Early Morning Tech Rally

albena
30 Nov, -0001
New York City

Several Dow stocks were under the spotlight. Merrill Lynch shares rallied 2.2% after the company reported 2Q earnings, topping estimates on a 20% jump in revenue. Better-than-expected results from Wachovia Corp. further boosted sentiment. Housing starts were flat in June as new residential construction rebounded in the South while declining in the rest of the U.S. Building permits advanced 2.4%.

U.S. MARKET AVERAGES

Paper products sector was sharply higher in the early trading, as International Paper ((IP)) gained more than 11% after announcing its reorganization plan. Georgia-Pacific ((GP)) was up $1.52, or 4.7%, at $33.60 and Weyerhaeuser Co. ((WY)) was up $2.81, or 4.3 percent at $67.12.

Tech shares were up as well, software and Internet stocks marking the biggest gainers.

Cosmetics stocks were among the biggest decliners after Avon Products ((AVP)) declined more than 10% on cautious outlook.

IBM’s shares rallied $3.74, or 4.6% to $85.55 as analysts cheered the blue chip’s second-quarter results.

Johnson & Johnson ((JNJ)) shares gained 5 cents to $64.65 after the company reported second-quarter results that beat views due to an 11.1% increase in year-over-year sales.

Caterpillar Inc. shares ((CAT)) added 3.7% ahead of the company's earnings report due later this week.

Shares of Hewlett-Packard Co. ((HPQ)) fell 1.2% as the computer and printer maker said it would cut 14,500 jobs, or roughly 10% of its workforce, as part of a major restructuring.

Merrill Lynch ((MER)) shares rallied 2.2% after the company reported 2Q earnings topping estimates on a 20% jump in revenue.

Ford Motor Co's ((F)) shares fell 1% as the carmaker's lower-than-expected drop in second-quarter earnings disappointed investors.

ECONOMIC NEWS

The government reported that housing starts were flat in June as new residential construction rebounded in the South while declining in the rest of the U.S. Building permits advanced 2.4%.

Greenspan is expected to testify before Congress on Wednesday and Thursday.

INTERNATIONAL MARKET NEWS

Asian benchmarks finished mixed reflecting a decline in Wall Street and awaiting earnings reports from major U.S. and Japanese companies. Japan’s Nikkei edged up 0.1% supported by gains in Nippon Steel. The traders are closely watching Intel’s earnings quarterly report as it is expected to have a great impact not only on the Japanese tech sector, but on the overall market. South Korea’s Kospi added 1.2% on weakness in the won. The dollar bought 112.60 yen in Tokyo. In after-hours trading the crude-oil was $57.25 a barrel.

European stocks made solid mid-day gains on merger-and-acquisition news in the beverage sector, strong results from International Business Machine, and a weaker euro. IBM’s report of 5.2% profit rise offset doubts over the strength of second-quarter corporate earnings. The German DAX 30 added 0.6%, the French CAC 40 gained 0.8%, and London’s FTSE 100 fell 0.1% as banks, airlines and drug companies lost ground. The euro was lower against the dollar at $1.1987; the pound was also lower at $1.7385.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil futures dropped as Hurricane Emily, which hindered most of Mexico’s production, subsided. U.S. light sweet crude futures slid 14 cents to $57.18 a barrel, following a decline of 77 cents Monday. London Brent fell 9 cents to $56.90.

Gold futures fell as the U.S. dollar rose. Gold in London traded at $420.000 bid per troy ounce, down from $421.50. In Hong Kong gold dropped $1.30 to close at $420.35 per troy ounce. Silver traded at $6.98, up from $6.97.

The U.S. dollar gained against other major currencies in European trading after optimistic comments on the U.S. economy from the Fed Reserve. The euro dipped to $1.1994, down from $1.2052. The dollar stood at 112.63 yen, up from 112.21. The British pound quoted at $1.7422, down from $1.7480.

EARNINGS NEWS

Johnson & Johnson and Merrill Lynch are slated to report Tuesday. Bellwethers Intel, Motorola and Yahoo are expected to post their quarterly results after the closing bell.

Ford Motor Co. posted a 19% drop in second-quarter earnings due to lower-than-expected sales of the company’s core sport-utility vehicles and surging gasoline prices. The auto maker said it earned $946 million, or 47 cents a share vs. $1.17 billion, or 57 cents a share, a year earlier. Ford also backed its full-year earnings forecast at $1.00-$1.25 a share, excluding special items.

Lucent Technologies ((LU)) posted 3Q earnings of $372 million, or 7 cents a share, down vs. $387 million, or 8 cents a share in the comparable quarter a year earlier. Excluding tax-related non-recurring items, earnings would have been 5 cents a share, beating views of 4 cents a share. Revenue jumped 6.8% to $2.34 billion vs. last year's $2.19 billion, below analyst estimates of $2.36 billion, as product revenue soared 5% and service revenue climbed 14%.

Avon Products Inc. ((AVP)) said second-quarter earnings advanced to $328.6 million, or 69 cents a share, versus $232.3 million, or 49 cents, including a 20 cent-per-share tax benefit. Analysts were looking for earnings of 66 cents per share.

KeyCorp ((KEY)) reported second-quarter net income of $291 million, or 70 cents a share, up versus $239 million, or 58 cents, last year. Revenue totaled $1.21 billion vs. $1.14 billion on growth in consumer banking. Analysts, had expected earnings of 64 cents a share on revenue of $1.15 billion.

U.S. Bancorp ((USB)) reported second-quarter net income of $1.12 billion, or 60 cents a share, up versus $1.04 billion, or 54 cents a year earlier. Total net revenue totaled $3.3 billion versus $3.02 billion. Analysts expected earnings of 59 cents a share on revenue of nearly $3.24 billion in the latest quarter.

SunTrust Banks Inc. ((STI)) said that second-quarter net income climbed to $465.7 million, or $1.28 a share, versus $386.6 million, or $1.36 a share, last year. Revenue rose to $1.9 billion vs. $1.5 billion a year ago. Operating income of $1.37 was in line with analysts’ forecasts.

Bedford Property Investors, real estate investment trust, reported 2Q earnings rise of 55 cents per share against 30 cents a year ago.

Brown & Brown, insurance company, posted 2Q profit increase of 53 cents a share vs. 46 cents last year on revenue growth, slightly missing expectations of 54 cents a share.

Compass Bancshares posted a record 2Q net income of 81 cents a share compared with 73 cents a year earlier.

Crown Holdings, maker of consumer packaging, posted a profit decrease of 16 cents a share vs. 22 cents last year reflecting foreign currency charges and higher expenses. The quarterly results missed estimates of 34 cents a share.

Exponent, engineering and scientific consulting firm, reported 2Q net income growth of 47 cents a share versus 40 cents a year ago.

Fidelity Bankshares, holding company, announced 2Q net income rise of 35 cents a share compared with 26 cents last year on increased net interest rate spread, beating forecasts of 30 cents a share.

First Busey Corporation reported 2Q income increase of 31 cents a share compared with 27 cents a year earlier on higher net income interest.

Firstt Charter, financial services company, reported 2Q profit rise to 37 cents a share, up from 34 cents last year on strong growth in loans, expense management and solid credit quality.

First Defiance, financial corporation, posted 2Q profit decline of 28 cents per share vs. 49 cents last-year same quarter, including after-tax-merger-related expenses.

Werner Enterprises, truckload freight company, posted 2Q net income growth of 31 cents a share, up from 27 cents a year ago due to effective cost management. Analysts had expected 33 cents a share.

CORPORATE NEWS

Hewlett Packard, a computer and peripheral maker, is planning to announce a restructuring at 8:45 a.m. Tuesday. Analysts expect around 25,000 job cuts.

Metro Inc. agreed to pay $1.2 billion cash and $500 million of Class A subordinate shares for Great Atlantic & Pacific Tea Co.'s A&P Canada. A&P Canada, with more than 32,000 employees and annual revenue of $4.4 billion, operates 236 food stores in Ontario under the names A&P, Dominion, Food Basics, the Barn and Ultra Food & Drug.

The French telecommunications giant France Telecom shows interest in acquiring Amena. It is one of the Spanish biggest mobile-phones operators and Spain is one of the few major markets France Telecom does not own a mobile operator. The deal is estimated at $10.9 billion with debt included.