Ford Slides 14% on Restructuring Plan

Elena
15 Sep, 2006
New York City

A decline in crude oil prices to a one-year low and data showing tame consumer inflation drove market averages sharply higher. Crude-oil futures fell to $62.45 a barrel, extending a week-long slide on speculation that oil demand is weakening. The good news offset disappointment with Ford Motors Co.''''s restructuring plan. Shares of the auto maker slid 14% on news it would cut its workforce by about 14,000 jobs and suspend the payment of its quarterly dividend.

[R]11:30AM Market averages rallied on a year-low crude oil and tame inflation.[/R]
A decline in crude oil prices to a one-year low and data showing tame consumer inflation drove market averages sharply higher. Crude-oil futures fell to $62.45 a barrel, extending a week-long slide on speculation that oil demand is weakening. The good news offset disappointment with Ford Motors Co.'s restructuring plan. Shares of the auto maker slid 14% on news it would cut its workforce by about 14,000 jobs and suspend the payment of its quarterly dividend.

Among Friday’s movers, shares of Bristol-Myers Squibb Co. ((BMY)) advanced 1.4% following a news report that rival drug manufacturer Schering-Plough ((SGP)) may wish to buy the company. Adobe Systems ((ADBE)) climbed 11.7% after the company reported Q3 earnings that fell from year-earlier levels but exceeded expectations. Marsh & McLennan ((MMC)) added 2.6% after it said it said it would cut 750 jobs or about 1.3% of its workforce, as part of its plan to cut costs by $350 million by the end of 2008. The Dow Jones industrial average was up 47.38 points, or 0.41%.The Standard & Poor's 500 Index was up 4.25 points, or 0.32%.The Nasdaq Composite Index was up 7.01 points, or 0.31%.


[R]10:30AM The Sensex ends above 12,000 level in a narrow market-breadth.[/R]
The Sensex on BSE closed with a gain of 36.57 points, or 0.31%, at 12,009.59. The market-breadth was negative, with 1,055 shares advancing on BSE, 1,442 that declined and 72 shares that were unchanged. From the Sensex stocks 16 advanced while 14 declined. The turnover on BSE was Rs 3,444 crore, much lower than Thursday''s Rs 4,069 crore. The turnover on NSE was Rs 6,873.17 crore.

Advancers

Grasim led the advancers, gaining 3.69% to Rs 2,480.05 on a volume of 1.51 lakh shares. Satyam Computers jumped 2.28%, to Rs 828.60, L&T advanced 3.62% to Rs 2631 and Hindustan Lever moved up 1.55% to Rs 242.70. Index heavy Reliance Industries surged 1.20% to Rs 1,139.50 on a volume of 12.48 lakh shares. It peaked at an intra-day high of Rs 1,143.70, while the low was Rs 1,115.

Cement companies were in focus on hopes that cement prices may be raised shortly in view of robust demand, in the aftermath of the monsoon. Kesoram Industries was up 5% to Rs 450.15, JK Lakshmi Cement jumped 3.78% to Rs 162, Mangalam Cement soared 4% to Rs 207.60, ACC edged up 1.11% to Rs 945, Prism Cements gained 2.26% to Rs 40.80 and Shree Cements advanced 5.29% to Rs 1,048.

Engineering large-cap BHEL made an impressive come-back after sinking to a low of Rs 2,235.50. The company rose to Rs 2,281 and ended 0.45% higher, at Rs 2,275 on a volume of 67,833 shares.

Godrej Consumer Products spurted 2.77% to Rs 163 supported by a large block deal, involving 11 lakh shares on BSE, at Rs 160 per share, in early afternoon trade. Tea producer McLeod Russel gained 0.64% to Rs 125.20 on a heavy volume of 29.87 lakh shares following large block deals in early trade.

Decliners

Reliance Communications led the decliners, sagging 2.47% to Rs 316 on 14.91 lakh shares. Bajaj Auto was off 1.50% to Rs 2782, Hindalco lost 1.37% to Rs 169.20 and Infosys edged down 1.28% to Rs 1,806.

Metal stocks remained under pressure in a firm market, tracking weak metal prices on the London Metal Exchange (LME) on Thursday. The BSE Metal index lost 91.49 points or 1.1% to 8,222.92. Major losers in metals sector were Sterlite Industries (down 2.37% to Rs 445), Hindustan Zinc (down 2.46% to Rs 591.40), Hindustan Copper (down 3.47% to Rs 93.15), SAIL (down 2.71% to Rs 73.50), Tata Steel (down 0.96% to Rs 503) and Madras Aluminium (down 3.69% to Rs 360).

Active Traders

Reliance Capital was the most-active stock on BSE, with Rs 160.91 crore followed by Reliance Industries and Infosys with Rs 141.39 crore and Rs 106.27 crore respectively.

Select mid-cap stocks surged. Escorts soared 12.42% to Rs 107.70 on 61.94 lakh shares, Hercules Hoists jumped 10% to Rs 1,899.05 on 10,192 shares and Panama Petrochemicals advanced 10% to Rs 115.15 on 1.58 lakh shares.


[R]9:45AM Stocks opened higher on inflation data.[/R]
Stock averages advanced at opening, boosted by data showing that U.S. consumer prices rose in line with market expectations in August. The Labor Department said that consumer price inflation moderated as gasoline and home ownership costs rose at a slower pace. Following the news retailers posted some strength, led by shares of consumer electronics retailers. Circuit City Stores Inc. ((CC)) stock added 2.3%; while RadioShack Corp. ((RSH)) gained 2.1%. Adobe Systems Inc. ((ADBE)) led a rally in the tech sector Friday as the publishing-software developer''s shares surged 12% after reporting 24% rise in its Q3 sales. Other gains came from Apple Computer ((APPL)), Hewlett-Packard ((HPQ)), and Texas Instruments ((TXN)).

The markets also benefited from weakness in the price of oil. In early trading, some housing, defense, and semiconductor stocks posted substantial gains. Among semiconductor stocks, California Micro Devices ((CAMD)) surged 16.3% after raising its Q2 guidance. Unlike most blue-chip stocks, some high-profile companies in the automotive sector showed weakness Ford ((F)) slipped 7.6% after plans to restructure the company fell flat. The company was downgraded by a number of Wall Street analysts. DaimlerChrysler ((DCX)) dropped 7.8% after cutting its outlook. In the first hour of trading, the Dow Jones industrial average advanced 58.03, or 0.50%. The Standard & Poor''s 500 index added 5.99, or 0.39%, and the Nasdaq composite index rose 9.03, or 0.41%. Bonds rose, with the yield on the benchmark 10-year Treasury note easing to 4.77% from 4.79% late Thursday.

[R]Industrial output declines unexpectedly in August.[/R]
Industrial production fell unexpectedly in the month of August, according to a report released by the Federal Reserve Friday morning. The report also showed a drop in the rate of capacity utilization. The report showed that industrial production fell 0.1 percent in August following an unrevised 0.4 percent increase in July. Economists had been expecting industrial production to increase by about 0.1 percent. The decrease in industrial production came as output from utilities fell 0.8 percent in August after rising 1.0 percent in July. Production at mines fell 0.3 percent, while manufacturing output was unchanged. The Federal Reserve also said that the capacity utilization rate fell to 82.4 percent in August from an upwardly revised 82.7 percent in July. Economists had expected the capacity utilization rate to come in flat compared to the 82.4 percent originally reported for the previous month.


[R]09:00AM Stock futures advanced on CPI data.[/R]
U.S. stock futures advanced on data showing that consumer price inflation moderated in August as gasoline and home ownership costs rose at a slower pace. The CPI rose 0.2% after a 0.4% gain in July, while prices excluding food and energy rose 0.2% for the second straight month. The upbeat economic news helped offset disappointment over restructuring plans at Ford Motor. Trading is expected to be volatile as Friday marks the expiration of four options and futures contracts.

Shares of Ford Motor Co. ((F)) fell 6% before the bell after the company said it would cut annual costs by about $5 billion by the end of 2008 and slash its salaried staff by about a third. Merrill Lynch cut its rating on Ford to sell from neutral. In contrast, shares of Adobe Systems Inc. ((ADBE)) jumped 10% after the company posted a stronger-than-expected quarterly profit. Shares of Public Service Enterprise Group Inc. ((PEG)) slid 8% in Europe as Exelon Corp. ((EXC)) said it is terminating a $17.7 billion takeover agreement of the utility after failing to reach an agreement with New Jersey regulators. Standard & Poor''s 500 futures were up 4.9 points, above fair value. Dow Jones industrial average futures were up 46 points and Nasdaq 100 futures were up 11.25 points.

[R]Consumer price inflation moderated in August.[/R]
Friday morning, the Department of Labor released its closely watched report on consumer prices in the month of August. The report showed that price growth came in line with economist estimates. The Labor Department said that its consumer price index rose 0.2 percent in August following an unrevised 0.4 percent increase in July. Economists had been expecting the index to increase by about 0.2 percent. The slowdown in the pace of growth compared to the previous month came as energy prices increased by only 0.3 percent in August after surging up 2.9 percent in July. At the same time, the pace of food price growth rose to 0.4 percent from 0.2 percent in the previous month. The report showed that the core consumer price index, which excludes food and energy prices, rose 0.2 percent in August, matching the increase seen in the previous month. The increase in core prices also came in line with economist estimates. The modest increase in core consumer prices was partly due to a notable increase in apparel prices, which rose 0.9 percent in August after falling 1.2 percent in July. Medical care costs also contributed to the increase, rising 0.4 percent. With the growth in both overall and core prices coming in line with economist estimates, the report may help to offset recent concerns about the pace of inflation. A fuller view of inflation will be provided with the release of the Labor Department''s report on wholesale prices next week.


[R]7:30AM Asian markets close mixed, Japan falls on profit-taking.[/R]
Asian markets closed mixed on Friday. The Nikkei 225 Average ended the day 0.47% lower at 15866.93. Toshiba slipped 1.1%, TDK lost 1.5% and Sony declined 0.8%. Toyota closed 0.3% lower and Honda fell 0.3%. Hitachi shed 3.1% as the company revised down its earnings outlook for this fiscal year to March shortly before the market close.

Hong Kong Hang Seng Index advanced 0.32% to close at 17237.65. Shares in Hong Kong finished higher supported by property companies on hopes that interest rates would not be hiked and earnings in the sector will be solid. Kerry Properties gained 3.3% and Sun Hung Kai Properties advanced 0.5% after both companies posted increases in net profit. Blue chip Hang Lung Properties climbed 1.3% and Henderson Land gained 1%.

South Korea''s Kospi Index gained 0.17% to 1361.10. Stocks ended higher as institutional buying toward the end of the session counters earlier losses, with gains led by automobile and brokerage shares. Hyundai Motor was up 1.8%, Kia Motors advanced 1.3% and Hyundai Mobis climbed 2%. Shanghai Composite Index jumped 1.9% to finish at 1721.05. Air China soared by the daily limit of 10%, China Southern Airlines jumped 6.3% and Shanghai Airlines rose 6.2%.

Taiwan ended 1.25% higher at 6681.09, while Australia S&P/ASX 200 dropped 0.67% to 5036.40. Shares in Taiwan advanced on possible support from government funds, led by financial and technology companies, while Australian shares dipped as commodity prices remained weak. BHP Billiton shed 2.3%, Rio Tinto fell 1.5% and Woodside Petroleum sagged 2.8%.


[R]6:30AM European markets edge into positive territory on Friday.[/R]
European markets were higher by mid-morning on Friday. The U.K. FTSE 100 index gained 0.04% at 5,880, the German DAX 30 index added 0.1% at 5,912 and the French CAC 40 index advanced 0.2% at 5,134. Veolia Environnement advanced 1.2% after it said first-half net profit rose 40.3% as sales climbed 13.7%.

The auto sector was in demand after data showed that new car registrations in European shed 1.4% in August and after reports that truck maker Man AG could unveil the terms of its takeover offer for Swedish peer Scania as early as next week. Shares in Man and Scania both rose around 0.5%.

SEB erased early gains to slip 1.2%. The Swedish bank advanced 5% on Thursday on speculation of a merger between it and Nordic bank Nordea, which added 3.2% yesterday, but was down 1.3% this morning. German tyremaker Continental rose 2.6% after JP Morgan started coverage of the stock with a overweight.

Crude oil prices were unchanged Friday after natural gas prices plummeted to a two-year low overnight, and supply concerns were relieved after Nigerian oil workers prematurely ended a strike. Light, sweet crude for October on the NYME was down 2 cents to $63.20 a barrel on Friday.

Gold opened Friday at a bid price of $577.30 a troy ounce, down from $587.60 late Thursday. The euro was down slightly on the U.S. dollar Friday before the release of U.S. inflation data, which could signal what the Fed next interest rate move will be. In morning trading, the euro bought $1.2722, down from $1.2729 late Thursday in New York. The British pound advanced to $1.8873 from $1.8864 in New York, while the dollar rose to purchase 117.56 Japanese yen from 117.49 the day before.