Market Cheers Rosy Earnings and Economic News

albena
30 Nov, -0001
New York City

The falling oil prices and the upbeat economic readings helped U.S. stocks extend early gains Tuesday. Another round of better-than-expected earnings fueled the good sentiment. June factory orders rose 1% in line with expectations and followed an upwardly revised gain of 3.6% in May.

U.S. AVERAGES

The pullback in oil prices, the positive income and factory data, and the round of better-than- expected earnings were the three main factors to drive U.S. stocks higher Tuesday.

Robust factory orders in June, with particular strength in electronics and computer orders, gave tech shares a boost. The Commerce Department said new orders at U.S. factories rose 1% in June, meeting expectations, with an 11% jump in orders for computers and electronics.

Personal income rose at a seasonally adjusted annual rate of 0.5% in June, after rising an unrevised 0.2% in May. Personal consumption increased by 0.8%, after an unrevised flat reading the month before. Economists called for personal income to increase 0.4% and consumer spending to rise 0.8%.

Non-defense capital-goods orders excluding aircraft, rose 3.9%, the biggest gain since January.

Tech stocks rallied, although shares of both Adobe Systems Inc. and Macrovision Corp. missed out on disappointment over their financial guidance.

Within the Dow industrials, Alcoa Inc. ((AA)) was the biggest percentage gainer, up 3.5% after CS First Boston upgraded mining stocks.

Tyco International Ltd. ((TYC) tumbled 9% as rosy 2Q results were offset by a disappointing 4Q and full-year profit outlook.

Comcast ((CMCSK)) climbed 1.2% after the cable TV company's 2Q results beat views.

Utility stocks gain steadily, while the semiconductor segment remains one of the leaders among the gainers, adding at this point 2.2%.

The airline sector edged up during the first half hour but declined recently and moved into negative territory. The housing sector is also weak.

U.S. stocks started the first week of August with a mixed performance Monday, as investors were concerned about the surging oil and interest rates. Tuesday caution remains though crude retreated from record highs and together with the upbeat economic readings managed to push stocks up.

ECONOMIC NEWS

Personal Income and Spending

Before the opening bell Tuesday, the Department of Commerce released its report on personal income and spending in the month of June. Personal income growth came in slightly above economist estimates while personal spending growth met expectations.

Personal income climbed 0.5% in June after rising 0.2% in May. The rise came in slightly above economist projections of an increase of 0.4%.

The Commerce Department said that the increase in personal income was due to growth in private wage and salary disbursements, which rose by $11.5 billion in June after a $4.4 billion increase in May.

Personal spending added 0.8% in June after coming in flat in May. Economists had seen personal spending to increase by 0.8%.

The increase in consumer spending reflected a sharp rise in spending on durable goods, which rebounded after showing a notable drop in May.

The price index for consumer expenditures excluding food and energy came in unchanged in June after rising 0.2% in May.

Factory Orders

The Department of Commerce released its report on orders for manufactured goods in the month of June, marking a rise in line with economist expectations.

New orders for manufactured goods gained 1.0% in June after an upwardly revised 3.6% increase in May. Economists had expected orders to jump by 1.0% vs. the 2.9% increase reported for May.

The increase was partly due to rise in orders for computer and electronic products, which increased 10.8% in June.

Shipments of manufactured goods declined 0.1% in June after gaining 0.3% in May. Inventories were unchanged in June, following a 0.2% decline in May. Subsequently, the inventories-to-shipments ratio remained unchanged at 1.23.

INTERNATIONAL MARKET NEWS

Asian-Pacific markets closed higher, gaining on the semiconductor sector after a report by the Semiconductor Industry Association that announced global chip sales rose 6.5% in the first half and continuous strong performance of telecommunication stocks. The Japanese Nikkei was the only decliner, losing 0.1%, erasing early gains. Hong Kong’s Hang Seng added 1.1%, led by oil company Cnooc, which gained 3.7% on talk of bid ending. South Korea’s Kospi advanced 0.3% and Taiwan’s stocks ended up 0.6% on chip makers and expectations of improved second-half earnings. The dollar traded at 111.39 yen in late trading in Tokyo.

European stocks traded higher at mid-day dealings, following a slight rally in U.S. markets and making gains on strong earnings reports of companies such as Irish airline Rynair and German retailer Metro. Oil companies advanced as crude-oil prices kept hovering over $61 a barrel; metals and mining stocks also made gains. The German DAX 30 added 0.3%, the French CAC 40 rose 0.4%, and London’s FTSE 100 climbed 0.4%. The euro traded higher against the dollar at $1.2194, the pound was also up, at $1.7692.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices slipped from record highs of yesterday, reached after the death of King Fahd of Saudi Arabia, but stability of Middle Eastern supplies softened the fall. Light sweet crude for September delivery dropped 47 cents to $61.10 a barrel in electronic trading on the NYME. London Brent fell 37 cents to $60.07 a barrel.

U.S. gold futures were flat, backing off Monday’s one-month high. Other metals also eased as the markets consolidated recent gains. Gold for September delivery slightly slipped to $431.60 per ounce, down from $431.90. September silver traded down 3.5 cents at $7.27.

Crude-oil prices dropped on profit-taking a day after hitting a record high of $62 a barrel in NY on supply concerns. The markets have also shrugged off the death of King Fahd of Saudi Arabia. Light sweet crude for September delivery fell 51 cents to $61.06 a barrel in electronic trading in NY. London Brent September delivery declined 74 cents to $59.70.

The declining U.S. currency raised gold futures in European trading. The recommended price of gold in London was $431.85 per ounce, up from $431.00. In Hong Kong gold gained $0.40 to close at $432.15 per ounce. Silver opened at $7.27, up from $7.25.

The dollar lost ground against other major currencies in early European trading. The euro quoted at $1.2215, up from $1.2205. The yen stood at 111.43, down from 112.02. The British pound traded at $1.7715, up from $1.7702.

EARNINGS NEWS

Statoli, oil company, posted 2Q profit increase of 6.75 billion Norwegian kroner compared with 4.36 billion a year ago on high oil prices, increased production and improved refining margins.

Expeditors International, freight forwarder, posted 2Q earnings of 40 cents a share, up from 34 cents a share in the year-ago period on revenue growth, matching the 40-cents-a-share forecast from analysts.

Molson Coors, beer and other malt-based beverages producer, announced 2Q net income decreased to 45 cents a share compared with. $1.90 a share the same period a year ago, missing analysts’ expectations of $1.61 a share despite sales growth.

Vishay, electronic components manufacturer, posted 2Q earnings of 5 cents a share, down from 22 cents a share posted a year earlier, missing analysts’ expectations of 9 cents a share.

The ServiceMaster, residential and commercial customers services provider, posted 2Q earnings from continuing operations of 27 cents a share, up vs. 24 cents a share in the year-ago period on revenue growth, beating expectations by 2 cents a share.

Perot Systems, information technology services provider, announced 2Q net income was up to 27 cents a share on revenue growth. Apart from one-time items, the company would have earned 21 cents a share, matching the prediction of analysts.

Argosy, casino-style gaming and related entertainment provider, posted 2Q net income of 73 cents a share, up vs. 63 cents a share a year earlier on revenue growth, beating analysts’ estimate of 71 cents a share.

Tenet, hospitals and related health care facilities operator, announced 2Q reduced net loss to 4 cents a share, up from 91 cents a share in the year-ago quarter despite a decline in revenue, missing analysts’ expectations by a penny.

Cooper, tire and rubber company, posted a 2Q loss of 11 cents a share, down from 46 cents a share for the same period a year ago on revenues decline, missing the expected earnings of 3 cents a share.

Blount, the chainsaw and lawnmower maker, announced 2Q profit was up to 36 cents a share,up from 25 cents a share in the same period last year on lower interest expenses, higher operating income and sales increase.

Remington, oil and gas company, posted 2Q earnings of 83 cents a share, up vs. 53 cents a share in the same period last year on revenue growth, missing analysts’ expectations of 86 cents a share.

PPL, electric utility company, posted 2Q earnings of 67 cents a share, down vs. 81 cents a share in the same period last year. Excluding non-recurring items, earnings would have been 91 cents a share, topping analyst forecasts of 81 cents on revenue growth.

TRW, automotive systems supplier, posted 2Q earnings of 83 cents a share, up vs. 75 cents a share in the year-ago period on revenue growth, topping analysts’ expectations of 37 cents a share. Excluding non-recurring items, earnings would have been 73 cents a share.

Green Mountain, coffee roaster, posted 3Q net income of 28 cents a share, up vs. 26 cents, gained in the same period in fiscal 2004 on quarterly sales increase, beating the analysts’ forecasts by a penny.

Group 1 Auto, electricity supplier, posted 2Q net income rise of 75 cents a share, up vs. 67 cents a share a year ago on revenue growth, beating analysts’ forecasts of 71 cents a share.

Sirius, satellite radio company, reported a bigger 2Q loss than the same period last year but topped its year-end subscriber and revenue forecast, saying it lost 13 cents a share, vs. a year-earlier loss of 11 cents on revenue growth, beating analysts’ expectations of a loss of 15 cents a share.

Masco Home, improvement and building products maker, reported 2Q earnings from continuing operations fell to 64 cents a share, down from 65 cents a share in the same period a year-ago despite sales growth, topping analysts’ predictions of 61 cents a share.

Qwest, telecommunications group, posted 2Q loss of 9 cents a share, up from a loss of 43 cents a share in the same period last year on revenue growth, meeting analysts’ expectations. Excluding non-recurring items, the loss was reduced to 7 cents a share vs. 18 cents a share the year-earlier period.

MAIR, regional scheduled passenger services provider, posted fiscal 1Q earnings of 6 cents a share, down vs.14 cents a share in the same period last year on revenue growth.

Coventry Health Care, managed health care company, reported 2Q net income increased to $1.19 a share, up vs. 93 cents a share in the year-ago quarter on improving operating fundamentals and revenue growth, beating market expectations of $1.14 a share.

Coach, market leather goods and furniture producer, announced 4Q net income soared to 25 cents a share, vs. 17 cents a share a year ago on market-share gains, beating analysts' forecasts by a penny.

Anadys Pharma, biopharmaceutical company, reported 2Q net loss of 31 cents a share, down from 50 cents a year ago on doubled sales of $581 million. The quarter was highlighted by the signing of collaboration with Novartis which improved the company’s outlook.

Genesee & Wyoming, freight railroad operator, posted 2Q net income rise of 41 cents a share vs. 39 cents last year on increased traffic and 25% revenue growth.

Tyco International posted 3Q profit increase of 56 cents per share, up from 43 cents last-year same period on 3.3% higher revenue, beating forecasts of 49 cents per share. The quarterly results included special items of 6 cents a share.

Del Monte Produce reported 2Q profit decrease of 80 cents a share compared with $1.01, earned last year, citing higher product and transport costs. The quarterly results failed to meet expectations of 83 cents a share.

Allied Defense, defense and security firm, projected full-year earnings of $1.48 a share after a very weak first-half results, but improving second-half results.

Rynair Holdings, Irish low-cost airline, reported 1Q net income rise of 9.1 euro cents vs. 7 euro cents a year ago on 35% revenue growth and 30% higher passenger traffic.

Tower Semiconductor, independent chip company, posted 2Q net loss increased to 71 cents a share, down from 55 cents a share on revenue decline.

Alliance & Leicester, U.K. mortgage bank, announced first-half pre-tax profit was down to 42.1 pence a share from 47.3 pence a share in the year-ago period. The bank said interim dividend was up to 16.8 pence a share.

Metro, retailer, posted 2Q pre-tax earnings were up to 43 euro cents a share on sales growth outside Germany, slightly ahead of expectations. The company backed its 2005 outlook.

Continental, tires and automotive parts maker, posted 2Q net profit rise vs. the same period last year and announced it expects to increase sales and operating profit.

Smiths Group, the British aerospace and medical products group, announced it should post in-line fiscal year earnings per share before exceptional charges and goodwill amortization, at around 54 pence on sales growth.

CORPORATE NEWS

Daimler Chrysler plans to enforce a major revamp of its manufacturing process, hoping it will decrease the cost of developing and producing cars by billions of dollars over many years. According to the new manufacturing process, three or more different car models will be built in a single plant.

CNOOC will officially drop its bid to buy Unocal ((UCL)). The Chinese oil company, majority owned by China’s government, has not been welcomed in the U.S. and the abandonment of its offer will open the way for Chevron ((CVX)) and Unocal to complete their merger deal.

Automakers will report July sales, with the traditional Big Three expected to report solid gains after offering all customers the chance to buy their vehicles at their employee discount price levels.

OTHER NEWS

South Africa, the world’s top gold producer, is facing its worst strike in 18 years as the unions threatened to launch work stoppage at all gold mines after wage talks broke down.

The World Trade Organization declared the EU tariff on imported bananas was illegal. A WTO arbitration body backed a claim by Brazil, Colombia and Venezuela which said that the imposed EU tariff of $279 on imported ton of bananas would seriously hurt their export and would have a ‘devastating effect’ on their economies.

Documentary Security Systems filed a lawsuit with the European Court of First Instance against the European Central Bank for alleged patent infringement. The company claims to have a patent that covers a method used by the ECB to protect the euro bank notes from counterfeiting.

Bank of Japan Governor Toshihiko Fukui told a government committee meeting Tuesday that the Japanese economy may emerge from deflation by the end of calendar 2005.