Morning Tech Rally Weakens

albena
30 Nov, -0001
New York City

Morning tech rally weakened at mid-day even though optimistic sentiment for the rest of the earnings season remained, bolstered by stronger-than-expected results from IBM, Caterpillar and Merrill Lynch. Investors look forward to more earnings reports today, including Motorola and Yahoo, which are due after the closing bell. 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

After Dow component Citigroup disappointed with its soft earnings on Monday, investors applauded the sound results from tech bellwether International Business Machines. Late Monday, IBM posted a profit rise to $1.12 a share, topping the forecast of $1.03 a share. Shares of IBM added 3.8%.

The Dow Jones Industrial Average climbed, bolstered by IBM and Caterpillar. Intel, which is slated to report its quarterly results after the closing bell Tuesday, advanced 1.4% amid the early morning tech rally.

Merrill Lynch said its profit climbed 6.1% and revenue advanced 20%, and correspondingly the investment bank’s stock rose 2%.

Johnson & Johnson’s shares declined in early trading though the company topped views by a penny on strong sales.

Ford Motor slipped 10 cents to $10.84 after the carmaker posted a 19% drop in 2Q profit. General Motors ((GM)) and DaimlerChrysler ((DCX)) also gained.

The semiconductor sector climbed by about 1.3% and is currently extending its peak in early Tuesday’s trading.

The HMO segment extended its early losses and is now near its intraday lows. The marked a decline of about 1.5%.

Hewlett-Packard slid after it announced its plans to cut 14,500 jobs, or 10% of its full-time staff.

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 finished up on merger-and-acquisition news in the beverage sector, strong results from the International Business Machine, and a weaker euro. Earnings reports from IBM, Johnson & Johnson, Merrill Lynch and other companies supported the markets releasing strong second-quarter earnings. The German DAX 30 added 0.8%, the French CAC 40 gained 0.9%, and London’s FTSE 100 fell 0.1% as banks, airlines and drug companies lost ground.

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.

Copper for delivery in three months fell $6, or 2%, to $3.357 a metric ton on LME. On average copper prices are expected to fall 17% to $1.20 a pound, less than previously expected. Copper futures which reached a 17-year high of $1.61 on June 17 will remain above $1 a pound through 2007, according to analysts.

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

Wells Fargo, financial services company, reported 2Q net income increase of $1.12 a share compared with $1, last year on increased consumer borrowing, deposit growth and investment gains. Analysts had expected earnings of $1.13 a share.

Wachovia, bank institution, posted 2Q earnings rise to $1.04 a share compared with 95 cents a year ago supported by the acquisition of South Trust and expense reduction.

Steel Technologies, producer of flat-rolled steel, posted 3Q profit decline of 43 cents a share vs. 81 cents a year ago reflecting reduced demand and soft market prices.

Merrill Lynch, Wall Street brokerage, posted 2Q profit increase of $1.14 a share compared with $1.05 on strong stocks performance and fixed income trading. The quarterly results exceeded expectations of $1.08 a share.

Johnson & Johnson, health-care products company, reported 2Q net income rise of 89 cents a share vs. 82 cents last year on strong medical devices and consumer product sales. The company repatriated $225 million through the American Jobs Creation Act.

Ford Motor, automaker, posted 2Q profit decline of 47 cents a share compared with 57 cents a year ago citing lower production and intense competition.

Avon Products, direct seller of beauty products, reported 2Q profit growth of 69 cents a share, up from 49 cents a year ago, beating estimates of 66 cents a share. The company lowered its full-year outlook to $2.03 to $2.08 a share.

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.

First 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.

Vicor, maker of converters, posted 2Q earnings rise of a break-even per share from a nil per share in the comparable quarter last year on higher margins and one-time royalty payment.

Valmont, manufacturer of poles, towers and lighting structures, reported 2Q profit growth of 42 cents a share vs. 12 cents a year ago on higher prices and acquisitions.

Swift Transportation, regional truckload carrier, posted 2Q profit fall to 40 cents per share, down from 43 cents a year ago citing decline in freight demand and expenses.

Stanley Furniture, furniture maker, reported 2Q net income increase of 44 cents a share , up from 40 cents a year earlier. The company raised its 2005 outlook to $1.78 to $1.85 a share.

SM&A, business strategy provider, reported 2Q earnings rise of 12 cents per share compared with 11 cents for the comparable period last year.

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.

SABMiller PLC announced a deal to acquire Colombian brewer Grupo Empresarial Bavaria, South America’s second-largest beer producer. The deal is for $5.6 billion in stock and cash, as SABMiller will purchase the 72% stake in Bavaria held by the Santo Domingo Group for $3.5 billion and pay $2.1 billion cash to the other shareholders. The U.K. brewer will also assume Bavaria’s $2 billion debt.