Apple Drags Nasdaq, Oil Falls 2%

albena
18 Jan, 2007
New York City

U.S. stocks traded mixed late Thursday after the cautious guidance from Apple disappointed investors and hurt tech shares. The Dow was held back by the declining Intel, IBM and Hewlett-Packard. General Electric also slid after the news that it is about to buy the diagnostics unit of Abbott Labs. The other government data released today indicated a ramp-up in housing construction, a modest increase in consumer prices and an unexpected drop in jobless claims to an 11-month low.

[R]4:00PM The drop in oil prices failed to boost stocks as Apple’s outlook worried investors.[/R]
Yield on 10-year bond closed at 4.751% and the 30-year bond closed at 4.843%.

Gold declined $5.50 to close at $627.80 a troy ounce, silver lost 21.5 cents to end at $12.675 a troy ounce and copper lost 8.20 cents to close at 248.75 cents per pound.

Oil lost $1.890 to close at $50.350 a barrel and heating oil declined 3.630 cents to finish at 146.350 cents a gallon. Natural gas gained 9.4 cents to close at $6.328 per MMBtu. Gasoline went down 2.5 cent to end at 135.360 cents a gallon.

Asian markets closed higher led by the Philippines with a gain of 1.32%, Indonesia with an increase of 1.09% and Hong Kong with an advance of 1.06%. Most Asian markets gained as Japanese exporters benefited from Bank of Japan''s decision to keep interest rates on hold, while China Mobile helped lead Hong Kong higher despite losses in Chinese banks and real-estate developers. There were no decliners. Australia advanced 0.44%.

European markets closed mixed as weakness in the technology sector after cautious outlooks from companies on both sides of the Atlantic offset a rally in the automotive sector after crude-oil prices plunged around $2 a barrel. The advancers were led by U.K. with an increase of 0.09%, Belgium with a gain of 0.06% and Netherlands with an advance of 0.05%. The decliners were led by Spain with a decrease of 0.21%, Germany with a loss of 0.18% and France with a decline of 0.12%.

Latin America markets ended lower as the price of oil continued to plummet and as markets ingested a slew of economic data released in the U.S. The decliners were led by Mexico with a decrease of 1.59%, Argentina with a loss of 1.39% and Brazil with a decline of 0.76%. There were no advancers. Canada lost 0.74%.

[R]1:00PM European markets closed mixed.[/R]
European stocks closed mixed on Thursday, with weakness in the technology sector offsetting a rally in the automotive sector. Shares in automakers BMW and Renault rose around 2% each after crude oil prices plunged around $2 a barrel. The tech sector was undermined by Apple''''s cautious Q2 outlook in the U.S. and a 15% drop in the shares of Finnish IT services firm TietoEnator, following news that its fiscal 2006 margin fell below expectations. Rivals also declined on the news, with shares in French Atos Origin falling 4.1% and Capgemini losing 2.4%. Semiconductor stocks, including Infineon Technologies and software firm Business Objects also moved lower. Among other gainers today, shares in French engineering group Alstom rose 2.7% as it posted a 15% increase in quarterly sales. Accor shares rose 1.4% after the hotels group said it expects adjusted operating profit before tax to be higher than earlier forecasts. Shares in Merck KGaA closed down 2.1% after touching a record high on Q4 profit increase. Both the German DAX 30 and the French CAC 40 lost 0.1%, while London FTSE 100 added 0.1%.

Crude oil prices dropped to a 20-month low after petroleum report showed strong crude and gasoline stockpiles. Benchmark light, sweet crude tumbled $2 to $50.24 a barrel. Heating oil fell 4 cents to $1.4610 a gallon, while gasoline dropped 4 cents to $1.3395. Natural gas rose 11 cents to $6.345 per 1,000 cubic feet. London Brent fell $1.76 to $51.02. The U.S. dollar traded mixed against its major currency rivals. The euro was quoted at $1.2958, up from $1.2932. The dollar bought 121.23 yen, up from 120.67. The British pound was quoted at $1.9726, up from $1.9691. European gold prices advanced. In London, gold traded at $632.95 per troy ounce, up from $631.64. In Zurich, the precious metal traded at $631.35 per ounce, up from $627.85. Silver closed at $12.74, down from $12.78.


[R]11:30AM Market averages traded mixed. Tech stocks led losers.[/R]
U.S. stock averages traded mixed, as investors digested recent economic data and the urgent tone of Fed Reserve Chairman Ben Bernanke, who warned of looming budget crisis and gave little clue about the direction of interest rates. The Nasdaq continued to move lower as disappointing guidance from Apple and Intel raised concerns about the outlook for the technology sector.

The steep decline by the Nasdaq was contributed by substantial weakness among technology stocks, led by shares of Apple ((AAPL)), down 4.3%. Shares of the iPod and PC maker slipped after it reported strong Q1 profit growth that came in above analyst estimates but forecast Q2 results below expectations. Other computer hardware stocks also came under pressure. Dell ((DELL)) declined 1.9% and Sun Microsystems ((SUNW)) dropped 2.5%. The semiconductor sector also showed significant weakness. Semiconductor equipment makers Applied Materials ((AMAT)) dropped 5.2%, Novellus ((NVLS)) fell 4.3%, and KLA-Tencor ((KLAC)) slipped 4.6%. Dow component Intel ((INTC)) was also a notable decliner, falling 1.6%.

Energy stocks declined, as the price of oil moved notably lower after government data showed strong crude oil and gasoline inventories. Exxon Mobil ((XOM)) lost 1.4% and Chevron ((CVX)) fell 1%. At the same time, oil-sensitive stocks benefited from the price decrease, with airline and retail stocks posting strong gains. Telecom stocks helped limit the downside for the Dow, with gains by Verizon ((VZ)), up 1.7% and AT&T ((T)), up 1.5%. Blue chips were also supported by earnings-inspired gains for brokerage giant Merrill Lynch ((MER)). In midmorning trading, the Dow Jones industrial average rose 3.28, or 0.03%, to 12,580.43. The Standard & Poor''''s 500 index was down 1.44, or 0.10%, to 1,429.18, and the Nasdaq composite index was down 20.02, or 0.81%t, to 2,459.40. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.80% from 4.78% late Wednesday.

[R]Crude oil and gasoline inventories climbed.[/R]
Government data released Thursday showed that crude oil inventories jumped sharply higher in the most recent week, reversing a draw down that took place in the previous week. Meanwhile, gasoline and distillate stockpiles also rose. The Department of Energy''''s Energy Information Administration said that crude oil inventories rose 6.8 million barrels in the week ended January 12. Specifically, the measure climbed to 321.5 million barrels from the previous week''''s level of 314.7 million barrels. This followed a decline of 5 million barrels in the previous week and a slide of 1.3 million barrels in the week before that. Oil inventories for the January 12 week were 0.7% lower than last year. Meanwhile, gasoline inventories showed a week-over-week increase of 3.5 million barrels. This added to a recent streak of gains, including a rise of 3.8 million barrels in the previous week. The level of gasoline inventories was 1.7% above last year. Distillate fuel oil also had an inventory increase during the week ended January 12. Stockpiles of these products, which include heating oil, edged up by 900,000 barrels. This added to an advance of 5.4 million barrels recorded in the previous week.


[R]10:30 AM NY-9:30PM Mumbai Sensex ends at all-time high on Reliance rally.[/R]
The Sensex on BSE finished 86.41 points, or 0.6%, higher at 14,217.75. The market-breadth was positive, though it weakened at the end of trading. As 1,386 shares advanced on BSE, 1293 declined and 57 were unchanged. Of the 30 stocks in the Sensex, 20 advanced, while the rest declined. The turnover on BSE was Rs 5053 crore, higher than Rs 4746 crore on Wednesday. On NSE, the turnover was Rs 10,178.12, compared to Rs 8,766.02 crore on Wednesday.

Economic news

The Commerce Ministry has postponed the meeting on Special Economic Zones scheduled to meet on January 22 The meeting should approve some policy changes in the SEZ rules and look into concerns and suggestions connected with land acquisition for Special Economic Zones which has become a burning issue in states like West Bengal.

U.S. investment bank Morgan Stanley announced on Thursday that its real-estate arm has invested about $152 million in Indian real-estate developer Oberoi Constructions, asits third investment in an Indian property company.

The strong results of software large-caps in the last quarter have sparked hopes that the target of $60 billion worth of software exports by 2009-10 is well within reach.

Trading highlights

Oil refiner and petrochemical producer Reliance Industries Ltd on Thursday registered a quarterly net profit growth of 58 per cent. Reliance, the biggest maker of polyester fibre and yarn in the world, announced its net profit rose to Rs 2,799 crore from Rs 1,776 crore, much ahead of market expectations. Net sales advanced 45.7% to Rs 26,472 crore from Rs 18,168 crore. Petrochemical margins grew over 35% in Q3 on higher product prices and a decline in feedstock prices.

Tech Mahindra has posted a 16.5% jump in net profit at Rs 166.8 crore for the quarter ended December 31, 2006 when compared with Rs 143.2 crore for the same period a year ago.

Most-active stocks

Tech Mahindra was also the most-active stock today with a turnover of Rs 387.40 crore followed by Reliance and IFCI.

Advancers

Housing finance large-cap HDFC surged 3.3% to Rs 1,599.70, leading the advancers. ONGC gained 2.2% to Rs 915. ONGC stated that natural the gas find off the eastern coast of India is commercially viable, and further details will be given later.

Reliance Industries gained 1.5% to Rs 1,370. It had struck an all-time high of Rs 1,383.50. Satyam Computer gained 1.8% to Rs 518, ahead of Q3 results. Analysts expect between 4.5% - 10.8% growth in consolidated net profit, between Rs 334.20 crore and Rs 354.30 crore, in December 2006.

Bharti Airtel advanced 0.7% to Rs 672, Maruti gained 1% at Rs 918 and Wipro also finished higher, over 1% at Rs 641. Larsen & Toubro surged over 2% to Rs 1,586. ITC, Hindustan Lever and BHEL advanced around 1.5% each at Rs 172, Rs 224 and Rs 2,304, respectively.

Mid-cap also surged on Q3 results. NIIT Tech jumped 20% to Rs 409.50, extending post-results surge from Wednesday. Consolidated net profit rose 92% in December 2006 quarter to Rs 34.60 crore, compared to Rs 18 crore at the same time the previous year. Biocon advanced 11% to Rs 413.85, after its December 2006 quarter net profit rose 45% from a year ago to Rs 47.51 crore.

Decliners

Ranbaxy Laboratories Ltd declined 0.3% to Rs 430 even after its Q3 results topped market forecasts. The company reported consolidated profit after tax & minority interests of Rs 183.30 crore for the quarter ended December 31, 2006 as compared to Rs 68.60 crore for the same period last year.

Other decliners included Tata Steel which fell 1.92% to Rs 474.50, Reliance Energy was down 1.55% to Rs 526.50, Reliance Communications slipped 1.45% to Rs 435.85, ICICI Bank was off 1.38% to Rs 972.15 and Tata Motors dropped 1.20% to Rs 953.

Canara Bank shed 0.4% to Rs 269.35 after it announced unaudited net profit of Rs 363 crore for the quarter ended December 31, 2006 as compared to Rs 356.29 crore for the same time the previous year.


[R]9:45AM Market opened mixed, awaiting Ben Bernanke’s testimony.[/R]
U.S. stock markets opened mixed ahead of a speech by U.S. Fed Reserve Chairman Ben Bernanke, expected to describe steadily moderating growth and give clues about interest rates. The same picture was described by economic reports which showed consumer prices slowly rose, jobless claims fell to an 11-month low, and housing construction increased. Earnings reports were also in focus, with strength in financial stocks and disappointment in the tech sector. Blue-chip stocks advanced after Merrill Lynch ((MER)) said Q4 earnings rose 68% to 2.41 per share, sharply up from $1.41 per share last year, exceeding analyst forecasts. The brokerage gained nearly 1%.

Meanwhile, the tech-heavy Nasdaq moved to the downside, as Apple ((AAPL)) dropped 4.3% on disappointing Q2 outlook. The news came a day after Intel Corp.((INTC)) said its Q4 profit plunged 39%. In deal news, Apache ((APA)) agreed to acquire a controlling interest in 28 oil and gas fields from Anadarko Petroleum Corp. ((APC)) for $1 billion. In early trading, the Dow Jones industrial average rose 13.13, or 0.10%, to 12,590.28. The Standard & Poor''''s 500 index was up 0.99, or 0.07%, to 1,431.61, and the Nasdaq composite index was down 5.20, or 0.21%, to 2,474.22. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.80% from 4.78% late Wednesday.

[R]Jobless claims fell to 11-month low.[/R]
The Department of Labor released its report on initial jobless claims in the week ended January 13 before the start of trading on Thursday, showing that jobless claims fell unexpectedly compared to the previous week. The report showed that jobless claims fell to 290,000 from the previous week''''s revised figure of 298,000. With the decrease, jobless claims fell to their lowest level in 11 months. Economists had expected jobless claims to rise to 315,000 from the 299,000 originally reported for the previous month. The Labor Department also said that the less volatile 4-week moving average fell to 308,000 from the previous week''''s revised average of 314,500. The report also showed that continuing claims in the week ended January 6 rose to 2.530 million from the preceding week''''s revised level of 2.410 million.


[R]9:30AM NY-2:30PM London The FTSE gains on updates and upbeat miners.[/R]
By mid-day, the FTSE 100 was up 26.2 points, or 0.4%, to 6,237.5.

Advancers

Resources stocks were the big gainers in London, with Vedanta Resources up 2.7% and Xstrata up 2.1%. ICAP, the inter-dealer broker, firmed 2.7% as Citigroup reiterated a buy rating on the stock and upped its price target. Pearson rose 1.9% on reports of bid interest from private equity group KKR.

In the mid-caps, shares in London Stock Exchange rose 0.7% after the group has announced an increase of up to 250 million pounds in its existing share buyback program today as the group looks to fight off a hostile bid from US rival Nasdaq.

Misys, the health sector and insurance software specialist, jumped 5.6% as it announced far-reaching changes in its boardroom. Kesa Electricals, rose 2.6% after the company behind the Comet retail chain reported a 7.3% increase in sales over Christmas. Weir Group, the mid-cap engineer, was 4.3% stronger after it said annual profits would reach the top of consensus forecasts.

Decliners

Security specialist ArmorGroup has blamed the continued weakness in Middle East training for its full year performance that is expected to see results marginally below market expectations. ArmorGroup plunged 10.23%.

Hikma Pharmaceuticals dropped 2.8% despite forecasting full-year revenue growth of 20%. The pharmaceutical group cautioned that margins will be lower than 2006. Broadcaster ITV declined 0.68% as the investors took profits in the group.


[R]9:00AM Market futures were lackluster, reflecting mixed economic data and Apple outlook.[/R]
U.S. stock futures traded mixed Thursday, as an increase in consumer inflation and weakness in Apple shares because of disappointing Q2 outlook, offset stronger-than-expected housing data and another drop in jobless claims. The U.S. Labor Department said its consumer price index rose 0.5% in December, while core CPI increased 0.2%. Housing starts rose 4.5% in December to 1.64 million annualized units, above the 1.57 million expected by economists. According to another report, initial jobless claims fell to 290,000 from the previous week''''s revised figure of 298,000. Analysts expected jobless claims to rise to 315,000.

On the corporate news front, Apple Inc. ((AAPL)) reported soaring Q1 profit of 78%, well above Wall Street expectations, boosted by record sales of its iPod media players. Merrill Lynch ((MER)) rose 0.9% ahead of the open after the brokerage giant said Q4 earnings rose 68%, lifted by stronger acquisition advisory fees and gains from its private equity business. The company posted earnings of 2.41 per share, sharply up from $1.41 per share last year, exceeding analyst forecasts. The brokerage also raised its quarterly dividend 40%. In other financial companies, Bank of New York ((BK)) said its quarterly earnings rose above expectations.

Outside the sector, Lam Research ((LRCX)) dropped 8.3% in the pre-open after the chip equipment maker released lower-than-anticipated quarterly forecast. Continental Airlines ((CAL)) reported narrower Q4 losses. The carrier said it lost 4 cents a share, excluding a special charge of $22 million. Including the charge, the airline lost $26 million, or 29 cents a share. Analysts had expected a loss of 15 cents a share on revenue of $3.16 billion. S&P 500 futures gained 1.20 points to 1,440.00 but futures for the technology-rich Nasdaq 100 fell 5.75 points to 1,835.50. The Dow industrial futures added 16 points to 12,655.

[R]Construction of new homes jumped 4.5% in December.[/R]
The Department of Commerce released its report on housing starts and building permits in the month of December on Thursday. The report showed that housing starts unexpectedly showed a significant increase compared to the previous month. The report said that housing starts rose 4.5 percent to an annual rate of 1.642 million units in December from the revised November estimate of 1.572 million units. Despite the increase, housing starts were down 18 percent compared to December of 2005. Economists had expected starts to fall to a 1.570 million unit rate compared to the 1.588 million unit rate originally reported for the previous month. The unexpected increase in housing starts was due in large part to strong growth in the Northeast and West, where housing starts rose 25.6 percent and 12.4 percent respectively. While housing starts in the Midwest edged up 1.8 percent, starts in the South fell 2.0 percent. The report also showed that building permits rose 5.5 percent to an annual rate of 1.596 million units from the revised November rate of 1.513 million units. Building permits are seen as an indication of future housing demand.

[R]Consumer price index rose 0.5% in December.[/R]
Thursday morning, the Department of Labor released its closely watched report on consumer prices in the month of December, showing that prices increased slightly more than economists had been expecting. The report showed that the consumer price index rose 0.5 percent in December after coming in unchanged in the previous month. The increase came in slightly above economist estimates of a 0.4 percent increase. The slightly bigger than expected increase in consumer prices was due in large part to a rebound in energy prices, which rose 4.6 percent in December after falling in each of the three previous months. The index for petroleum-based energy rose 7.7 percent.

The increase in energy prices contributed to a 1.8 percent increase in transportation costs, which also rose after falling in the three previous months. Prices for housing and apparel also showed notable increases. The Labor Department added that the core consumer price index, which excludes food and energy costs, rose 0.2 percent in December after coming in unchanged in November. The modest increase came in line with economist estimates. On Wednesday, the Labor Department released a separate report showing that its producer price index rose 0.9 percent in December following an unrevised 2.0 percent increase in November. Economists had been expecting a more modest increase of about 0.5 percent. While the increase was largely due to higher food and energy prices, the core producer price index still rose 0.2 percent in December after rising 1.3 percent in November. The increase came in slightly above economist estimates of a 0.1 percent increase.


[R]8:00AM Apple reported soaring Q1 profit, boosted by iPod.[/R]
Apple Inc. ((AAPL)) said late Wednesday that its Q1 profit soared 78%, far beyond Wall Street expectations. The soaring quarterly profit was contributed to strong demand for the company’s products, including record sales of its iPod media players. Apple''''s total number of iPod sales currently stands at about 90 million units since the device was launched in October 2001.

Apple reported a profit of $1 billion, or $1.14 a share, up from $565 million, or 65 cents a year ago. Revenue increased 24.5% to $7.1 billion from $5.75 billion. The results beat the estimates of analysts, who expected Apple to earn 78 cents a share on revenue of $6.42 billion.

The company shipped 21 million iPods during the quarter, which is 50% higher than a year ago. Sales of the device accounted for $3.43 billion of the company''''s revenue, or nearly half the total.

Apple''''s shares fell about 2%, as the company gave a Q2 forecast that was below analyst estimates. For Q2, Apple projected earnings of 54 cents to 56 cents a share on revenue in a range of $4.8 billion to $4.9 billion. That was below the average forecast of 60 cents a share on $5.22 billion in revenue. In the second-quarter results, the company will be able to include a partial quarter of sales of its new Apple TV device, going on sale in February. However, Apple won''''t be able to include in its next report the new iPhone. The company plans to put the iPhone on sale in June.


[R]7:30 AM Asian markets rose on Thursday as BOJ voted to leave rates unchanged.[/R]
Asian markets were mostly higher on Thursday. Japan''''s Nikkei Index finished the day 0.6% higher at 17,371. Sumitomo Realty & Development moved 2.3% higher. Exporters also advanced on the rate decision. Honda Motor gained 1.9% and Nikon advanced 2.5%. Toyota Motor was up 0.8%. Shares of Mitsubishi Estate Co rose 1.2%.

The Hong Kong Hang Seng Index gained 1.1% to 20,278. China Mobile led the benchmark index higher, while Chinese banks declined on profit-taking and mainland property developers slipped. China Mobile ended 2.8% higher and HSBC rose 0.9%. The Shanghai Composite Index shed 0.8% to 2, 757. ICBC fell 3.5% and Bank of China was off 2.5%. China Merchants Property Development dropped 4.6% and Poly Real Estate Group plunged 6.9%.

Oil and gas shares gained after several days of losses, tracing gains in energy prices. Japanese Inpex Holdings rose 3.4% and Australian Woodside Petroleum gained 2.4%. China Petroleum & Chemical Corp advanced 0.2% after reporting Thursday it processed 4.6% more crude oil last year than in 2005.

Elsewhere around the region, South Korean Kospi Index advanced 0.3% to 1,383, Taipei ended 0.8% higher at 7,895 and Australian S&P/ASX 200 rose 0.5% to close at 5,672. The Hang Seng China Enterprises Index, an index of mainland-incorporated shares listed in Hong Kong, declined 1.2% to 9,803.75.


[R]6:30 AM European markets gained on strength in oil shares, upbeat earnings.[/R]
European markets were higher on Thursday. By mid-morning, the U.K. FTSE 100 index rose 37 points, or 0.5% at 6,237.10, while the German Xetra Dax added 28 points, or 0.4%, at 6,729.78 and the French CAC 40 gained 34.8 points or 0.6% at 5,96.59.

Advancers

Dexia led advaners with a gain of 2.9% after the Franco-Belgian bank was upgraded from neutral to outperform by Exane BNP Paribas.

Alsthom added 2.4% after the French industrial group reported encouraging growth in new orders along with third quarter sales in-line with market expectations.

Merck was 0.6% higher after the German drugs and chemicals company beat analysts expectations with a 58 % increase in fourth-quarter operating profits, helped by a recovery in the sales of liquid crystals used in televisions and mobile phones.

Oil stocks gained, helped by a modest recovery in crude prices with Statoil of Norway 2.1% higher while Neste Oil of Finland added 1.3 %.

Decliners

Novartis dipped 0.4% after the Swiss drugs giant posted record full-year year of sales and profits but warned growth would slow in 2007 before picking up again from 2008.

Belgium supermarket group Delhaize declined 2.6% after it said that its fourth-quarter sales dipped 1% to 4.8 billion euros, mainly due to the U.S. dollar weakening against the euro. At constant exchange rates, sales would have risen by 4.6%

Oil and commodities

Crude oil for February delivery fell as much as 39 cents, or 0.8%, to $51.85 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $52.97 in early trade in London. Brent crude for March settlement dropped 12 cents at $52.67 on the ICE Futures exchange in London.

Gold for immediate delivery climbed $2.60, or 0.4%, to $634.40 an ounce in London. Silver rose 10.6 cents to $12.91 an ounce, palladium gained 50 cents to $339.50 an ounce and platinum advanced $8.50 to $1,156 an ounce.

Currencies

The dollar was mixed against other major currencies in European trading Thursday morning. The euro traded at $1.2940, up from $1.2932 late Wednesday. The British pound traded at $1.9724, up from $1.9691. The dollar was at 121.37 Japanese yen, up from 120.67.