Legg Mason Slips 15%

Elena
11 Oct, 2006
New York City

Weaker-than-expected Q3 earnings posted by Alcoa sent stocks sharply lower at opening, as concerns about corporate profits at the start of the earnings season weighed. The aluminum giant''s shares fell 5.5% to $26.73. Genentech was another early loser, falling 2.1%, despite posting a 58% rise in Q3 net earnings, helped by better-than-expected sales of its drug Lucentis.

[R]9:45AM Market opened sharply lower on disappointing earnings.[/R]
Weaker-than-expected Q3 earnings posted by Alcoa ((AA)) sent stocks sharply lower at opening, as concerns about corporate profits at the start of the earnings season weighed. The aluminum giant's shares fell 5.5% to $26.73 after reporting 86% net profit jump that came in below analyst estimates. Genentech ((DNA)) was another early loser, falling 2.1%, despite posting a 58% rise in Q3 net earnings, helped by better-than-expected sales of its drug Lucentis. Monsanto Co. ((MON)), which makes herbicide and other agricultural products, posted wider Q4 loss as sales fell in its seeds and genomics segment. The company issued a fiscal 2007 forecast that came in well below analysts’ expectation. The stock traded down 5%.

In early trading, significant weakness emerged in the brokerage sector, with Legg Mason ((LM)) helping to lead the sector lower after forecasting lower-than-expected Q2 earnings. Company’s shares tumbled 15%. In the first hour of trading, the Dow Jones industrial average was down 40.02, or 0.34%, at 11,827.15. The Standard & Poor's 500 index was down 4.97, or 0.37%, at 1,348.45, and the Nasdaq composite index was down 10.72, or 0.46%, at 2,304.71. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.74% from 4.76% late Tuesday.


[R]9:30AM London markets edges lower by mid-day Wednesday on mining stocks.[/R]
The FTSE 100 index in London lost 18.8 points, or 0.2%, to 6,053.9 by mid-day.

Decliners

Kazakh mining group Kazakhmys, sankk 1.7%. U.K. supermarket chain J Sainsbury, supermarket operator, lost 1.4% following statenment of the company that it will face much tougher sales growth comparatives in the second half of the year.

Wolseley, declined also 1.7% as dealers reacted positively to comments from Alan Greenspan, former chairman of the US Federal Reserve, on the US housing market.

Investors took profits in Shire, Brambles and Man Group pushing the stocks. Shire eased 3.5% while Brambles and Man, both reported as takeover targets this week, retreated 1.6% to and 1.5% respectively. Other decliners included Rexam losing 1.1%, Tesco shedding 0.7% and 888 Holdings easing 2.3%.

Corus Group lost 2.9% as the Anglo-Dutch group was rumoured to be the target of Tata Steel of India, but Corus has yet to receive a firm proposal.

Advancers
BT Group advanced 1.2% , after reports that the telecommunications group could be a possible merge partner for Deutsche Telekom. BSkyB also gained 1.6% as renewed speculation of a takeover and talk a US mutual fund was looking to buy in the stock.

Carphone Warehouse was the standout stock in mid-caps. The mobile phone retailer swung from early losses after it announced plans to acquire Time Warner AOL internet access business in the UK. Carphone shares were last up 9.3%.

Luxury retailer Burberry advanced 4.3% in the wake of its announcement that, in the second half, it is planning to raise its average retail selling space by around 14%.


[R]09:00AM Stock futures pointed to a lower opening due to disappointing Alcoa earnings.[/R]
Stock equity futures traded weak Wednesday, pointing to a negative start as Dow component Alcoa released disappointing third-quarter earnings after market close, raising worries about the earnings outlook and economic growth. Investors were also looking to the release of minutes from the Federal Reserve''''s September policy-setting meeting and their outlook for interest rates.

Shares of aluminum producer Alcoa ((AA)) dropped more than 5% to $26.85 in electronic trading before the bell as the company reported Q3 profit that almost doubled but missed expectations, blaming lower aluminum prices, higher costs and weaker automotive and home-building sectors in North America. In other earnings news, biotechnology company Genentech ((DNA)) reported a 58% rise in Q3 net earnings, supported by higher royalty revenues and lower costs. Despite the positive results, the stock fell 1.5% in preopen. The financial services sector is expected to come under pressure after asset manager Legg Mason Inc. ((LM)) predicted quarterly earnings below analyst expectations. Legg shares fell 13% before the bell.

Oil prices rose after OPEC members agreed to reduce global oil production by 1 million barrels a day in order to boost prices. The Nigerian oil minister and OPEC president Edmund Daukoru said that the cuts would begin at the end of the month and added that the members of the producing cartel were close to reaching consensus on how to share the cuts. Standard & Poor''s 500 futures were down 3.9 points, below fair value. Dow Jones industrial average futures were down 37 points, and Nasdaq 100 futures were down 3.5 points.


[R]8:00AM Harrah’s Entertainment received an improved bid offer.[/R]
Harrah''s Entertainment ((HET)), casino operator, has reportedly received a sweetened offer from the private-equity firms interested in buying the company. The improved offer is worth more than $15.5 billion, with Apollo Management Group and Texas Pacific Group now offering $83 to $84 a share for the world''s largest casino operator, the New York Times reported. The revised bid was submitted earlier this week after the company''s directors rejected an initial approach valued at $81 a share, or $15.05 billion in cash, the Times reported. Shares of Harrah''s advanced nearly 2% in pre-market trading.


[R]7:30AM Asian markets end mixed, Japan lower on banks, Internet shares.[/R]
Asian markets finished mixed on Wednesday. The Nikkei 225 Average finished the day 0.47% lower at 16400.57. stocks closed lower as profit-taking took hold in the wake of worries over North Korea nuclear-bomb test. Investors were optimistic about the upcoming earnings season, though. Internet-related companies, banks and chemical stocks declined. Softbank fell 2%, Mizuho Financial Group recorded a 2% decrease and Shin-Etsu Chemical shed 1.8%.

The Hang Seng Index of Hong Kong ended 0.22% higher at 17862.79. Yue Yuen Industrial led the advancers after it reported strong revenue for September. Cathay Pacific kept on the rise on falling oil prices. South Korea Kospi Index fell 0.22% to 1325.49. The benchmark stock index bounced back from a near 1% dip in intraday trading after it became clear that reports about North Korea conducting a second nuclear test were probably exaggerated.

Shanghai Composite Index closed 0.3% higher at 1790.10, Taipei gained 0.13% to 7006.67, and Australia''s S&P/ASX 200 rose 0.65% to close at 5282.80. In China, China Petroleum & Chemical helped push the benchmark index to a five-year closing high. In Australia, across-the-broad demand boosted the market to its highest level in five months. Promina surged 6.2% on speculation that Suncorp-Metway was planning a takeover offer.


[R]6:30AM European markets were lower Wednesday on profit-booking.[/R]
European stocks were lower by mid morning on Wednesday. The FTSE 100 in London shed 0.2% to 6,062.4, while Frankfurt Xetra Dax slipped 0.4% to 6,094.27, and the CAC 40 in Paris lost 0.6% to 5,279.91.

Advancers

Mediolanum advanced 2.5% as broker Cheuvreux upgraded the Italian bank from underperform from outperform. French insurer CNP Assurances surged 5.1% following its statement that it would raise 700 million euros in debt and the same amount in stock to fund its acquisition of a stake in rival Ecureuil Vie.

Deutsche Telekom gained 1.5% on speculation that Blackstone, the private equity group, and BT, the UK fixed-line operator, were readying for a joint bid. Telecom Italia gained 2.5% after it was reported in the Italian press that Franco-Polish financier Roman Zaleski had bought a stake in the company.

Decliners

Banks were on the decline in early trading. Crédit Agricole, the French bank, fell 2.9% after downgrades from both UBS and ABN Amro. ABN Amro downgraded Agricole from buy to hold.

Banca Intesa lost 0.5%, while Sanpaolo IMI shed 0.1% as investors awaited the outcome of a board meeting at Agricole, which owns an 18% stake in Intesa. Agricole board will discuss the likely merger of Intesa and Sanpaolo.

Other news

The bid of Ryanair for Aer Lingus,met with further resistance as pilots in the former state-owned carrier bought a 2% stake that could help to block the takeover offer.

Oil and gold

Oil prices fell further Wednesday. Light, sweet crude for November delivery dropped 11 cents to $58.41 a barrel in Asian electronic trading on the New York Mercantile Exchange. November Brent crude also slipped 11 cents to $59.23 a barrel on the ICE Futures exchange in London.

Gold rose above $575 an ounce on Wednesday. Spot gold hit an intraday high of $575,20 before slipping to $571,30/572,30 an ounce by 04:00 GMT, down from $573,70/574,70 late in New York on Tuesday.

Currencies

The euro gained slightly against the U.S. currency on Wednesday, and the dollar also lost ground against the Japanese yen after hitting a 10-month high. The euro bought $1.2544 in morning European trading, up from $1.2535 in New York late Tuesday. The British pound strengthened to $1.8552 from $1.8539. The U.S. dollar briefly reached a 10-month high against the Japanese currency on unsubstantiated rumors about a second North Korean nuclear test. It surged to 119.78 yen, but declined to 119.45 yen in Europe, down from 119.76 late Tuesday.