Microsoft and Caterpillar Boost Opening

Elena
26 Jan, 2007
New York City

U.S. stock markets opened in the positive Friday, as government data showed an improving manufacturing sector, with orders of durable goods up 3.5% in December, in line with expectations. Better-than-expected forecast from Caterpillar Inc. also provided a boost. Technology stocks were supported by a stronger-than-expected quarterly profit from Microsoft. Caterpillar shares rose 2.8%, while Microsoft gained 1.8%.

[R]9:45AM Market opened higher, boosted by upbeat manufacturing data.[/R]
U.S. stock markets opened in the positive Friday, as government data showed an improving manufacturing sector, with orders of durable goods up 3.5% in December, in line with expectations. Better-than-expected forecast from Caterpillar Inc. ((CAT)) also provided a boost, with company's shares rising 2.8%. Caterpillar's earnings, considered an indication about the pace of U.S. construction, rose 4.3% in the fourth quarter.

Technology stocks were supported by a stronger-than-expected quarterly profit from Microsoft ((MSFT)). Strong sales of its Xbox video game console helped offset the delayed release of its latest operating system, Vista. The software maker also projected double-digit growth in all of its core businesses through the rest of the fiscal year. Microsoft gained 1.8% in early trading. Among other companies reporting quarterly earnings, Biotech bellwether Amgen ((AMGN)) dropped 4.9% after it reported Q4 adjusted profit below Wall Street forecasts. In the first hour of trading, the Dow Jones industrial average rose 13.86, or 0.11%, to 12,516.42. The Standard & Poor's 500 index was up 1.93, or 0.14%, at 1,425.83, and the Nasdaq composite index added 3.94, or 0.16%, to 2,438.18. Bonds held steady, with the yield on the benchmark 10-year Treasury note flat at 4.88% from late Thursday.

[R]Durable goods orders rose 3.1% in December.[/R]
Friday morning, the Department of Commerce released its report on durable goods orders in the month of December. The report showed that durable goods orders rose less than expected due in part to a drop in defense orders. The report showed that durable goods orders rose 3.1 percent in December following an upwardly revised 2.2 percent increase in November. Economists had expected orders to increase by 3.5 percent compared to the 1.6 percent increase originally reported for the previous month. The growth in orders was partly due to a notable increase in orders for transportation equipment, which rose 4.8 percent in December following a 10.2 percent increase in November. Excluding transportation, durable goods orders rose by a more modest 2.3 percent. However, as mentioned above, a decrease in defense orders helped to limit the upside for durable goods orders. Durable goods orders rose 3.9 percent excluding a 17.5 percent decrease in defense capital goods. The report also showed that shipments of durable goods rose 0.8 percent in December following a 0.3 percent increase in November, while inventories of durable goods rose 0.4 percent after increasing by 0.3 percent in the previous month.


[R]9:30AM NY-2:30PM London FTSE 100 declines as banks, miners weaken.[/R]
The benchmark FTSE 100 Index shed 15.2, or 0.2%, to 6254.10 at mid-day in London.

Decliners

Oil and mining stocks declined. BP shed 0.4% and weaker metals prices weighed on shares in the mining sector. Xstrata led the decliners, down 1.5 %. Man Group, the largest listed hedge fund in the world, fell 0.9%. Drax Group, the power company, continued its fall after several broker downgrades during the previous session. The company suffered a further decline of 2.6%. Broker comment from JP Morgan on pharmaceutical stocks sent the sector downward. Shire dipped 1.7 % and GlaxoSmithKline was 0.4% lower. Provident Financial Plc fell 0.5%,. The U.K. lender to low-income households plans to split its international division off as a separate company.

Among the small-caps and mid-caps JJB Sports fell 4 % after its founder, David Whelan, cut his stake in the retailer to 29.5% with the sale of 20.5 million shares.

Advancers

Defensive stocks advanced slightly on limited upside. Imperial Tobacco was 0.7% higher with Gallaher up 0.3%. British American Tobacco gained 1.6%. Jarvis Plc, an unprofitable U.K. rail construction company, climbed 8%, after the company won three contracts valued at a minimum of 65 million pounds, or $128 million from train-track owner Network Rail Ltd.


[R]9:00AM Market futures were flat. Microsoft, Caterpillar, Cisco were in focus.[/R]
U.S. stock equity futures indicated a mixed performance at opening Friday, with traders digesting stronger-than-expected sales growth at Microsoft versus somewhat disappointing results from Dow components Caterpillar and Honeywell. Networking giant Cisco Systems was also in focus in pre-market trading, due to a brokerage downgrade. On the economic news front, the closely watched durable-goods orders report was seen as another leading factor in the session.

Shares of Dow component Microsoft ((MSFT)) added 1.9% in pre-open trading on better-than-forecast sales increase of 6% to $12.54 billion in Q2, helped by strong demand Xbox 360 video game player and by sales of server software. The company’s profit dropped 28% on the delay in shipping the Vista operating system and Office 2007. Again in the tech sector, Citigroup downgraded Cisco Systems ((CSCO)) to hold from buy, sending the stock down by 0.4%. At the same time, Citigroup upgraded Juniper Networks ((JNPR)) to buy from hold, citing expectations of continuous business improvement. Juniper’s shares gained 1.1% in pre-open.

Among other blue-chip stocks, Honeywell ((HON)) reported earnings that came in above the average analyst estimate, but revenue missed expectations. The stock moved slightly lower in pre-open trading. Caterpillar ((CAT)) reported higher quarterly earnings, but missed expectations. Revenue also increased, but fell shy of forecasts. The stock rose 2% in the pre-open. In corporate news, General Motors ((GM)) said late Thursday it will delay its Q4 and full-year earnings report, and again restate several years of financial results. Homebuilder KB Home ((KBH)) said the SEC was currently probing into its stock-option grants. S&P 500 futures inched 0.10 of a point lower to 1,429.70 while Nasdaq 100 futures slipped 2.75 points to 1,788.50. Dow industrial futures rose 15 points to 12,556.


[R]8:00AM Halliburton reported 40% profit decline in Q4.[/R]
Halliburton Co. ((HAL)), oil industry services provider, announced its Q4 profit fell 40% to $658 million, or 64 cents per share, compared with $1.1 billion, or $1.04 per share a year ago. Despite the huge decline, the company’s quarterly profit managed to exceed analyst estimates of 61 cents a share. The prior year's results benefited from $540 million, or 51 cents per share, of income related to a reduction in a deferred tax asset valuation allowance. Quarterly revenue rose 8% to $6.02 billion on more activity in the company's energy services group. However, it was partially offset by lower revenue from Halliburton's engineering, construction and government-services arm KBR Inc., due to decreased activity on government services projects for the military. KBR sales declined to $2.5 billion from $2.7 billion. The oil industry services provider expects demand for its services to remain strong throughout 2007.


[R]7:30AM Asian markets closed lower on Friday on weak tech and banking shares.[/R]
Asian markets finished mostly lower on Friday. Japanese Nikkei 225 index dipped 0.21% to finish at 17,421.93. Department store Marui lost 1.77%.Kyocera fell 1.2% and Canon was off 0.5%. NEC Electronics shed 4.3% after the electronics large-cap posted a wider net quarterly loss. The Hang Seng Index in Hong Kong shed 1.9% to 20,281.13. China Construction Bank declined 2.5%, while Bank of China fell 1.5%. Guangzhou R&F Properties slipped 2.8%, Agile Property was off 3.3% and Shanghai Forte gave up 3.4%.

China bucked the downward trend, with the Shanghai Composite Index advancing 0.9% to close the day at 2,882.56. Banks surged as they are most likely to be favored by funds that subscribed to the IPO of Industrial Bank. China Minsheng Banking finished up by the daily limit of 10%, Hua Xia Bank soared 10% and Shanghai Pudong Development Bank settled 9.1% higher.

The Korea Composite Stock Price Index, or Kospi, fell 0.8% to 1,371.33. Samsung Electronics shed 2.7% and Hynix Semiconductor finished down 1.8%, on declining chip prices. Kia Motors gained 0.9%, in spite of reporting worse-than-expected Q4 results. The Weighted Price Index of the Taiwan Stock Exchange fell 1.29% to close at 7,821.32.


[R]6:30AM European stocks fell Friday on weaker chemical and industrial shares.[/R]
European markets were lower Friday. In morning trade, the U.K. FTSE 100 index retreated 0.6% at 6,231.10, German DAX Xetra 30 index dropped 0.8% at 6,667.01 and the French CAC-40 index slipped 1% at 5,554.11.

Decliners

Siemens shares declined 2% despite strong gains made Thursday after earnings while EADS lost 1.6% on reports that the U.K. government could review contracts if the company does not proceed with a planned 100 million pound investment.

Chemical company, Bayer, slipped 1.4%, and another chemical firm, Linde, lost 1.2% while Imperial Chemical Industries declined 1.1%.

Advancers

L'Oreal gained 3.9% in early Paris trading after the cosmetics company late Thursday reported that Q4 comparable sales grew 6.5%. Credit Suisse updated L'Oreal to outperform after the figures.

Carrefour shares added 0.3% after Citigroup upped the French supermarket chain to hold from sell, citing valuation. Chip maker STMicroelectronics shares advanced 0.6% after UBS upgraded the company to buy from reduce.

Oil and precious metals

Oil advanced on speculation colder U.S. weather will increase use of heating fuel. Crude oil for March delivery gained 62 cents, or 1.1%, to $54.85 a barrel in after-hours electronic trading on the New York Mercantile Exchange, and traded at $54.47 at 10:26 in early trade in London. Brent crude for March climbed 66 cents, or 1.2%, to $54.78 a barrel in electronic trading on the ICE Futures exchange, and last traded at $54.33 in London.

Gold declined for a second day in London on weakening demand from India. Gold for immediate delivery dropped 20 cents to $645.90 an ounce in early trade in London. Silver gained 3.5 cents to $13.35 an ounce, palladium added 50 cents to $348.50 an ounce and platinum advanced 50 cents to $1,173.50 an ounce.

Currencies

The dollar was mostly higher against other major currencies in European trading Friday morning. The euro was quoted at $1.2908, unchanged from late Thursday. The British pound traded at $1.9606, down from $1.9711. The dollar bought 121.42 Japanese yen, up from 120.87.