Retail Sales Drive Afternoon Rally

123jump.com Staff
12 Jan, 2007
New York City

December retail sales rose 0.9% better than 0.7% forecast. Oil closed higher. Investors responded to the twin news and bid stocks higher in the afternoon. Funds continue to flow in tech stocks. IBM, Microsoft, Google and Yahoo advanced. Cisco filed trademark suite against Apple. Marathon Oil, AMD and German software maker SAP issued earnings warnings. AMD dropped 10%. India led emerging markets with a rise of 3% to a record close. BP CEO retires, stock up 5%.

[R]4:00PM NY – 10:00PM Frankfurt – 2:30AM Mumbai[/R]
[R]December retail sales strength supported a rebound in afternoon rebound in stocks prices. Oil prices remained weak. European markets closed higher.[/R]

Yield on 10-year bond closed down at 4.774% and the 30-year bond closed at 4.862%.

Gold lost $12.60 to close at $626.50 a troy ounce, silver increased 41 cents to end at $12.870 a troy ounce and copper decreased 4.30 cents to close at 261.60 cents per pound.

Oil increased 96 cents to close at $52.840 a barrel and heating oil advanced 2.32 cents to finish at 150.36 cents a gallon. Natural gas increased 33.8 cents to close at $6.630 per MMBtu. Gasoline closed up 3.55 cents to end at 142.60 cents a gallon.

Asian markets closed higher led by India with a gain of 3.12%, Taiwan with an increase of 1.88% and Philippines with an advance of 1.77%. The only decliner was Indonesia with a decline of 1.51%. Asian markets were mostly higher as indexes in Japan and South Korea advanced on exporters.

European markets finished higher followed the last-day highs. The leader of advancers was Netherlands with a gain of 0.54%, followed by Switzerland with an increase of 0.505 and Belgium with an advance of 0.28%. The only decliner was Norway with a decrease of 0.06%. European stocks closed positive as oil-depend chemical and travel stocks managed to offset negative sentiments generated by weakness from software giant SAP and French retailer Carrefour.

Latin America markets ended higher in part on the back of an increase in the price of oil. Argentina led the region with a gain of 1.45%, followed by Brazil with an advance of 1.00%. There were no decliners in the Latin Markets. Canada gained 1.35%.


[R]1:00PM European markets closed positive, helped by chemical and travel stocks.[/R]
European stocks closed in the positive, as gains in oil-dependent chemical and travel stocks managed to offset negative sentiment generated by weakness from software giant SAP and French retailer Carrefour. Positive start on Wall Street also provided help. Tech shares were dragged down by 7.7% loss for SAP. The largest business software company in the world fell after Q4 license sales fell short of analyst forecasts. Other technology companies such as Atos Origin, Cap Gemini and Business Objects finished lower in Paris. Although oil prices moved slightly higher, they kept under $53 a barrel, helping to boost oil-dependent chemical and travel companies. Shares in airlines Air France-KLM and Deutsche Lufthansa rose nearly 1%, while shares in Germany''s BASF and Linde rose by more than 1%. Shares of European retailers showed weakness after French supermarket group Carrefour dropped 5.5% after it reported weaker-than-forecast Q4 sales. The German DAX 30 closed higher by 0.3%, the French CAC 40 added 0.1%, and London FTSE 100 gained 0.1% with last-minute help from BP which rose 1.8% after reporting that E&P Chief Tony Hayward will replace John Browne as CEO after his retirement at the end of July 2007.

Crude oil prices hovered round $52 a barrel, reflecting strong inventories and fears of production cuts by OPEC. Crude oil February contract rose 33 cents to $52.21 a barrel. Heating oil added to $1.4955 a gallon, while gasoline rose to $1.4027. Natural gas climbed 16 cents to $6.456 per 1,000 cubic feet. London Brent rose 65 cents to $52.35. The U.S. dollar traded mixed against its major currency rivals. The euro was quoted at $1.2933, up from $1.2893. The dollar bought 120.29 yen, up from 120.44. The British pound was quoted at $1.9591, up from $1.9455. European gold prices advanced. In London, gold traded at $617.72 per troy ounce, up from $614.60. In Zurich, the precious metal traded at $616.20 per ounce, up from $611.70. Silver closed at $12.61, up from $12.30.


[R]11:30AM Market turned to lackluster performance.[/R]
U.S. stocks fluctuated in late morning trading Friday ahead of a three-day weekend for the Martin Luther King Jr. holiday. Investors digested a pair of profit warnings in the technology sector and better-than-anticipated economic data which signal healthy economy that could make the Fed Reserve to hold interest rates. Although shares of chip maker Advanced Micro Devices ((AMD)) plunged 12%, tech stocks traded in the positive. However, shares of Apple Inc. ((AAPL)) traded down 1%, reflecting a trademark lawsuit filed by Cisco Systems Inc.

After touching a new 19-month low, oil stocks were pushed higher on speculations of production cuts by OPEC. ConocoPhillips ((COP)) rose 2.4%, while Exxon Mobil Corp. ((XOM)) picked up nearly 1%. Murphy Oil Corp. ((MUR)) traded slightly lower after the oil and gas refiner warned Q4 profit will come below expectations. In corporate news, Cablevision Systems Corp. ((CVC)) fell 2.5% after the family that founded the company raised its buyout bid in what they called the ''best and final offer.''

In late morning trading, the Dow fell 3.93, or 0.03%, to 12,511.05. The index reached a record close of 12,514.98 on Thursday, topping its previous record set Dec. 27. The Standard & Poor''s 500 index rose 1.14, or 0.08%, to 1,424.96, and the Nasdaq composite rose 2.54, or 0.10%, to 2,487.39. The yield on the benchmark 10-year Treasury note rose to 4.77% to the highest level since October, from 4.74% late Thursday.


[R]10:30AM NY – 9:30 PM Mumbai Sensex rallies to an all-time high, banks spurt.[/R]
The Sensex on BSE closed 426 points, or 3.1%, higher at 14,056.53, an all-time high. The market-breadth was strong, for every three advancers there were two decliners. For 1,607 shares advancing on BSE, 1,071 declined and 46 stocks were unchanged. Of the 30 stocks in the Sensex, there were 30 advancers and no decliners. The turnover on BSE was Rs 4,585 crore, compared to Rs 4,430 crore on Thursday. On NSE, the turnover was Rs 10,015.72 crore, higher than Rs 9,854.7 crore on Thursday.

Economic news

The Union Cabinet on Thursday approved an Ordinance to amend the Banking Regulation Act, 1949. The amendment relaxes the guidelines for the Reserve Bank of India and allows the commercial banks to lower statutory liquidity ratio, the minimum limit that banks have to keep in the form of approved bonds, cash and gold. Under the current conditions, banks should keep 25% of their total deposits in the form of liquid assets. The move is expected to release more funds for the industry.

Inflation was higher, as latest data showed that the wholesale price index rose at an average rate of 5.58% in the last week in 2006, higher than previous week increase of 5.48% on a rise in food and fuel prices.

The government on Thursday raised a ban on sugar exports with immediate effect on the high domestic production. India is the second-largest sugar producer in the world. It is also one of the largest consumers of sugar.

Industrial production increased 14.4% in November 2006 compared to a year ago, much higher than market forecasts on a strong surge in manufacturing output.

Trading highlights

Tech Mahindra was the most-active stock with a turnover of Rs 248.45 crore followed by Reliance Industries and IFCI.

Advancers

Banks rallied on the cabinet decision to lower the SLR, giving the Reserve Bank of India more flexibility. ICICI Bank surged almost 8% to Rs 965. State Bank of India jumped 6% to Rs 1,222, HDFC Bank advanced 6.8% to Rs 1,067. HDFC Bank, on Thursday, posted a 31.7% growth in net profit to Rs 295.64 crore. UTI Bank gained 3.9% to Rs 499.45. The private sector bank today released 40.1% growth in net profit for December 2006 quarter to Rs 184.61 crore. Housing finance large-cap HDFC advanced nearly 5% to Rs 1,596.

Index heavy Reliance Industries surged 3.6% to Rs 1,343. Reportedly, Reliance Industries is considering the possibility of joining the bidding race for plastic business of General Electric, deal may be worth more than $8 billion.

Bharti Airtel soared nearly 5% to Rs 667, on hopes of strong third quarter results. Power equipment maker BHEL surged nearly 5% to Rs 2,260, buoyed by strong industrial production data for November.

IT shares continued their rally from Thursday following an increase in stock price in New York trading on Thursday. TCS surged 4% to Rs 1,330. TCS reports Q3 results on January 15. Infosys gained 1.5% to Rs 2,217, after New York listed ADR advanced 3.6% on Thursday to $56.22. Satyam Computer was up 2.4% to Rs 492, after its ADR added 5.3% on Thursday to $24.26.

IFCI jumped 5% to Rs 21.75. The stock advanced on a huge volume of 6.3 crore shares on BSE, following the company decision to unlock a part of its holding in NSE on Wednesday.

Steel Authority of India (SAIL) gained nearly 5% to Rs 90.55 and state-owned oil refiners Indian Oil Corporation, BPCL, HPCL and IBP advanced between 3.9% and 6.1% on declining crude prices.

Sugar companies Balrampur Chini Mills, Dhampur Sugar Mills and Bajaj Hindustan advanced between 4 - 6.4% after the Central Government on Thursday raised the ban on sugar exports.


[R]9:45AM Market opened little changed. Techs advanced, despite profit warning from AMD.[/R]
Wall Street opened Friday session little changed, as profit warnings from chip maker Advanced Micro Devices and business software provider SAP AG took a bite of the tech stocks strength that powered rally yesterday. Shares of AMD ((AMD)) dropped 12.5% in early trading, while SAP ((SAP)) remained in the positive territory, up 2.8%. Despite the unfavorable news, Dow components Microsoft ((MSFT)) and Hewlett-Packard ((HPQ)) traded 1% higher, while Google and Amazon gained 1% on the Nasdaq. Investors also digested stronger-than-expected retail sales data which stirred interest-rate worries. The Commerce Department said that December retail sales rose to a five-month high of 0.9%. Crude oil prices gained some ground, rising to $52.11 a barrel, helping energy stocks recover. Exxon Mobil ((XOM)) advanced 1%. The Dow rose 4.88, or 0.04%, to 12,519.86. The Standard & Poor''s 500 index rose 2.10, or 0.15%, to 1,425.92, and the Nasdaq composite rose 5.36, or 0.22%, to 2,490.21. The bond market was rattled after the Commerce Department report. The yield on the benchmark 10-year Treasury note rose to 4.77%, the highest since October, up from 4.74% late Thursday.


[R]9:30AM NY-2:30PM London The FTSE declines on real estate, oil, mining stocks.[/R]
The FTSE 100 lost 17 points, or 0.26%, at 6,214 in mid-afternoon on Friday.

Advancers

There were only a few gainers on the market. Hotel company, InterContinental Hotels, was advanced as bid talk resurfaced. Speculation has centered on a private equity bid from the likes of Permira, Starwood Capital or a consortium in the Middle East. InterContinental Hotels gained 1.85%.

Bear Stearns upgraded drug giant AstraZeneca to outperform from peer perform with a higher target arguing that the shares are now looking relatively cheap following the recent sell-off. AstraZeneca advanced 1.41%.

Decliners

The profit warning from EMI is the main company news though. Annual profits at its music business will miss expectations after a weak Christmas. Music boss Alain Levy is also leaving as part of a 110 million pounds cost-cutting exercise and will be replaced by executive chairman Eric Nicoli. EMI plunged 6.71%

Miners are firmly in negative territory with Antofagasta, Xstrata and Anglo American leading the decliners, despite a bullish note from Deutsche Bank which saw Kazakhmys upgraded to buy from hold. Antofagasta was down 1.79%, Xstrata shed 1.46%, Anglo American declined 1.58% and Kazakhmys lost 0.76%.

Oil stocks are under pressure again following the decline in crude oil prices to under $52 a barrel overnight. Cairn Energy was off 1.78% and Royal Dutch Shell fell 1.11% today.


[R]9:00AM Market futures pointed to a lower opening amid weakness in the tech sector.[/R]
U.S. stock market futures declined on Friday as weakness in the tech sector offset a bigger-than-expected increase in December retail sales. Techs moved lower after a profit warning from chip maker Advanced Micro Devices ((AMD)) sent the stock 7.3% lower in pre-market trading. Dow component Intel ((INTC)) lost 0.9%, while Apple ((AAPL)) slipped 1% on the Nasdaq. Disappointing sales data from software giant SAP AG also weighed on the sentiment. SAP ((SAP)) said late-Thursday that software-license sales rose 7% to 1.26 billion euros, missing expectations by about 100 million euros. In economic news, strong retail sales, as well as upbeat import and export data further dragged the futures down, signaling that the Fed reserve will be less likely to cut interest rates any time soon. The Commerce Department said that December retail sales rose to a five-month high of 0.9%, exceeding estimates of 0.7% increase. According to another report, import prices rose 1.1% in December, topping expectations of a 0.8% rise, while export prices rose 0.7%. S&P 500 futures slipped 2.50 of a point to 1,428.40 and Nasdaq 100 futures slid 2.75 points to 1,847.00. Dow industrial futures lost 17 points to 12,549.

[R]December retail sales rose above expectations.[/R]
Friday morning, the Department of Commerce released its report on retail sales in the month of December, showing that sales rose by more than economists had expected. The sales growth reflected significant increases in gas station and electronics & appliance stores. The report showed that retail sales rose 0.9 percent in December following a downwardly revised 0.6 percent increase in November. Economists had expected sales to increase by 0.7 percent compared to the 1.0 percent increase that was originally reported for the previous month. The better than expected increase in sales reflected notable sales growth at gas station and electronics & appliance stores, which rose 3.0 percent and 3.8 percent, respectively. The Commerce Department also said that sales, excluding auto sales, rose 1.0 percent in December following a 0.7 percent increase in November. The increase came in well above economist estimates of a 0.5 percent increase.


[R]8:00AM Advanced Micro Devices warned of lower Q4 revenues.[/R]
Advanced Micro Devices Inc, ((AMD)), chip company, posted a profit warning late Thursday, saying that Q4 operating income, excluding ATI-related segments and acquisition-related charges, would be lower than in Q3, citing lower selling prices for microprocessors which largely offset a significant increase in unit sales. According to information provided by the company, Q4 revenues would be about $1.37 billion, coming in below the average estimates of $1.85 billion. Earlier the company said that it expects Q4 microprocessor sales to grow in the range of 7%-13% sequentially or 42%-50% over the prior year period. The lower revenues-and-profits warning appears to intensify the price war with Intel ((INTC)) for microprocessor chips. AMD has also been planning to generate higher-than-projected cost savings from its $5.4 billion acquisition of ATI. The chip maker will report fourth quarter results on January 23, 2007 after market close. The stock dropped 7.2% in pre-market trading.


[R]7:30 AM Asian markets closed higher on Friday on strong US close overnight.[/R]
Asian markets closed higher on Friday. The Nikkei 225 Index in Japan rose 1.3% to end at 17,057.01, after dropping during the past two sessions. The stronger dollar, which inflates exporters overseas earnings when brought back to the country, prompted investors to buy Kyocera, Sony and NEC. Shares of Kyocera jumped 3%, Sony added 2.4% and NEC advanced 4.1%. Other gainers included banks and brewery stocks, with Mitsubishi UFJ Financial rising 2.7% and Asahi Breweries adding 2.5%.

The Korea Composite Stock Market Index, or Kospi, rose 1.7% to 1,388.37. Samsung Electronics and Posco reported strong fourth quarter results. US rise and the European Central Bank decision to keep its rates unchanged also helped boost the market. Samsung Electronics, rose 3.6%, after the company said it earned 2.35 trillion Korean won in the fourth quarter, down from 2.56 trillion won a year earlier.

The Hang Seng Index gained 1.2% to 19,613.41. China Mobile led gains, rising 1.9%. HSBC also lent support, advancing 0.3%. And Swire Pacific added 1.8% after the company outlined its investment plans. Affiliate Cathay Pacific also surged 5.5% on a bullish outlook and declining fuel prices. The Shanghai Composite Index shed 3.7%, the sharpest single-day drop since July 13. China Petroleum & Chemical, the top refiner by capacity in Asia, plunged 7.3%. Shanghai International Port dipped 7.2%, Daqin Railway sank 6.4% and China Yangtze Power dropped 6%.

Australia S&P/ASX 200 Index advanced 1.3% to 5,638.80, while New Zealand NZSX-50 Index finished up 0.1% at 4,051.84. Taiwan Weighted Price Index rose 1.9% to 7,761.71 and Singapore Straits Times Index gained 1.3% to 3,009.09.


[R]6:30AM European markets decline on Friday on SAP and Carrefour weak results.[/R]
European markets were lower on Friday. In early trade, the U.K. FTSE 100 index lost 0.2% at 6,220.80, Germany Xetra Dax slipped 0.1%, at 6,684.11, while in France the CAC 40 was essentially flat, slightly lower at 5,609.19.

Decliners

SAP plunged heavily, down 7.7% as the German software company took investors by surprise with disappointing fourth quarter results. Carrefour shed 4.7% after slower than forecast sales growth from the French retailer in the fourth quarter thus prompting widespread broker downgrades and price target reductions.

Advancers

Sodexho Alliance was in favor, advancing 3.3% as traders continued to expect stronger-then-anticipated first quarter sales which the French contract food and services group posted on Wednesday.

Accor staged a strong performance for a second session, adding 2.8% after two leading brokers stated French hotels group could return significant cash to shareholders through further asset sales.

Oil and gold

Oil rebounded from a 19-month low under $52 a barrel on Friday. US crude oil was up 71 cents at $52.59 a barrel in early electronic trade in London. Brent crude was up 93 cents at $52.63. Gold opened Friday at a bid price of $613.25 a troy ounce, down from $614.60 late Thursday.

Currencies

The dollar traded at 120.43 yen in early trade in London, from 120.50 late yesterday in New York. Against the euro, it was at $1.2911, from $1.2892. The pound today strengthened to 66.20 against the euro, its highest since June 2005, from 66.36 pence yesterday. It was also at $1.9467.