Treasury Yield Climbs Driving Averages Down

albena
30 Nov, -0001
New York City

U.S. stocks extended their losses after the news that China would have the yuan pegged to a basket of currencies rather than just tied to the greenback. It also vaulted the yuan 2% higher vs. the dollar. According to a number of reports, London police have responded to small blasts at 3 subway stations and also to some events related to buses. Greenspan repeated that economy growth was solid and interest rates will keep rising.

U.S. MARKET AVERAGES

U.S. stocks opened lower on Thursday after China moved away its yuan currency exchange rate versus the dollar, which could hit the profits of companies that source heavily from China, such as Wal-Mart Stores Inc, whose shares fell 1.4% percent.

Stocks tended to move higher in pre-market trading after the news that China would no longer peg its currency to the U.S. dollar but later stocks declined on news of further blasts in London’s underground.

Treasurys were sharply lower. The benchmark 10-year note lost 24/32, or $7.50 per $1,000 invested, to yield 4.252. The 30-year bond rose 1 6/32 points to yield 4.463%. Yields move inversely to prices.

The HMO sector sharply declined in the first half hour of trading and has been narrowing some of its losses over the past 2 hours. The segment is still down, falling 6.5% to its lowest level in about 7 weeks.

Tech sector drags the market down, with the disk drive sector down 2.6% and the semiconductor and networking spaces lower by 1.7% each.

The gold sector is up about 1.3%. Internet stocks are strong. The retail sector posts modest gains.

Microsoft reports its fiscal fourth-quarter earnings Thursday. Excluding stock-based compensation expenses, analysts see earnings at 31 cents a share, up vs. 28 cents a year ago.

Google is expected to post second-quarter earnings of $1.20 a share, excluding stock-based compensation, up vs. 58 cents a share last year.

Coca-Cola Co. was up 82 cents after posting 2Q that rose 8.8% on a 5% increase in unit case volume driven by strong international sales.

McDonald's dropped 28 cents after 2Q revenue rose more than expected but earnings declined.

Nokia Corp. declined $1.96 after the company's 3Q earnings estimate missed expectations.

eBay Inc. jumped $6.34 after 2Q earnings surged beyond expectations.

SBC Communications fell 15 cents to 23.65 after the company reported a drop in 2Q profit.

EMC Corp. fell 70 cents after the company projected lackluster 3Q earnings and revenue, despite a strong 2Q results.

ECONOMIC NEWS

China put an end to a decade-old fixed exchange rate to the dollar. The new yuan rate revalues the currency by 2.1% to 8.11 per U.S. dollar immediately. China will value the yuan against a number of currencies as the new system will allow it to rise or drop according to the fluctuations of the dollar versus other currencies.

The Federal Reserve Bank of Philadelphia released its survey of regional manufacturing activity, with the diffusion index of current activity rising to 9.6 for July. In June, the measure came in at negative 2.2.

The Conference Board announced its basket of leading economic indicators climbed 0.9% in June, beating expectations. The board also revised numbers for the two previous months upward.

The number of Americans filing new claims for unemployment benefits declined by the largest amount in 2 1/2 years last week, reflecting a slowdown in layoffs in the auto industry.
The Labor Department said that new benefit claims fell by 34,000 to a new total of 303,000 as the labor market continued to signal strength.

The drop of 34,000 was the largest one-week improvement since a decline of 35,000 in the week of Dec. 21, 2002. The decline was more than triple the 10,000 drop that private analysts had forecasted. The total of 303,000 claims last week was the lowest level in 16 weeks. The four-week moving average also declined last week to 318,000, the lowest level in more than four months.

INTERNATIONAL MARKET NEWS

European stocks dropped after the bomb explosions in London with shares giving up some of their earlier gains made on the news of China’s new currency revaluation system. Utilities and resource stocks were among the leaders and helped the German and French indices rise 1.01% and 0.2% respectively. London’s FTSE 100 lost 0.2%. The euro slipped 0.2%, while the pound was up 0.4%.

Asian-Pacific benchmarks ended mixed. Some markets were boosted by China’s economic news, the positive assessment of the U.S. economy and solid earnings reports. The Japanese stocks closed flat after early gains in tech, auto and bank shares, supported by gains in Wall Street. Australian stocks reached a record high of 1% on improved confidence in global growth and demand for commodities. Hong Kong’s Hang Seng rose only 0.1% on a decline in property shares after banks raised their prime rate. Taiwan’s Taiex closed down 0.5% dragged on by financial stocks. In currency markets the dollar lost ground against the yen and stood at 112.38.

European shares traded mostly higher at mid-day lifted by resource stocks, retail-sales data, and positive profit reports from Ericsson and SAP. Metal and mining shares were among the top gainers after China posted strong economic growth and a production update from Anglo-Australian miner Rio Tinto. U.K. stocks lost early gains from upbeat monthly sales data and earnings from top retailers and dropped 0.1% after reports of incidents and evacuations in London. German and French stocks gave up some of their early gains and added 1% and 0.6% respectively.

The Australian stock market reached a record high Thursday on growing confidence in global growth and demand for commodities, particularly from China. The benchmark S&P/ASX 200 index advanced 42 points, or 1% to 4,343.2, beating the previous high on June 17. The index also reached an intraday record of 4,351.7. Australian traders cheered the news that China's economy climbed 9.5% in the first half and Alan Greenspan's comments overnight that the U.S. economy should produce sustained growth with low inflation. Both China and the U.S. are major trading partners with Australia, and China is a big importer of Australian iron ore and coal.

ENERGY, METALS AND CURRENCIES MARKETS

The yen rose 2% versus the dollar and rallied against other currencies on China’s currency revaluation system. The yen traded 110.18 per dollar. The greenback reversed early losses against the euro and stood at $1.2115 per euro.

Oil prices eased after explosions were reported on London’s public transport system. Light sweet crude fell 35 cents to $57.67 a barrel. London Brent dropped 39 cents to $56.26. The fact that there were no injuries this time made for less impact on oil prices than the explosions on July, 7th exerted on the market. Losses were also limited by China’s modest currency revaluation.

The Japanese yen reached a three-year high against the dollar after China’s currency revaluation. The yen climbed to 110.74 at 9.30 a.m. in NY from 112.91 late yesterday. The dollar dropped to $1.2172 per euro, down from $1.2138.

EARNINGS NEWS

Sherwin-Williams, manufacturer of coatings and related products, reported 2Q net income growth of $1.08 per share compared with 87 cents a year ago on strong sales, acquisitions and division improvements. The quarterly results exceeded estimates of $1.03 a share. The company projected 3Q earnings between $1.06 and $1.10 per share.

Tidewater, shipping company, reported 1Q net income rise to 50 cents a share, up from 23 cents a year ago on $192.2 million revenue growth, beating estimates of 46 cents a share.

Midland Company, insurance services provider, reported 2Q profit growth of $1.06 per share vs. 58 cents for the year-earlier quarter. The company raised its 2005 earnings outlook to the range of $3.25 to $3.45 per share.

Reebok, sports and fitness products maker, posted 2Q net income rise of 60 cents a share compared with 35 cents a year ago on sales growth of $876.2 million, exceeding expectations by 2 cents.

New York Times, media group, posted 2Q income decrease of 42 cents a share, down from 50 cents a year earlier, citing charges and stock-based compensation expense.

Nucor, steelmaker, reported 2Q profit rise of $2.03 a share compared with $1.58 a year ago on revenue growth, beating estimates of $1.96 a share. The company expects 3Q earnings below 3Q of 2004 and this-year 2Q.

Weyerhaeuser, forest products group, reported 2Q profit rise of $1.71 per share, up from $1.57 last year on sales growth. For the second quarter the company took gains of 37 cents a share, excluding them it would have reported $1.34 a share, beating analysts’ estimates.

Horizon Financial, commercial & mortgage lending provider, posted 1Q net income increase of 37 cents a share vs. 31 cents a year earlier, reflecting net interest income rise.

Coca-Cola, beverage company, reported 2Q profit rise of 72 cents a share. Excluding special items it would have posted 68 cents a share, exceeding previous forecasts of 64 cents a share. In the quarter the company bought back $1 billion in shares and is planning to buy at least $2 billion in 2005.

Equifax, provider of credit-management services, posted 2Q profit drop of 47 cents a share vs. 55 cents a year ago on 15% revenue growth.

Danaher, industrial products manufacturer, posted 2Q earnings growth of 70 cents a share compared with 56 cents a year ago. Excluding special items it would have reported earnings of 67 cents a share.

Charlotte Russe Holding, retailer, announced 3Q income fall of 14 cents per share , down from 23 cents in the comparable last-year quarter, missing estimates of 17 cents a share. In 4Q the company expects to report mid single-digit positive same-store sales and earnings between 16 and 20 cents per share.

Provident Financial Holdings, financial services company, reported 4Q net income rise to 68 cents a share, up from 60 cents last year on increased net interest income.

Nokia, Finnish mobile-phone maker, reported 2Q earnings of 18 euro cents on sales of 8.09 billion, missing estimates by a penny. The company sees its 3Q earnings between 14 and 17 euro cents a share on sales in the range of 7.9 billion to 8.2 billion euros.

Groupe Danone, dairy products maker, announced first-half net income fall of $422 million, down from $665 million a year ago, citing 200 million-euro provisions for its HOD U.S. home and office water-delivery business. Same-store sales grew 6.5%.

Reynolds & Reynolds, software seller, posted 3Q profit growth of 37 cents a share, including 3 cents a share benefit from lower tax rates. The company projected 2005 earnings in the range of $1.37 to $1.41 a share.

Boots, U.K. drugstore chain, posted 2Q sales growth of 1.9%, but same-store sales dropped 0.8%, missing expectations of 2% rise.

CORPORATE NEWS

It was reported Thursday that several top executives and board members at Delta Air Lines have warned CEO Gerald Grinstein that a turnaround plan there isn't working and that a Chapter 11 bankruptcy filing for the nation's No. 3 airline is inevitable. Delta is also slated to post its quarterly results early Thursday.

Australian mining giant BHP Billiton ((BHP)) said Thursday it has reached a deal to sell more than $4 billion worth of iron ore to Japan's JFE Steel. Billiton also said Thursday it had reopened its Olympic Dam copper, gold and uranium mine in South Australia after an explosion Tuesday in which a worker was killed.

Dow Jones & Co. agreed to transfer its 50% equity interests in CNBC Europe and CNBC Asia, as well as its 25% interest in CNBC World, to General Electric's NBC Universal, ending its international television partnership with CNBC. Dow Jones will post a second-quarter charge of about $36.7 million on the move.

OTHER NEWS

China denounced a Pentagon report, stating that Beijing is willing to expand its regional military power. China insists that it is no threat to its neighbors and throws accusations toward Washington of searching for excuses to sell weapons to Taiwan. The report appeared at a delicate time for China-U.S. relations.