Bear Stearns Falls Despite 16% Net Rise

Elena
14 Sep, 2006
New York City

Market averages kept trading in the negative mood, hurt by price data which revived fear that the U.S. rate-tightening cycle is not over. Oil and gas stocks reversed from earlier gains as crude prices retreated and U.S. reported that natural gas supplies fell to a two-year low. Bear Stearns declined 57 cents at $135.65, despite reporting better-than-expected earnings and revenue increase.

[R]11:30AM Stocks traded lower on inflation worries.[/R]
Market averages kept trading in the negative mood, hurt by price data which revived fear that the U.S. rate-tightening cycle is not over. While retail and housing stocks saw some early weakness, gains by utility stocks helped to limit the downside. The computer hardware and airline sectors also showed some strength. At the same time oil and gas stocks reversed from earlier gains as crude prices failed to hold their ground and U.S. reported that natural gas supplies fell to a two-year low. Crude oil futures for October delivery dropped 10 cents at $63.90 a barrel. October natural gas futures fell 22.9 cents, or 4.2%, to $5.22 per 1,000 cubic feet. Among the biggest movers in the oil group, Marathon Oil Corp. ((MRO)) was leading the decliners, down 1.8% to $74.22 a share, while ConocoPhillips ((COP)) was leading the few gainers in the oil group, up 0.2%.

After upbeat reports from Goldman Sachs ((GS)) and Lehman Bros ((LEH)) and a strong rally in the brokerage sector earlier in the week, Bear Stearns ((BSC)) reported better-than-expected fiscal Q3 earnings and revenue, and continued the pattern of investment bank results exceeding forecasts. Bear Stearns was down 57 cents at $135.65. In late morning trading, the Dow Jones industrial average fell 19.69, or 0.17%. The Standard & Poor's 500 index fell 2.34, or 0.18% and the Nasdaq composite index slipped 0.74, or 0.03%. Bonds fell, with the yield on the benchmark 10-year Treasury note flat at 4.76% from late Wednesday.


[R]10:30AM The Sensex closes higher as large-caps in banking and IT stocks rally.[/R]
The Sensex on BSE finished 79.23 points, or 0.67% higher, at 11,973.02. The market-breadth, positive in the first half of the trading session, turned negative as selling pressure intensified in small-caps and mid-caps. For 1,116 shares that advanced, 1,380 declined and 72 shares were unchanged. From the Sensex stocks 18 advanced while 12 declined. The turnover on BSE was Rs 3,365 crore, much lower than Wednesday Rs 3,999 crore. The turnover on NSE was Rs 8,424.29 crore.

Market resurged and returned to near 12,000 level after five months of trading.

Private sector banking large-cap, ICICI Bank soared 3.04% to Rs 650 on 4.97 lakh shares. Grasim advanced 2.83% to Rs 2,393, and Gujarat Ambuja Cements jumped 1.90% to Rs 115.20 were the other top advancers. Dr Reddy’s Labs gained 1.20% to Rs 746.15 on 4.24 lakh shares. The company is reportedly on the look-out for acquisition in Italy and Spain, and plans to expand into Europe.

The IT sector was in strong demand. Satyam Computers advanced 0.82% to Rs 808.80 on 7.22 lakh shares and Infosys Technologies Ltd gained 1.25 to Rs 1,831.85 after the domestic bank in Croatia, Hrvatska Postanska, selected company’s banking solution to drive its technology-led transformation initiative.

Index heavy Reliance Industries surged to a high of Rs 1,136.05, but retreated at close. It finished 0.7% higher, to Rs 1,124.15, on a volume of 12.62 lakh shares. Reliance Industries was the most-active stock on BSE with a turnover of Rs 142.45 crore, followed by Reliance Capital with Rs 137.14 crore.

Cement shares were in focus following reports that prices could go up between Rs 5 and Rs 10 per 50 kg bag, as demand soars after monsoon. Prism Cement gained 5% to Rs 39.90, ACC advanced 1.47% to Rs 945, Madras Cement rose 3.70% to Rs 3134.50, Birla Corporation moved up 11.35% to Rs 332.70, Mangalam Cement surged 5.92% to Rs 199.40, India Cements advanced 2.64% to Rs 208, JK lakshmi Cement spurted 7.30% to Rs 15 and UltraTech Cement jumped 4.65% to Rs 821.

The banking sector led the advancers today. State-run banks surged. Corporation Bank jumped 5.27% to Rs 353.55, Bank of Baroda edged up 1.35% to Rs 266, Allahabad Bank rose 3.95% to Rs 79, Oriental Bank of Commerce gained 1.52% to Rs 223.20 and Indian Overseas Bank advanced 4.78% to Rs 103. Private sector banks also surged. Karur Vysya was up 6.31% to Rs 294, UTI Bank moved ahead 3.42%, to Rs 351, and Federal Bank advanced 5.58%, to Rs 211.75.

Decliners included Hero Honda which fell 1.755 to Rs 765.05, Bharti Airtel sank 1.145 to Rs 438, HDFC Bank was off 1.12% to Rs 864, Reliance Energy fell 1.06% to Rs 465.50 and Maruti shed 0.74% to Rs 948.90.

Reliance Communications Ltd, said on Thursday it had sought 3G spectrum from the government to test services and equipment. The company’s move comes after India allowed four major carriers, including Bharti Airtel Ltd, to conduct indoor trials of third-generation mobile services.


[R]9:45AM Stocks opened down on inflation worries and downgrades.[/R]
U.S. stocks started trading below the flat line Thursday, dragged by data showing unexpected inflation from imports as well as brokerage downgrades of blue chip industrial giants General Electric and Boeing. General Electric ((GE)) was downgraded by UBS to neutral from buy, and had its price target cut to $38 from $40, on the belief that earnings will be negatively affected by the shape of the Treasury yield curve and higher tax rates. UBS also downgraded Boeing Co ((BA)) , moving its rating to reduce from neutral, and its price target to $74 from $85, on concerns of economic slowdown.

Semiconductor, networking, and retail stocks posted notable losses. The losses by retail stocks declined although a report from the Commerce Department showed that retail prices increased unexpectedly in August. In the first hour of trading, the Dow Jones industrial average fell 34.98, or 0.30%. The Standard & Poor''s 500 index fell 3.01, or 0.23% and the Nasdaq composite index slipped 6.26, or 0.28%.

[R]Initial jobless claims fell unexpectedly.[/R]
The Department of Labor released its report on initial jobless claims in the week ended September 9 on Thursday, showing that jobless claims fell unexpectedly. The report showed that jobless claims fell to 308,000 from the previous week''s revised figure of 313,000. Economists had expected claims to increase to 315,000 compared to the 310,000 originally reported for the previous week. The Labor Department also said that the 4-week moving average fell to 314,250 from the previous week''s revised average of 315,750. This marked the second consecutive decrease by the less-volatile moving average. The report also showed that continuing claims in the week ended September 2 rose to 2.499 million from the preceding week''s revised level of 2.481 million.


[R]09:00AM Stock futures declined on economic data.[/R]
U.S. stock futures pointed lower Thursday morning, as a number of economic reports renewed concerns about the strength of U.S. economy and a rise in inflation. August retail sales rose a stronger-than-expected 0.2% in August as lower gasoline prices helped boost consumer spending. But this was down from a 1.4% rise in July, suggesting an economic slowdown. In another report, the Labor Department said U.S. jobless claims unexpectedly fell by 5,000 last week. August import prices rose by a greater-than-expected 0.8% in August, hinting at inflation pressures. Standard & Poor''s 500 futures were down 1.3 points, below fair value. Dow Jones industrial average futures were down 13 points and Nasdaq 100 futures were down 0.25 point.

[R]Import and export prices increased.[/R]
The Department of Labor released its report on import and export prices in the month of August on Thursday, showing that both import and export prices continued to increase. The report showed that import prices rose 0.8 percent in August following an upwardly revised 1.0 percent increase in July. With the increase, import prices increased for the fifth consecutive month. The increase in imports was partly due to a notable increase in the prices of petroleum imports, which rose 2.3 percent in August after rising 5.1 percent in July. Excluding petroleum import prices, import prices rose by a more modest 0.5 percent. The Labor Department also said that exports prices rose by 0.4 percent for the second consecutive month. A 1.0 percent increase in the prices of agricultural exports contributed to the increase, although export prices still rose 0.4 percent excluding agricultural export prices.

[R]Retail sales advanced 0.2% in August.[/R]
Thursday morning, the Department of Commerce released its report on retail sales in the month of August, showing that sales increased unexpectedly after surging higher in the previous month. The report showed that retail sales edged up 0.2 percent in August following an unrevised 1.4 percent increase in July. Economists had been expecting sales to fall by about 0.2 percent after the strength that was seen in the previous month. With the increase, August retail sales were up 6.7 percent year-over-year compared to the 4.8 percent year-over-year growth seen in July. The sales growth was partly due to an increase in auto sales, which rose 0.4 percent in August after surging up 4.3 percent in July. Excluding auto sales, retail sales still rose 0.2 percent in August after a downwardly revised 0.6 percent increase in July. Ex-auto sales had been expected to increase 0.3 percent compared to the 1.0 percent originally reported for the previous month. The report showed that the increase in ex-auto sales reflected notable sales growth by sporting goods, hobby, book and music stores and by food services and drinking places. At the same time, the sales growth was partly offset by a 1.0 percent decline in sales by gas stations. The decrease likely reflected a decrease in gasoline prices. Sales by furniture and home furnishings stores and clothing and clothing accessories stores also fell.


[R]8:30AM Canadian Natural Resources Ltd agreed to buy Anadarko Canada Corp.[/R]
Canadian Natural Resources Ltd agreed to buy Anadarko Canada Corp., a division of Anadarko Petroleum Corp. in a deal worth $4.08 billion. The acquisition includes production assets in Western Canada that produce around 358 million cubic feet of natural gas and 9,300 barrels of crude-oil per day. The deal is expected to increase cash flow by 24 cents a share in 2006 and 99 cents a share in 2007 but the impact on earnings is seen neutral. In addition, the company said it had hedged a significant part of its natural gas and crude oil production for 2007 and 2008 and will consider selling non-core assets to gain additional balance sheet flexibility.


[R]8:00AM General Electric decided to sell GE Advanced Materials unit.[/R]
General Electric ((GE)) announced Thursday it had decided to sell its GE Advanced Materials (Silicones & Quartz) unit to private equity firm Apollo Management for $3.8 billion in cash and securities. The unit supplies silicone-based products, silanes, sealants, urethane additives and adhesives; and high-purity fused quartz and ceramics materials. The deal is expected to close by the end of the current year.

Once the transaction is completed, GE will receive a 10% ownership stake in the combined company and hold $400 million of notes. GE is planning to use the estimated $2 billion in proceeds from the deal to support financially growth and restructuring in its industrial businesses. Wayne Hewett, who is in charge of the Advanced Materials business for GE, will serve as president and CEO of the new business.


[R]7:30AM Japanese commodities and U.S. markets lead Asia higher[/R]
Asian markets finished mostly higher on Thursday. The Nikkei 225 Average finished the day 1.22% higher at 15942.39. In Japan, stocks finished higher as commodity shares rebounded with trading houses and oil companies like Mitsubishi and refiner Show Shell Sekiyu gaining prominently. Mitsubishi, which has extensive energy and commodity interests, advanced 4.2% while Showa Shell Sekiyu ended trading 3.2% higher. Canon advanced 1.4% as a local media reported that the camera maker net profit is expected to climb 16% in the current fiscal year.

South Korea''s Kospi Index jumped 1.92% to 1358.75. Stocks in Seoul finished higher, mainly due to large program buying toward the end of the session as well as gains on U.S. markets. Technology shares gained, following overnight gains on U.S. markets. LG.Philips LCD posted the biggest gain, up 4.6%, followed by LG Electronics rising 3.2% and Samsung Electro-Mechanics gaining 2.6%.

The Shanghai Composite Index added 0.02% to close at 1689.69 and Australia S&P/ASX 200 rose 1.06% to 5070.40. Resource large-caps BHP Billiton and Rio Tinto in Australia helped the stock market rise as they continued to recover after a selloff earlier in the week. BHP gained 2.2% and Rio Tinto advanced 0.9%.

Bucking the upward trend, Hong Kong Hang Seng Index ended 0.15% lower at 17183.45 and Taipei lost 0.99% to close at 6598.87. Shares in Hong Kong closed slightly lower as investors raised cash for some new listings, causing a strong two-day rally to cease. In Taiwan, stocks were led lower by technology firms.


[R]6:30AM European markets advance Thursday due to oil and retailers.[/R]
European stocks were higher on Thursday. The U.K. FTSE 100 index advanced 0.3% to 5,912, The German DAX Xetra 30 index rose 0.1% to 5,914, the French CAC-40 index increased 0.3% to 5,150. The large-cap oil companies advanced with BP gaining 1.3% and Total up 0.7%. Neste Oil, the Finnish refiner, advanced 1.3%.

Richemont jumped 2.4% as total sales for the five months ended in August advanced 16%, driven by growth across all its divisions and geographical regions. On the other hand, French supermarket operator Groupe Casino declined 1.9% after reporting first-half net income surged 28% as sales rose 17%. British retailer Kingfisher gained 3.4% after it said first-half net income was unchanged, but total retail sales climbed 6.6%.

Oil advanced for a second day after U.S. stockpiles declined more than expected and the State Department demanded sanctions on Iran. Crude oil for October delivery rose as much as 68 cents, or 1.1 percent, to $64.65 a barrel. Gold opened Thursday at a bid price of $588.70 a troy ounce, up from $587.00 late Wednesday.

The U.S. dollar was mostly lower against other major currencies in European trading Thursday morning. The euro bought $1.2700, up from $1.2692 late Wednesday in New York. The British pound traded at $1.8813, up from $1.8763. The dollar bought 117.71 Japanese yen, up from 117.56.