Rally Fades on Profit Taking

Elena
28 Sep, 2006
New York City

After a short-lasting rally, U.S. stock markets lost direction as investors turned to profit taking. In early trading, the Dow briefly topped its record closing high of 11,722.98, but was unable to move significantly above that level and has moved back to the downside since then.

[R]11:30AM Market rally faded on profit taking.[/R]
After a short-lasting rally, U.S. stock markets lost direction as investors turned to profit taking. In early trading, the Dow briefly topped its record closing high of 11,722.98, but was unable to move significantly above that level and has moved back to the downside since then. Earlier the 110-year-old Dow Jones industrial average rose to 11,724.86, pulling past its previous record closing high of 11,722.98 set on January 14, 2000. In late morning, the Dow was up just 1.92, or 0.02%, at 11,691.16. The S&P, up 0.09, at 1,336.68, is still 190 points below its closing high of 1,527.46, although it is trading at a 5 1/2-year high. The Nasdaq, up 0.18 at 2,263.57, is not expected to approach its high close of 5,048.62 any time soon.

Among the most notable Thursday's gainers, Resources Connection ((RECN)) jumped 14% after reporting Q1 net earnings of $11 million, or 22 cents a share, compared with $15.1 million, or 29 cents a share a year ago. Intel ((INTC)) shares rose 1.4% after Citigroup raised its stock price target for the company, citing an improved PC industry environment for the third quarter. Energy Conversion Devices ((ENER)) rose 9% after the company increased the number of independent directors on its board.

On the side of the losers, Tvia ((TVIA)) plunged 58% after the provider of digital display processors said it expects Q2 revenue of $300,000 to $400,000, compared to Q1 revenue of $5.1 million, citing shortages of LCD panels. American Greetings ((AM)) dropped 8.5% as the company swung to a Q2 loss of $10.5 million, or 18 cents a share, from year-ago income of $3.2 million, or 5 cents, missing estimates. Sales fell to $360.1 million from $385 million. Family Dollar Stores ((FDO)) reported Q4 earnings of 26 cents a share, up from a year-ago profit of 18 cents a share, beating estimates of 23 cents. Sales rose 10.3%, while same-store sales increased 4.9% in the quarter. For September, the company projected same-store sales growth of roughly 2%, below a previous plan for growth of 3% to 5%. The stock dropped 3%. HB Fuller ((FUL)) slipped 5.5% after its stock was downgraded to neutral from overweight at J.P. Morgan, citing valuation. McCormick & Co ((MCK)) fell 3.6% following a downgrade at Merrill Lynch to neutral from buy.


[R]10:30AM The Sensex closes marginally higher on F&O derivatives.[/R]
The Sensex on BSE advanced 13.83 points, or 0.1%, to settle at 12,380.74. The market breadth was positive. For 1,358 shares that advanced 1,122 shares declined and 72 shares remained unchanged. The market traded in a range of 91 points. The turnover on BSE was Rs 3,578.65 crore, higher than Rs 3,279 crore on Wednesday. The turnover on NSE was Rs 8,583 crore.

[Stocks in focus

Banking stocks were in highest demand. HDFC Bank jumped 4.5% to Rs 940, State Bank of India gained 2.6% to Rs 1,025 and ICICI Bank rose 2.3% to Rs 704.

[Advancers

Many state controlled banks gained. Top advancers were Syndicate Bank (up 7% to Rs 87), Corporation Bank (up 7% to Rs 442), Bank of Baroda (up 7% to Rs 287.55), Oriental Bank of Commerce (up 6.5% to Rs 276), Vijaya Bank (up 6% to Rs 57.35), Bank of India (up 6% to Rs 163.60), Union Bank of India (up 6% to Rs 138) and Canara Bank (up 4.9% to Rs 293).

Housing finance company HDFC gained 3.5% to Rs 1,498, continuing its recent recovery on hopes of sustained strong demand for housing loans. Mahindra & Mahindra added nearly 2% to Rs 668. The company today announced it had signed an agreement to buy Jeco Holding AG of Germany.

Software outsourcing company Infosys advanced 1.5% to Rs 1,863. Shares reached a high of Rs 1,874.70 which is a 52-week high for the stock. Tata Power rose 3% to Rs 555. The copmany announced on Wednesday that it will commission the first unit of its 1,000-Megawatt Maithon power project in eastern India by the end of 2009, and a second unit by mid-2010.

Gateway Distriparks added up after a huge block deal of 46.3 lakh shares was traded in the stock on BSE, at Rs 160. The stock rose 4% to Rs 163.

Decliners

TCS led the decliners , sinking 2.25%, Maruti Udyog lost 2.19%, Larsen retreated 2.09%, Dr Reddy''s Labs sank 2.01%, and Jet Airways sagged 3%. A rebound in crude prices pushed down refiners. HPCL lost 3% to Rs 285, BPCL shed 1.5% to Rs 369 and Indian Oil Corporation dipped 1.7% to Rs 517. International crude oil price rose to a 7-day high of above $63 a barrel amid speculation that OPEC may cut output.

Other news

Prime Minister Manmohan Singh asked ten northern states to go slow on fiscal incentives to the industry, while prescribing hasty improvement of tax systems and free trade for better economic growth.

India should gradually reduce exports of iron ore as local demand is rising, steel minister Ram Vilas Paswan stated on Thursday. Exporters claim that India has enough iron ore reserves to meet both domestic and export demand, but steel makers argue the country should process the raw material and export value-added products.


[R]9:45AM The Dow Jones average hit a record high.[/R]
The Dow Jones industrial average hit its record-high close Thursday morning, lifted by optimism about steady interest rates and a soft landing for the economy. The Dow rose to 11,724.86, facing one more milestone, its intraday high of 11,750.28, before it could move into uncharted territory. The Nasdaq Composite gained 2.01 to 2,265.40 and the Standard & Poor''s 500 slipped 0.26 to 1,336.33.

A rally in shares of General Motors contributed to the record-high level of the blue-chip index. General Motors ((GM)) rose 3.4% after company''s CEO said that talks on joining the Renault-Nissan alliance may extend beyond a mid-October deadline. Retail stocks moved higher, with shares of Saks Inc. ((SKS)), department-store retailer, rising 4.5% to after Bank of America raised its rating on the stock to buy.

Technology stocks slightly advanced in early trading, with gains from Intel Corp.((INTC)), Apple Computer Inc.((AAPL)), and Oracle Corp.((ORCL)). Hewlett-Packard ((HPQ)) was in focus after CEO Mark Hurd said in testimony that a company probe into boardroom leaks was provoked by good intentions, but soon turned into a ‘rogue investigation’. The scandal claimed its latest victim among H-P''s management team, with the resignation Thursday of general counsel Ann Baskins. Company’s shares dropped 1%.

Airline stocks moved narrowly higher at the open, with regional carrier Mesa Air Group Inc. ((MESA)) leading percentage gainers with a 1.1% rise and Continental Airlines Inc. ((CAL)) leading decliners, down 1%. Prices in the telecommunications sector were little changed. ADC Telecom ((ADCT)) added 1.5% to lead the equipment sector, while Verizon Communications ((VZ)) fell again despite positive analyst reports.


[R]09:00AM Stock market futures turned lower on GDP data.[/R]
U.S. stock futures fell on Thursday after a report showed revised Q2 GDP below expectations, renewing worries about economic slowdown. The latest reading on the GDP, released by the Commerce Department showed that economy grew at 2.6% pace in the second quarter, slower than the 2.9% figure estimated a month ago. In another report, the Labor Department reported that number of new people signing up for unemployment benefits fell by a seasonally adjusted 6,000 to 316,000 for the work week ending Sept. 23. The figures came in close to expectations for claims to total around 315,000. S&P 500 futures were down 0.10 point, still above fair value. Dow Jones industrial average futures were down 1 points and Nasdaq 100 futures were unchanged.

[R]Economy grew at a slower pace in Q2.[/R]
Thursday morning, the Department of Commerce released its final report on second quarter gross domestic product, showing that the pace of GDP growth was unexpectedly revised down from the preliminary reading. The report showed that GDP growth was revised down to 2.6 percent from the preliminary reading of 2.9 percent growth. The downward revision came as a surprise to economists, who had expected GDP growth to be unrevised. The downwardly revised second quarter growth compares to the 5.6 percent rate of growth that was reported for the first quarter. The Commerce Department said that the downward revision in second quarter GDP growth primarily reflected a downward revision to private inventory investment, an upward revision to imports of services, and a downward revision to residential fixed investment.

The report also noted that the growth in second quarter GDP was primarily due to positive contributions from consumer spending on services, exports, nonresidential structures, state and local government spending, and private inventory investment. The deceleration in the pace of growth compared to the first quarter reflected downturns in consumer spending on durable goods, equipment and software spending, and federal government spending. The Commerce Department also said that its closely watched reading on core consumer prices, which excludes good and energy prices, rose at an annual rate of 2.7 percent in the second quarter. This represents a downward revision from the 2.8 percent rate of growth previously reported. The pace of core consumer price growth in the second quarter still represents a significant acceleration from the 2.1 percent rate of growth reported for the first quarter.

[R]Initial jobless claims fell by 6,000.[/R]
The Department of Labor released its report on initial jobless claims in the week ended September 23 on Thursday, 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 322,000. Economists had expected jobless claims to fall to 315,000 from the 318,000 originally reported for the previous week. The Labor Department also said that the less volatile four-week moving average fell to 315,500 from the previous week''s revised average of 316,000. The report also showed that continuing claims in the week ended September 16 fell to 2.444 million from the preceding week''s revised level of 2.452 million.

[R]7:30AM Asian stocks advance Thursday on energy-related stocks.[/R]
Asian markets were broadly higher on Thursday. Japan''s Nikkei 225 Average ended the session 0.5% higher to 16,024.9. shares of Japanese oil and gas company Inpex Holdings gained 1.7%, while refiner AOC Holdings Inc gained 2.9%. Mining, which includes upstream oil stocks such as Inpex, climbed 2.1%. Nippon Steel rose 1.7%. Rival JFE rose 1.5%. Sumitomo Metal Mining climbed 2.3%.

Australia S&P ASX/200 advanced 0.4% to 5,115.2, as the mining sector rose for a second day following recent weakness in the commodity sector. Miners advanced with BHP Billiton Ltd up 1.2%, while smaller rival Rio Tinto Ltd. firmed up 1.3%. Hang Seng Index in Hong Kong edged up 0.2% to 17,551.5.

The China Enterprises Index, or Hong Kong-listed shares in mainland-incorporated companies, was up 0.6% at 7,113.8. The largest oil producer in China PetroChina climbed 1.5%; offshore oil producer CNOOC rose 1.4%. Kospi Index in South Korea was up 0.8%, while the Shanghai Composite Index advanced 0.7%. The Weighted Index in Taiwan fell 0.9% to 6,885.1, to rank as the lead declining market.


[R]6:30AM European markets driven higher on Thursday by profit-taking[/R]
European markets were slightly higher by mid-day on Thursday. The U.K. FTSE 100 index added 0.1% to 5,937, the German DAX Xetra 30 added 0.1% to 5,995.08 and the French CAC-40 index climbed 0.25 to 5,253.89.

Advancers

German truckmaker MAN gained 3.6% on rumours that Volkswagen, the German carmaker, was poised to make a bid for the company. MAN has been trying to buy Scania, its Swedish rival in which VW has a major stake. Shares in Scania were up 1.1%. Dutch chemicals group DSM gained 4% after it announced the launch of a share buyback programme and a loyalty dividend. TNT gained 2.4%, while KPN remained flat.

Decliners

VW fell 0.7% and Novartis slipped 0.1%.The company showed that its experimental treatment offered sustained relief for patients with relapsing MS, with up to 77% remaining free of relapses for over two years. Iberdrola fell 5.6% having gained nearly 18% over the previous two sessions after construction group ACS built a 10% stake.

Endesa fell 1.7% having risen more than 19% in the two previous days after Germany’s Eon raised the stakes in the bid for the company following the purchase of a 10% holding by Acciona, the Spanish conglomerate.

Other news

In Brussels, the European Court of Justice ruled that the Dutch state broke EU laws by holding golden shares in telecoms group KPN and parcel delivery company TNT. The court stated that by holding the shares the Dutch government restricted the free movement of capital. The ruling effectively restricts measures for member states to protect companies from foreign takeovers.

Oil and gold

Light, sweet crude oil for November delivery added 6 cents to $63.02 a barrel in electronic trading on the New York Mercantile Exchange. November Brent crude on London''s ICE Futures exchange fell 11 cents to $62.10 a barrel. Gold traded around $600 for the first time in more than two weeks on Thursday after a recovery in crude oil prices sparked buying from investors.

Currencies

The U.S. dollar was lower against the euro but gained against other major currencies in European trading Thursday morning. The euro bought $1.2710, up $1.2704 late Wednesday in New York. The British pound traded at $1.8782, down from $1.8885. The dollar bought 117.67 Japanese yen, up from 117.45