Caterpillar Drops 13%, Google Rises 7%

123jump.com Staff
20 Oct, 2006
New York City

Industrial stocks traded lower after Caterpillar released earnings of 95 cents. The stock dropped 13%. SanDisk dropped 20% after it warned that fourth quarter earnings will drop between 15% and 20% on flash memory price slow down. Coca Cola rose 4% on earnings and broker recommendation. 3M reported earnings of $1.18 vs. $1.08 a year ago. Google jumped 7% on higher than expected earnings.

[R]4:00PM NY – 10:00PM Germany[/R]
Caterpillar, SanDisk and AMD fell on earnings. Merck gained but delivered lower earnings. Oil fell below $58 per barrel.

Yield on 10-year bond closed at 4.784% and the 30-year bond closed at 4.907%.

Gold lost $6 to close at $596.50 a troy ounce, silver declined 18.50 cents to end at $11.975, as well as copper fell 4.75 cents to close at $3.462.

Oil fell 85 cents a barrel to close at $59.65, heating oil declined 0.0319 cents to finish at $1.727. Gasoline fell 0.0149 cents a gallon to end at $1.495, while natural gas increased 12.5 cents to close at $7.257 per mBtu.

Asian markets closed higher, led by a gain of 0.90% in Australia, an increase of 0.78% in Philippines and a rise of 0.75% in South Korea. The only decliner was India with a loss of 0.11%. Investors in Japan and Australia were upbeat, following overnight record-high close in New York trading.

European markets finished higher supported by a decline in energy prices. The advancers were led by an increase of 0.70% in Spain, a gain of 0.41% in Germany and a rise of 0.33% in Belgium. The decliners were led by Netherlands with a loss of 0.22% and U.K. with a decrease of 0.11%.

Latin America markets ended lower led by a decline of 0.95% in Brazil, a lost of 0.31% in Canada and a decrease of 0.20% in Argentina. The only advancer was Mexico with an increase of 0.32%. Latin America markets finished lower due to investors’ reaction to oil prices and political issues in Brazil and Mexico.

[R]13:00PM European shares ended mostly higher.[/R]
European stock markets closed mostly higher on Friday, with retreating oil prices helping to erase some of the earlier gains. Oil giants like BP and Total moved higher after OPEC agreed on a deeper-than-forecast production cut, boosting oil prices. However, BP shares closed up just 0.3% as oil fell down 90 cents to $57.60 a barrel. The oil-sensitive London FTSE 100 ended down 0.01% at 6,155.20. Banking stocks like Lloyds TSB also weighed on the index and fresh economic data signaled of another interest rate hike in November. Shares of PartyGaming lost 7.2% after the firm said that since U.S. customers were stopped from accessing the real money sites, average daily gross revenue of the non-U.S. facing business has been 2% below that seen in the third quarter. Across the region, the German DAX 30 closed up 0.41% at 6,202.82. In Paris, the CAC 40 gained 0.29% at 5,375.35.

Crude oil declined, despite the OPEC’s decision to cut production more than previously expected. Oil lost $1.05 to $57.45 a barrel. London Brent fell 89 cents to $59.98. The U.S. dollar gained ground against its rival currencies. The euro was quoted at $1.2606, down from $1.2626. The dollar bought 118.70 yen, up from 118.18. The British pound stood at $1.8870, down from $1.8777. European gold prices dropped. In London, gold traded at $594.30 per troy ounce, down from $596. In Zurich the precious metal was traded at $594.15, down from $595.58. Silver traded at $11.89, down from $11.95.

[R]11:30AM Stocks traded down. Sandisk dropped 20%[/R]
U.S. stock market averages traded in the negative Friday. A steep decline of 11% shown by Caterpillar ((CAT)) helped to drag the Dow lower. The Nasdaq also traded below the unchanged line, despite a notable earnings-inspired advance by Google((GOOG)), up 6.7%. SanDisk ((SNDK)) tumbled 20% amid concerns about pricing pressure and oversupply for the company''s flash memory storage technology used in consumer electronic gadgets. Company''s stock was downgraded at Citigroup and Oppenheimer to hold from buy. On Thursday, SanDisk reported Q3 profit drop of 4% to 51 cents a share, despite 27% revenue growth. By sector, energy and oil services stocks fell as the price of oil retreated. After rising as high as $59.40 a barrel, crude for November delivery is currently down $0.90 at $57.60a barrel. Meanwhile, airlines advanced, benefiting from the lower crude price. Gold stocks fell on the decline in the price of the precious metal. In late morning trading, the Dow fell 32.25, or 0.27%, to 11,979.48. The Standard & Poor''s 500 index was down 1.64, or 0.12%, at 1,365.32, and the Nasdaq composite index fell 6.39, or 0.27%, to 2,334.55. Bonds showed little movement, with the yield on the benchmark 10-year Treasury note flat at 4.79% from late Thursday.

[R]10:30AM The Sensexdips, shedding 14 points in a last-minute sell-off.[/R]
The Sensex on BSE lost 14.19 points, or 0.1%, to close at 12,709.40. The market-breadth was positive, but had weakened in the final part of trading. As 1,312 shares advanced on BSE, 1,111 shares declined and 89 shares were unchanged. Advancers outpaced decliners by 6:5. From the Sensex stocks, 17 advanced, while the rest declined. The turnover on BSE was Rs 3,330 crore, compared to Rs 3,490.86 crore on Thursday. The turnover on NSE was Rs 6,797.8 crore.

Economic news

The wholesale price index in India advanced 5.16% in the 12 months to Oct. 7, unchanged from the level in previous week. Lower food prices were neutralized by higher fuel and manufactured product prices, data showed on Friday.

Most active

Tech Mahindra was the most-active stock with a turnover of Rs 301 crore, followed by Tata Steel, and Reliance Industries.

Advancers

Reliance Industries gained only 0.6% to Rs 1,203. The stock declined from a session high of Rs 1,218.80. After trading hours on Thursday, Reliance Industries reported 9% growth in net profit to Rs 2,709 crore, as a strong growth in the petrochemicals segment counterbalanced a poor performance in oil refining, where gross refining margins continue to fall.

ACC advanced 1.2% to Rs 969 in volatile trade. The net profit of the company jumped in third-quarter of September 2006, to Rs 224.68 crore from Rs 23.13 crore. Sales surged to Rs 1,373.51 crore from Rs 1,004.95 crore.

Gujarat Ambuja Cements gained 1.1% to Rs 122, in volatile trade. Gujarat Ambuja Cements today posted a 159% rise in consolidated net profit at Rs 279.95 crore for the quarter ended September 30, 2006 when compared with Rs 108.06 crore for the quarter ended September 30, 2005.

Tata Steel shares gained 1.3% to Rs 508 after target company Corus Group accepted its offer for a takeover. The deal, which is estimated at $8 billion, will help Tata to become the world’s fifth-largest steel company, and is the largest ever foreign takeover in India following Mittal Steel $31 billion acquisition of Arcelor this year. Cellular services large-cap Bharti Airtel gained 1.4% to Rs 498 on hopes of strong second-quarter results.

NIIT Technologies surged 16% to Rs 215, following its report of a surge in net profit for second-quarter ending September 2006 to Rs 26.90 crore from Rs 15.10 crore in Q2 September 2005.

Decliners

Satyam Computer led the decliners, losing 3% to Rs 426.75, as a late sell-off appeared in the stock. Second-quarter results topped market expectations, and the company revised upwards its FY 2007 EPS guidance. The results were announced before trading hours today.

ONGC lost 0.3% to Rs 1,151.70. The net profit of ONGC gained less than 1% in second-quarter, September 2005, to Rs 4,174 crore, from Rs 4,138 crore as discounts given to refiners, staff costs and the flooding of a plant topped gains accruing from high crude prices.

Refinery shares fell after OPEC unexpectedly raised its first output reduction in over two years, to 1.2 million barrels per day. BPCL lost 2.3% to Rs 393.90 and HPCL shed 2.6% to Rs 300. Bajaj Auto plunged for the third day in a row, after the company second-quarter results showed its core operating profit margins were under stress. The stock shed 1.6% to Rs 2,743. Cigarette large-cap ITC slipped 2.2% to Rs 186.

Other news

Diwali Muhurat trading will be conducted on BSE and NSE tomorrow, from 18:15 IST to 19:30 IST, to mark the beginning of Vikram Samvat year 2,063. Diwali has a special significance for stockbrokers and marks the beginning of a new business year.

[R]9:45AM stocks opened mixed. 3M and Merck limited Dow losses.[/R]
Stocks traded in a lackluster fashion at opening, driven by mixed earnings news. The Dow erased gains on disappointing Caterpillar ((CAT)) results a day after breaking through 12,000 for the second day in a row. The Dow component dropped 10.6% after warning that costs, a slowing housing market and lower sales would negatively affect its earnings by the end of 2006 and 2007. However, the decline was limited by 2% gain for 3M ((MMM)) and 1.3% for Merck ((MRK)) after they reported better-than-expected Q3 earnings. Google ((GOOG)) supported the Nasdaq, rising 7% after it said its profit nearly doubled and revenue surged 70% during the third quarter. Yahoo ((YHOO)) was downgraded by Stifel Nicolaus to hold from buy, citing worries about competition from rival Google. Yahoo shares lost 1.7%. In midmorning trading, the Dow fell 45.86, or 0.38 percent, to 11,965.87. The Standard & Poor''s 500 index was down 3.03, or 0.22%, at 1,363.93, and the Nasdaq composite index fell 9.75, or 0.42%, to 2,331.19, despite a strong showing by Google Inc. Bonds showed little movement, with the yield on the benchmark 10-year Treasury note flat at 4.79% from late Thursday.

[R]9:30AM The London benchmark FTSE 100 declines, following U.S. futures down.[/R]
The FTSE 100 in London declined 1.4 points, or 0.02%, to 6,155.4 in early afternoon on Friday.

Advancers

Pearson, the media group that owns the Financial Times, advanced 1.7%, its highest level since April. The advance was sparked by Goldman Sachs, which encouraged clients to buy ahead of the trading update of Pearson.

ITV ignored a profits warning from SMG, as talks of a private equity bid continued to emerge. Its shares improved 0.9%. Despite a profits warning from US rival Martin Marietta, building materials group Hanson gained 1.3%. Rumours of a private interest helped bookmaker Ladbrokes gain 3%

Decliners

SMG was down 26% and Corus slid 1.4% after the Anglo-Dutch steelmaker recommended an offer from Tata Steel of India. Next was also under pressure, falling 1.4% on further worries about tough trading.

Wolfson Microelectronics was in focus. Its shares slumped 37% after the chip designer warned full-year revenues would fall short of expectations because of a glut of consumer electronics goods. The Wolfson warning impacted fellow chip designer CSR, which was down 3%.

Other news

UK public borrowing hit 7 billion pounds in September, leaving the Treasury with much ground to make up if it is to reach its Budget public finance forecasts this financial year.


[R]9:00AM Stock futures declined on disappointing results from Caterpillar.[/R]
U.S. stock futures erased earlier gains and moved to the downside, hurt by disappointing earnings and guidance from blue chip equipment maker Caterpillar. Rebounding crude oil prices ahead of production cuts, also weighed. Crude oil rose 35 cents to $58.85 a barrel, following a move by the OPEC to cut production by more than expected. Positive results from Internet bellwether Google failed to lift sentiment.

In corporate news, Dow component Caterpillar ((CAT)) slipped 8% in preopen trading after reporting disappointing Q3 earnings of $1.14 a share, up from 94 cents a year ago, but missing expectations of $1.35. The company also cut its full-year earnings outlook. Revenue of $10.52 billion topped analysts'' prediction for $9.87 billion, benefiting from higher volume, prices and currency translation. In contrast, Google Inc. ((GOOG)) climbed 7.5% in preopen trading after the Internet search giant reported a 92% quarterly profit rise on 70% sales growth.

In other Dow components reporting results, Merck and 3M Co. topped analyst expectations. 3M ((MMM)) said it earned $1.18 per share, up from $1.08 per share last year. Drugmaker Merck & Co. ((MRK)) reported a 34% drop in Q3 net income to 941 million, or 43 cents per share, down from $1.42 billion, or 65 cents per share due to flat sales and restructuring costs. The pharmaceutical company said it is adding an additional $598 million to its reserves for future legal defense costs over its withdrawn painkiller Vioxx.

Drugmaker Schering-Plough Corp. ((SGP)) rose 3% after it said its Q3 earnings rose nearly sevenfold to top Wall Street estimates as its revenue rose 13% and profits nearly doubled from its cholesterol drug joint venture with Merck & Co. Net income grew 19 cents per share, from 3 cents per share, a year ago. S&P 500 futures eased 1.60, to 1372.70 and Nasdaq 100 futures gave up 0.75 of a point to 1722. Dow industrial futures shed 34, to 12025.

[R]8:00AM Steelmaker Corus accepted an $8 billion bid offer from Tata Steel.[/R]
Anglo-Dutch steelmaker Corus Group ((CGA)) on Friday agreed to be taken over by India''s Tata Steel ((TATLY)) in a deal worth 4.3 billion pounds ($8 billion). Under the terms of agreement Corus stockholders will receive 455 pence in cash for each of their shares. The offer is at a 26.2% premium to the 12-month average closing price for Corus shares, but it came in below their market price. Since Tata said it was considering a bid in early October, the shares had risen around 26%.

The transaction will create the world''s fifth-largest steel producer. Still, some investors held out hopes for a better offer. Corus shares fell 1.6% in London but still held well above the offer price at 470.5 pence, suggesting investors see an alternative bid, or an improved offer from Tata Steel. However, Corus insisted it had achieved a good price. The deal marks another step in the consolidation trend among steelmakers, including the $32.4 billion takeover of Arcelor by Mittal Steel. Tata Steel rose 1.4% in Bombay

[R]7:30AM Strong U.S. close and oil production cuts led Asia to a broad rise.[/R]
Asian markets finished broadly higher on Friday. The benchmark Nikkei 225 rose 0.61% to finish at 16651.63. Canon gained 0.93% and Toyota added 1.47%. Machinery maker Komatsu climbed 1.83%, while Nippon Steel reported a 0.81% gain. Sony, however, shed 0.83% after the company revised its earnings forecast downward due to troubles with laptop batteries and delays at its games unit.

The Hang Seng Index in Hong Kong rose 0.7% to end at 18113.55. The China Enterprises Index was up 0.4% to 7,469.80. The Shanghai Composite Index declined 0.3% a day after mainland authorities announced that GDP growth was 10.4% in the third quarter, down from 11.3% annualized growth it the second quarter.

Australia S&P/ASX 200 index closed up 1% at 5335.4. South Korea Kospi index advanced 0.8% and Singapore Straits Times Index was up 0.2%. Taiwan''s Taiex index rose 0.5% and Malaysia KLSE Composite traded nearly flat. Shares traded in New Zealand were lower 0.2%. Indonesia Jakarta Composite Index declined 0.1%.


[R]6:30AM European stocks advance on oil cuts and strong overnight U.S. finish.[/R]
European markets were higher by mid-morning on Friday. The U.K. FTSE 100 gained 0.44% at 6,183.30, the German DAX 30 rose 0.4% at 6,204.16, the French CAC 40 advanced 0.5% at 5,384.01.

Advancers

BP and Royal Dutch Shell each advanced 1%, boosted by the unexpected oil production cut by OPEC. Shares of PartyGaming gained 1.6%, following its statement that in the few days since U.S. customers were prevented from accessing the real money sites, average daily gross revenue of the non-U.S. facing business has been 2% below that of the third quarter.

Valeo, a French auto parts maker, also gained after recent slips. Valeo shares jumped 6.8% after it reported that its quarterly profit sank76%. Valeo agreed on a memorandum of understanding to sell its electrical motors and actuators unit for an undisclosed price.

Decliners

Corus Group declined 1.5% as investors were disappointed that it gave its agreement to be bought by Tata Steel for 4.3 billion pounds ($8 billion). Wolfson Microelectronics, a Scottish chipmaker producing chips for the iPod music device of Apple Computer, fell 30% after registering a build-up of inventory in consumer electronics products, leading to a fourth-quarter revenue guidance between $52 million and $57 million.

Oil and gold

Crude oil for November delivery advanced 40 cents to $58.90 a barrel in on the NYME. December Brent crude on London ICE Futures exchange rose 33 cents to $61.20 a barrel.

Gold opened on Friday at a bid price of $600.15 a troy ounce, up from $596.00 late Thursday.

Currencies

The euro was steady against the U.S. dollar Friday, holding onto gains that it made on disappointing U.S. economic data. The euro bought $1.2624 in morning European trading, barely changed from its level of $1.2626 in New York late Thursday. The British pound was unchanged at $1.8777. The dollar rose to 118.32 Japanese yen from 118.15 yen.