Mixed Opening on GM and Wal-Mart

Elena
04 Oct, 2006
New York City

Wal-Mart dropped 2.2% after the retailer cut its September same-store sales forecast to 1.3% from its previous estimate of 1.8%. TiVo slipped 9% after an appeals court allowed EchoStar Communications to continue selling its competing digital-video recorder models pending appeal of the companies'' patent dispute over the technology. As a result, Bear Stearns cut its rating on TiVo to underperform.

[R]9:45AM Market opened mixed.[/R]
Stock markets opened mixed, pressured by lowered sales forecast at Wal-Mart, but supported by an upgrade of General Motors at Bear Stearns. Weaker-than-expected data on the U.S. services sector further weighed as it added to concerns about the state of the economy and pushed the Dow lower.

Wal-Mart ((WMT)) dropped 2.2% after the retailer cut its September same-store sales forecast to 1.3% from its previous estimate of 1.8%. Dow component General Motors ((GM)) gained nearly 1% following a brokerage upgrade to peer perform from underperform, while Ford Motors ((F)) stock declined about 1% after Bear Stearns lowered its rating on the company to peer perform from outperform. Among other early movers, TiVo ((TIVO)) slipped 9% after an appeals court allowed EchoStar Communications ((DISH)) to continue selling its competing digital-video recorder models pending appeal of the companies' patent dispute over the technology. As a result, Bear Stearns cut its rating on TiVo to underperform. Biotechnology company ImClone Systems Inc. ((IMCL)) rose 6.3% after saying an unidentified international pharmaceutical company was interested in making an offer of $36 per share for the company.

In the first hour of trading, the Dow fell 5.93, or 0.05% to 11,721.89. The Standard & Poor's 500 index was down 1.80, or 0.13%, at 1,332.31 and the Nasdaq composite index fell 2.67, or 0.12%, at 2,240.98. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.60% from 4.62% late Tuesday.


[R]09:00AM Stock futures declined after Wal-Mart cut sales outlook.[/R]
U.S. stock market futures turned lower, reversing from solid gains Tuesday when the Dow Jones industrials rose to an all-time record of 11,727,34. The Nasdaq and the S&P 500 also saw rises, reflecting a sharp drop in commodity prices, with oil down more than $2 a barrel and gold falling more than $20 an ounce. On Wednesday, the negative market sentiment was generated by lowered same-store sales figures at blue chip retailer Wal-Mart Stores Inc. and a disappointing national employment index.

Dow component Wal-Mart ((WMT)) cut its September U.S. same-store sales growth estimate to 1.3% from its previous estimate of 1.8%. Elsewhere, shares of Dow component General Motors ((GM)) rose nearly 2% in pre-open trading after Bear Stearns upgraded the automaker to peer perform from underperform. Ford Motor ((F)) fell about 1% after the same broker cut its rating on the stock to peer perform from outperform. In other analyst moves, RBC Capital downgraded telecommunications giant Verizon Communications ((VZ)) to perform from outperform, sending the stock up 1%. Among other companies in focus, Boeing ((BA)) added nearly 1% amid another profit warning at EADS, the majority owner of rival Airbus.

A speech by Federal Reserve Chairman Ben Bernanke at the Economics Club of Washington later today is expected to provide further clues to the Fed''s view on the economy. Government data on factory orders and ADP''s payrolls figures are also due out Wednesday. S&P 500 futures were down 0.4 point, slightly above fair value. Dow Jones industrial average futures fell 9 points, and Nasdaq 100 futures rose 1 point.


[R]8:00AM Ford downgraded, General Motors upgraded[/R]
Bear Stearns downgraded Ford Motors Corp. ((F)) to peer perform from outperform, saying that most of the near-term catalysts for the shares, including declining gas prices and positive September auto sales, have unfolded. The firm added it is cautious about holding shares ahead weak third-and-fourth-quarter results.

At the same time, the broker upgraded General Motors ((GM)) to peer perform from underperform, citing continuous beliefs that there is too much optimism in the stock surrounding the benefits of an alliance with Renault and Nissan. It added that the desire of Kirk Kerkorian''s Tracinda Corp. to build its stake will support shares in the near-term.


[R]7:30AM Asian markets fell Wednesday on N. Korea nuclear test plans.[/R]
Asian stocks were mostly lower on Wednesday. The Nikkei 225 Index finished down 0.98% at 16082.55 after erasing morning gains. Sumitomo Metal Mining shed 5.29% and Mitsui & Co. sank 5.53%. Electronics shares also moved lower, with Sony slipping 3.26% following its announcement on Tuesday that its next-generation Blu-ray DVD recorders would be released later than those of rival Matsushita Electric Industrial, which markets electronic products under the Panasonic and Technics brand names.

Kospi in South Korea closed 1.6% lower at 1352.00 after dropping to a low of 1345.83 earlier in the afternoon. S&P/ASX 200 in Australia gave up 0.8% as slipping oil and metal prices took a toll on energy and mining stocks. Shares of Woodside Petroleum were off by 2.9 % and BHP Billiton declined 4.6%. Taiex index in Taiwan fell 1.2%. Chipmaker Taiwan Semiconductor Manufacturing dipped 2.5% amid a broad decline in tech shares.

Hang Seng Index in Hong Kong bucked the trend and advanced 0.13% to 17629.21. Airline stocks rose on lower oil prices. Cathay Pacific shares gained 1.3% and Air China rose 2.6%. But Hong Kong-listed mainland oil producer Cnooc shed 3.6%, also on the crude moves.


[R]6:30AM European stocks were mostly higher Wednesday on bank shares.[/R]
European markets were higher by mid-morning on Wednesday. The FTSE 100 in London gained 0.1% to 5,939.4, Frankfurt Xetra Dax added 0.3% to 6,010.55 and in Paris, the CAC 40 was 0.2% higher at 5,227.92.

In focus

Oil company British Petrolium declined in London after reporting expected lower margins while EADS announced late Tuesday that it will push back the already-delayed delivery schedule of A380 superjumbo jets by up to another year.

Advancers

Banks advanced after the US bank Citigroup was reported to be setting out on an acquisition course. Among those identified as targets, BNP Paribas of France gained 1.6%, Société Générale added 1.6% and BBVA of Spain gained 1.5%.

Companies that benefited from the decline in oil prices included British Airways with its shares up 2.4%, and cruise operator Carnival, which gained 1.4%. Chipmaker Infineon Technologies was also up 2.4% following an upgrade to buy from neutral from Goldman Sachs.

Decliners

EADS led the decliners. The aerospace group fell 6.7% after it announced further delays to its troubled Airbus A380 superjumbo, prompting top buyer Emirates to put its purchases under review.

DaimlerChrysler shares slipped 0.8%. The automaker last night also posted a narrower-than-expected 2.3% monthly drop in U.S. auto sales on strength from its Mercedes. Mining stocks moved lower on commodity exchanges. BHP Billiton lost 3.4% and Rio Tinto shed 3.3%.

Oil and gold

Oil prices fell for a third day Wednesday. Light sweet crude oil for November delivery fell 18 cents to $58.50 a barrel in electronic trading on the New York Mercantile Exchange. November Brent crude fell 41 cents to $58.02 at London''s ICE Futures exchange. Gold traded in London at $578.50, down from $581.80 late Monday.

Currencies

The U.S. dollar advanced against other major currencies in European trading Wednesday morning. The euro traded at $1.2696, down from $1.2727 late Tuesday in New York. The British pound traded at $1.8824, down from $1.8872. The dollar bought 118.05 Japanese yen, up from 117.89.