Market Cautious Ahead of Earnings

albena
30 Nov, -0001
New York City

Futures were down in early trading, pointing to a lower opening for stocks, in a week that expects to receive earnings reports from nearly 30% of the S&P's 500 companies. Rising oil and the possibility of more earnings in the red might discourage traders from buying. On Friday government is expected to report the economy slowed in 2Q. Europe's No.1 mobile phone company Vodafone said Monday that it signed up 4.1 million users in 1Q, topping views and up 35% vs. a year ago.

U.S. MARKET AVERAGES

U.S. stock futures declined early Monday as downward movements in Europe with a sharp drop in food giant Groupe Danone impacted early moods. After weeks of speculation, Pepsi said that it will not make a bid for the French food company. The sentiment is likely to depend primarily on the raft of earnings reports scheduled before the opening bell and also on the companies’ outlook for future earnings.

Among the earliest earnings reports, oil service company Smith International ((SII)) posted stronger-than-forecasted 2Q earnings and boosted its 2005 outlook.

Pilgrim's Pride ((PPC)), a poultry producer, reported fiscal 3Q earnings above year-ago levels and beating estimates. The company also raised its fiscal 4Q outlook.

Google ((GOOG)) was under scritiny after Merrill Lynch lifted its earnings estimate for the Internet search giant. The company moved to $5.90 a share vs. $5.83 for 2005 and to $7.33 a share vs. $7.11 for 2006.

The Home Depot's 12-month price objective was lifted to $53 vs. $50 a share by Prudential Equity Group.

ECONOMIC NEWS

The only economic release on Monday is the data of the existing-home sales for June. Economists are expecting sales at an annual pace of 7.13 million units, equal to May's results.

On Tuesday, consumer confidence figures for July are due to be reported. Analysts’ estimate is 105.2, down versus 105.8 in the previous month.

There are three economic reports scheduled to be released on Wednesday and namely the Fed's beige book, new-home sales and durable goods orders for June, which are seen to swing to minus 1.4% versus positive 5.5% in May.

The beige book report is expected to play a more important part than usual after Fed Chairman Greenspan's attitude to rates during his congressional testimony last week.

Initial jobless claims and the help-wanted index are due on Thursday.

On Friday the economic highlights will be the employment cost index, revised Michigan sentiment and the Chicago PMI. Advanced GDP for 2Q is also to be released Friday with analysts expecting growth of 3.5%, down versus 3.8% in the prior period.

INTERNATIONAL MARKET NEWS

Asian markets closed generally higher Monday, with Japan's bellwether Nikkei 225 boosted by some top domestic companies ahead of this week’s earnings. The Nikkei closed up 0.6% at 11,762.65. Australia's All Ordinaries Index advanced 0.3% to 4,335.60, South Korea's Seoul Composite added 1.4% to 1,089.7 and Taiwan's Weighted Index gained 0.6% to 6,420.45, while Shanghai, Jakarta and Singapore markets finished lower.

European markets turned mixed Monday, as tech stocks and food producers cancelled out early gains made after a positive end of the U.S. trading week and welcomed corporate earnings. The German DAX 30 index shed 0.2% to 4,825.27, while France's CAC 40 index lost 0.2% at 4,407.34. The U.K.'s FTSE 100 index made the strongest gains of the European indexes, up 0.4% at 4,262.2 as markets continued to rebound after last week's terrorist developments.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices were down in early trading, as the September light crude futures contract for NYMEX shed 27 cents to $58.38 a barrel in electronic trading, while the September contract for Brent crude dropped 45 cents to $57.13.

Treasury prices were lower, lifting the yield on the 10-year note to 4.22% versus the 4.21 % level late Friday.

The dollar was narrowly mixed Monday morning versus major currencies in European trading. The euro was traded at $1.2074, up versus $1.2064 late Friday in New York. The greenback bought 111.65 Japanese yen, up vs. 111.20. The British pound finished at $1.7386, up versus $1.7374.

Gold advanced to $424.85 bid per troy ounce in London from $424.80 late Friday. In Zurich, the bid was $424.60, up versus $424.50. Gold declined $1.50 in Hong Kong to close at $425.25.

EARNINGS NEWS

The earnings tide comes on Monday with NYSE merger partner Archipelago, as well as Cendant, Netflix and Xerox.

On Tuesday, the market quarterly results are expected from AK Steel, BJ Services, DuPont, Sun Microsystems and video-game maker Electronic Arts.

Companies slated to post their quarterly results Wednesday include ConocoPhillips, Furniture Brands, Starbucks and Kellogg.

More than 500 companies will be reporting results on Thursday, including DaimlerChrysler, Exxon Mobil, Phelps Dodge and Raytheon.

Nearly 100 companies will be reporting Friday, among which Chevron and Vornado Realty Trust.

Arkansas Best ((ABFS)), a trucking company, reported earnings for 2Q of 91 cents per share, up from 76 cents per share last year, meeting analysts' estimates. Revenue for the period was $456.7 million, up vs. last year's $424.5 million.

BellSouth ((BLS)) is to post its quarterly results later in the morning. Analysts expect a profit of $0.43 per share vs. last year's mark of $0.51 per share.

Dow member American Express ((AXP)) is also slated to report earnings on Monday, with analysts seeing a jump in quarterly profit to $0.78 per share.

Xerox, copier and printer maker, reported 2Q net income growth of 40 cents a share compared with 21 cents a year ago, boosted by a tax benefit of 33 cents a share.

Volvo, truck maker, posted 2Q 40% profit rise of SEK3.9 billion on sales increase of SEK61.1 billion. Earnings rose 455 to SEK9.67 per share.

Triad Hospitals, health care services provider, posted 2Q profit of 72 cents a share, reversing a year-ago loss of 7 cents a share on revenue growth of $66 million. The company lifted its 2005 outlook to $2.82 and $2.90 a share.

Silicom, server adapters maker, reported 2Q swung to profit of 7 cents a share vs. a net loss of 13 cents on sales increase of $2.64 million.

Smith International, oil and gas industry services provider, posted 2Q earnings rise of 67 cents per share against 27 last year on revenue growth of $1.35 billion. The company raised its full-year guidance to $1.40 and $1.45 per share.

Vodafone, U.K. mobile phone operator, announced 2Q 8.6% organic growth in mobile phone revenue and an increase in the total number of customers to 165 million

CORPORATE NEWS

In corporate news, appliance maker Maytag Sunday said an improved $18 a share buyout offer from rival Whirlpool may be expected to be better than the company’s pending merger with Ripplewood Holdings, although Maytagt is not ready to change its recommendation for the Ripplewood offer at this point.

Israel's Teva Pharmaceutical Industries said Monday it is negotiating with Ivax Corp. on a possible transaction between two of the world's biggest generic drug makers. According to reports, Teva is to buy Ivax for about $7.5 billion in cash and stock. Teva will pay $26 a share for Ivax, or a 14% premium over Friday's closing stock price of $22.88, and Teva also will assume about $1 billion in Ivax debt.

Schering-Plough Corporation said it agreed to buy exclusive U.S. rights to develop and market Integrilin, a cardiovascular drug that it co-promotes with Millennium Pharmaceuticals Inc., for an upfront payment of $35.5 million, plus royalties.

Pepsico Inc. plans to repatriate up to $7.5 billion of undistributed international earnings, which will carry an estimated $475 million tax expense to be booked in its current 3Q.