Sun Micro and Yahoo Boost Tech Stocks

Elena
24 Jan, 2007
New York City

U.S. stocks opened higher on Wednesday after better-than-expected earnings reports from several major tech companies boosted investor confidence in the technology sector. Sun Microsystems rose 8.8% after the company reported its first quarterly profit in years as revenue rose. Yahoo jumped 6.6% after the Internet-search company''s Q4 profit topped analyst estimates, despite the 61% decline.

[R]9:45AM Market opened higher, led by the tech sector.[/R]
U.S. stocks opened higher on Wednesday after better-than-expected earnings reports from several major tech companies boosted investor confidence in the technology sector. Sun Microsystems ((SUNW)) rose 8.8% after the company reported its first quarterly profit in years as revenue rose. Yahoo ((YHOO)) jumped 6.6% after the Internet-search company's Q4 profit topped analyst estimates, despite the 61% decline. Shares in AT&T ((T)) was a notable gainer on the Dow, rising 2.2% after its wireless unit Cingular reported better-than-anticipated earnings. However, Advanced Micro Devices ((AMD)) limited gains for the sector, falling 7% in early trading, hurt by Wall Street downgrades. Another drag was software giant SAP ((SAP)) which dropped 4.5% due to a disappointing margin outlook.

In other corporate news, McDonald's Corp. ((MCD)), the world's largest fast-food chain, said Q4 profit more than doubled, thanks largely to the spinoff of the Mexican-style eatery Chipotle and strong sales in Europe. The restaurant company earned $1.2 billion, or $1 a share, up from $608.5 million, or 48 cents a share a year ago. McDonald's revenue climbed 11% to $5.6 billion. Quarterly results beat expectations of 61 cents per share and revenue of $5.7 billion.

Market also digested President Bush's State of the Union address in which he called for expanded health insurance coverage and a 20% reduction in the country's consumption of gasoline over the following 10 years. Renewable energy stocks, which had rallied before the speech, steeply dropped. Shares of Verasun Energy Corp. ((VSE)) fell 5%, Pacific Ethanol ((PEIX)) lost 4%, and Xethanol Corp. ((XNL)) fell 4.6%. In the first hour of trading, the Dow Jones industrial average was up 35.49, or 0.28%, at 12,569.29. The Standard & Poor's 500 index was up 4.00, or 0.28%, at 1,431.99 and the Nasdaq composite index was up 15.42, or 0.63%, at 2,446.83. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.80% from 4.81% late Tuesday.


[R]9:30AM NY-2:30PM London FTSE gains Wednesday on upbeat market sentiment.[/R]
The FTSE 100 in London gained 0.8% at 6,275.6, an increase of 48 points.

Advancers

Northern Rock was 2.5% higher on reports of a better-than-expected full year profit. Bradford & Bingley added 0.6%, and Barclays made gains of 0.6%, while HBOS was 1.2% higher.

Kazakhmys was the top advancers among miners after analysts at HSBC lifted the rating on the stock to neutral from underweight. Stronger metals prices on commodities markets brought the rest of the sector back into positive territory. Antofagasta was 1.6 % higher, Xstrata made gains of 2.5% and Rio Tinto was 2% higher.

Expectations of stronger demand for electricity and gas supported utilities. Drax, the electricity company, was 1.7% higher, Scottish & Southern Energy gained 1.3% and National Grid advanced 1.6%. BG Group added 2%. United Utilities, the water company based in the north west of England, climbed 2.4% after JP Morgan upped its rating on the stock to overweight from neutral .

JD Wetherspoon rose 2.7% after it posted a 5.5 % increase in same-store sales. Punch Taverns gained 0.7 % after it said the same-store sales in its core chain continued to rise.

Decliners

Chemists group Alliance Boots fell 0.8 % after Morgan Stanley reduced its rating on the stock to underweight from equalweight. Capita Group, the outsourcing company, lost 0.5 % after Deutsche Bank lowered its rating on the stock to hold from buy.

There were losses for BSkyB ahead of its Q2 subscriber numbers due next week. The company slipped 0.2 % on a potential mixed report from the pay TV broadcaster, which has suffered from slower growth.


[R]9:00AM Market futures were flat. Yahoo and Sun Micro advanced on earnings.[/R]
U.S. stock futures pointed to a flat market opening, with tech stocks ready for a better performance Wednesday, led by Yahoo Inc. and Sun Microsystems. On Tuesday, strong earnings reports from Texas Instruments ((TXN)) and United Technologies ((UTX)) helped generate positive mood in the sector. Yahoo ((YHOO)) rose 5.6% in pre-open trading, despite the 61% profit drop reported by the Internet search group. The company''s shares gained on news that it would roll out new search ad technology, as well as expectations of improved revenue per page view. In addition, Goldman Sachs downgraded its shares, citing valuation. Shares in Yahoo''s rival Google ((GOOG)) advanced 1.1% in pre-market trading.

Sun Microsystems ((SUNW)) rallied 8.8% in the pre-open, due to a better-than-forecast profit on 7% revenue group. Shares of mobile communications technology company RF Micro Devices ((RFMD)) rose 10.5% on strong quarterly results. However, not all tech stocks posted strength. Advanced Micro Devices ((AMD)) slipped 6.3% in the pre-open after the chipmaker said it swung to a loss in Q4 and provided a lower outlook.

Outside the tech sector, Dow component McDonald''s ((MCD)) added 1% after it reported improved quarterly earnings, with earnings from continuing operations min line with expectations. Among companies due to release later today are Internet auction house eBay ((EBAY)) and microchip designer Qualcomm ((QCOM)). S&P 500 futures gained 1.30 points to 1,436.70, while futures for the technology-rich Nasdaq 100 futures climbed 8.00 points to 1,795.00. Dow industrial futures tacked on 8 points to 12,600.


[R]8:00AM Yahoo profit plunged 61%.[/R]
Yahoo Inc. ((YHOO)) said that its Q4 profit tumbled 61% from a year ago but exceeded analyst estimates. Yahoo reported net income drop of $269 million, or 19 cents a share, down from $683 million, or 46 cents a year earlier, when it had a $340 million gain from the sale of investments. The Internet bellwether said Q4 results were also hurt by considerably higher costs for employee stock options. Fourth-quarter profit was higher than the expected earnings of 13 cents a share.

The company said sales rose 13% to $1.7 billion on stronger demand for the company''s display ads. Excluding expenses on Internet traffic, sales rose 15% to $1.23 billion, slightly above analyst expectations and in line with Yahoo''s own forecast. Still, sales increase was the lowest reported in several years, due to a heightened competition in the online ad market from Google. Analysts expect the long-awaited features to help Yahoo better compete with its rival. Yahoo shares traded up 5.5% in after-hours trading, as the company said it would roll out new search ad technology next month, earlier than expected.


[R]7:30 AM Asian markets rallied Wednesday with Tokyo near six-year record.[/R]
Asian markets ended higher on Wednesday. Nikkei 225 Index in Japan closed up 0.6% at 17,507.40. Shares of Toyota gained 2% and Canon shares advanced 1.2%. Among domestic-related issues, Nippon Steel added 1.3% while consumer-focused lender Aiful put up 1.8%. Kawasaki Kisen Kaisha Ltd was up 7.7% and Mitsui OKS Lines Ltd rose 4%. The largest oil producer in Japan, Inpex Holdings advanced 2.4%.

Hong Kong Hang Seng Index advanced 0.7% to 20,912.23. The Hang Seng China Enterprises Index gained 0.9% to 10,033.59. Shares of China Mobile surged 3.8%, jumping sharply for a second day in a row after Merrill Lynch earlier raised its price target on the share. Ping An Insurance gained among mainland insurance companies, with shares up 2.5%.

Australian S&P/ASX 200 settled up 0.4% with Woodside Petroleum adding 1.2%. Singapore Straits Times Index edged up 0.6% and Weighted Price Index in Taiwan rose 0.8%. Malaysia Composite Index added 0.8%, while Thai SET index increased 0.9%. Indonesian Jakarta Composite Index was the only one to buck the trend, declining 0.1%. New Zealand NZSX-50 rose 0.1%.

[R]6:30 AM Europe was higher Wednesday on oil and banking stocks upmove.[/R]
European markets gained on Wednesday. In early trade, FTSE 100 in London climbed 0.6% to 6,262.4, Frankfurt Xetra Dax added 0.3% to 6,696.07, and the CAC 40 in Paris gained 0.5% to 5,605.1.

Advancers

Shares in HVB gained 5.8% and Bank Austria added 5.5 % after Unicredit, which owns 95 % in both businesses, announced it was to buy out the remaining shares in the two banks. Italian banks were higher following upgrades to the sector late on Tuesday by Morgan Stanley. Banca Monte dei Paschi di Siena edged 0.3% higher, while Capitalia edged up 0.5% after the broker raised its rating from underweight to equal weight.

Crude prices surged overnight after the US announced it would double the capacity of its emergency reserves stockpile. European oil producers all benefited. Total of France gained 1%, Cepsa of Spain notched up 1.9% and Statoil of Norway rose 2%. BP advanced 1.2% and miner Vedanta Resources gained 2%.

Decliners

SAP shares declined 5.4% after it announced that its 2007 operating margins would fall. The company posted Q4 profit and sales figures matching its warning from a few weeks ago, with net income up 29% and revenue up 7%.

Oil and gold

Crude oil for March delivery dropped 59 cents, or 1.1%, to $54.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange, as a government report today may show commercial stockpiles advanced for a second week. It traded at $54.50 in early trade in London. Gold traded in London at $643.00 per troy ounce, down from $645.12 late Tuesday.

Currencies

The dollar was mostly higher against other major currencies in European trading Wednesday morning. The euro was at $1.3002, down from $1.3021 late Tuesday. The British pound was quoted at $1.9760, down from $1.9825. The dollar bought 121.44 Japanese yen, down from 121.64.