Intel Gains on Chip Stocks Upgrade

Elena
13 Nov, 2006
New York City

Stocks opened mixed Monday ahead of retail sales and inflation data later in the week. Intel was an early gainer, up 1.1%, lifted by an upgrade for the chip sector from Citigroup. SanDisk fell 2.2% after UBS downgraded the company to neutral from buy. Tyson Foods reported a Q4 loss vs. a year-earlier profit. Revenue fell from a year ago, but matched forecasts. The stock rose 2.2% in early trading.

[R]9:45AM Stocks opened mixed on cautious trading ahead of key data release.[/R]
Stocks opened mixed Monday on cautious trading ahead of retail sales and inflation data later in the week. On Tuesday the Labor Department releases its Producer Price Index and the Commerce Department issues retail sales data. Both are expected to give investors a better reading on the economy, inflation and consumer spending.

Intel ((INTC)) was an early gainer, up 1.1%, lifted by an upgrade for the chip sector from Citigroup. SanDisk ((SNDK)) fell 2.2% after UBS downgraded the company to neutral from buy. Tyson Foods ((TSN)) reported a Q4 loss vs. a year-earlier profit. Revenue fell from a year ago, but matched forecasts. The stock rose 2.2% in early trading. ISIS Pharmaceuticals ((ISIS)) was a notable gainer, up 29% after the drug maker said data from two Phase II trials showed its drug, ISIS 301012, reduces LDL, or bad, cholesterol.

KB Home ((KBH)), homebuilder, rose 3% on news its longtime CEO, resigned under pressure on Sunday, agreeing to return $13 million in profit from backdated stock options. The review revealed that company had misreported several unspecified grant dates for options issued between 1998 and 2005. KB Home expects to take a charge to its earnings of no more than $50 million, but may be forced to cover tax obligations related to the improper grants.

Significant weakness was visible in the gold sector, due to lower price of the precious metal. While a decrease by the price of oil contributed to some weakness among energy stocks, the oil-sensitive airline sector benefited from the price decrease. In the first hour of trading, the Dow Jones industrial average fell 19.69, or 0.16%, to 12,088.74. The Standard & Poor's 500 index was down 1.38, or 0.10%, at 1,379.52, and the Nasdaq composite index dropped 1.32, or 0.06%, at 2,388.40.


[R]9:30AM FTSE 100 advances on Monday on merger and acquisition talks.[/R]
In late morning, the FTSE 100 in London gained 7.6 points, or 0.1%, at 6,216.3.

Advancers

Resolution, the closed life assurance fund consolidator, was a leading gainer, up 3.9%. Talk in the market was of a possible merger with life assurer Prudential, up 2.4%, while others suggested Resolution could tie-up with Scottish Widows, the life assurance arm of Lloyds TSB, up 0.8 %.

ITV gained 2.9% amid reports that NTL was planning to meet with the shareholders of the broadcaster to explain a takeover approach.

Rumours of a counterbid from the US pushed Scottish Power up 1.3%. Iberdrola, the Spanish energy company, has confirmed an interest in buying the Scottish power company.

Decliners

The falling price of copper sent miners south. Mining group Rio Tinto fell 4.1% while Antofagasta dropped 3.4% and Xstrata was 2.3% lower.

Biofuels lost 8.9% as Numis Securities reiterated its price target on the biodiesel producer. Biofuels said on Friday that the lower oil price and a recent rise in feedstock prices had led to tighter profit margins.

Other news

The Office for National Statistics announced that output prices climbed by 1.7% in the year to October, down from the increase of 1.8% seen the previous month and the lowest reading since March 2004.


[R]9:00AM Stock futures pointed to a flat opening on weaker oil.[/R]
Stock futures turned flat, as crude oil retreated from an early rally toward $60, falling 77 cents to $58.82. S&P 500 futures were down 0.8 point, about flat with fair value. Dow Jones industrial average futures were down 7 points and Nasdaq 100 futures gained 0.25 point.

Among stocks to watch, SanDisk Corp. ((SNDK)) was downgraded to neutral from buy at UBS, with the broker citing expectations for a likely oversupply in flash memory chips in 2006-2007.Citigroup raised utility operator Sierra Pacific Corp. (((SPP)) to ‘buy’ from ‘hold.’

Of companies in focus, Tyson Foods Inc. ((TSN)), the world''s largest meat processor, reported a wider-than-expected Q4 loss to 17 cents per share, compared with a profit of 33 cents per share last year, missing estimates of a 4-cent loss. The wider loss was attributed to one-time charges and losses in the chicken and beef sectors.


[R]8:00AM Stock futures pointed to a positive start.[/R]
Stock market futures moved slightly higher Monday morning, with investors shifting their focus from election news toward inflation and CPI data later this week. Dow Jones futures were recently up 12 points, S&P 500 futures were unchanged and Nasdaq futures rose 2 points. Last week, stocks finished positive, as American International Group results and retreating crude oil helped offset disappointment with Walt Disney & Co.''s latest financial results.

Isis Pharmaceuticals ((ISIS)) soared 36% in pre-open trading after the company said that results from Phase II trials showed that ISIS 301012 significantly reduced cholesterol.

Companies releasing quarterly earnings Monday include Tyson Foods ((TSN)) and Dick''s Sporting Goods ((DKS)). In corporate news, KB Home ((KBH)) announced late Friday that CEO Bruce Karatz is leaving after the conclusion of a stock-option grant price probe. He''ll repay the company $13 million. International Business Machines ((IBM)) is reportedly joining a consortium led by Citigroup that is bidding for China''s Guangdong Development Bank. Of the stocks, driven by analyst comments, SanDisk ((SNDK)) was downgraded to neutral from buy at UBS, with the broker citing expectations for a likely oversupply in flash memory chips in 2006 and 2007. In contrast, Gannett ((GCI)) was upgraded to buy from neutral at Merrill Lynch.

Among European movers, Deutsche Telekom ((DT)) rose in Frankfurt after announcing that CEO Kai-Uwe Ricke had submitted resignation. Novartis ((NVT)) moved down after the Swiss drugmaker said it is submitting more data to the U.S. Food and Drug Administration on its diabetes drug Galvus. The company expects that the new data will push back an FDA review by three months.


[R]7:30AM Asian markets end mostly lower Monday, Japan leading the decline.[/R]
Asian markets declined on Monday. The Nikkei 225 Index shed 0.6% to finish at 16022.49. Traders were also cautious ahead of July-September GDP data due Tuesday. Commodity and domestic demand issues fell in early trading. Mizuho Financial Group posted a 2.1% fall and Shinsei Bank lost 2.6%. Nippon Oil shed 0.98% and trading company Itochu sank 3.2%. Major machinery maker Fanuc fell 0.9%.

The Hang Seng Index in Hong Kong fell 0.1% to 18868.54. Henderson Land fell 6.3% after it raised $710 million through a share placement over the weekend. Shares of other developers fell as concern grew that they may follow suit. Sun Hung Kai fell 1.27% and Cheung Kong Holdings declined 1.29%.

South Korean shares finished flat, with strong gains in technology shares offsetting losses in shipbuilders. The Korea Composite Stock Price Index, or Kospi, ended up 0.1% at 1396.69. Technology shares rose on bargain-hunting, with Samsung Electronics advancing 1.6% and Hynix Semiconductor gaining 2.6%. Hyundai Heavy Industries dropped 5.7%, Daewoo Shipbuilding & Marine Engineering lost 2.8% and Samsung Heavy Industries lost 5%.

In Taiwan, shares end down 0.5% at 7136.06, with technology stocks leading the decline. TSMC fell 1.3%, UMC declined 1.1% and MediaTek lost 1.9%. Gains in paper and property-related stock countered losses. Chung Hwa Pulp rose 5.8%, while Goldsun Development & Construction rose 5.4%. Australia S&P/ASX 200 Index fell 0.3% to 5418.4, as plunging metal prices pressured the market and sent miners Rio Tinto and BHP Billiton sharply lower.


[R]6:30AM European stocks move higher Monday on upbeat earnings.[/R]
European markets were higher on Monday. In early trade, the FTSE 100 in London climbed 0.2% to 6,218.0, Frankfurt Xetra Dax gained 0.1% to 6,365.67, and the CAC 40 in Paris added 0.3% to 5,459.83.

Advancers

Alstom It reported a 27% rise in first-half operating profit, together with an operating margin of 6.32%. The outlook was also positive, targeting an operating margin of 7% for 2007 and full-year sales growth of more than 10%. Alstom shares rose 5.1%.

Spanish Sacyr Vallehermoso, rose 4.1% ahead of its nine-month results. Deutsche Telekom rose 2.6% after the company announced on Sunday the resignation of Kai-Uwe Ricke.

Decliners

Miners declined the most on fears that a slowdown in the global economy would hurt demand for metals. Rio Tinto fell 2.4%, while BHP Billiton lost 1.7%.

Shares in Swiss drugmaker Novartis fell 1.6% after asking the US Food and Drug Administration to extend its review period on Galvus, its diabetes treatment, to consider new data showing that skin problems in animal tests were not seen in trials on patients.

Iberdrola, the Spanish utility, fell 1.8% after ratings downgrades followed announcement on Friday that it was in merger talks with Scottish Power.

Oil and gold

Crude oil fell as mild weather in the U.S., the world''s largest energy consumer, reduced demand for heating oil. Crude oil for December delivery fell 27 cents to $59.32 a barrel in electronic trading on the NYME. Brent crude oil was down 7 cents to $59.64 a barrel on the London-based ICE Futures exchange.

Gold for immediate delivery gained as much as $4.15, or 0.7 %, to $632.70 an ounce. Gold futures for December delivery rose $3.50, or 0.6 %, to $633.60 an ounce.

Currencies

In morning trading, the euro bought $1.2857, up from $1.2847 late Friday in New York. Among other currencies, the British pound rose to $1.9122 from $1.9113 while the dollar was down slightly to purchase 117.41 Japanese yen from 117.62 yen.