Dow and Nasdaq Flirt with Record Levels

123jump.com Staff
27 Sep, 2006
New York City

Market averages rose in the morning hours but managed to hold on to gains during the session. Dow rose to the high for the year but Nasdaq and S&P 5000 were subdued. August durable goods orders fell 0.5% when expectations were for the orders to rise 0.5%. Oil rose inthe final hour of trading after government reported that oil inventory levels were higher than expected at the end of previous week. New home sales rose 4.1% in August to 1.05 million annual rate.

[R]4:00PM NY, 10:00PM Frankfurt – Popular averages trade near the high for the year.[/R]

-Yield on 10-year bond closed at 4.59% and 30-year bond closed at 4.71%.

-Crude oil gained $1.93 to close at $62.94 and natural gas down 36 cents to close at $4.16 per mBtu.

-Gold up $6 to close at $597.60, silver up 20 cents to $11.70 and copper 2 cent to $3.4850.

-Asian Markets surged on the overnight strength in New York trading. Japan led the region with a rise of 2.5% followed by 2.0% gain Australia, 1.5% in Indonesia, 1.3% in Hong Kong, Singapore and Korea. Taiwan and Thailand rose 0.65%.

-European Markets rose across the region led by 2.6% rise in Spain on merger news, 2.0% rise in Norway on rebound in oil in late trading and 1% rise in the UK on upgrade on mining company stocks.

-Latin American Markets closed higher except index in Mexico traded near all time high and near close fell 57 points to 21,735. Brazil led the rise in the region with a gain of 0.5% or 182 points to 36,001. Brazil primary year-to-date budget surplus at the end of August jumped to 4.47% of GDP. Brazilian Central Bank reported that for the month of August alone the surplus was recorded at 13.2 billion Brazilian reals.

[R]2:30PM NY Time, 8:30PM Frankfurt Time – European markets rise across the region.[/R]
European markets closed higher across the region led by 2.6% rise in Spain and 1.95% rise in Norway. All other markets in the region closed higher on rising mining stocks in the UK and revised bid from German E.on to $47 billion for Spainsh utility Endesa. UK index closed up 1%, Germany and France closed up 0.5% and Switzerland rose 0.3%. Most of the action in the region was seen in Madrid trading. Spanish construction company Acciona purchased on Monday 10% stake at 3.5 billion euros or 32 euros per share and another Spanish company has offered to purchase the company for 21.45 euros per share. Endesa shares jumped nearly 8%, Gas Natural rose 5.5% and Acciona closed up 2.3%.

Aer Lingus Group, operator Irish national air line set IPO price at 2.2 euros per share and valuing the company at 1.1 billion euros.

In the French market PSA Peugeot Citroen rose 5% on the news that the company plans to close plants and will lay-off, idle or retire up to 10,000 people in Europe. Renault rose 0.5% on the media news that GM has asked for multi-billion payment for its alliance with the company.

Arcelor-Mittal rose 3.5% on the news that the company has laid out its long term strategy and expects to release a new dividend policy. Market expects the company to make more acquisition in the U.S.

[R]11:30AM Dow Jones rallied on better than expected new home sales.[/R]
U.S. stocks traded higher Wednesday, with blue chip stocks like Intel and McDonald''s pushing the Dow Jones Industrial Average very close to a new high. Intel rose 3% while Advanced Micro Devices rose 1.7% after a federal judge limited AMD''s antitrust suit against its larger competitor. Shares of McDonald''s rose 1.5% after its board approved an increase of nearly 50% for its dividend. Another Dow component, General Motors Corp. ((GM)) rose 2.3% on news it is demanding billions of dollars payment from Renault and Nissan as the price to join the French and Japanese companies in a global automotive alliance. In late morning trading, the Dow was up 36.90, or 0.32%, at 11,706.29, about 17 points away from its record high close of 11,722.98. The Standard & Poor''s 500 index rose 0.96, or 0.07%, to 1,337.30, and the Nasdaq composite index advanced 3.83, or 0.17%, at 2,265.17.

[R]Crude oil inventories slipped, while gasoline stockpiles gained.[/R]
Crude oil inventories edged down in the most recent week, according to government statistics released Wednesday. This added to declines posted in the previous couple weeks. However, the slide was not as steep as experts had projected. Meanwhile, gasoline stockpiles saw a substantial increase in the week, continuing a recent string of gains. The Department of Energy''s Energy Information Administration said that crude oil inventories slipped 100,000 barrels in the week ended September 22. Specifically, the measure fell to 324.8 million barrels from the previous week''s level of 324.9 million barrels. This followed a draw down of 2.8 million barrels posted in the previous week. Oil inventories for the September 22 week were 5.3% higher than last year. Meanwhile, gasoline inventories showed a week-over-week increase 6.3 million barrels. This added to a recent string of mild gains. In the previous week, gasoline stockpiles rose by 600,000 barrels. The level of gasoline inventories was 9.3% above last year. Distillate fuel oil had an inventory increase of 2.6 million barrels for the week ended September 22. This followed an advance of 4.1 million barrels reported in the previous week.

[R]10:30AM The Sensex gains slightly amid high volatilit due to profit-taking.[/R]
The Sensex on BSE advanced 45.72 points, or 0.37%, to close at 12,366.91. The market-breadth, although positive, had worsened. Against 1,327 shares that advanced, just 1,178 declined and 90stocks remained unchanged. From the Sensex stocks 16 advanced, while 14 declined. The turnover on BSE was Rs 3,279 crore, lower than Rs 3,501 crore. The turnover on NSE was Rs 7,160 crore.

[Most active stocks

Reliance Capital was the most active stock on BSE with a turnover of Rs 196.91 crore, followed by Reliance Industries (Rs 108.34 crore) and L&T (Rs 97.85 crore).

Advancers

Reliance Energy led the advancers, up 3.82% to Rs 481.20 on a volume of 3.36 lakh shares. HDFC moved up 1.9% (Rs 27) to Rs 1,447. Maruti added 1.8% (Rs 17) to Rs 963, while Bajaj was up Rs 36 at Rs 2,938. Cipla gained 1.7% (Rs 4) to Rs 265, and Ranbaxy was up Rs 4 at Rs 421. ITC, ONGC, SBI, Infosys and Tata Steel also closed with gains today.

Decliners

Wipro led the decliners slipping 1.60% to Rs 518. L&T sank 1.10% to Rs 2,590 and Hero Honda shed 1.40% to Rs 776.65. Index heavy Reliance Industries higher throughtout the day, dipped into negative territory. It shed 0.42%, to Rs 1,173.30 on a volume of 9.13 lakh shares.

BPO firm HOV Services finished at a discount, on Rs 179.75, on BSE. A huge 24.78 lakh shares were transacted. The IPO price for the stock was Rs 200. It struck a low of Rs 177.10 and a high of Rs 208.80.

Other news

Tata Power Co. Ltd. announced on Wednesday it will commission the first unit of its 1,000-megawatt Maithon power project in eastern India by the end of 2009 and the second unit by mid-2010.

The BPO industry in the country has the potential to process up to 30% of the banking industry transactions in the U.S. by 2010, significantly higher than the current 8%, Nasscom President Kiran Karnik has stated. It is widely estimated that the Business Process Outsourcing can be $20 billion industry in the next ten years. In a separate report U.S. based research firm Forrester said that there were more banking security violations in the UK and U.S. then in India in the year 2005. U.K. banking industry independent arm, Banking Code Standards Code, said that the call centers in India covering the banking industry are among the best in the world.

Bharti Telecom, now diversified into insurance and food products exports will pick a retail partner in October according to its chairman. The company has held discussions with Wal-Mart in the U.S., Carrefour in France and Tesco in Britain. Media reports have suggested that initial investment of $100 million will be raised to $1 billion in five years of operation.

Sonata Software has acquired 50.1% of German based TUI Infotech for Rs 106 crore or $22 million in all cash deal. The German company has a staff of 400 people and Sonata in Bangalore has 1,700 people. TUI provides IT services to the travel and shipping conglomerate TUI Group with a total turnover of $25 billion. The TUI Infotech generated revenue of $140 million with net earnings of $15 million. Sonata and TUI have been working together for three years on various software projects.


[R]9:45AM Stocks opened slightly down.[/R]
Stock markets opened in the negative reflecting a weak durable-goods report that revived fears of slowing economy. An advance by oil prices further undermined sentiment. Shortly after opening hours, stocks turned flat to higher to enter the positive territory after the Commerce Department said that new home sales rose 4.1% in August, their biggest increase in five months.

Oil and gas stocks moved higher, extending recent gains as crude oil prices advanced. In early trading, telecom stocks were mixed. ADC Telecom ((ADCT)) rose 2%, while Ciena Corp. ((CIEN)) fell up to 6%. Verizon Communications ((VZ)) said its fiber network will start to contribute to operating income in 2009 and generate positive operating cash flow a year earlier in 2008. Shares of Verizon fell 0.3% in early trades.

Among companies in focus, shares of Merck ((MRK)) gained 0.5% after the drugmaker said that a federal jury cleared the company of responsibility for a Kentucky man''s heart attack in the 10th Vioxx-related case to go to trial. Shares of McDonald''s ((MCD)) rose 1% after its board approved an increase of nearly 50% for its dividend, lifting the annual payout from 67 cents to $1 a share. In the opening minutes, the Dow Jones industrial average was down 4.09, or 0.04%, at 11,665.30, just 57 points away from its record high close of 11,722.98. The Standard & Poor''s 500 index was off 0.75, or 0.06%, at 1,335.59, and the Nasdaq composite index fell 3.10, or 0.14%, at 2,258.24.


[R]New home sales rose in August.[/R]
The Department of Commerce released its closely watched report on new home sales in the month of August on Wednesday, showing that sales increased compared to a downwardly revised reading for the previous month. The report showed that new home sales rose 4.1 percent to a seasonally adjusted annual rate of 1.050 million units in August from a downwardly revised July rate of 1.009 million units. Despite the increase, sales were down 17.4 percent year-over-year. Economists had been expecting new home sales to fall to a 1.040 million unit rate in August compared to the 1.072 million unit rate originally reported for the previous month. The increase in new home sale was partly due to strong growth in the Northeast, where sales rose 21.7 percent in August. Sales in the Midwest and the South also saw double-digit growth, while sales in West fell 17.7 percent. The report also showed that the median sales price of new houses sold in August was $237,000, while the average sales price was $304,400. The Commerce Department also said that the seasonally adjusted estimate of new houses for sale at the end of August was 568,000. This represents a supply of 6.6 months at the current sales rate.

[R]09:00AM Stock market futures turned lower on weak data.[/R]
Stock market futures turned lower Wednesday, erasing earlier gains with the Dow close to a new all-time high after closing at its highest level of the year on well-received consumer confidence data. Market sentiment was hurt by an unexpected decline in orders to U.S. factories for big-ticket manufactured goods. The Commerce Department reported that durable goods orders dropped 0.5% last month to $209.7 billion, reflecting a decrease in demand for computers and other electronic products. Recovering oil prices also weighed on pre-market sentiment, with crude-oil futures up cents to $61.58 a barrel ahead of weekly petroleum data.

Of companies in the spotlight, rivals Intel Corp. ((INTC)) and Advanced Micro Devices ((AMD)) are likely to be in focus after a federal judge limited AMD''s antitrust suit against the world''s biggest chipmaker. Intel rose 1.5% to $20.24 in pre-open trading, while AMD added 1%. Red Hat Inc. ((RHAT)), a provider of open-source software, said quarterly sales could come in below analyst forecasts. Although Red Hat posted Q2 profit declined 34%, the earnings drop was above analyst estimates. Red Hat shares tumbled 19% to $21.35 in the pre-open. Electronic contract maker Jabil Circuit ((JBL)) jumped 10% after forecasting higher Q1 revenue and reporting a 45% rise in Q4 sales. S&P 500 futures slipped 2.60 points to 1,344.10 and Nasdaq 100 futures eased 3.00 points to 1,670.50. Dow industrial futures shed 22 points to 11,726.

[R]Durable goods orders dropped unexpectedly in August.[/R]
Wednesday morning, the Department of Commerce released its report on durable goods orders in the month of August, showing that orders fell unexpectedly after showing a significant decline in the previous month. The report showed that durable goods orders fell 0.5 percent in August following a revised 2.7 percent decline in July. Economists had expected orders to increase by about 0.5 percent compared to the 2.5 percent drop originally reported for the previous month. The Commerce Department said that the decrease in orders was partly due to a steep drop in orders for computers and electronic products, which fell 4.7 percent in August after rising 5.1 percent in July. At the same time, a rebound in orders for transportation equipment helped to limit the overall decline in orders. Excluding a 3.7 percent increase in orders for transportation equipment, overall orders fell 2.0 percent in August. The report also showed that shipments of durable goods rose 1.9 percent in August following a 1.3 percent decrease in July. With the increase, shipments rose to the highest level since the series was first stated on a NAICS basis in 1992. Inventories of durable goods extended a recent upward move, rising 0.2 percent in August after a 1.1 percent increase in July. The continued increase was partly due to a notable increase in inventories of primary metals.

[R]8:00AM Germany’s E.On raised its bid for Endesa to $47 billion.[/R]
Endesa ((ELE)) received an improved bid offer from Germany''s E.On ((EON)) which raised its initial offer for the Spanish utility by 38% to $47 billion (37 billion euros). E.On upped its all-cash offer for Endesa to 35 euros a share vs. a previous bid of 25.40 euros a share.

The company’s move aims at reducing the attractiveness of rivals’ proposals and ensuring that they don''t end up owning the company. It comes after Acciona disclosed Monday that it bought a 10% stake for 32 euros a share, or 3.39 billion euros, suggesting that the Spanish government was urging the conglomerate to buy a stake in order to keep Endesa out of German reach. The Spanish government has been against an E.On acquisition of Endesa for a long time, first trying to block it and then imposing several conditions on a deal. Another Spanish company, Gas Natural, has a hostile cash-and-shares offer that at Monday''s close was worth 21.42 euros a share.

E.On said that to be successful, its offer needs the approval of investors holding more than 50% of Endesa''s shares. Endesa''s Madrid-listed shares jumped 6.5% to 34.61 euros. E.On shares slipped 1.4% in Frankfurt.

[R]7:30AM Asian stocks advanced sharply Wednesday tracking U.S. market gains[/R]
Asian markets closed higher on Wednesday. The Nikkei 225 index advanced 390.42 points, or 2.51%, to 15947.87. Canon Inc and Nikon Corp were leading advancers, rising respectively 3.2% and 2.4%. Sony Corp spurted, advancing 3%.

Shares of Softbank Corp rose 0.9%, adding to sharp gains that the Internet conglomerate registered Tuesday after announcing a refinancing plan. Sumitomo Mitsui Financial Group Inc gained 4.4% following reports that the banking group will repay 695 billion yen ($5.9 billion) in bailout aid it owes to the government earlier than expected.

Hang Seng Index in Hong Kong rose 213.43 points, or 1.2%, to 17521.51. Among the banks, BOC Hong Kong rose 5.3%, becoming the biggest blue-chip advancer on the day, and banking company HSBC Holdings rose 0.9%. Shares in Taiwan finished higher, led by construction and property firms after the Taipei City government began allowing certain unused land-development rights to be sold. The Weighted Price Index of the Taiwan Stock Exchange rose 44.52 points, or 0.7%, to 6946.27.

S&P/ASX 200 index in Australia ended up 103.6 points, or 2.1%, at 5093.2. Australian Pharmaceutical Industries soared 19% after confirming it had received takeover approaches and Vision Systems rose 10%. Resource large-caps BHP Billiton and Rio Tinto both gained 3.7%, respectively.

Shares in South Korea also rallied, lifted by banks. The main Korea Composite Stock Price Index, or Kospi, gained 1.2%, or 16.06 points, to 1360.03.


[R]6:30AM European stocks rise on Wednesday helped by M&A and mining shares.[/R]
Europe was higher by mid morning on Wednesday. The U.K. FTSE 100 index rose 0.6% at 5,907, the German DAX Xetra 30 index rose 0.5% at 5,991 and the French CAC-40 index climbed 0.5% at 5,242.

M&A

Eon, the German utility at the centre of the battle for Spanish company Endesa, raised its offer for the Spanish company by 38%. This would make it the largest ever utilities takeover should the deal go through.

Advancers

Gas Natural, which still showed an interest in acquiring Endesa and failed in a hostile bid earlier this year, gained 5.5%. Also receiving a boost from the moves in Spain was EDP, power generator in Portugal. Its shares gained 4.4%.

Hennes & Mauritz, the Swedish fashion retailer, gained 4.5% after it reported a forecast-beating rise in third-quarter pre-tax profit, boosted by a 5% rise in like-for-like sales.

Decliners

E.On wasn''t performing so well, down 1.7% after raising its offer for Endesa. French insurer CNP Assurances fell 5.6% after its 16.6% rise in first-half net profit failed to impress.

Corporate news

Aer Lingus, the Irish airline, debuted on the Dublin bourse on Wednesday after its initial public offering was nearly four times oversubscribed. The stock was priced at 2.20 euros, the lower end of the pricing range, but in early trade it stood at 2.39 euros.

Oil and gold

Oil prices rose Wednesday amid lingering uncertainty about OPEC production plans. By mid-afternoon Wednesday, light, sweet crude for November delivery had rebounded 35 cents to $61.36 in on the NYME. November Brent crude on London ICE futures exchange rose 14 cents Wednesday to $60.26 a barrel. Gold traded in London at $595.10, up from $591.10 late Tuesday.

Currencies

The U.S. dollar was mostly higher against other major currencies in European trading Wednesday morning. The euro bought $1.2692, up from $1.2691 late Tuesday in New York. The British pound traded at $1.8889, down from $1.8949. The dollar bought 117.29 Japanese yen, up from 117.10.