Nervous Tech Traders Lead Sell-off

123jump.com Staff
30 Nov, -0001
New York City

The day's trading was dominated by earnings news from 3M, Bank of America, CitiGroup and Eaton Corp. CitiGroup and Bank of America announced better earnings than a year ago but still missed the market expectations. The weakenss in the large cap stocks during the day was reflecting this disappointment. IBM reported 2Q earnings of $1.12 vs. $1.01 per share beating the estimates by 9 cents.

U.S. MARKET AVERAGES

The lackluster market sold-off in the end largely reflecting the disappointment in the earnings related to CitiGroup and Bank of America and 3M.

Airline and transportation sectors were up and select housing stocks were up ahead of the housing start release. Tech stocks were under pressure through out the session.

Large cap stocks have lagged the small cap group for the month and for the year so far, with Russell 2000 outperforming the S&P 500 by 40%. Investors are looking towards the housing starts and existing home sales for June to be released tomorrow.

Citigroup was down 2.97% after reporting 2Q earnings of 97 cents per share Monday, up versus 22 cents a year ago, but below forecasts for a profit of $1.01 per share. The company blamed the low results on the tough capital markets environment

Bank of America was down 1.6% after posting 2Q earnings of $1.08 per share, up versus the year earlier quarter and 7 cents more than expected on a growth in credit card fees and retail deposits.

3M dropped 0.9% after reporting higher second-quarter earnings and revenue in line with forecasts. The company also boosted the low end of its fiscal 2005 earnings outlook

General Motors was un-changed after trading up 0.5% for the day ahead of its quarterly earnings, due Wednesday.

Geron advanced up 27% after announcing it has made a licensing deal with Merck to develop a cancer vaccine.

Maytag gained 14% after Whirlpool offered to buy it for $1.37 billion in cash and stock, topping an earlier offer from an investment group.

Shares of International Business Machines Corp. ((IBM)) fell 0.4% as the company prepares to post its 2Q earnings after the Monday close.

ECONOMIC NEWS

No major U.S. economic data were released today.

Housing Starts data, which is a key measure of initial construction of residential units both single and multi-family, for the month of June, is due to be released Tuesday. Economists expect Housing Starts for the month of June to be 2.03 million. Housing Starts data for May came in at annual unit rate of 2.009 million, 0.2% higher than the 2.005 million units April, while economists had forecasted an annual unit pace of 2.040 million. Housing Starts for multi-unit homes declined 19.3%, while that of single-family homes advanced 4.7%.

On Wednesday, the Energy Information Department is expected to release the weekly Petroleum inventory data for the week ended July 15th.

Federal Reserve Chairman, Alan Greenspan is to deliver the semi-annual Monetary Policy report to House Financial Services Committee in Washington on Thursday.

The customary weekly Jobless Claims data for the week ended July 16th is scheduled to be released on Thursday. Economists expect the claims for unemployment benefits for the first time to decline 9,000 to 327,000 for the week.

Thursday, the Philadelphia Fed index, a read on manufacturing in the northeast region, is expected to have risen to 9.0 from a read of -2.2 in May. Any read over zero signifies expansion in the sector.

INTERNATIONAL MARKET NEWS

European markets were unsteady and finished mostly down as Philips Electronics released a cautious outlook, although dealings in the telecom sector and a positive broker comment on steel stocks provided some support. Stocks were also pressured by the U.S. stocks which opened lower as Citigroup posted a quarterly net loss. Averages in Germany added 0.1%, in France lost 0.2%, and in the U.K. declined 0.3%. The euro rose 0.1% to $1.2057, while the pound slipped 0.1% to $1.7489.

Asian-Pacific markets ended mixed with Tokyo closed for a national holiday and Taiwan’s stock exchange closed because of a typhoon. South Korea’s Kospi, one of the gainers, finished higher 0.3% boosted by gains in the U.S. markets Friday and buying from retail investors. Hong Kong’s Hang Seng advanced 0.4%, reaching a 52-month high, helped by the strong property sector. China’s Shanghai Composite declined 1.4% as its biggest offshore oil company Cnooc expanded its losses.

European shares slightly advanced as a cautious outlook by Philips Electronics was offset by positive close of U.S. markets Friday and gains in the telecommunications sector. The German DAX 30 rose 0.3%, the French CAC 40 gained 0.2%, and the U.K.’s FTSE 100 added 0.3%. The euro rose against the dollar to $1.2051, while the pound fell to $1.7461.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil futures were pulled downward by an OPEC forecast of a lessened new global demand that outweighed the fears of Hurricane Emily causing damage to oil fields in the Gulf of Mexico. Light sweet crude for August delivery slid 77 cents to $57.32 a barrel on the NYMEX, heating oil dropped 3 cents to $1.630 a gallon, and London Brent futures fell 35 cents to $57.26. Analysts said that traders could still bet on some damage from the storm.

The dollar was lower against most major currencies in European trading. At closing in NY gold futures closed down 30 cents at $421, copper futures rose for August delivery by 0.45 cents to $1.5665 and silver futures were up 1.5 cents to $7 per ounce.

In London, the euro quoted at $1.2060, up from $1.2042, the dollar bought 111.76 yen, down from 112.22, and the British pound closed at $1.7507, down from $1.7513. Gold in London traded at $421.50 per troy ounce, up from $420.70. In Hong Kong gold rose $1.90 to close at $421.65. Silver traded $6.97 per troy ounce, down from $6.99.

The euro gained against the dollar as the European Union released a report showing accelerated last-month inflation for the European region. The euro rose to $1.2060 in NY and may rise as high as $1.2255 this month, according to analysts. The greenback bought 112.09 yen.

EARNINGS NEWS

The most recent quarter ended June is traditionally pointing to the smallest year-over-year growth, but many of the early earnings reports have been positive and there haven't been many earnings warnings lately. Analysts forecast that earnings in the second-quarter advanced 8.1% compared with last year.

Private Bancorp, financial services provider, reported 2Q profit rise of 38 cents a share vs. 31 cents last year.

Orckit Communications, telecom equipment provider, reported 2Q earnings of 21 cents a share vs. a net loss of 45 cents for the comparable last-year same period.

Noble Corporation, driller, posted 2Q more-than-doubled net income of 53 cents a share compared with 26 cents last year on higher demand for offshore rigs, missing expectations of 54 cents a share.

Mattel, toy maker, reported 2Q net loss of 23 cents a share vs. a net income of 6 cents for the comparable period last year citing large tax expense related to foreign profits expatriation. The quarterly results missed estimates of income of 7 cents a share.

Hibernia, southern regional bank, reported 2Q profit growth of 50 cents a share compared with 47 cents last year on higher services charges and deposits, meeting analysts’ expectations.

Hasbro, toy maker, posted 2Q earnings rise to 13 cents per share, up from 6 cents last year on a strong performance from ‘Star War’ products, beating forecasts of 8 cents per share.

First State Bancorp, community bank, reported 2Q profit increase of 32 cents a share vs. 22 cents a year ago on higher loans and deposits, beating estimates of 29 cents a share.

First Horizon National reported 2Q lower net income of 80 cents a share vs. 92 cents a year ago on lower interest and mortgage banking income, missing expectations pf 87 cents a share.

Philips Electronics reported 2Q profit rise of 59.6% due to the sale of Navteq shares, but a 3% decline in quarterly sales. The company posted a cautious business outlook.

Eaton, a diversified industrial manufacturer, posted 2Q profit rise of $1.37 a share compared with $1.03 last year, exceeding expectations of $1.32 a share. The company raised its 2005 outlook to the range of $5.20 to $5.40 a share.

Citigroup, financial institution, reported 2Q profit growth of 97 cents a share vs. 22 cents a year ago reflecting tough capital markets environment, but below estimates of $1.02 a share.

Bank of America, financial services company, reported 2Q profit growth of $1.06 a share vs. 93 cents last year on investment gains, beating expectations of $1.01 a share.

3M, a diversified manufacturing company, reported 2Q higher net income of $1 a share vs. 97 cents a year ago with one-time charge included, meeting analysts’ expectations. The company expects full-year earnings between $4.10 and $4.15 a share.

Bank United Financial Corporation, parent of BankUnited FSB, reported a 3Q net loss of $14.8 million compared with a net income of $13.0 million last year due to an after-tax charge, related to prepayment of high-rate debt.

J.B.Hunt Transport Services, transportation logistics provider, posted 2Q profit of 33 cents per share vs. 27 cents a year ago, missing forecasts of 34 cents a share.

PriceSmart, warehouse clubs operator, reported 3Qnet loss of 53 cents per share vs. $1.01 for the comparable period last year.

PYR Energy, oil and gas company, announced 2Q net loss of 1 cent a share vs. a loss of 2 cents a year earlier mainly attributable to one time non-cash charge.

Suffolk Bancorp, one-bank holding company, reported 2Q profit increase of 50 cents a share compared with 46 cents last year.

Washington Federal, the parent of Washington Federal Saving & Loan Association, posted lower 3Q income of 39 cents a share vs. 40 cents a year ago on higher operating expenses and lower margins. Analysts had expected a profit of 42 cents a share.

CORPORATE NEWS

Whirlpool, an appliance maker, made a bid worth $17 a share, or more than $1.3 billion, for rival Maytag, topping a $14 a share bid from Ripplewood Holdings.

Apollo Advisors is the possible winner over Bain Capital for the marketing-services division of Cendant Corp.. Both bids are considerably higher than the $2 billion analysts originally expected, according to people familiar with the matter. A final decision has yet to be made, and a bid from Bain could still top that of Apollo. An announcement could come as soon as today.

The U.S. Department of Justice is examining the potential mergers between the New York Stock Exchange and Archipelago Holding Inc. ((AX)), and the Nasdaq Stock Market Inc. ((NDAQ)) and Instinet Group Inc. ((INGP)). The department's antitrust division has asked to be provided with more information about the exchange mergers which may delay or even abandon the deals.

Stanley Works ((SWK)) made a 410 million euro ($494 million) cash offer for Fimalac's Facom tools business. The deal should boost 2006 earnings per share by 10 cents, 2007 earnings per share by 35 cents and 2008 earnings by 65 cents. Stanley Works targets $35 million of pre-tax synergies by the end of 2008. The deal would result in operating margins between 15% and 16% by 2007.

Versatel Telecom International announced that Swedish Tele 2 AB will buy the Dutch alternative telecommunications for 1.34 billion euro. Tele 2 will pay 2.20 euro per share to Versatel’s shareholders and will buy the outstanding convertible debt. After the purchase, private equity group Apax Partners will buy Versatel’s German operations for 565 million euro.