Bounce Back from Mid-day Lows

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

U.S. stocks bounced back from their lows at mid-day, after opening lower, pressured by the disappointing earnings from Intel, Yahoo and GM. Federal Reserve Chairman Greenspan said that the central bank must keep raising rates to ensure economic growth without inflation. Crude futures fell on news of a small drop in crude stocks in the latest week.

U.S. MARKET AVERAGES

U.S. stocks managed to bounce back from the lows at mid-day, after opening lower, pressured by the disappointing earnings from Intel, Yahoo and General Motors. Tech sector did not participate in the today’s rally but railroads, miners, biotech and home builders were some of the best performing sectors of the day. Energy sector declined with the 2.2% fall in oil price.

Federal Reserve Chairman Alan Greenspan said that the central bank must keep raising rates to ensure economic growth without inflation.

Crude futures fell on news of a small drop in crude stocks in the latest week. The Energy Department said crude supplies declined by 900,000 barrels to 320.1 million for the week ended July 15. The summary of the release is at the end of this report.

The Internet and networking sectors, which were among the biggest decliners, have recently rebounded from their lows, though they still remain lower at the end of the day.

Material sector was one of the best performing sectors of the day. Phelps Dodge was up 2%, Georgia Pacific was up 3%, Brazilian iron ore miner CVRD was up 2.8% and Australian miner BHP was 3%.

Railroad sector gained during the day’s trading. Union Pacific closed up 2.3%, CSX up 1.47%, and Burlington Northern up 3.6% and Canadian National up 6.1%. Canadian National reported 2Q earnings growth of 30% to $1.47 from $1.13. The company also raised 2005 guidance growth to 20% to 25% from 10% to 15% on 2004 earnings of $4.34 per share.

The biotech sector is up posting gains of 1.2% led by 14.4% gain in Amgen shares. Amgen market cap for the first time crossed $100 billion during the day’s trading. The shares of Millennium Pharma were up 6%, Genzyme up 4%, and Invitrogen up 2%.

The housing sector is also among the advancers, Toll Brothers stock closed up 2.4%, Lennar closed up 1.6%, and Ryland Group closed up 2.1%.

General Dynamics stock closed up 4.2% on 13% rise in 2Q revenue and 15% rise in earnings. Funded backlog at the end of the second quarter was $29.9 billion, and total backlog was $43.6 billion, compared to $26.1 billion and $40.7 billion, respectively, at the end of the second quarter of 2004.

Yahoo ((YHOO)) shed 10% after late Tuesday reporting net income of $755 million, or 51 cents a share, versus $113 million, or 8 cents a share in the year-ago period. The company’s shares were under pressure by worries about whether Yahoo is losing search engine share to Google ((GOOG)).

Intel ((INTC)) lost 5.5% after late Tuesday posting 2Q income of 33 cents a share, up vs. 27 cents, a year ago.

General Motors ((GM)) slid 2.3%, on its earnings report of a 2Q loss of $286 million vs. the year-earlier profit of $1.38 billion. Revenue also declined.

Pfizer ((PFE)) posted a jump in second-quarter net income of 21%, topping views, as revenue climbed 1%. The company’s shares advanced.

Altria Group ((MO)) added 16 cents to $65.42 after its 2Q earnings topped views and the company boosted its full-year target.

J.P. Morgan posted a profit and earnings ahead of estimates. Shares rose 14 cents to $35.35.

ECONOMIC NEWS

Alan Greenspan, the Federal Reserve Chairman, said that the U.S. central bank considers the U.S. economy stable and there are good prospects for further economic growth and low inflation, but close attention to labor costs trends and energy prices should be paid so that economic stability could be ensured. He also pointed out that the Fed Reserve has not finished the campaign of interest-rate increases, which was started in 2004.

China’s economy grew by 9.5% in the second quarter, exceeding expectations of a rise by 9.3%. Total gross domestic product reached $811 billion, supported by gains in exporter issues, resurgence in investment in construction and factory equipment and efforts to boost coal production and electricity output.


INTERNATIONAL MARKET NEWS

European markets closed mixed pressured by early U.S. markets declines and sharpened investors’ attention toward interest-rate policy. The German DAX 30 ended up 0.3%, the French CAC 40 lost 0.1%, and London’s FTSE 100 added 0.2%. The euro gained 0.3% to reach $1.2068; the pound was steady at $1.7368.

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

Oil prices eased on a government report, showing U.S. crude supplies fell only 900 000 barrels compared to expected fall of 3.7 million barrels, while distillate and gasoline inventories posted larger-than-expected gains. At close in NY oil fell $1.26 to $56.20 down 2.2%.

The dollar gained against other major currencies, reflecting upbeat government report on U.S. economy. The euro fell to $1.2004 in afternoon trading. The dollar rose against the pound and the yen to reach $1.7287 and 113.63 yen respectively.

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

Honda Motor unveiled a three-year ambitious corporate plan to use fuel-efficient technologies to expand annual world auto production by more than 20% to 4 million vehicles by March 2008, relying mainly on the North American and Asian markets.

Cott, retailer brand soft drinks supplier, posted 2Q income decline of 35 cents a share, down from 41 cents last year, reflecting acquisitions and foreign exchange. The company cut its 2005 guidance to the range of $1.06 to $1.11 due to category softness.

Gardner Denver, compressor and vacuum products manufacturer, reported 2Q earnings rise of 61 cents a share, up from 41 cents a year ago on higher revenue, beating estimates of 52 cents a share. The company raised its full-year outlook to $2.20 to $2.40 a share, up from $2 to $2.16.

St Jude Medical, medical devices maker, posted 2Q net income of 27 cents a share vs. 27 cents a year ago. Excluding special items, the company would have posted 38 cents a share. It sees 3Q earnings between 38 and 39 cents a share and 2005 profit of $1.49 to $1.51 a share.

Linen’s Things, home textiles retailer, reported 2Q net loss of 13 cents per share in line with its outlook. Same-store sales dropped 6.8%.

Eastman 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 expecations 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

The Essar Group, an Indian steel-to-telecommunications conglomerate, agreed to purchase a controlling stake in BPL Communications, India’s sixth-largest cellular company, for more than $1 billion, led by the ambition to gain a bigger control in the world’s cellular market. Essar is planning to merge the company into Hutchinson Essar LTD to put it among the tops with more than 11 million subscribers.

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.


Summary of Weekly Petroleum Data for the Week Ending July 15, 2005

U.S. crude oil refinery inputs averaged nearly 15.6 million barrels per day during the week ending July 15, down 500,000 barrels per day from the previous week's average. Refineries operated at 92.8 percent of their operable capacity last week. Gasoline production dropped substantially, averaging over 8.5 million barrels per day, while distillate fuel production declined slightly, averaging nearly 4.2 million barrels per day.

U.S. crude oil imports averaged over 10.8 million barrels per day last week, up 871,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 10.5 million barrels per day, an increase of 88,000 barrels per day from the comparable four weeks last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 810,000 barrels per day, while distillate fuel imports averaged 195,000 barrels per day.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) declined by 0.9 million barrels from the previous week. At 320.1 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year. Total motor gasoline inventories decreased by 1.3 million barrels last week, putting them in the upper half of the average range. Distillate fuel inventories rose by 2.3 million barrels last week, and are in the upper half of the average range for this time of year. Most of the increase was seen in high-sulfur distillate fuel (heating oil). Total commercial petroleum inventories increased by 2.5 million barrels last week, placing them near the upper end of the average range for this time of year.

Total product supplied over the last four-week period has averaged nearly 20.7 million barrels per day, or 1.1 percent more than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.5 million barrels per day, or 2.5 percent above the same period last year. Distillate fuel demand has averaged 4.0 million barrels per day over the last four weeks, or 3.6 percent above the same period last year. Kerosene-type jet fuel demand is up 6.4 percent over the last four weeks compared to the same four-week period last year. Comparisons to last year do not yet reflect recent revisions to 2004 data.