Wal-Mart Sales Weigh

Elena
02 Oct, 2006
New York City

U.S. stocks opened below the flat line Monday after Wal-Mart Stores said September same-store sales came in at the low end of a forecast. Company''s shares slipped nearly 2%. In corporate news, casino operator Harrah''s Entertainment rallied 19% after it received a $15.05 billion offer from private equity firms Apollo Management and Texas Pacific Group.

[R]9:45AM Market opened lower.[/R]
U.S. stocks opened below the flat line Monday after Wal-Mart Stores ((WMT)) said September same-store sales came in at the low end of a forecast. The New York Times reported that the retailer is capping wages, hiring more part-time workers and scheduling more workers on nights and weekends to create a cheaper workforce. Company's shares slipped nearly 2%. The early weakness came as traders were nervous ahead of the release of key economic data later this morning. Oil service stocks posted notable losses in early trading following a decrease in the price of oil.

In corporate news, casino operator Harrah's Entertainment Inc. ((HET)) received a $15.05 billion offer from private equity firms Apollo Management and Texas Pacific Group. The stock rallied 19%. Drug research company Gilead Sciences Inc. ((GILD)) agreed to pay a 50% premium to acquire biopharmaceutical concern Myogen Inc. ((MYOG)) for $2.5 billion. In the first hour of trading, the Dow Jones industrial average rose 8.33, or 0.07%, to 11,687.40. The Standard & Poor's 500 index was up 0.32, or 0.02%, at 1,336.17, and the Nasdaq composite index fell 2.17, or 0.10%, at 2,256.26.


[R]09:00AM Stock futures declined on Wal-Mart sales and Apple downgrade.[/R]
Stock market futures reversed from earlier gains to move slightly down, as Wal-Mart reported disappointing sales results and the stock of Apple Computer was downgraded. The news offset the positive impact of an acquisition and a possible merger deal.

Dow component Wal-Mart ((WMT)) fell 2% after posting September same-store sales rose 1.8%, just below the mid-point of its 1% to 3% forecast range. Apple ((APPL)) fell 2% to $75.40 in pre-open trading after Citigroup downgraded shares to hold as the broker sees little potential for higher-than-expected revenue in the third or fourth quarter of the year. Positive news for the whole tech sector was brought be the Semiconductor Industry Association, which said that worldwide sales of semiconductors reached an all-time monthly record of $20.5 billion in August, up 10.5% from a year ago.

In merger-and-acquisition news, shares of Myogen ((MYOG)) surged 48% to $51.74 in pre-open trading after Gilead Sciences ((GILD)) said it will acquire the biotech company for $2.5 billion, or $52.50 a share in cash. The bid represents a 50% premium to Friday''s closing price. Shares in Gilead shares slipped 5.6% to $64.87. Harrah''s Entertainment ((HET)) jumped 12% on news that the company was in talks to be acquired in one of the biggest leveraged buyout deals ever. S&P 500 futures were down 0.7 point, but above fair value. Dow Jones industrial average futures down 13 points, and Nasdaq 100 futures were down 2.25 points.


[R]8:00AM Gambling companies tumbled on Congressional legislation.[/R]
British online gambling companies tumbled Monday after the U.S. Congress passed legislation prohibiting the use of credit cards, checks and electronic fund transfers for online gaming. On Saturday, the House of Representatives and the Senate passed the legislation as part of a port securities bill.

Shares of companies, such as Sportingbet PLC and PartyGaming PLC, moved steeply to the downside. PartyGaming plunged 60% to 43 pence (81 cents), shares in 888 sank 48% to 76 pence ($1.42), while Sportingbet shares dropped 67% to 60 pence ($1.12).

PartyGaming, the world''s biggest online gambling company, said it would pull out of the United States if President Bush signs the legislation into law, while Sportingbet, which does more than 60% of its business in the United States, said the impact of the legislation was unclear. Sportingbet PLC also said it terminated takeover talks with World Gaming PLC. Another gaming company, 888 Holdings PLC, said that following the legislation, it is suspending online betting operations in the U.S. The company interprets the legislation as a Congressional intent to treat Internet gaming as illegal.


[R]7:30AM Asian markets rise on upbeat Japanese economic sentiment.[/R]
Asian markets were higher on Monday. The Nikkei 225 Average in Tokyo finished the day up 0.8% to 16,254.3, its highest close in nearly a month. After the release of the tankan, Honda Motor shares gained 2.5%. Shares of Fuji Photo Film advanced 2.8% but Sony Corp. shares fell 1.1% as a recall of laptop batteries made by one of the firm subsidiaries widened.

On Friday, Toshiba Corp. announced they were joining several other computer-makers in recalling lithium-ion batteries manufactured by Sony. Softbank Corp shares slipped 2% following Friday 7.2% gain. Mitsubishi Heavy Industries shares gained 2% after the company said it would sell compact nuclear reactors to U.S. utilities starting in 2011. Airline shares dropped as a recent recovery in crude-oil prices suggested that fuel costs may not retreat as much as expected. All Nippon Airways shares dipped 1.1%.

Australia''s S&P/ASX 200 added 0.5%. Woodside Petroleum was up 1.2% as crude-oil prices continued to recover. Miners gained in Australia, with BHP Billiton up 0.9% and Rio Tinto up 0.3%. The Taiex index in Taiwan rose 1.1%, while South Korea Kospi index gained 0.2%. Hong Kong and mainland China stock exchanges were closed Monday for National Day.


[R]6:30AM Merger hopes and commodities lift Europe on Monday.[/R]
European markets were higher by mid-morning on Monday. The FTSE 100 in London climbed 0.2% to 5,972.7, Frankfurt Xetra Dax added 0.3% to 6,021.65 and in Paris, the CAC 40 gained 0.2% to 5,261.69.

In focus

There was activity again in the utilities sector. EDP in Portugal gained 2.3% after reports in the Spanish press that it could form a friendly merger with Spain’s Gas Natural.

Advancers

RWE gained 1.8% , while Enel, which HSBC initiated at neutral, rose 0.2%. Ahold added 0.5% on reports its US Foodservice unit could be the target of private equity bids.

Decliners

Partygaming led the declines, falling 55.6%. Austria’s Bwin Interactive fell 17.3%. Telekom Austria fell 6.8% after investment bank UBS cut its rating on the company from buy to neutral and lowered its price target.

Oil and gold

Light, sweet crude for November delivery rose 12 cents to $63.03 a barrel in electronic trading on the NYME. November Brent crude on the ICE futures exchange in London rose 22 cents to $62.70 a barrel. Gold opened Monday at a bid price of $602.20 a troy ounce, up from $595.70 late Friday.

Currencies

The euro bought $1.2672 in morning European trading, compared with $1.2678 in New York late Friday. The British pound slid to $1.8689 from $1.8710. The dollar climbed Monday to 118.27 Japanese yen from 118.11 yen.