Weak Techs and Higher Oil Pressure Market

Elena
22 Jan, 2007
New York City

Stocks fell steeply lower as negative sentiment for the tech sector, a notable rebound in oil prices, and a downgrade of Boeing led investors to pull money out of the market. The Nasdaq dropped 1%, with Cisco Systems falling 1.5% after JMP Securities downgraded its stock. The biggest drag on the Dow was Boeing, with shares down 3.1% after a brokerage downgrade. Among blue-chip tech stocks, Sun Micro fell 1.4% while Intel rival Advanced Micro Devices dropped 1.8%.

[R]11:30AM Rising oil and weak tech stocks dragged market steeply down.[/R]
Stocks fell steeply lower as negative sentiment for the tech sector, a notable rebound in oil prices, and a downgrade of Boeing led investors to pull money out of the market. Crude oil surpassed $53 a barrel, boosting shares of oil majors and, at the same time, dragging airline stocks down. UAL Corp. ((UAUA)) dropped 3.5%, AMR Corp. ((AMR)) lost 3%, and Southwest Airlines Co. ((LUV)) lost 2.3%.

The Nasdaq dropped 1%, with some networking, semiconductor, and software stocks posting particularly steep losses in late morning trading. Following last-week losses on disappointing profit forecast, shares in computer maker Apple ((APPL)) moved further lower to 2.7% Cisco Systems ((CSCO)) fell 1.5% after JMP Securities downgraded its stock. Heavyweights Microsoft Corp. ((MSFT)) slipped 1.7% and Yahoo ((YHOO)) fell 1.1%. The companies are expected to report quarterly earnings this week.

Among blue-chip tech stocks, Intel ((INTC)) fell 0.2% following a report that Sun Microsystems was close to an agreement to use Intel's chips. Sun Micro ((SUNW)) fell 1.4% while Intel rival Advanced Micro Devices ((AMD)) dropped 1.8%. The biggest drag on the Dow was Boeing ((BA)), with the aerospace giant falling 3% after Wachovia downgraded its rating on the company's stock to market perform from outperform. Pfizer ((PFE)) also weighed on the blue-chip average with a decline of 1.5%.

Financial services giant Citigroup ((C)) was one of the few advancers among blue chips, rising 1% on management-related news. The company drew more attention from investors after it agreed to buy ABN Amro's mortgage Group in a deal worth $3 billion. In deal news, Swift Transportation ((SWFT)) climbed 9% after the trucking company agreed to be acquired by a group formed by its largest shareholder, Jerry Moyes, for $2.74 billion.
In midmorning trading, the Dow Jones industrial average fell 93.73, or 0.75%, to 12,471.04. The Standard & Poor's 500 index was down 7.25, or 0.51%, to 1,423.25, and the Nasdaq composite index was down 27.08, or 1.10%, to 2,424.23. The yield on the benchmark 10-year Treasury note edged lower to 4.77% from 4.78% late Friday.


[R]10:30 AM NY-9:30PM Mumbai The Sensex gains slightly Monday in a day of high volatility.[/R]
The Sensex on BSE finished 26.53 points, or 0.19%, higher to 14,209.24. The market-breadth was strong, although it weakened in the course of trading. As 1,381 shares advanced on BSE, 1,283 declined and 52 shares were unchanged. Of the 30 stocks in the Sensex, 17 advanced while the rest declined. The turnover on BSE was Rs 3,681 crore, lower than Rs 4,145 crore on Friday. On NSE, the turnover was Rs 7,574.18 crore, much lower than Rs 9,053.77 crore on Friday.

Economic news

The latest initiative of the Central Government to reach a consensus on the issue of pension reforms failed as socialists controlled states rejected the new scheme. Socialist parties leaders expressed their concerns over 10% reduction in employee wages.

Trading highlights

Maruti Udyog Limited reported 11% rise in profit in third quarter to Rs 376.41 crore from a year ago. Total income increased to Rs 3,807.90 crore from Rs 3,218.62 crore in the same period.

Most-active stocks

Tech Mahindra was the most-active stock with a turnover of Rs 269.40 crore followed by Satyam and Maruti.

Advancers

Maruti led the advancers, up 3% % to Rs 938. Other auto shares, too, recovered buoyed by the rally in Maruti. Bajaj Auto rose 2% to Rs 2,785, and Tata Motors gained 1.9% to Rs 968.80. BHEL gained 2.3% to Rs 2,322, on expectations of better earning results. Zee Telefilms Ltd jumped 2.3% to Rs 301.75 on releasing consolidated profit after tax of Rs 95.81 crore for the quarter ended December 31, 2006.

Infosys advanced 2% to Rs 2,248.50, and TCS gained 1.1% to Rs 1,312. Cigarette leader ITC gained 2.5% to Rs 180. Orchid Chemicals was up 4% to Rs 216.60, after the company announced its betalactam bulk drug making unit in Maharashtra had obtained UK regulatory approval. Jet Airways spurted 7% to Rs 774.20, after the airline reported first quarterly profit following losses in the two previous quarters.

Decliners

Satyam Computer led the decliners, down 3% to Rs 473. Satyam reduced 2007 fiscal year revenue guidance. Bharti Airtel sank 1% to Rs 675.25 in volatile trade on profit expectations.

Index heavy Reliance Industries shed 0.5% to Rs 1, 372.35. Reliance said it had no plans to search for a strategic partner for developing its Krishna Godavari basin deepwater block. Ranbaxy Laboratories shed 1.6% to Rs 407.50.

ICICI Bank dipped 1% to Rs 975. The bank reported third quarter fiscal 2007 earnings of Rs 910 crore, a rise of 42% from a year ago. JSW Steel shed nearly 1% to Rs 419. The company posted 160% rise in fiscal third quarter 2007 profit to Rs 362.15 crore.

India Cements slipped 2.3% to Rs 242. The company reported ten fold rise in third quarter profit to Rs 79.78 crore, from Rs 7.22 crore a year ago.


[R]9:45AM Market opened mixed on hopes of tech stocks rebound. Boeing weighed on the Dow.[/R]
U.S. stocks opened mixed on Monday, reflecting merger activity and hopes of a rebound in the tech sector after last-week losses, caused by disappointing results from IBM ((IBM)) and Apple ((APPL)). Shares of Sun Microsystems ((SUNW)) rose 1.1% on news that it was near an agreement to use Intel chips. As a result, AMD ((AMD)) shares slipped 1%. Intel ((INTC)) shares added 0.5%. Boeing ((BA)) weighed on the Dow after it was downgraded to market perform from outperform by Wachovia on concerns that the commercial aircraft order cycle has peaked. The stock fell 2.6%.

The pharmaceuticals sector got moved higher in early trading after Pfizer ((PFE)) posted better-than-expected Q4 earnings. Investors refrained from being very enthusiastic, awaiting the world''s biggest drug maker releases its restructuring plan later in the day. Shares in the company lost 0.5%. In corporate news, Citigroup ((C)) rose 1.3% safter it agreed to buy the mortgage unit of ABN Amro for an estimated $3 billion. S&P 500 futures rose 1.8 points at 1,438.50 and Nasdaq 100 futures climbed 7 points at 1,813.50. Dow industrial futures rose 8 points. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.77% from 4.78% late Friday.


[R]9:30 AM NY-2:30 PM London The UK benchmark gains on bid talks.[/R]
By mid-day, the FTSE 100 gained 25.6 points, or 0.2%, to 6,262,8.

Advancers

InterContinental rose 2.1% as it was confirmed that David and Frederick Barclay, the millionaire owners of the Ritz hotel and the Telegraph newspaper group, had acquired a 5% stake in the hotel chain. BP gained 0.6% and Royal Dutch Shell rose 0.7% as crude rose back above $63 a barrel as winter arrived in the US.

Resolution, the life assurance consolidator, rose 1.8% on speculation that AIG of the US was considering a bid. ICI was 1% stronger as JP Morgan increased its earnings estimated for the chemicals maker and raised the price target of the stock

The mining sector gained on bargain hunting and firmer metal prices. Kazakhmys was 1.15% higher, BHP Billiton advanced 1.37%, Rio Tinto climbed 1.28% and Antofagasta traded 1.32%.

Decliners

Wolseley, the world largest supplier of plumbing goods, led the decliners, losing 1.2% as it warned that a slowing US housing market would damage its bottom line.

Confirmation from British Airways that it had received formal notice of a series of three-day strikes by its cabin crew - combined with increasing crude prices - pulled its stock 1.6% lower.

Investors book profits from Pearson after a strong trading statement capped a strong run for the shares. Pearson eased 1.9%.


[R]9:00AM Market futures moved modestly higher ahead of earnings.[/R]
U.S. stock market futures predicted a slightly higher opening on Monday ahead of a busy week of earnings reports. The technology sector was again in focus on speculations that a deal could help chip maker Intel Corp. ((INTC)) gain a market share. According to a report, Sun Microsystems ((SUNW)) is close to an agreement to buy Intel chips. In earnings news, drug maker Pfizer ((PFE)) topped analyst estimates on earnings by a penny a share. The Dow component inched up 8 cents in pre-open trading. Other companies scheduled to report results on Monday include American Express Co. ((AXP)) and Texas Instruments Inc. ((TXN)).

Another blue-chip stock, Boeing Co. ((BA)) fell 1.4% after the aerospace giant was downgraded by Wachovia. In other corporate news, Citigroup ((C)) agreed to buy ABN AMRO Mortgage Group, an originator and servicer of U.S. prime residential mortgage loans that is a unit of LaSalle Bank Corp and ABN AMRO Bank NV.S&P 500 futures rose 1.50 points to 1,438.20 and Nasdaq 100 futures climbed 6.00 points to 1,812.50. Dow industrial futures added 4 points to 12,614. Data on leading indicators for December is due, and Fed member Janet Yellen is due to speak on the economy.


[R]8:00AM Pfizer reported surging Q4 earnings, helped by the sale of its consumer health care unit.[/R]
Pfizer Inc. ((PFE)), the world''s biggest drug maker, reported surging Q4 profit to $9.45 billion, or $1.32 per share, higher than $2.73 billion, or 37 cents per share a year ago. The considerable increase was largely contributed to the hefty gain from the sale of its consumer health care unit. The company sold its consumer health care business for $16.6 billion to health care products maker Johnson & Johnson in December 2006. The sale resulted in a gain of $7.9 billion after taxes.

Excluding the gain, earnings totaled 43 cents per share, beating the average estimates by a penny but falling 12% from the adjusted figure for a year ago. Revenue moved slightly higher to $12.60 billion from $12.55 billion a year ago, missing expectations of $12.62 billion.

For 2006, Pfizer reported earnings of $19.34 billion, or $2.66 a share, up from $8.09 billion, or $1.09 a share, in 2005. Company’s revenue climbed to $48.37 billion from $47.41 billion a year earlier, driven by strong U.S. sales of Lipitor, Celebrex and Norvasc.


[R]7:30 AM Asian markets advance Monday with HK, Shanghai and Japan leading.[/R]
Asian markets finished higher on Monday. Japan''s Nikkei Index ended 0.7% higher at 17,424. Mitsubishi Estate gained 2.4% and Mitsui Fudosan ended 2% higher. Nippon Steel advanced 2.5% and JFE Holdings added 3.7%. Among bank stocks, Mitsubishi UFJ Financial Group was 2.6% higher, Mizuho Financial Group closed 2.1% higher and Sumitomo Mitsui Financial Group advanced 1.6%.

The Hong Kong Hang Seng Index soared 2.2% to 20,772. HSBC gained 1.7% and was the most heavily traded stock, while China Mobile finished 4.3% higher on its report last Friday that it had its strongest-ever monthly subscriber additions in December. The Shanghai Composite Index surged 3.6% to 2,933. The top biggest gainers included, bus and taxi operator Beijing Bashi which surged 10%, the daily limit, and Daqin Railway which also rose 10%, while Shanghai Airlines gained 9.9%. Among retailers, Chengdu People Department Store, Beijing Wangfujing Department Store and Yinchuan Xinhua Department Store all closed 10% higher.

South Korean Kospi Index advanced 0.2% to 1,363. Shares gained on large-caps including Hynix and LG Electronics. Hynix Semiconductor advanced 2.2% on a technical rebound after a loss of 4.9% Friday. LG Electronics gained 1.7%. Australian S&P/ASX 200 gained 0.9% to close at 5,727. Strength in commodity prices powered broad-based gains in the stock market, with resources leading the charge. BHP Billiton was the biggest points contributor to the index, advancing 2.1%. Woodside Petroleum rose 2.5%.


[R]6:30 AM European shares gain Monday with auto, oil and resource stocks higher.[/R]
European markets were higher on Monday. By late morning, FTSE 100 in London climbed 0.5% to 6,266.9, Frankfurt Xetra Dax added 0.2 % to 6,758.26, and the CAC 40 in Paris gained 0.4 % to 5,639.17.

Advancers

Swatch, the world largest watchmaker, reported a 12.3% rise in 2006 sales, adding that it expected full-year operating profit to above average

Austrian bank Raiffeisen International gained 2.8% after Morgan Stanley raised its price target, saying it had underestimated the bank asset growth potential.

DaimlerChrysler led the auto sector higher after JPMorgan raised its price target keeping its overweight rating.

German car parts maker Continental gained 2.1% after Merrill Lynch lifted its target price in expectation of capital restructuring in the coming months.

Philips shares rose 1.6% in Amsterdam after the company said its fourth quarter net profit more than doubled on comparable sales growth of 2%.

Credit Suisse rose 0.4% after it said that it intends to return up to 8 billion Swiss francs to its shareholders over three years.

Oil stocks were higher too. Norway Statoil gained 1.7%, while Austrian OMV added 1.6% and Royal Dutch Shell climbed 0.8%.

Decliners

British Airways were trading down 1.7% after it said it was notified by the Transport and General Workers Union that British Airways employees who are members of the TGWU cabin crew branch will be called upon to take part in a series of strikes.

Oil and gold

Crude oil advanced for a second day in New York on speculation that cold weather in the northeastern U.S. will increase consumption. Crude oil for February delivery rose $1.06, or 2%, to $53.05 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for March settlement gained 69 cents, or 1.3%, to $54.13 a barrel in electronic trading on the ICE Futures exchange and was at $53.97 in London. Gold traded in London at $635.10 per troy ounce, up from $632.00 late Friday.

Currencies

The dollar rose against other major currencies in European trading Monday morning. The euro traded at $1.2949, down from $1.2965 late Friday. The British pound traded at $1.9730, down from $1.9737. The dollar bought 121.60 Japanese yen, up from 121.29.