Merck and Pfizer Pressure S&P 500

Elena
08 Nov, 2006
New York City

Worries about the impact of the U.S. election results, kept stocks under pressure in morning trading. Drug stocks Merck and Pfizer were the biggest drags on the S&P 500, falling 3.3% and 1.9% respectively. Health insurance stocks moved lower, led by Molina Healthcare, falling 8.3% after the company reaffirmed full-year outlook below estimates.

[R]11:30AM Drug companies Merck and Pfizer led the S&P 500 down.[/R]
Worries about the impact of the U.S. election results, kept stocks under pressure on Wednesday. Among pharmaceutical stocks, shares of drug maker Merck & Co. ((MRK)) dropped 3.3% after the drug maker revealed that it faces a tax liability of $5.58 billion due to four tax disputes in the U.S. and Canada. Rival company Pfizer Inc.''s ((PFE)) fell 1.9%.The two Dow components were the biggest drags on the S&P 500. Health insurance stocks also moved to the downside, led by Molina Healthcare ((MOH)), with the managed care company falling 8.3% after the company reaffirmed full-year outlook below estimates. The weakness in the health insurance sector also came amid concerns that a Democrat-controlled congress could have a negative impact on the industry. Shares of Wal-Mart Stores Inc. ((WMT)) also came under pressure, falling 0.6%.

On the other hand, companies in the mortgage business posted gains on the notion that Democrats would push plans to broaden access to housing. Fannie Mae ((FNM)) rose 2.3%, while Freddie Mac ((FRE)) advanced 2.4%. Rising oil prices and a broker upgrade helped shares of Exxon Mobil Corp. ((XOM)) gain 1% to $73.26. The stock was a leading gainer in both the Dow and S&P 500. Sirius Satellite Radio Inc. ((SIRI)) rose 2% after posting a narrower-than-expected loss on improved revenue. In late morning trading, the Dow Jones industrial average moved off earlier lows and was down 12.88, or 0.11%, at 12,143.89. The Standard & Poor''s 500 index was down 1.31, or 0.09%, at 1,381.53, and the Nasdaq composite index fell 1.79, or 0.08%, to 2,374.09. Bonds showed little movement, with the yield on the benchmark 10-year Treasury note flat at 4.66% from late Tuesday


[R]10:30AM The Sensex falls for a second day in a row on selling pressure.[/R]
The Sensex on BSE finished 84.15 points, or 0.64%, lower to 13,072.51. The market-breadth positive at the start of trading turned weak in late trading. As 1,1628 shares declined on BSE, only 881 advanced and 64 stocks were unchanged. For every 2 decliners there was 1 advancer. From the Sensex stocks, 22 declined while the rest advanced. The turnover on BSE was Rs 4,305 crore, lower than Rs 4,688 crore on Tuesday. The turnover on NSE was Rs 8,572.66 crore, lower than Rs 9,066.78 crore on Tuesday.

Decliners

The auto sector was in decline today. The costs of materials such as nickel, aluminium, rubber and steel is rising. Hero Honda led the decline, down 3.77% to Rs 715, on 2.16 lakh shares. It slid to a low of Rs 705.45, after hitting a high of Rs 744 in early trade. Advancing input costs and intense competition forced investors into selling shares of auto firms. Bajaj Auto fell 3.37% to Rs 2,630 and TVS Motor was down 5.16% to Rs 102.

Maruti Udyog dipped 1.1% to Rs 933.50, following the Heavy Industries Minister Santosh Mohan Deb announcement that he had formally proposed the selling of the remaining 10% government stake in the company. Tata Motors also declined 2.36% to Rs 799.

Index heavy Reliance Industries plunged 2.93% to Rs 1,252.50 on a volume of 22.32 lakh shares on major sell-off by funds along with profit-taking by retail investors. It traded in the range of Rs 1,240 and Rs 1,295.

The energy sector was also hit today. Indian Oil Corp fell 1.3% to Rs 499.35 as it said that the state-run Indian Oil Corp is losing Rs 50 crore a day on retail fuel sales despite making a profit of Rs 3.5-4 per litre on petrol sales. Reliance Communications also dipped 1.82% to Rs 380 and HDFC lost 2.88% to Rs 1,515.

Hindustan Zinc experienced high volatility, trading in a range of Rs 1,008.90 and Rs 943.35. It closed 1.47% lower, at Rs 966.85.

Advancers

Bank stocks rallied from their lows, in the final hours of trade. ICICI Bank led the advancers, up 2% to Rs 785. IndusInd Bank gained 5.20% to Rs 46.45, UTI Bank added 2.87% to Rs 437.50, ICICI Bank jumped 2% to Rs 785, ING Vysya Bank was up 1.71% to Rs 178. State-run banks also took part in the rally. SBI was 1.76% higher to Rs 1,124.50, Allahabad Bank gained 2.30% to Rs 91 and Bank of Maharashtra advanced 1.31% to Rs 34.85.


Software exporter Infosys gained 1.07% to Rs 2,125. It had soared to a 52-week high of Rs 2,151 in early trade. The stock advanced for the second day in a row after shareholders of Infosys on Tuesday approved an issue of up to 30 million sponsored American Depositary Receipts.

Advancers from shares not part of the Sensex stocks included Hyderabad Industries surging 20% to Rs 298, Ashok Leyland jumping 4% to Rs 46.20 on on renewed buying and UTV Software soaring 6.55% to Rs 248.80.

Other news

Foreign funds inflows keep rising. As per provisional data, foreign funds were net buyers to the tune of Rs 316.66 crore on Tuesday.

The Government is planning to apply a tighter control on the number of IT special economic zones. It will initiate changes to the SEZ Act, which will be implemented in about 3 months.


[R]9:45AM Stocks opened lower after the Congressional elections.[/R]
Stocks opened lower on Wednesday, as investors reacted negatively to the election victory by the Democrats who are known as less business friendly than the Republicans. In early trading, significant weakness emerged among pharmaceutical stocks. Despite an increase by the price of oil, some oil service stocks also came under pressure. The downward move by the markets also reflects considerable weakness among health insurance, airline, and housing stocks.

On the earnings news front, Federated Department Stores Inc. ((FD)), owner of the Macy''s and Bloomingdale''s chains, posted $3 million profit loss in Q3 due to costs related to its acquisition of May Department Stores. The loss amounted to a penny per share compared with a profit of 90 cents per share last year, missing analyst estimates of 25 cents per share. Revenue grew 6% to $5.89 billion, while same-store sales rose 5.9%. The stock dropped 2.26%.

Cablevision Systems Corp. ((CVS)) owner of Madison Square Garden, Radio City Music Hall, reported a narrower Q3 loss as the cable TV operator signed up more customers for premium services. The company posted a loss of 21 cents per share, versus a loss of 22 cents per share a year ago, lower than the expected loss of 14 cents per share. Revenues rose 13.4 percent to $1.41 billion. In the first hour of trading, the Dow Jones industrial average fell 40.02, or 0.33%, to 12,116.75. The Standard & Poor''s 500 index was down 5.94, or 0.43%, at 1,376.90, and the Nasdaq composite index fell 14.83, or 0.62%, to 2,361.05. Bonds showed little movement, with the yield on the benchmark 10-year Treasury note flat at 4.66% from late Tuesday.


[R]9:30AM FTSE 100 in London falls on mining stocks, US markets.[/R]
The FTSE 100 in London lost 0.42% and is trading at 6,218 in mid-afternoon session.

Decliners

The mining sector was weak. BHP Billiton declined 2.7%, Xstrata was down 7% and Rio Tinto fell 2.3%.

Among insurers, Standard Life fell 1.8% after reporting third-quarter sales just below expectations. Worldwide sales rise by 26% in the nine months to date, with a 41% increase in latest three months. UK Life and Pensions sales are up 35%, with a 56% increase in the third quarter. Legal & General fell 1.8% on related sentiment.

Pest control group Rentokil Initial reported a 3.6% fall in third quarter pre-tax profit today, reflecting difficult markets in European Textiles and Washroom Services. Rentokil Initial dropped 0.34%.

Merrill Lynch has downgraded supermarket company Tesco to hold from buy citing valuation grounds. Tesco lost 0.74%.

Among the companies going ex-dividend, the biggest decliners were Unilever which slipped 1.4% , and BP, which dropped 1.1%.

Advancers

Scottish Power, the fifth-biggest energy supplier, was up 11.9% after it confirmed the bid approach. No bidder was named, but market speculation surrounded German utility RWE AG as a possibility. Scottish & Southern Energy was also up 4.1%.

Electricity stocks and retailers went against the market trend. General retailers gained, with Marks & Spencer adding 1.8% after brokers upgraded price targets following a stellar first-half earnings report on Tuesday.

London Stock Exchange has thrown down the gauntlet to possible bidder Nasdaq with a very strong set of interim results. Revenue is up 20%, operating profit up 60% and the dividend by 50%. LSE was up 0.08%.


[R]9:00AM Stock futures turned lower as Democrats seem to take over.[/R]
Following Tuesday’s strong rally, U.S. stock market futures dropped Wednesday, pressured by the possibility that the Democrats may gain control over the House of Representatives and the Senate as a result of the midterm elections. Although the Democrats were largely expected to take control of the House, they weren''t widely expected to take over the Senate. The possible takeover by the Democratic Party raised concerns among investors, as they are known to be less friendly than the Republicans and fewer U.S. government decisions are expected in the next two years.

In earnings news, Satellite television broadcaster DirecTV Group Inc. ((DTV)) reported that its Q3 profit nearly quadrupled to 30 cents a share, up from 7 cents last year, driven by 13% higher revenue and a lower rate of customer defection. Shares of the company climbed 6.5%, to $23.25 in premarket trading. Dynegy Inc. ((DYN)) reported a Q3 loss as the power company recorded a large write-down related to a Kentucky power plant. It forecast a bigger loss for the year than it previously estimated. Dynegy posted a loss of 14 cents per share, compared with a profit of 6 cents per share, a year earlier.

Major companies due to report earnings news include Federated Department Stores ((FD)), Cablevision Systems ((CVS)) and Cisco Systems ((CSCO)). True Religion Apparel ((TRLG)) is expected to drop sharply after warning it won''t meet analyst expectations for earnings or revenue. UTStarcom ((UTSI)) may see a downward move after delaying the release of its Q3 earnings for a review of its stock-option grant practices.

In corporate news, NYSE Group Inc.((NYX)), the operator of the New York Stock Exchange, announced on Wednesday it will reduce more than 500 jobs due to cut costs, eliminate duplicate services and leverage the results of its March acquisition of the Archipelago electronic exchange.
In European trading, Airbus owner EADS posted an unexpected loss, while automakers Volkswagen and PSA Peugeot Citroen were mixed after naming new chief executives. S&P 500 futures dropped 6.60 points at 1,382.40 and Nasdaq 100 futures dropped 9.75 points at 1,742.00. Dow industrial futures dropped 39 points at 12,149.


[R]7:30AM Asian stocks end broadly lower, Japan falls on interest rates talks.[/R]
Asian markets finished broadly lower on Wednesday. The Nikkei 225 Index closed the session 1.1% lower at 16215.74. Mizuho Financial Group shed 2.7%, while shares of Softbank plunged 4.1% ahead of its earnings report due after the market close. Consumer-finance company Aiful, falling more than 7% after reporting weak financial results, finished down 1%. Shares of Canon fell 0.8%, while Nikon slipped 2.6%.

Toyota Motor jumped 1.8%, after the leading auto maker by sales in Japan posted strong profit growth for the fiscal first-half, raised its full-year profit outlook. Also in the auto sector, Honda Motor gained 0.5%.

Indexes in Hong Kong and Australia paused from record-breaking streaks, with Hang Seng Index in Hong Kong down 0.7% at 18807.35 as investors booked profits on China Mobile and other large-cap stocks that have led the recent rally. China Mobile fell 2.5%, its second day of loses. Property stocks remained in demand a day after the leading banks slashed interest rates by a quarter percentage point and blue-chip Henderson Land rose 1.5%. Mainland refiner Sinopec rose 0.4% on softer crude-oil prices and continuing speculation it will be added to the Hang Seng Index when results of quarterly index review are announced Friday.

Australia S&P/ASX 200 fell 0.6% to 5459.20, after setting highs for three straight sessions as investors worried about higher interest rates. BHP Billiton fell 1.5%, while oil and gas producer Woodside Petroleum fell 0.9%. Australian-listed shares of Singapore Telecommunications jumped 4.9% after reporting a better-than-expected 19% rise in quarterly profit.

The Kospi index in South Korea fell 0.5% to 1380.07. In Seoul, the construction sector declined 3.5%, although a rise in heavy technology stocks limited losses. Technology stocks posted gains, with Samsung Electronics advancing 1%, helped by a recent rise in technology shares in the U.S. New Zealand shares ended at record closing high for the second day in a row, as the benchmark NZX-50 Index added 0.2% to 3818.25.


[R]6:30AM European stocks fall in early trading Wednesday on US election results.[/R]
European markets were lower on Wednesday. By mid morning, the FTSE 100 in London lost 0.3% to 6,222.3, Frankfurt Xetra Dax shed 0.4% to 6,338.43, and the CAC 40 in Paris was down 0.4% to 5,417.95.

Advancers

Shares in European defense company and Airbus owner EADS advanced 2.1% in Paris after it confirmed it expects to reach sales of well above 37 billion euros in 2006. German retailer KarstadtQuelle rose 2.8% after the firm said its third-quarter profit before interest, taxes, depreciation and amortization fell 51.4% to 57.4 million euros.

Peugeot rose 1.5% after finding a replacement to Jean-Martin Folz, who already had said he is quitting.

Decliners

BHP Billiton shed 2.2%, while Xstrata lost 1.9%. Hypo Real Estate led the decline after its third-quarter results failed to beat expectations, despite a 25% rise in net profit. The shares fell 3.4%.

Truckmaker Scania declined too after German rival MAN appeared less likely to succeed in its bid for the Swedish company. Shares of Scania, which carry the majority of the voting rights, fell 2.9%.

Volkswagen, the biggest shareholder of Scania, was down 1.7% after Bernd Pischetsrieder, chief executive, unexpectedly announced his departure at the end of the year.

Oil and gold

Crude oil rose on trader and analyst speculation that U.S. heating oil inventories will drop with winter approaching in the Northern Hemisphere. Crude oil for December delivery advanced as much as 37 cents, or 0.6%, to $59.30 a barrel in after-hours electronic trading on the NYME. Brent crude oil for December settlement rose 25 cents to $58.73 a barrel on the London-based ICE Futures exchange.

Gold was trading in London at a $625.50 bid per troy ounce, down from $625.75 on Tuesday

Currencies

The U.S. dollar was lower against other major currencies in European trading Wednesday. The euro was quoted at $1.2792, up from $1.2771 Tuesday. The British pound was quoted at $1.9074, up from $1.9055. The dollar bought 117.55 Japanese yen, down from 117.68.