Late Afternoon Rally Falters

123jump.com Staff
20 Dec, 2006
New York City

Advancing stock indexes faced headwind as investors stayed on the sidelines, however in the broader market stocks managed to gain. FedEx reported 9% jump in earnings but forecasted lower Q3 earnings dragging the stock lower by 2%. Redback agreed to be acquired by Ericsson for $2.1 billion, stock rose 20%. Used car dealer, CarMax rose 8% on sharp rise in sales and earnings. European markets rose. Asian markets gained on Thai market rise of 11% after losing 15% a day earlier.

[R]4:00PM NY – 10:00PM Frankfurt – 2:30AM Mumbai[/R]

Yield on 10-year U.S. bond closed at 4.596% and the 30-year bond closed at 4.727%.

Gold lost 80 cents to close at $624.60 a troy ounce, silver declined 15.5 cents to end at $12.635 a troy ounce and copper decreased 5.75 cents to close at 296 cents per pound.

Oil gained 13 cents to close at $63.590 a barrel and heating oil advanced 1.23 cents to finish at 173.10 cents a gallon. Gasoline was down 2.46 cents to end at 167.590 cents a gallon. Natural gas lost 29.8 cent to close at $6.785 per mBtu.

Asian markets closed higher led by Thailand with a gain of 11.16%, Indonesia with an advance of 1.73% and Hong Kong with an increase of 1.45%. The decliners were led by Philippines with a loss of 0.71% and India with a decline of 0.31%. Thai stocks surged after the country announced reversal of the Central Bank decision.

European markets closed higher led France with a gain of 0.54%, Germany with an increase of 0.51% and Netherlands with an advance of 0.44%. The only decliner was U.K. with a loss of 0.09%. European stocks closed positive helped by takeover activity from Swedish telecom equipment maker Ericsson and steel giant Arcelor-Mittal.

Latin America markets finished lower led by Mexico with a decline of 0.89%, Brazil with a loss of 0.20% and Argentina with a decrease of 0.02%. The only advancer was Canada with an increase of 0.04%.

[R]3:00PM NY – CarMax reports strong rise in earnings and sales for the quarter.[/R]

Largest used-car dealer, CarMax Inc., reported third quarter earnings of 42 cents vs. 25 cents a year ago on a revenue rise of 24%. The used-car industry wide sales are down 4% for the year. The company reported that its sales from web advertising brought more than expected customers. The stock rose 15% in the early afternoon trading but settled 9.7% higher.

With 74 locations in the country, the company plans to open 13 new stores in the next 14 months, five of these stores will be in new markets. Used-vehicle sales form 95% of total sales. Sales of SUV and pick-up trucks drove 13% growth in the used-vehicle segment.

The company has revised upwards its full-year earnings target two times this year. The company now estimates full-year earnings between $1.75 and $1.85 per share up from its previous guidance of $1.55 to $1.65 per share. The company earned $1.26 per share in the fiscal year 2005. The company raised sales growth for the year between 8% and 9% from 6% and 8%.


[R]1:00PM European markets closed mostly higher, helped by Ericsson and Arcelor-Mittal.[/R]
European stocks closed mostly in the positive Wednesday, lifted by takeover activity from Swedish telecom equipment maker Ericsson and steel giant Arcelor-Mittal. Ercsson shares rose 1.3% after the world's largest maker of mobile-phone networks agreed to buy Redback Networks Inc. for $2.1 billion in cash. Steelmaker Arcelor-Mittal rose 2.4% in France after it agreed to acquire Mexico's Sicartsa for $1.44 billion, continuing the steel-industry consolidation trend. In the aerospace sector, shares of Airbus parent EADS rose 4.1% after the company said its Airbus 400M military transport aircraft program is ‘continuing to fully meet its targets.’ On the side of the losers, shares in HMV Group closed down 4.8% after the U.K. book and music retailer warned that annual profit would come at the low end of market expectations. The French CAC 40 climbed 0.5%, the DAX 30 also gained 0.5%, while London FTSE 100 fell 0.1%.

Crude oil prices gained following a sharper-than-expected decline in U.S. oil inventories. Crude oil January contract rose 33 cents to $63.80 a barrel. Gasoline fell to $1.6905. Natural gas futures slipped 15 cents to $6.935 per 1,000 cubic feet. The U.S. dollar traded mixed against its major currency rivals. The euro was quoted at $1.3193, up from $1.3192. The dollar bought 118.19 yen, up from 118.08. The British pound was quoted at $1.9682, down from $1.9684. European gold prices were mixed. In London, gold traded at $620.66 per troy ounce, up from $620.20. In Zurich, the precious metal traded at $618.10 per ounce, down from $619.95. Silver closed at $12.47, down from $12.61.


[R]11:30AM Market was driven higher by merger activity.[/R]
Stock market averages gained ground in late Wednesday trading, driven higher by a flurry of merger deals which helped offset disappointing forecasts from Fedex Corp. and Palm Inc. Harrah's Entertainment ((HET)) rose 0.6% after it agreed to be bought by private-equity firms. Telecoms equipment provider Ericsson ((ERIC)) added 1% after it agreed to buy Redback Networks for $2.1 B. Steel giant Arcelor Mittal ((MT)) rose 1% on news that it is buying Mexico's Sicartsa from Grupo Villacero for $1.44 billion. Again in the M&A news, M&F WorldWide Corp. ((MFW)) agreed to buy John H. Harland ((JH)) for $1.7 billion cash, or $52.75 a share. The offer is a premium of 19% above its Tuesday closing price of $44.47. Shares of M&F rose 3.7%, while John H. Harland climbed 12%. Shares of the NYSE fell 1.6% after its shareholders approved the exchange's merger with Euronext.

On the earnings news front, FedEx ((FDX)) fell 2.6% after reporting a 9% gain in Q2 income, but a disappointing Q3 earnings estimate. Palm ((PALM)) was another decliner, down 1% after posting a sharp drop in earnings, in line with expectations, but disappointed investors with its forecast for the current quarter. On a positive note, used car dealer CarMax ((CMX)) rose 9.6% after its Q3 earnings nearly doubled on strong sales to the wholesale market and strong demand for trucks and sport utility vehicles. In late morning trading Wednesday, the Dow rose 24.51, or 0.20 percent, at 12,475.83. The Standard & Poor's 500 index was up 2.89, or 0.20%, at 1,428.44 and the Nasdaq composite index rose 11.12, or 0.46%, to 2,440.67. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.60% from 4.59% late Tuesday.


[R]10:30AM The Sensex declined Wednesday amid a highly volatile session.[/R]
The Sensex on BSE finished 41.80 points, or 0.31%, lower at 13,340.21. The benchmark index traded within a range of 335 points. The market-breadth was negative. As 1,465 shares declined, 1,094 advanced and 83 remained unchanged. From the Sensex stocks 21 advanced while the rest declined. The turnover on BSE was Rs 4,383 crore, higher than Rs 4,183 crore on Tuesday.On NSE, the turnover amounted to Rs 10,066.83 crore, up from Rs 9,066.2 crore yesterday.

Economic news

Arcelor Mittal, the largest steelmaker in the world, which is still in the process of completing $33 billion merger, said it had agreed to purchase for $1.45 billion Grupo Villacero for Sicartsa of Mexico.

Trying to improve transparency, the Reserve Bank of India has asked banks to publish separate profit and loss account for different business segments like retail and wholesale.

IPO

Sobha Developers made a remakable debut closing with 51% gain. Ruchira Papers made a flat debut, easing 9% from its issue price.

Most-active stocks

Sobha Developers was the most-active stock with a turnover of Rs 710.90 crore followed by Tech Mahindra and Reliance Industries.

Advancers

Tata Steel led the advancers, up 2.30% to Rs 465. It bounced back from low of Rs 450.10, advancing after Britain takeover agency set January 30, 2007 deadline on Tuesday for Tata Steel and CSN of Brazil to make revised offers for steelmaker Corus Group.

Sobha Developers closed at Rs 968.75 on BSE above its IPO price of Rs 640. The stock opened at Rs 1,111.25 and reached Rs 1,179 before closing.

Cipla gained 1.24% to Rs 24, Maruti Udyog advanced 1.73% to Rs 925 and HDFC rose 1.97% to Rs 1,580.

ITC advanced 1.13% to Rs 170.25 following reports that it will expand its fruit and vegetable retail and wholesale business by opening 54 new outlets in select metros in next three years.

Tech Mahindra surged 7.18% to Rs 1,238.10 on intense buying in expectation of strong financial performance for third-quarter December 2006.

iGate Global Solutions soared 16.66% to Rs 305 after the company reported the company board meeting on 10 January 2007, to discuss record third-quarter December 2006 results.

Decliners

Tata Motors led the decliners, off 3.22% to Rs 835.10 on 5.46 lakh shares. Hindustan Lever declined 3.14% to Rs 217.70, Grasim shed 2.29% to Rs 2,655 and HDFC Bank edged lower 1.82% to Rs 1,019.

Index heavyw Reliance Industries closed 0.24% lower at Rs 1,250.10 on a high volume of 13.29 lakh shares.


[R]9:45AM Stocks opened narrowly mixed. FedEx reported Q2 profit rise but released disappointing Q3 forecast.[/R]
U.S. stocks opened little changed on Wednesday as transportation stocks fell after FedEx financial report limited gains generated by optimism about global merger-and-acquisition activity. FedEx Corp. ((FDX)) reported Q2 profit rise of 9% on strong results from its ground delivery business. Earnings for the quarter increased to $1.64 per share, up from $1.53 per share last year. However, the company also released a disappointing Q3 forecast, sending its shares down 2.2%. Used car dealer CarMax ((KMX)) said its Q3 earnings nearly doubled on strong sales to the wholesale market and strong demand for trucks and sport utility vehicles.

The Nasdaq was pushed higher by Swedish telecommunications equipment maker Ericsson ((ERIC)) which agreed to buy networking equipment vendor Redback Networks ((RBAK)) for $2.1 billion in cash. Redback shares jumped 17.5%. Some strength emerged in the semiconductor sector, with Maxim ((MXIM)) leading the sector higher after announcing the retirement of its CEO. The stock jumped 4.9%. Shares of U.S. metal producers advanced Arcelor Mittal ((MT)) agreed to buy Mexico's Sicartsa for $1.44 billion. from Grupo Villacero.U.S. Steel Corp. ((X)) stock gained 1.3% and Allegheny Technologies ((ATI)) shares gained 0.7%. Software, disk drive, and housing stocks also posted strong gains. At the same time, transportation stocks came under pressure in early trading. In the first hour of trading Wednesday, the Dow was down 4.17, or 0.03%, at 12,467.15. The Standard & Poor's 500 index was up 0.88, or 0.06% at 1,426.43 and the Nasdaq composite index rose 7.84, or 0.32%, to 2,437.39


[R]9:30AM The London benchmark index was higher Wednesday on Asian recovery.[/R]
The FTSE 100 advanced 26.6 points, or 0.4%, to 6,230.4.

Decliners

British Energy was in focus as its shares slumped 8.3% on reports that repair work at Hunterson and Hinkley reactors will not be completed until March.

HMV Group, the music and book retailer, also hogged the limelight after warning that full-year pretax profits would be at the low end of City expectations. HMV dipped 4.07%.

Northern Foods shed 5.2% after Credit Suisse downgraded to neutral on recent share price strength and the fact that Christmas is a crucial period for the company and four of the past five January’s have brought profits warnings.

Bodycote International, engineering company, was 4.22% lower after it warned that costs had stabilised at record high levels.

Advancers

Experian, the credit company, led the gainers, up 2.5% on a Morgan Stanley upgrade to outperform. The broker said the company was undervalued and could spend up to $3 billion on acquisitions over the next couple of years.

Soft drinks group Britvic advanced 4% as investors reponded to Tuesday after-hours conformation that Permira had increased its stake from just under 3% to 14%.

There was more gains for John Wood, the oilfield services group, as its forecasts were upgraded in the wake of the trading statement on Tuesday. The shares rose 3.9%.

Bangladeshi drug maker Beximco recouped part of its recent decline after it guided full year revenue growth of more than 10%.


[R]9:00AM Stocks futures advanced, lifted by Ericsson acquisition deal.[/R]
U.S. U.S. stock market futures pointed higher Wednesday, boosted by tech shares gains after Ericsson agreed to acquire a network hardware company. A recovery in Asian-Pacific stock markets after a sharp decline yesterday also contributed to the advance. Thailand's government reversed a decision on capital controls, sending its benchmark SET index up 11%.

Swedish telecommunications equipment maker Ericsson agreed to buy Redback Networks for $2.1 billion cash, an 18% premium to Tuesday's close. In other merger-and-acquisition news, Harrah's Entertainment ((HET)) late Tuesday agreed to be bought by two private-equity firms. Texas Pacific Group and Apollo Management topped a bid from Penn National Gaming, offering $90 a share in cash, or $27.8 billion with assumed debt included. The steel sector continued consolidation as Arcelor and Mittal ((MT)), which are in the process of combining to form the world's biggest steelmaker, announced they had bought Mexico's Sicartsa from Grupo Villacero for $1.44 billion. The companies said that the deal would result in the creation of Mexico's largest steel producer with an annual capacity of 6.7 million tons.

In earnings news, express package delivery company FedEx Corp. ((FDX)) reported on Wednesday Q2 profit rise of 9% on strong results from its ground delivery business. Earnings for the quarter increased to $1.64 per share, up from $1.53 per share last year. But the company also released a Q3 forecast that was below both the previous year's results and analysts' expectations. The company's shares fell 4% in premarket trading. Dow Jones futures were recently up 16 points, S&P 500 futures rose 2.6 points and Nasdaq futures rose 6.5 points.


[R]7:30AM Asian stocks bounced back led by reversal of Thai central bank decision.[/R]
Asian markets ended higher on Wednesday. SET Index of Thailand rebounded 11% to 691.55, after plummeting 15% in the previous session. On Monday the Thai central bank introduced rules designed lock up 30% of foreign-currency deposits for a year and penalize investors trying to repatriate funds within a year. Late Tuesday, Thai authorities reverse the move.

In Japan, the Nikkei 225 Index closed up 1.4% at 1,7011.04. Exporters led the way. Honda advanced 2.3% while Toyota rose 1.3%. Toyota and related units Daihatsu Motor and truck maker Hino Motors are reportedly on schedule to build 9.45 million vehicles next year. Consumer electronics conglomerate NEC gained 2.9% while Toshiba advanced 0.9%.

Hang Seng Index of Hong Kong gained 1.5% to 19,240.12. Sun Hung Kai Properties advanced 0.7%, after the real-estate company paid $231.48 million for a residential lot in the exclusive Peak district on Hong Kong Island. China Life, the biggest life insurer in mainland China, surged 8.2% to a record as investors were optimistic about the share, after it won approval last week from mainland authorities to list shares in Shanghai.

In Seoul, the Korea Composite Stock Price Index, or Kospi, gained 1% to 1,442.28. Industrial Bank of Korea advanced 2.4% as concerns over the planned 15.7% stake sale by the Ministry of Finance and Economy have been overcome as it is anticipated to be delayed into next year

Other markets around the region also gained including Australia S&P/ASX 200 Index advancing 0.9% to 5607.80 and New Zealand NZSX-50 Index rising 0.6% to 4004.96. Singapore Straits Times Index surged 8% to 2920.83 and Shanghai Composite Index of China added 0.4% to 2,373.20, while Taiwan Weighted Price Index ended 0.7% higher to 7,648.35.


[R]6:30AM European shares advanced Wednesday on autos and merger deals.[/R]
European markets were higher on Wednesday. By mid morning, the FTSE 100 in London climbed 0.4% to 6,232.3, Frankfurt’s Xetra Dax gained 0.7% to 6,597.89, while the CAC 40 in Paris advanced 0.6% to 5,518.66.

Advancers

DaimlerChrysler led European autos higher, up 2%, before a supervisory board meeting. Volkswagen, whose board is locked in a management leadership struggle with chief shareholder Porsche, advanced 1%. Porsche added 1.8%.

Price increases buoyed Continental. The company said it might return some of its 4 billion euros to shareholders if it did not find suitable acquisitions. Shares gained 0.8%, while Michelin climbed 1.8%.

Ericsson led the tech sector after investors welcomed its acquisition of Redback Networks. Ericsson gained 1.5%. Swiss engineer ABB advanced 2.1% after Moody’s raised its rating on the debt of the company, in view of its the stronger-than-expected improvement of its operating performance.

Arcelor-Mittal the world largest steelmaker, advanced 1.5% following its statement that it is buying Sicartsa of Mexico from Grupo Villacero.

Decliners

HMV Group traded down 1.8% after the U.K. book and music retailer said that it anticipates its annual profit to be at the low end of market expectations.

Oil and gold

Crude oil for February delivery declined 15 cents at $63.31 a barrel in on the New York Mercantile Exchange. At London ICE Futures exchange, oil prices also moved slightly lower, with Brent crude for February delivery 17 cents lower to $62.64 a barrel.

Gold traded in London at $623.40 per troy ounce, higher than $620.20 late Tuesday. In Zurich, gold traded at $621.70, up from $619.95.

Currencies

The U.S. dollar dipped against the euro on Wednesday morning. The euro traded at $1.3229, up from $1.3192 late Tuesday. The British pound was quoted at $1.9707, up from $1.9682. The dollar bought 117.98 Japanese yen, down from 118.08.