Dow, Record High on Weak Data

Elena
04 Oct, 2006
New York City

The Dow hit an all-time intraday high, as stocks recovered Wednesday after a weaker-than-expected data on business activity helped ease concerns about inflation and interest-rate hikes. The ISM''s services sector index slipped to a weaker-than-expected 52.9 in September from 57.0 in August.

[R]11:30AM Market turned higher on weaker economic data.[/R]
The Dow hit an all-time intraday high, as stocks recovered Wednesday after a weaker-than-expected data on business activity helped ease concerns about inflation and interest-rate hikes. The ISM's services sector index slipped to a weaker-than-expected 52.9 in September from 57.0 in August. A government report surprisingly showed a rise in crude oil inventories, sending light sweet crude down 79 cents to $57.89 a barrel.

The Dow was boosted by a 3.4% gain by General Motors ((GM)), with the auto maker moving higher after Bear Stearns upgraded its rating on the stock to Peer Perform from Underperform. Gains by IBM ((IBM)), up 1.3% and Microsoft ((MSFT)), up 1.3%, also helped the blue chip index higher.

In late morning trading Wednesday, the Dow rose 57.87, or 2.17%, to 11,785.21. The blue chips traded up to 11,786.49; that is now its all-time high. The Standard & Poor's 500 index was up 2.31, or 0.17%, at 1,336.42 and the Nasdaq composite index rose 14.33, or 0.64%, at 2,257.98. Bonds rose sharply, with the yield on the benchmark 10-year Treasury note falling to 4.51% from 4.62% late Tuesday.


[R]Crude and gasoline supplies rose.[/R]
Crude oil inventories climbed in the most recent week, according to government statistics released Wednesday. This broke a recent streak of declines. Meanwhile, gasoline stockpiles also saw an increase in the week, continuing a recent string of gains. The Department of Energy's Energy Information Administration said that crude oil inventories rose 3.3 million barrels in the week ended September 29. Specifically, the measure rose to 328.1 million barrels from the previous week's level of 324.8 million barrels. This followed a draw down of 100,000 barrels posted in the previous week. Oil inventories for the September 29 week were 6.7% higher than last year. Meanwhile, gasoline inventories showed a week-over-week increase 1.2 million barrels. This added to a recent string of gains. In the previous week, gasoline stockpiles rose by 6.3 barrels. The level of gasoline inventories was 9.6% above last year. Distillate fuel oil had an inventory increase of 200,000 barrels for the week ended September 29. This followed an advance of 2.6 million barrels reported in the previous week.

[R]New factory orders slipped in August.[/R]
Wednesday morning, the Department of Commerce released its report on new orders for manufactured goods in the month of August. The report showed that orders fell less than economists had expected. The report showed that new orders for manufactured goods fell slightly to $403.60 billion in August from $403.63 billion in July. The modest decrease came after orders fell 1.0 percent in the previous month. Economists had been expecting orders to fall 0.2 percent. The modest decrease in factory orders came as new orders for durable goods and new orders for non-durable goods both fell slightly but came in nearly unchanged. The drop in durable goods orders was revised from the previously published 0.5 percent decrease. The report also showed that shipments of manufactured goods rose 1.1 percent in August following a 0.1 percent decrease in July. At the same time, inventories of manufactured goods rose 0.4 percent in August after rising 0.8 percent in July. Subsequently, the inventories-to-shipments ratio came in at 1.17 in August, unchanged from the previous month.

[R]Business activity slowed in September.[/R]
The Institute for Supply Management released its report on business activity in the service sector in the month of September on Wednesday, showing that the pace of growth in the sector slowed more than economists had been expecting. The report showed that the index of activity in the sector fell to 52.9 in September from 57.0 in August. While a reading above 50 indicates growth in the sector, economists had been expecting a more modest decline to a reading of 56.0. The slowdown in the pace of growth in the sector came in spite of an acceleration in the pace of new orders growth, with the new orders index rising to 57.2 in September from 52.1 in August. The pace of employment expansion also accelerated in September, with the employment index rising to 53.6 from 51.4 in the previous month. The report also showed a notable deceleration in the pace of price growth, as the prices index fell to 56.7 in September from 72.4 in August.


[R]10:30AM The Sensex sheds 162 points Wednesday in volatile trading.[/R]
The Sensex on BSE lost 162.38 points, or 1.3%, to close at 12,204.01. The market-breadth was weak tracking a sharp decline in blue-chips. For 1,421 shares that declined, 1,039 rose and 67 shares remained unchanged. Decliners outpaced advancers by 4 to 1. The turnover on BSE was Rs 3,416 crore, compared to Tuesday Rs 3,092 crore. The turnover on NSE was Rs 7,284.91 crore.

Decliners

IT shares led the decliners on sales. TCS lost 2.6% to Rs 988, Satyam Computer shed 2.4% to Rs 802, Wipro lost 2.2% to Rs 507.80, and Infosys shed 0.5% to Rs 1,807. Infosys unveils second-quarter results on 11 October 2006.

Banks declined on profit-taking. HDFC Bank lost 3% to Rs 893 and SBI shed 1.6% to Rs 1,016. ICICI Bank shed 0.08% to Rs 695.90. Housing finance large-cap HDFC shed 2%, to Rs 1,445.

Reliance Industries lost 1.1% to Rs 1,147. Reliance Industries on Sunday reduced retail price of petrol and diesel by a rupee, following a drop in global crude oil price. A sharp decline in oil price pulled ONGC down 2.3% to Rs 1,132. BHEL lost nearly 3% to Rs 2,300, and Bharti Airtel dipped 1.3% to Rs 460. Separately, Reliance Energy said that 20 lakh customers in Mumbai will be charged 31.5% more for electricity as of October 1st.

Steel shares declined on worries that rising steel production in China will lead to dumping of Chinese steel. SAIL lost 3% to Rs 75.80 and Tata Steel sank 2% to Rs 523. The latest data showed, that Chinese steel output advanced 17.6% between January-August 2006 to 272.50 million tones.

Advancers

Select shares not part of the Sensex stocks soared. Phoenix Mills closed at Rs 790.10, Bright Brothers at Rs 47.45, Rama Newsprint Rs 55.20, MIRC Electronics Rs 27.90, Lakshmi Precision Screws Rs 68.30, Eicher Motors Rs 336.60 and SPIC at Rs 20.95.

Bajaj Auto gained 1.7%, to Rs 3,085. The stock advanced for the second day in a row after reporting a healthy 38% growth in vehicle sales in September 2006. Tata Motors advanced 1.1%, to Rs 880. The company on Tuesday reported 24% growth in vehicle sales for September 2006. Eicher Motors jumped 10% to Rs 336.60.

Construction shares gained led by 2% rise in IVRCL Infrastructure to Rs 266.30, Nagarjuna Construction rose 1.2% to Rs 168, Era Construction advanced 1.2% to Rs 328.78 and Madhucon Projects edged up nearly 1% to Rs 257. Newly listed Atlanta jumped 8% to Rs 207.45. The stock gained on a high volume of 59.7 lakh shares on BSE.

Other news

Finance Minister P Chidambaram today said more funds would be allocated for reinvestment in oil sector as softening international oil prices would reduce the subsidy burden.

HPCL Chairman, MB Lal told reporters on Wednesday that Hindustan Petroleum Corp Ltd is willing to offer a stake of up to 50% in its proposed Bhatinda refinery to state-run Oil India Ltd.

Cinemax India, a chain of movie theaters, filed draft propsectus to raise funds to pay for capital expenditure. The theater chain has 10 locations with 33 screens and 9,300 seats. The company generated a profit of 6.7 crore on revenue of Rs 44 crore.

Security has been raised at all major Indian airports after warnings that flights between Nepal and India may be targeted terrorists, a security official said on Wednesday.


[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.