision from the advance reading of 2.5 percent, economists had been expecting growth to be revised slightly higher to about 3.0 percent.

The Commerce Department said that the upward revision reflects higher than previously estimated readings on exports of goods, non-residential structures, private inventory investment, and state and local government spending. The upward revisions were partly offset by a downward revision to residential fixed investment. Despite the upward revision, the second quarter GDP growth is still well below the 5.6 percent rate of growth that was reported for the first quarter. The deceleration in the pace of growth compared to the first quarter reflects slower growth in spending on durable goods and equipment and software as well as slower federal government spending.

The report also showed a downward revision to the pace of price growth in the second quarter, as it said consumer prices, excluding food and energy prices, rose at an annual rate of 2.8 percent in the second quarter compared to the 2.9 percent rate of growth previously reported. The pace of price growth in the second quarter still represents a significant acceleration from the 2.1 percent rate of growth reported for the first quarter.


[R]8:30AM Stock futures indicated a flat opening on Costco profit warning.[/R]
U.S. stock futures were sitting near the flat line Wednesday morning following a profit warning from Costco Wholesale and an advance by the oil price. Crude oil futures rose 52 cents to $70.23 a barrel before the weekly petroleum report, expected to show a decline in crude and gasoline inventories.

Costco Wholesale Corp. ((COST)) said Wednesday that Q4 profit would come in below analyst expectations, citing lower-than-expected profit margins and an income-tax charge. The No. 1 U.S. wholesale club operator forecast earnings per share of 68 cents to 71 cents for the quarter and $2.23 to $2.26 for the fiscal year ending Sept. 3. Analysts expected it to earn 77 cents for the quarter and $2.33 for the year. Company’s shares dropped 6.1% in pre-market trading.

Among other companies in focus, Novell Inc. ((NOVL)) may decline after beginning an internal review of its stock-option grants that could result in not filing its quarterly results on time. Novell estimated that Q3 revenue fell a weaker-than-forecast 4%. Euronext, the European stock exchange operator that agreed to merge with the NYSE Group Inc. ((NYX)), reported a 63% profit jump. It also set a date for a vote on the merger. S&P 500 futures rose half a point at 1,305.60 and Nasdaq 100 futures were flat at 1,576.00. Dow industrial futures edged up 5 points.


[R]7:30AM Japan falls on media report, HK gains on Fed’s decision.[/R]
Asian markets were mixed on Wednesday. In Tokyo, the Nikkei 225 Average ended the day 0.12% lower to 15,872.02. Shares in Rakuten sank by their daily limit of 8.5% on rumors a weekly magazine intended to publish a damaging report about the company. Internet and cellular provider Softbank Corp. plunged 3.33%. Toshiba rising 2.53%, and Canon Inc up 2.15% led the advancing blue-chips in Tokyo.

Hong Kong''s Hang Seng Index closed up 1.18% to 17,284.71. Shares were led higher by rate-sensitive property stocks on expectations that U.S. rate rise cycle will come to an end soon. Developer Sun Hung Kai Properties gained 1.6%, and Cheung Kong Holdings edged up 1%. Henderson Land surged 3.9%.

The Shanghai Composite Index notched up 0.3% as the yuan hit its highest level against the dollar since being revalued last July. Australia''s S&P/ASX 200 was flat, edging down 0.01%. Beverage company Foster''s Group shed 0.64% after denying rumors it had been approached about a takeover. In South Korea, the Kospi index dropped 0.24%. Taiwan''s Weighted index gained 1.65%, with PC-maker Acer adding 7% after Merrill Lynch upgraded it to buy from neutral.


[R]6:30AM European markets were higher lifted by tech and transport shares.[/R]
European markets were higher by mid-morning on Wednesday. London FTSE 100 rose 0.4% to 5,910.2, while Frankfurt’s Xetra Dax added 0.4% to 5,867.3. In Paris, the CAC 40 advanced 0.5% to 5,184.13. Transport stocks were in demand, led by Moller-Maersk, the Danish container shipping group, which reported upbeat full-year guidance in the previous session. Its shares gained 4%.

EADS, continued to benefit from speculation about Russian stakebuilding, as state bank Vneshtorgbank was reported by the Russian press on Tuesday to have accumulated a 5% stake in EADS. Also in the transport sector, Deutsche Post, the German logistics and delivery group, advanced 1.8%, while Dutch group TNT gained 1.7%.

Crude oil for October delivery gained 19 cents to $69.90 a barrel, supported by an expected decline in U.S. crude and gasoline stocks in statistics due later on Wednesday and Iran''s determination to press ahead with its nuclear program.

Gold was trading around $614.20 an ounce, up a little from late New York trade and off a five-week low of $606.80 struck earlier on Tuesday. The euro was steady against the U.S. dollar in early European trading Wednesday, holding onto gains made as the chances of higher U.S. interest rates appeared to wither. The euro bought $1.2830, compared with $1.2831 in New York late Tuesday. The British pound slipped slightly to $1.8986 from $1.8989 on Tuesday, while the dollar was at 116.95 Japanese yen, up from 116.61 yen.