Intel Limits Early Weakness

Elena
16 Oct, 2006
New York City

Stocks markets started trading below the unchanged mark before a new batch of earnings reports, expected to give some clarity how companies are coping with a slowing economy. The Dow was dragged by downgrades of Home Depot and General Electric. However, shares of chip maker Intel Corp. advanced 2%, providing support to technology shares. The disk drive sector gained, with SanDisk, up 5.2% and Msystems, rising 4.7%.

[R]9:45AM Stock markets opened lower ahead of earnings. Intel moved higher.[/R]
Stocks markets started trading below the unchanged mark before a new batch of earnings reports, expected to give some clarity how companies are coping with a slowing economy. The Dow moved to the downside in early trading, dragged by several downgrades. General Electric ((GE)) shares fell 1.2% after Merrill Lynch downgraded the diversified industrial group to neutral from buy, saying the stock at $36 a share was trading at its historic multiple to the broader market. Another Dow component, Home Depot Inc. ((HD)) fell 1.3% after Goldman Sachs cut its rating on the home improvement retailer to neutral from buy, citing recent management departures. The same broker upgraded rival Lowe's Cos. ((LOW)) to a buy, sending company’s shares up 0.8%. However, shares of chip maker Intel ((INTC)) advanced 2%, providing support to technology shares. Some strength emerged in the disk drive sector, with SanDisk ((SNDK)) jumping 5.2% and Msystems ((FLSH)), rising 4.7%. In the first hour of trading, the Dow Jones industrial average fell 9.53, or 0.08%. The Standard & Poor's 500 index declined 0.45, or 0.03%, and the Nasdaq composite index rose 2.23, or 0.09%.


[R](9:30 AM The FTSE 100 hit a fresh record supported by miners, Lloyds.[/R]
The FTSE 100 topped another five-year high, up 21 points, to 6,178.3, its highest level since June 2001.

M&A

Swiss Re and Axa, of France, are said to have proposed paying 8 billion pounds for Widows, which was bought for 7.3 billion in 2000.Lloyds is yet to comment on the possible sale.

Advancers

Elsewhere, ITV led the large-cap advancers, up 2%, after Morgan Stanley raised its rating on the broadcaster from equal-weight to overweight. Lloyds shares rose 1.3%, their highest level for four year.

Decliners

Cadbury Schweppes fell 1.5% as Merrill Lynch reduced its recommendation on the chocolate maker from buy to neutral.

In the mid-caps, a profit warning from Benfield pulled its shares 7.6 % lower, due to costly legal dispute, the reinsurance group said it expected profit for the year to be around £10m below the level previously anticipated. PartyGaming slumped 7.2% to a fresh all-time low of 32p after UBS cut its price target for the online gaming group to just 26p.

EMI slipped 0.2% after the music group said it expected a decline in total revenues of about 3% for the six months to September 30.

Corporate news

A US federal agency concluded on Sunday that BP could have prevented a damaging fire at its Texas refinery, four months after a unit there suffered a fatal explosion, had it spent more money on its piping system.


[R]9:00AM Stock futures slightly gained on positive earnings from Mattel and Wachovia.[/R]
U.S. stock market futures slightly advanced on Monday with investors focused on quarterly earnings releases, expected to determine whether the last-week rally would be extended or not. The Q3 earnings reporting season had a very strong start, pushing the Dow Jones industrial average close to the record 12,000 mark for the first time in its 110-year history. Being concerned with a U.S. economy slowdown, traders were also looking to Q4 and Q1 earnings outlook on offer from leading companies. Fed Chairman Ben Bernanke is due to speak on banking regulation at 1:30 p.m. San Francisco Fed Bank President Janet Yellen is also scheduled to speak.

Among companies, posting quarterly results before the bell, Wachovia Corp. ((WB)), the No. 4 U.S. bank, said Q3 profit rose 13%, helped by higher fees and lending income. Net income rose to $1.88 billion, or $1.17 per share, up from $1.67 billion, or $1.06 per share, a year ago. Mattel Inc. ((MAT)), the No. 1 U.S. toy maker, said Q3 earnings rose 6%, lifted by 7% sales rise. Net income increased by 62 cents per share, up from 55 cents per share a year ago, beating estimates of 61 cents. Other companies reporting profit this week include two Dow components, financial services company Citigroup Inc. ((C)) and chip maker Intel Corp. ((INTC)). Intel rose 1.7% in electronic trading to $21.96.

In corporate news, General Electric Co. ((GE)) fell nearly 1% after Merrill Lynch lowered its rating on the conglomerate to ‘neutral’ from ‘buy’. UnitedHealth Group Inc. ((UNH)), health insurer, said on Sunday CEO William McGuire will submit his resignation by December 1 after a scandal over backdated stock options. UNH shares fell 4% before the bell. S&P 500 futures were up 0.70 point, above fair value. Dow Jones industrial average futures were up 5 points, and Nasdaq 100 futures were up 2.25 points.


[R]8:00AM Allegheny Technologies signed a long-term agreement with Boeing Co.[/R]
Allegheny Technologies Inc. ((ATI)), specialty metals producer, announced Monday that it had signed a long-term contract with Boeing Co. (((BA)) to supply titanium products for commercial aerospace use. The company will supply aerospace titanium mill products including ingot, billet, bar, rectangle, plate and sheet. Allegheny previously announced capital investments for titanium sponge and further expansion of its titanium melt and finishing capabilities for both long products and flat-rolled products. The deal is expected to generate revenue of approximately $2.5 billion for the period starting from 2007 and ending in 2015 at base prices. Shares of Allegheny closed Friday at $74.26, up 61 cents, while Boeing''s stock finished the session at $83.39, down 1.5%.


[R]7:30AM Asian markets end higher, Japan and Korea lead shares higher.[/R]
Asian markets closed broadly higher. The Nikkei 225 index in Japan advanced to a fresh five-month high, increasing 0.94% to end at 16692.76. Sony rose 2.52% as it neglected new worries over increasing costs for its battery recall after reports that a number of Japanese companies were considering seeking compensation related to the problem.

The Korea Composite Stock Price Index rose 0.6% to 1356.72. Shares of South Korea Samsung Electronics edged higher 0.9% after the group posted better-than-expected quarterly net profit. The Hang Seng index in Hong Kong advanced 0.12%, to close at 18010.20, in the wake gains on U.S. markets on Friday, despite a sell-off of Chinese banking stocks to make room for Industrial & Commercial Bank of China initial public offering.

In Taiwan, a surge in the tech sector helped boost the Weighted Price Index 1.1% to 7151.42. The upward momentum was kept mainly because foreign investors anticipated good third-quarter results as the earnings season begins. Australia leading share index was up 0.5%.


[R]6:30AM European markets rise on Monday on oil, technology and bank stocks.[/R]
European markets were marginally higher on Monday. By mid morning, the FTSE 100 in London climbed 0.2% to 6,169.1, Frankfurt Xetra Dax was flat at 6,174.84, and the CAC 40 in Paris was little changed at 5,351.5.

Advancers

Banca Popolare Italiana surged 5.7% after accepting a takeover bid from rival Banca Popolare di Verona e Novara in a share swap worth over 8 billion euros. BPVN will offer 0.43% of its shares for each BPI share, while BPI shareholders will also obtain an extraordinary dividend of around 2 euros a share.

Oil shares also gained ahead of OPEC meeting later this week. Norsk Hydro gained 3.5%, while Statoil rose 3.1% and Neste Oil climbed 1.6%.

Scania, the Swedish target of MAN of Germany announced it could pay an extra dividend a share this year in a move to defend itself. Scania A shares, which carry the voting rights, added 1.6%.

Decliners

Philips, the Dutch electronics group, fell 1.1% after missing forecasts with its third-quarter core profit and shares in BPVN fell 4.6%. Shares of MAN, bidding fro Scania, fell 1.8%. Hennes & Mauritz, the Swedish clothing retailer, lost 1% after it said that same-store sales did not make any progress at all in September. Total sales, excluding currency rate changes, rose 9%, the company said.

Oil and gold

Crude oil advanced for a third day on speculation that OPEC members will formally agree at a meeting this week to cut production to counter a 21% decline in prices over the past three months. Crude oil for November delivery gained 69 cents, or 1.2%, to $59.26 a barrel in after-hours trading on the NYME.

It traded at $59.19 at 10:22 a.m. London time. Brent crude oil for November settlement advanced 56 cents to $60.08 a barrel on the London-based ICE Futures exchange.

Gold opened Monday at a bid price of $591.50 a troy ounce, up from $586.70 late Friday.

Currencies

The euro was lower against the U.S. dollar on Monday, at the beginning of a week that will see the release of closely watched U.S. inflation data. The euro bought $1.2493 in morning European trading, down from $1.2514 in New York late Friday. The British pound bought $1.8569, barely changed from its Friday level of $1.8568. The dollar slipped to 119.36 Japanese yen from 119.63 yen.