Stocks Fall Before Bernanke's Speech

Elena
31 Aug, 2006
New York City

The Department of Commerce reported that orders for manufactured goods fell 0.6% in July following an upwardly revised 1.5% increase in June. Economists had expected orders to fall 0.8%. The drop in factory orders was due to a 2.5% decline in manufactured durable goods in July following a 3.3% increase in June.

[R]11:30AM Stock markets rebounded from early strength.[/R]
U.S. stocks rebounded from earlier strength, as investors awaited a speech on productivity from Federal Reserve Chairman Ben Bernanke expected to provide new clues about inflation and interest rates. In early hours of trading, stocks were supported by news that core consumer inflation last month dropped to its weakest gain so far in 2006, adding to hopes that Fed Reserve rate hikes might come to an end soon.

Significant strength emerged in the gold sector due to an increase by the price of gold as well as news of Goldcorp's ((GG)) acquisition of Glamis Gold ((GLG)). Glamis shares jumped 20%. Meanwhile, semiconductor stocks came under pressure, dragged by STMicroelectronics ((STM)) after Citigroup downgraded its rating on the chip maker to ‘sell’ from ‘hold’. The health insurance, networking, and energy sectors also moved to the downside. Ford Motor Co. ((F)) was also in focus as the carmaker said it is considering the sale of all or part of its Aston Martin luxury brand. The Standard & Poor's 500 index lost 0.69, or 0.05%, while the Nasdaq composite index fell 1.14, or 0.05%.Bonds continued to move higher, with the yield on the benchmark 10-year Treasury note falling to 4.74% from 4.76% late Wednesday.

[R]Industrial production slowed less than expected.[/R]
Thursday morning, the Department of Commerce released its report on orders for manufactured goods in the month of July, showing that orders fell less than economists had been expecting. The report showed that orders for manufactured goods fell 0.6 percent in July following an upwardly revised 1.5 percent increase in June. Economists had expected orders to fall 0.8 percent compared to the 1.2 percent increase originally reported for the previous month. The drop in factory orders came as orders for manufactured durable goods fell 2.5 percent in July following a 3.3 percent increase in June. The drop in durable goods orders was downwardly revised from the 2.4 percent decrease reported last week. An increase in orders for manufactured non-durable goods helped to offset the decrease in durable goods orders, with non-durable goods orders increasing 1.6 percent in July. The report also showed that shipments of manufactured goods were nearly unchanged in July after falling 0.1 percent in June, while inventories of manufactured goods rose 0.6 percent in July following a 0.9 percent increase in June. Subsequently, the inventories-to-shipments ratio edged up to 1.17 in July from 1.16 in June.


[R]10:30AM The Sensex ends in the red due to expiry of derivatives.[/R]
The Sensex on BSE lost 24.87 points, or 0.21%, to close at 11,699.05. Index traded in a narrow range for most of the trading session. The market-breadth was weak as 1,688 shares declined, 827 advanced and 72 shares were unchanged. The turnover on BSE was Rs 2,758 crore compared to Wednesday’s Rs 2,717 crore. From the Sensex stocks, there were 11 advances to 19 declines. On National Stock Exchange total turnover was Rs 7,870 crores.

ITC, HDFC Bank, Reliance Petroleum and Tata Power advanced on short covering in the derivatives segment and due to expiry of futures and options contracts for August 2006. ITC climbed 2.2% to Rs 191.50, Reliance Petroleum surged 4.6% to Rs 66, HDFC Bank gained nearly 2% to Rs 857 and Tata Power advanced 1.2% to Rs 532.50. Some IT stocks also advanced, as IT large-cap Infosys rising 0.3% to Rs 1,805 and software company TCS edging up 0.6% to Rs 990. However, Wipro sank 1.8% to Rs 516 and Satyam Computer lost 1% to Rs 811.

PSL advanced 1.3% to Rs 201 after the company announced it had secured a pipe coating order worth $21 million from Reliance Ports and Terminal. Voltas soared 7% to Rs 947.90 on hopes that it will soon unveil a record date for a liberal 10-for-1 stock split.

TV broadcasters declined after Telecom Regulatory Authority of India issued a tariff order prescribing rates for pay channels. Governemt set Rs 5 per channel and a minimum of four month subscription duartion. Cable companies can not charge for installation or activation of the service. Traders worried that this low fee structure will cut in the revenue outlook of the company. Zee Telefilms plunged 4.4% to Rs 277, TV 18 India slid 8% to Rs 595, Sun TV was off 2.4% to Rs 1,195 and NDTV was down 2.9% to Rs 194.90.

Steel shares lost on reports that producers may cut prices from September 2006. SAIL dipped 4% to Rs 71.70 and Tata Steel lost 1.7% to Rs 497.65. Cement shares also fell on profit-taking. ACC lost 1.4% to Rs 909, Gujarat Ambuja Cements declined 1.6% to Rs 112.75 and Grasim lost 0.3% to Rs 2,253. Index large-cap Reliance Industries declined nearly 1% to Rs 1,119.

Moser Baer witnessed volatile session, soaring about 9% in opening trade to reach Rs 207 level. It then sank to Rs 196 level in mid-morning before rebounding to Rs 201- 202 level in afternoon trade. A sell-off in mid-afternoon trade made the the stock retreat to Rs 190 level.

Several small-cap and mid-cap stocks plunged. Spanco Telesystems, Gulshan Sugars, GR Cables, Atul Auto, Megasoft, GEI Hamon Industries, Manugraph, Rajesh Exports, Whirlpool, Cosmo Films, Archies Greetings, Bombay Rayon, Ricoh India, Gujarat Apollo Equipment and Flex Industries slipped between 5% - 10.7% for the day.


[R]09:45AM Upbeat economic data and retail sales lifted stocks.[/R]
U.S. stocks opened higher, boosted by news of higher consumer spending, fewer jobless claims and solid retail sales. Investors welcomed news that spending rose by 0.8% last month, twice the 0.4% gain shown in June, as well as the Labor Department figures showing a drop of initial jobless claims to 316,000 from the previous week''s revised figure of 318,000. Retailers reported strong same-store sales in August due to the back-to-school buying period. Wal-Mart Stores Inc. ((WMT)), Limited Brands Inc. ((LTD)), as well as Macy''s and Bloomingdale''s parent Federated Departments Stores Inc. ((FD)) posted gains. Meanwhile, J.C. Penney Co. ((JCP)) and Gap Inc. ((GPS) turned in disappointing numbers. The Dow Jones industrial average is up 0.56 at 11,383.47, the Nasdaq Composite has gained 2.93 to 2,188.66 and the Standard & Poor''s 500 index is up 0.16 to 1,304.43.

Blyth Inc, ((BTH)), decoration products provider, reported a Q2 loss of $2.24 a share, down from earnings of 10 cents a share a year-ago. On a continuing operations basis, the company lost 52 cents a share in Q2. The latest results include a pre-tax goodwill impairment charge of $36.8 million. If not for the charge, the company said it earned 13 cents a share in Q2. Sales rose 2% in Q2 from the same period a year earlier. The company missed analysts’ estimate for a loss of 4 cents a share.

Del Monte Foods Co, ((DLM)), food company, reported that Q1 net income fell to 3 cents a share, from 8 cents a year ago. If not for discontinued operations, earnings came to 4 cents a share. Sales for Q1 increased to $674.1 million from $616.6 million. The company missed analysts’ views for earnings from continuing operations of 4 cents a share. For Q2, Del Monte forecast earnings from continuing operations at 5 cents to 7 cents a share, including expenses accruing to 7 cents a share.

Family Dollar Stores, ((FDO)), discount retailer, reported that same-store sales advanced 4% in August and raised earnings estimates for its Q4. The company topped analysts’ expectations for a gain of 3.8%. The company also said it expects better-than-expected cost control and a more favorable mix will positively impact results in its Q4. It now expects earnings of 22 cents to 24 cents a share in Q4, compared to its previous expectations of 19 to 22 cents.

Federated Department Stores Inc, ((FD)), department stores operator, reported that same-store sales rose 3.8%, missing analysts expectations for it to post a same-store sales gain of 4%. Total sales for period rose 61.6% to $1.73 billion. Federated expects same-store sales to increase by 3% to 5% in September.

Wal-Mart Stores, ((WMT)), retailer, reported same-store sales at its U.S. same-store sales advanced 2.7% in August. The company topped analysts’ estimate for an increase of 2.5%. The same-store sales performance broke down to a 2.5% rise at the company''s namesake stores and a 3.4% increase at its Sam''s Club stores for the month. Total sales jumped 12.5% in August to $25.97 billion from $23.07 billion in the same period a year earlier. The company said it expects U.S. same-store sales to rise between 1% and 3% in September.


[R]9:00AM Stock futures gained on upbeat inflation data.[/R]
U.S. stock futures moved to the upside backed by a moderation in core consumer inflation and signs of strength in back-to-school sales. Personal income and spending in July came in line with economist estimates. Personal income rose 0.5%, while personal spending rose 0.8%. Core consumer inflation rose 0.1% in July, the smallest gain since December and less than the 0.2% gain expected by economists. In addition to the economic calendar, Federal Reserve Chairman Ben Bernanke is scheduled to speak at 12:30 p.m., followed by St. Louis Fed President William Poole at 1 p.m. S&P 500 futures were up 2.2 points, but slightly below fair value. Dow Jones industrial average futures were up 10 points, and Nasdaq 100 futures were up 2.75 points.

[R]Initial jobless claims declined to 316,000.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended August 26, showing that jobless claims fell compared to an upwardly revised reading for the previous week. The report showed that jobless claims fell to 316,000 from the previous week''s revised figure of 318,000. Economists had expected jobless claims to increase to 315,000 from the 313,000 originally reported for the previous week. The Labor Department also said that the four-week moving average rose to 317,500 from the previous week''s revised average of 316,500. This marked the third consecutive increase by the less volatile moving average. The report also showed that continuing claims in the week ended August 19 rose to 2.486 million from the preceding week''s revised level of 2.483 million.

[R]Personal income and spending rose in line with estimates.[/R]
The Department of Commerce released its report on personal income and spending in the month of July on Thursday, showing increases in both personal income and spending that came in line with economist estimates. The report showed that personal income rose 0.5 percent in July compared to an unrevised 0.6 percent increase in June. Economists had been expecting personal income to increase by about 0.5 percent. The Commerce Department also said that personal spending rose 0.8 percent in July following an unrevised 0.4 percent increase in June. The increase in personal spending came in line with economist estimates. The report also showed that its reading on core consumer inflation, which excludes food and energy prices, edged up 0.1 percent in July after rising 0.2 percent in June. Core consumer inflation rose at an annual rate of 2.4 percent.


[R]8:00AM Stock futures were busy digesting retailers’ August sales.[/R]
Among the companies releasing upbeat results, Mothers Work Inc ((MWRK)), maternity apparel retailer, posted a 5% increase in August comparable store sales, citing strength in its product lines. Net sales rose 1% during the month, to $46.5 million. The retailer also said that it expects to meet or exceed Q4 sales and earnings per share guidance.

Bebe Stores Inc ((BEBE)), women’s apparel retailer, said same-store sales rose 12.5%, topping estimates of 11.4% increase. The reported same-store sales growth in August was the 41st straight month of positive comparable sales. Department store operator Nordstrom Inc ((JWN)) said same-store sales rose 7.1%, above expectations of 3.3% growth. On a preliminary basis, total sales rose 9.3% to $517 million. Limited Brands ((LTD)), operating Victoria''s Secret, Bath & Body Works, Express, Limited Stores, White Barn Candle Co. and Henri Bendel stores, said Thursday its August sales at stores open at least one year rose 9%, exceeding expectations of an increase by 6.2%. Net sales rose 11% to $638.8 million.

J.C. Penney Co ((JCP)) said Thursday its August sales at department stores open at least one year fell 0.5%, missing expectations of a gain of 1.8%. The company backed its previous Q3 and Q4 earnings forecast, with same-store department store and direct sales both expected to increase in the low single digits in the five week September period. Stage Stores ((SSI)) reported 3.8% same-store sales growth and 15.8% jump in August total sales. Same-store sales rise was driven by cosmetics, women''s special sizes and home décor and came in above analyst estimates of 2.7%. Stage Stores said it sees Q3 same-store sales growth in the low single digits.

At the same time, some retailers reported results which came in below estimates, while others posted monthly sales decline. Claire''s Stores Inc ((CLE)), jewelry retailer, said August same-store sales rose 1%, missing estimates of a rise of 2%.

Pier1 Imports ((PIR)) posted a 9.1% drop in August same-store sales, saying traffic trends remained below last year. Analysts had forecasted an 8.1% decline in same-store sales. Gottschalks ((GOT)), department store chain, said August same-store sales slipped 1.1% from last year due to weak results from its home store division. The Gap ((GPS)) Thursday said same-store sales fell 7% in August. Analysts had expected a decrease of 3.4% in same-store sales for the month. Total sales slipped 2% to $1.15 billion from $1.17 billion in the same period a year earlier.


[R]7:30AM Asian stocks advanced on weaker yen and upbeat exporters.[/R]
Asian markets ended higher on Thursday. The Nikkei 225 Average closed the day 1.69% higher at 16140.76. Exporters led the advancers in Japan. Canon ended 2.3% higher and Toshiba gained 3.2%. Kyocera rose 3%, Sony closed 1.8% higher, Matsushita Electric Industrial jumped 2.2% and Pioneer climbed 2.5%. Auto stocks ended up because of the relatively weak yen and a Nihon Keizai Shimbun report that Toyota, Nissan and Honda will boost procurement of locally produced auto parts in China. Toyota ended 1.3% higher, Honda gained1.5% and Nissan advanced 2.4%.

Hong Kong''s Hang Seng Index rose 0.62% to close at 17392.27, with property stocks leading the advance. Sun Hung Kai Properties rose 1.6%, Cheung Kong Holdings gained 1.3%, and Henderson Land Development ended 0.8% higher. South Korea''s Kospi Index rose 0.85% to 1352.74, with Samsung Securities climbing 1.6% and Mirae Asset Securities rising 6.1%. In China, Shanghai Composite Index ended 0.2% higher at 1658.64. Shares closed higher for a fourth consecutive session, with strong performance by banks, following their solid first-half results as well as with optimism over China Merchants Bank''s Hong Kong initial public offering.

Taipei gained 0.37% to 6611.77, and Australia''s S&P/ASX 200 closed 0.95% higher at 5115.40. In Taiwan stocks closed moderately higher on demand from hedge funds and hopes of an improvement in companies profits for the remainder of the year, while in Australia, month-end buying exaggerated strength in the stock market, after slight gains in commodity prices Wednesday.


[R]6:30AM European stocks are trading lower Thursday on oil price rise.[/R]
European markets were lower by mid-morning on Thursday. The FTSE 100 in London shed 0.1% to 5,923.8, the Xetra Dax in Frankfurt edged down 0.1% to 5,863.62, and the CAC-40 in Paris sank 0.2% to trade at 5,170.74. On the corporate front, Thales, defence electronics group, gained 1.7% after Safran, aero engine maker, denied speculation it was interested in Zodiac, which Thales had also been linked with. Safran added 0.2%.

L’Oreal, cosmetics group, advanced 3.55 after it topped expectations with a 19.6% rise in first half operating profits, while KBC, banking and insurance group, plunged 5.2% despite a 48% jump in second quarter net earnings. Altadis, tobacco group, fell 1.4% after first half core earnings fell 1%, hit by tax hikes, an anti-tobacco law and a price war in its domestic market.

Oil prices advanced Thursday on concerns about possible supply disruptions as a U.N. deadline on Iran''s nuclear program arrived.
Light sweet crude for October delivery increased 37 cents to $70.40 a barrel on the NYME. Brent crude on London''s ICE futures exchange rose 42 cents to $70.60 a barrel.

Gold opened Thursday at a bid price of $619.40 a troy ounce, up from $617.60 late Wednesday. The euro was at $1.2852 at 10:10 a.m. in London, from $1.2833 late yesterday in New York. The British pound was also at $1.9067 versus the dollar from $1.9025. The U.S. dollar rose to 117.45 yen, the highest since July 19, before slipping back to 117.22 yen, up from 117.13 yen on Wednesday in New York.