Market Adrift After Large Caps disappoint

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

The initial impressions from the flood of earnings from large and small cap companies, tech and consumer products companies and job reductions from some of the largest companies such as Eastman Kodak, Hewlett Packard, Kimberly Clark and IBM led market adrift. Google, Microsoft, Maytag, Whirlpool failed to impress the market.

U.S. MARKET AVERAGES

During the day’s session large caps disappointed and small caps shined brighter.

Google just met the expectation, Microsoft failed to deliver more, Kimberly-Clark lowered the earnings guidance and Nokia and Motorola did not meet the unit sales targets. Overall market was not interested in rewarding these stocks even though companies are dealing with tough climate.

On the other end smaller companies such as Broadcom, Sandisk, Foundry Networks, Genesis Microchip impressed the market and were rewarded with more than 10% rise in stock prices. Energy services and defense contractors reinforced the prevailing themes in the markets. Schlumberger and Haliburton stocks advanced by 4%.

Tech stocks declined pressuring the broader market, amid some disappointing earnings and forecasts from Google and Microsoft. Google Inc. tumbled 5% despite four fold profit growth in the second quarter on two fold rise in revenue.

Kimberly-Clark Corp. rose $1.12 as it said would cut 6,000 jobs and sell or close up to 20 manufacturing plants as part of a restructuring plan.

Blue-chip stocks declined after the previous session's rally as investors digest earnings from tech bellwethers Microsoft and Google. Shares of Broadcom rallied 11% after the chipmaker reported higher-than-expected earnings late Thursday, and issued a bullish third-quarter forecast. SanDisk jumped 12% after reporting quarterly earnings late Thursday that slipped from a year earlier but beat estimates.

Tempur-Pedic International tumbled 19.5% after reporting quarterly revenue that missed estimates and issuing a current-quarter forecast that is shy of expectations.

INTERNATIONAL MARKET NEWS

European markets recovered from earlier declines after the latest violent attacks in London with the markets being focused on interest rates, earnings news and the Chinese revaluation system. Averages in Germany ended up 0.2%, in France lost 0.2%, and in the U.K advanced 0.3%.

Asian benchmarks closed mixed with China being a top gainer and Japan the leading loser. The Japanese stocks ended down 0.8% after the surging yen in the wake of China’s currency revaluation send shares lower with big exporters like Honda Motor and Sony being among the leading losers. The Nikkei was also dragged downward by Wall Street losses and further unrest in London. China’s Shanghai Composite gained 2.5% after the currency reform was introduced. Airlines, property developers and paper mills ware among the leading gainers. Hong Kong’s Hang Seng added 1.1% on gains in property stocks. South Korea ended flat, weighed down by losses in auto and tech exporters. The dollar rebounded to 111.06 yen in Tokyo trading.

European shares traded lower at mid-day dealings on new attack fears in the British capital. The German DAX 30 lost 0.2%, the French CAC 40 declined 0.4%, and the U.K.’s FTSE 100 dropped 0.3%. In currency markets the euro was up 0.1% to quote at $1.2168; the pound lost 0.1% to trade at $1.7528.

A close step behind China, Malaysia announced that it was abandoning its seven-year-old currency peg to the U.S. dollar in favor of a ‘managed float’ of the ringgit which had been fixed at 3.80 to the dollar. According to specialists this move could provide at least a short-term boost to the domestic economy.
ENERGY, METALS AND CURRENCIES MARKETS
Oil prices advanced although traders remained cautious after yesterday’s blasts in London. U.S. light sweet crude gained $1.51 to $58.64 a barrel. London Brent climbed $1.01 to reach $56.73.

The dollar recovered against the yen and other major currencies, retracing some of the previous day’s losses. In mid-morning trading the dollar rose 0.6% to 110.96 yen. The euro slipped to $1.2127, and the pound fell to $1.7425.

Crude-oil gained for the first day in three on speculation that China’s refineries will boost imports and increase output of fuels after the currency reform, allowing the yuan to rise against the dollar. Light sweet crude for September delivery gained 47 cents to $57.60 on NYME. London Brent added 59 cents to $56.31 on London’s International Petroleum Exchange.

The U.S. dollar fell slightly against the euro after the London attacks and the currency revaluation system in China. The euro traded at $1.2177, up from $1.2171 in late NY trading. The dollar rose against the yen and stood at 110.97, but fell against the pound which reached $1.7535, up from $1.7521. The Chinese yuan rose 2% against the dollar a day after the government cut its link with the dollar, a move which could make the Chinese exporters more expensive and foreign assets cheaper for China to buy. The yuan closed at 8.1111 to the dollar.

EARNINGS NEWS

Bryn Mawr, retail and commercial banking services provider, reported 2Q profit increase of 32 cents a share compared with 24 for the comparable quarter last year on higher net interest income.

FPL Group, utility company, reported 2Q profit drop of 52 cents a share compared with 71 cents last year, citing mild weather conditions and a special tax-related loss. The company sees 2005 earnings between $2.45 and $2.55 a share.

Genesis Microchip, technology developer, posted 1Q net income rise of 6 cents per share vs. a net loss of 20 cents a year ago. Excluding special items the company would have posted 13 cents a share, exceeding expectations of 8 cents a share.

Haliburton, oilfield services provider, reported 2Q profit growth of 78 cents a share compared with a loss of $1.52 a year ago due to an influx of new government contracts. The quarterly results are well ahead of estimates of 56 cents a share.

Belo, media company, reported 2Q earnings fall of 36 cents a share, down from 39 cents last year on revenue decline, meeting analysts’ estimates. The company forecast earnings for 2005 in the range of $1.17 to $1.24 a share.

Donegal, insurance holding, posted 2Q net income increase of 48 cents per share, up from 37 cents a year ago on solid revenue growth and excellent underwriting results.

Maytag, appliance maker, posted 2Q net income of 4 cents a share compared with a net loss of 52 cents a year ago, citing rising raw material costs and higher fuel transportation costs which offset sales growth and improved cost savings. Excluding restructuring charges the company would have posted 7 cents a share, missing estimates of 10 cents.

Merck & Co, pharmaceutical company, reported 2Q profit drop of 33 cents a share compared with 79 cents a year earlier on the withdrawal of its drug Vioxx and repatriation charges.

Eli Lilly, drug maker, posted 2Q net loss of 23 cents vs. 60 cents in the comparable period last year on litigation charges.

Microsoft, software maker, announced 4Q profit rise of 34 cents per share, up from 25 cents a year ago, reflecting 9% sales growth and a big tax benefit. Excluding special items the company would have posted 33 cents per share, topping estimates of 31 cents.

Google, online search engine, reported 2Q earnings increase of $1.19 per share compared with 30 cents a year ago on revenue growth of $1.38 billion.

Hyperion Solutions, software provider, posted 4Q net income rise of 50 cents per share , up from 36 cents last year on record sales of license revenue. Excluding special items, the company would have posted earnings of 55 cents a share, beating estimates of 52 cents.

Hutchinson Technology, supplier of suspension assemblies for disk drivers, reported 3Q earnings drop of 65 cents a share, down from $1.30 a year ago. The company projected 4Q earnings between 55 and 65 cents a share.

Schlumberger, oilfield and information services provider, posted 2Q earnings rise of 80 cents a share compared with 59 cents last year on revenue growth, exceeding expectations of 67 cents a share.

Beckman Coulter, biomedical equipment manufacturer, reported 2Q profit drop of 73 cents a share vs. 88 cents a year earlier. The company sees its 3Q earnings between 45 and 60 cents a share.

Skyworks Solutions, chip maker, posted 3Q net income fall of 5 cents a share, down from 8 cents last year on decline in revenue.
Kimberley-Clark said it is narrowing its 2005 adjusted earnings per share and expects to post earnings between $3.77 and $3.83 on solid sales growth and higher prices.

Great Atlantic & Pacific Tea, supermarket operator, reported net loss of $2.28 per share vs. a loss of $1.11 a year ago. Same-store sales fell 0.3%.

CORPORATE NEWS

Ford Motor could cut as much as 30% of its white-collar employees over the next few years to come, a reduction far deeper than announced earlier.

Pharmacy-benefits management company Express Scripts agreed to acquire specialty pharmacy company Priority Healthcare for $1.3 billion, or $28 a share. The deal represents an 8.3% premium for Priority, which sells high-cost injectable drugs for diseases such as hepatitis, cancer and multiple sclerosis.

Starwood Capital Group, a private investment company, agreed to buy the controlling stakes in two French companies - Groupe Taittinger SA and Societe du Louvre for $1.46 billion in cash. Thus Starwood will gain control over 2 of Paris’s historic luxury hotels and a 271-year-old Champagne producer and crystal maker Baccarat. Starwood will try to buy the remaining part of the companies after the sale is cleared by the EU. The total value would be $2.54 billion plus $605 million in debt.