Market Gains on Confidence Data

Elena
26 Sep, 2006
New York City

Better-than-expected improvement of consumer confidence index for September helped stocks move higher. The Conference Board said that consumer confidence rose to 104.5 from a revised reading of 100.2 in August, exceeding forecasts of a rise to 103. Following the confidence data, home improvement stores Home Depot Inc. and Lowe''s Cos. gained 1% and 1.5% respectively.

[R]11:30AM Home builders rallied on strong consumer confidence data.[/R]
U.S. stocks extended gains after a report showing a stronger-than-expected growth in consumer confidence on the back of lower gasoline prices helped ease concerns about slowing economy. The Conference Board said that consumer confidence rose to 104.5 from a revised reading of 100.2 in August, exceeding forecasts of a rise to 103. Following the confidence data, home improvement stores Home Depot Inc. ((HD)) and Lowe''s Cos. ((LOW)) gained 1% and 1.5% respectively. House builder Lennar ((LEN)) fell 1.2 after it cut its Q4 earnings outlook and reported 39% drop in third-quarter profits. Transportation stocks, brokers, energy and oil services stocks were other notable gainers. At the same time, drug stocks, semiconductor companies and the telecom sector showed some weakness. In late morning trading, the Dow Jones industrial average rose 47.71, or 0.41%. The Standard & Poor''s 500 index was up 5.11, or 0.39%, and the Nasdaq composite index rose 3.27, or 0.15%. Bonds fell after a sharp rally Monday in what was perhaps some profit-taking. The yield on the benchmark 10-year Treasury note rose to 4.58% from 4.54% late Monday.

[R]Consumer confidence index rose to 104.5.[/R]
Tuesday morning, the Conference Board released its report on consumer confidence in the month of September, showing that confidence improved more than economists had been expecting. The improvement was likely due to the recent decrease in gasoline prices. The Conference Board said that its consumer confidence index rose to 104.5 in September from an upwardly revised 100.2 in August. Economists had expected the index to increase to about 102.0 in September compared to the 99.6 originally reported for August. The report showed that the present situation index rose to 127.7 in September from 123.9 in August, as those claiming conditions are good increased to 27.4 percent while those claiming conditions are bed fell to 15.4 percent. At the same time, consumers'' assessment of the labor market was mixed, with those saying jobs are plentiful rising to 25.9 percent while those claims jobs are hard to get edged up to 21.3 percent. The Conference Boars also said that the expectations index rose to 89.0 in September from 84.4 in August, as those expecting conditions to worsen fell to 10.6 percent while those expecting conditions to improve were unchanged. The outlook for the labor market improved moderately.


[R]10:30AM The Sensex gains 147 points on banks, auto and Reliance Industries.[/R]
The Sensex on BSE surged 147.28 points (1.2%), to settle at 12,321.19, its highest closing since May 2006. The market-breadth was almost even. Against 1,229 shares that advanced on BSE, 1,249 declined and 109 shares were unchanged. The turnover on BSE reached Rs 3,478 crore, compared to Rs 3,503 crore a day ago. The turnover on NSE was Rs 7,055.94 crore. From the 30-issue Sensex stocks 29 advanced and only 1 declined. Index heavy Reliance Industries advanced 1.3%, to Rs 1,179.50 and the stock is now very near to an all-time high of Rs 1,195, attained in early May 2006.

Advancers

Banks led the advancers on Tuesday. State Bank of India advanced 2.8% to Rs 999, ICICI Bank gained 2.7% to Rs 678 and HDFC Bank rose 1.3% to Rs 890. Software stocks were in demand. Wipro rose 2.5%, to Rs 527.50, TCS gained 1.8%, to Rs 1,044, Satyam Computer advanced 0.8%, to Rs 835 and Infosys gained 0.5%, to Rs 1,828.

Auto stocks gained on hopes of strong sales in the upcoming festive season. Car maker Maruti Udyog gained 2% to Rs 945, Hero Honda gained 2% to Rs 788, Bajaj Auto rose 1% to Rs 2,895 and Tata Motors advanced 1.3% to Rs 858. BSE Auto index rose 67.01 points or 1.2% to 5,262.12.

Hindustan Lever advanced 2.2%, to Rs 258.50. The stock has advanced over the past few days on reports that the company had raised prices by about 3% on key products, July onwards. BHEL jumped nearly 2.2% to Rs 2,379. Bhel reported that it has secured an order of over Rs 800 crore.

Real estate firms were in focus too. Real estate developer Mahindra Gesco Developers jumped 6% to Rs 844 and Unitech rose 5% to Rs 305.20. From a recent low of Rs 701.45 on 11 September, Mahindra Gesco Developers has surged 20.3% in a short while. Unitech has soared 58.7% from a low of Rs 192.25 on 1 September 2006.

Grasim Industries advanced 1% to Rs 2,495 although the company stated on Tuesday that production at its chemical division would be halved due to repairs to a captive power plant, affecting profitability in the second and third quarters.

Decliners

There were few major decliners today. Orient Paper lost 1.2% to Rs 583. The company announced on Tuesday its board would meet on Oct. 5 to consider a rights issue to raise equity capital.

Other news

State Bank of India Chairman and Managing Director O P Bhatt said that the interest rates are softening but whether its is a trend or not is not clear.

Daman-based packaging company, Radha Madhav Corporation Ltd announced it has struck a deal worth Rs 3.25 lakh from Reliance Retail and another Rs 11 lakh order from Fab Mart for supply of environment-friendly packaging films.


[R]9:45AM Stocks opened flat ahead of data.[/R]
U.S. stocks started trading mixed, awaiting data expected to show an improvement in consumer sentiment, but a profit warning from home builder Lennar Corp. ((LEN)) built on worries about a slowing housing market. The tech-heavy Nasdaq declined, with Apple Computers ((AAPL)), Dell ((DELL)), and Cisco Systems ((CBCO)) contributing to the weakness. PMC-Sierra ((PMCS)) dropped 8% after the chip maker warned its sales would fall short of its expectations. The disk drive sector posted a notable decline, with Hutchinson Technology ((HTCH)) posting a substantial loss. Most telecommunications stocks moved to the downside in early trading, but a few stocks such as ADC Telecom, Alcatel SA and Openwave Systems Inc. bucked the downward trend. ADC ((ADCT)) rose 1%, Alcatel ((ALA)) gained 0.8% and Openwave ((OPWV)) added 2% in value. Some strength emerged in the transportation sector, benefiting from a decrease by the price of oil. The gold and housing sectors also showed modest strength. Retail shares opened lower, with department store operator Dillards Inc. ((DDS)) and home improvement retailer Lowe''s Cos. ((LOW)) among the top decliners.


[R]09:00AM Stock market futures gained ahead of consumer confidence data.[/R]
Stock futures moved higher Tuesday, with investors optimistic about the consumer confidence growth. U.S. consumer confidence is expected to have risen to 102.7 in September from 99.6 in August, supported by a pullback in gasoline and other energy prices. Home builder Lennar ((LEN)) reported a 39% profit drop in the most recent quarter, and warned its Q4 earnings would range between $1 and $1.30 a share, well below expectations of $1.60. Again in the housing sector, home improvement retailer Lowe’s Cos. ((LOW)) warned that annual profit will come in toward the lower end of its prior view. The stock gained 1% in pre-open trading.

The auto sector also received warning, as Visteon ((VC)), an auto parts maker, said it won''t meet its previous 2006 targets because of lower North American vehicle production. There were a few modest deals. Britain''s Aggreko agreed to pay up to $212 million in cash for the GE Energy Rentals unit of General Electric ((GE)), while Procter & Gamble ((PG)) is expected to announce it''s selling its Sure deodorant brand to privately held Innovative Brands LLC.S&P 500 futures tacked on 1.1 point to 1,336.80, while Nasdaq 100 futures rose 1.25 points to 1,666.50. Dow industrial futures ticked up 7 points to 11,655.


[R]8:00AM Lowe’s Cos. Projected full-year profit at the low end of a prior view.[/R]
Lowe''s Cos. ((LOW)), home improvement retailer, projected full-year profit toward the lower end of its prior forecast, citing accelerating housing market declines and higher energy costs.

Lowe’s Cos sees annual per-share income at or near the low end of its prior outlook ranging from $2 to $2.07, as sales are below expectations. Analysts are looking for fiscal 2007 per-share income of $2.01. On Tuesday, at the Lowe''s annual meeting with shareholders and analysts Tuesday, the CEO will provide an outlook, noting the company''s plan to add 155 and 150 stores in 2007 and 2008, respectively. The company sees per-share profit increase of 10% to 14% in 2007, and 12% to 16% in 2008. Lowe''s, with a market capitalization of more than $44 billion, added that it sees the additional square footage driving annual sales growth of 10% to 13% in 2007, and 11% to 13% in 2008.

Last month, Lowe''s shares declined after the retailer reported Q2 earnings that missed analyst outlook and cut its full-year profit forecast, citing pressure on consumer spending.


[R]7:30AM Asian shares end lower on Tuesday pulled down by blue chips.[/R]
Asian markets ended lower on Tuesday. Nikkei 225 Average in Japan ended down 76.36 points, or 0.5%, at 15,557.5. Komatsu Ltd. ended down 0.6% after agreeing Monday to sell its outdoor power equipment business to Swedish garden equipment and tools group Husqvarna AB.

Fuji Electric Holdings Co gained 3.3% after broker Nikko Citigroup initiated coverage with a buy rating citing growth in core business areas of electric-machinery systems. Softbank Corp gained 3.8% after the Nikkei daily reported Tuesday the company plans to raise 1.45 trillion yen through the securitization of its Vodafone KK operations.

The Hang Seng Index in Hong Kong closed down 1.4% at 17,308.1. China Life Insurance Co lost 6.1% after nudging a life-time high Monday. China Mobile tumbled 3.8%. The slide accounting for 130 points of the Hang Seng 237-point slide Tuesday.

South Korea Kospi index fell 0.8% at 1,343.97, its lowest level in close to two weeks. South Korean shipbuilder Hyundai Heavy Industries Co. Ltd. rose 3.3% after winning a contract worth $1.6 billion to build offshore plant and equipment for natural gas production in Abu Dhabi.

Straits Times Index in Singapore added 0.1% at 2,526.0 and the Composite Index in Shanghai lost 0.6% at 1,712.6. Australia S&P/ASX 200 gained 0.1% at 4,989.6. BHP Billiton shares fell 1.4%, pacing a general pullback in industrial commodity prices.


[R]6:30AM Spanish utilities supported Europe higher on Tuesday.[/R]
European markets were higher by mid morning on Tuesday. London FTSE 100 gained 0.7% to 5,836.6, while Frankfurt Xetra Dax added 0.6% to 5,97.74 and the CAC 40 in Paris climbed 1% to 5,195.96.

M&A

The bid for Spain largest utility Endesa warmed up after Acciona, the Spanish conglomerate bought 10% of the company late on Monday, and said it may purchase more, potentially blocking the bid by Germany Eon.

Advancers

Acciona’s move however, sparked a flurry of activity in the Spanish utility sector, sending Iberdrola 3% higher. Metrovacesa continued its rally following recent bid hopes as major shareholders battled for control of the company. Metrovacesa’s shares rallied 5%.

Linde, the German industrial gases group, rose 3.7% on hopes the company would sell its forklift division for a high price. Vivendi, the French media and telecoms group, had offered to buy a 49% stake in Polish mobile operator PTC from Deutsche Telekom. Vivendi shares gained 0.6% and Deutsche rose 0.3%.

Oil stocks enjoyed a better day after crude prices rallied overnight. Statoil climbed 2.9%, and Austria OMV gained 2%.

Decliners

E.On, which is trying to buy Endesa, slid 2.2% and Ryanair Holdings shares declined 1.9% after it said that it has hedged its fuel requirements between January and March 2007 at a rate equivalent to $73 per barrel of Brent crude.

Oil and gold

Oil held above $61 on Tuesday after recovering from a six-month low as dealers focused on whether OPEC might trim output should prices fall further. U.S. crude sank four cents to $61.41 a barrel by mid morning, while London Brent slipped 12 cents at $60.68 a barrel. Gold advanced more than one percent on Tuesday tracking higher crude oil prices. Gold hit a high of $593.75 an ounce, its highest in nearly two weeks, and was quoted at $589.30/590.30.

Currencies

The euro fell against the U.S. dollar on Tuesday as fears of lower inflation data from the European Union undermined the common currency. In morning trading, the euro was down to $1.2743 from $1.2757 late Monday in New York. The British pound dropped to $1.8989 from $1.9014 late Monday. The dollar fell to 116.34 Japanese yen from 116.48 yen.