Investors Forced to Revise Expectations

albena
30 Nov, -0001
New York City

Stocks opened lower Wednesday after General Motors reported a big loss and further disappointed investors after lackluster results from Intel, Yahoo, as the market awaits economic testimony from Federal Reserve chief Alan Greenspan. U.S. light crude oil for August delivery rose 78 cents to $58.24.

U.S. MARKET AVERAGES

Some investors’ disappointment with Intel Corp., Yahoo Inc. and General Motor's second-quarter earnings weighed on stocks in the early trade Wednesday, as traders are looking forward to the semi-annual testimony from Federal Reserve Chairman Alan Greenspan due at 10 a.m.

GM ((GM)) revealed a second-quarter loss of $0.56 per share, excluding one-time items. This was down vs. $2.42 per share last year and below the expectations of $0.02 profit per share. GM said that its quarterly revenue came in at $48.5 billion, down versus $49.3 billion last year.

Continental Airlines ((CAL)) posted a second-quarter profit of $0.69 per share, excluding a $47 million gain related to the contribution of ExpressJet shares to Continental's defined benefit pension plan. In the same period last year, the company reported a loss of $0.43 per share. Analysts had expected the company to post a 2Q profit of $0.19 per share.

Intel said its profit surged 16% on a 15% jump in revenue and the chip maker forecasted a 16% sales gain this quarter with a rise in profit margins. Intel's earnings slightly topped estimates, and revenue met views, but some investors had expected the company to surprise with better results.

Yahoo said its net increased sevenfold and sales soared 51% but that wasn't satisfactory enough fore some investors’ views and Yahoo stock lost 10% in after-hours trading.

Traders expect a heavy load of earnings releases in the morning, and more after the closing bell Wednesday, including AT&T and eBay.

Five of the six Dow members scheduled to report financial results reported their earnings. Four of the Dow industrials components beat average estimates.

Pfizer Inc. said that 2Q net income rose 21%, topping estimates, as revenue jumped 1%.

Altria Group was in line with the earnings projections for the quarter and boosted its 2005 guidance by 5 cents a share.

J.P. Morgan swung to a profit and announced adjusted results that beat views, while United Technologies and Honeywell also reported quarterly earnings ahead of estimates.

ECONOMIC NEWS

Federal Reserve Chairman Alan Greenspan is to give his view of the economy before the House Financial Services Committee in his semi-annual congressional testimony at 10 Wednesday. On Thursday, the testimony will continue with an appearance before the Senate Banking Committee.

President Bush nominated Judge John Roberts as his choice for the Supreme Court on Tuesday night. Stock futures slightly advanced on the news, but shortly afterwards slid back.

INTERNATIONAL MARKET NEWS

Asian benchmarks finished mostly up lifted by steel and automotive shares following overnight gains in Wall Street, strong economic data in China, stating GDP grew 9.5% in the second quarter and a 14-month high of the dollar against the yen, giving support to exporter issues. The Japanese Nikkei rose 0.2%, Hong Kong’s Hang Seng added 0.2% helped by solid gains in shoe maker Yue Yuen. South Korea’s Kospi ended slightly lower to close down 0.1%. The U.S. dollar advanced against the yen in Tokyo markets and quoted at 113.07.

European markets traded generally up at mid-day as investors focused on tech shares and interest-rate policy after the Bank of England released news that the MPC voted 5 to 4 to keep interest rates at 4.75% in July, and ahead of U.S. monetary policy comment later in the day. The German DAX 30 rose 0.1%, the French CAC 40 remained flat, and London’s FTSE 100 gained 0.8%. The euro gained 0.4% against the dollar and quoted at $1.2072; the pound declined to $1.7336.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil futures rose on concerns over production disruption in Mexico as Hurricane Emily progressed into Mexican northeastern coastline and on expectations that the weekly petroleum report would show a decline in crude stocks. Light sweet crude for August delivery was up 37 cents to reach $57.83 a barrel on NYME. Heating oil rose more than 1.5 cents to $1.6461 a gallon. London Brent for September delivery climbed 34 cents to $57.70.

The dollar was mixed against other major currencies. Gold futures rose. In London gold traded at $420.65 bid per troy ounce, up from $419.50. In Hong Kong, gold fell 60 cents to close at $420.95. Silver traded at $6.96 per ounce, up from $6.95.

The U.S. dollar steadied against other major currencies ahead of U.S. Fed Reserve Chairman Alan Greenspan’s testimony to Congress, whereas the British pound lost ground on heightened interest rate cut hopes. The euro traded at $1.2076 in early European trading; the dollar stood at 112.94 yen; the pound quoted at $1.7351.

EARNINGS NEWS

Eastment Kodak, photographic film maker, posted 2Q net loss of 51 cents a share vs. a profit of 46 cents a year earlier on restructuring charges of $1.07 a share. Excluding special items earnings would be 53cents a share. The company intends to cut between 22 550 and 25 000 jobs.

Orbital Sciences, space systems developer, posted 2Q profit fall of 12 cents a share, down from 17 cents a year ago. Excluding one-time items, the company would have posted earnings of 20 cents a share.

Jakks Pacific, toymaker, reported 2Q net income rise to 39 cents a share, up from 22 cents last year on revenue growth. The company projects 2005 earnings of $2.28 a share on sales of $660 million.

J.P.Morgan Chase, financial services company, announced it swung to profit in 2Q, or 28 cents a share vs. a net loss of 27 cents a year ago, reflecting a merger operation with Bank One. The quarterly results included a pretax litigation reserve of 33 cents a share and a pretax merger charge of 5 cents a share.

Knight Capital, financial services company, reported 2Q narrower net loss of 4 cents a share compared with 42 cents for the last-year same quarter.

Host Marriott, real estate investment trust, posted 2Q profit loss of 22 cents a share vs. 2 cents a year ago after refinancing and asset sales. The company expects net loss between 4 and 5 cents per share for the 3Q and earnings in the range of 28 to 32 cents for 2005.

Kraft Foods, food manufacturer, reported 2Q profit decline of 28 cents a share compared with 41 cents a year ago due to a loss from the sale of its candy divestiture and higher commodity costs. The quarterly results missed expectations of 47 cents a share.

Hutting Building Products, millworks and building supply company, posted 2Q earnings drop of 17 cents per share, down from 34 cents last year citing lower profit margin and poor weather which affected sales.

Gilead Sciences, biotechnology company, posted 2Q net profit rise of 41 cents a share vs. 25 cents a year ago on strong demand for its drugs treating HIV-virus, beating analysts’ expectations of 36 cents a share.

First Indiana, financial services company, reported 2Q net income increase of 45 cents per share, up from 32 cents for the comparable last-year period on improved net interest margin.

Landec, polymer products developer, posted 4Q net income rise to $4.6 million, up from $4.3 million, but earnings remained flat at 17 cents per share, hurt by produce sourcing issues at Apio, Landec’s subsidiary.

Akzo Nobel, Dutch pharmaceuticals and chemicals group, posted 2Q profit growth of 182 million euro missing expectations of 187 to 212 million euro. The company sees 2005 income within the range of 2004.

Pfizer, pharmaceutical producer, reported 2Q earnings growth of 47 cents a share compared with 38 cents last year on 1% revenue growth, exceeding estimates of 44 cents a share.

Bank of New York posted 2Q net profit rise to 52 cents a share, up from 48 cents a year earlier, beating average expectations of 50 cents a share.

CIT Group, commercial and consumer financial company, announced 2Q profit increase of $1.03 a share versus 82 cents a year ago.

CORPORATE NEWS

Chevron ((CVX)) increased its bid for Unocal, and is now offering $63.01 in cash and stock. Unocal reaffirmed the revised offer, while Chinese oil company CNOOC said it was holding onto its $67 cash offer.

Groupe Danone continued to post gains from bid speculation, up over 5% on news that PepsiCo has hired UBS and Morgan Stanley to provide advice on a possible bid.

Eastman Kodak boosted the number of jobs it planned to reduce as part of its restructuring to 22,500 to 25,000 from 15,000 due to the faster-than-anticipated decline in consumer film sales. Kodak posted a 2Q loss of $146 million, or 51 cents a share, vs. a profit of $136 million, or 46 cents a share in the same period a year ago.