GM Falls on Weaker Sales

Elena
02 Feb, 2007
New York City

U.S. stock markets opened mixed on Friday. Weaker-than-expected January employment report eased inflation concerns, but dragged economically-sensitive stocks on the Dow. Shares in aluminum producer Alcoa slipped 2.2%. General Motors also weighed, falling 2.2% due to a big drop in January sales. In addition, Amazon shares dropped 3.8% on concerns about its margins.

[R]9:45AM Market opened mixed on weaker-than-expected employment report.[/R]
U.S. stock markets opened mixed on Friday. Weaker-than-expected January employment report eased inflation concerns, but dragged economically-sensitive stocks on the Dow. The Labor Department report signaled employers were more cautious than anticipated in adding jobs in the new year. Shares in aluminum producer Alcoa ((AA)) slipped 2.2%. General Motors ((GM)) also weighed, falling 2.2% due to a big drop in January sales. In addition, Amazon ((AMZN)) shares dropped 3.8% on concerns about thinning margins.

Among other companies in focus, Intuitive Surgical ((ISRG)) surged 16.1% after reporting profit drop that came in above estimates. Video game publisher Electronic Arts ((ERTS)) rose 6.3% on Q4 earnings that were well above analyst expectations. In midmorning trading Friday, the Dow Jones industrial average was down 0.32, or less than 0.01%, at 12,673.36. The Standard & Poor's 500 index was up 2.25, or 0.16%, at 1,448.19 and the Nasdaq composite index was up 7.14, or 0.29% at 2,475.52. Bonds rose on the jobs report, with the yield on the benchmark 10-year Treasury note falling to 4.82% from 4.83% late Thursday.


[R]9:30AM NY-2:30PM London FTSE gains on Friday on likely bid for Sainsbury.[/R]
The UK market was higher on Friday. The FTSE 100 gained 42.4 points, 0.7%, to 6,324.6 in mid-day session.

Advancers

American KKR and Blackstone and London-based CVC said they were assessing a potential bid for J Sainsbury but were at the preliminary stage. Sainsbury jumped 18.3%, boosting other retailers. William Morrison gained 6.5% as Tesco firmed 3.2%, Kingfisher added 3.8% and Marks & Spencer put on 3.3%.

Housebuilders traded higher with Redrow advancing 1.7 per cent, Persimmon higher by 1.1% and Barratt Developments 0.8%.

Imperial Tobacco shares also advanced as JP Morgan took on board the chances of a bid for the group and repeated its overweight rating on the stock. The tobacco company traded 5.6%.

British Airways shares moved higher by 1.8% on mixed third-quarter results. The airline reported a 27% drop in operating profits but its revenue advanced 0.5% from a year ago.

Decliners

Royal Dutch Shell declined 1.1% after Goldman Sachs reduced its rating on the stock from buy to neutral.

Accountancy software group Sage shed 1% after Merrill Lynch downgraded the stock from buy to neutral on valuation grounds as the shares have climbed above its price target.

Vehicle salvage specialist Universal Salvage has received a bid offer worth, valuing the company at 57 million pounds. However, the stocks declined 1.32%.

Legacy software group Micro Focus says that revenue growth for this year should meet or marginally exceed the top end of its previously estimated range of 7% to 10%. Micro Focus dipped 0.2%.


[R]9:00AM Market futures pointed higher, helped by upbeat employment report.[/R]
U.S. stock futures moved higher after a solid payrolls report indicated strength in the economy. The Labor Department reported that U.S. nonfarm payrolls increased by 111,000 in January, while the unemployment rate climbed to a four-month high of 4.6%. The new jobs added last month fell short of analyst expectations for a gain of 150,000. The report suggested that the jobs market started at a slower pace in 2007 and still remains in good shape.

Microsoft ((MSFT)) also helped boost the sentiment, rising 1% in the pre-open after it was upgraded to buy from neutral at Banc of America Securities. Among other pre-market highlights, Amazon ((AMZN)) shares dropped 2.8% on the margin worries. The retailer posted better-than-expected profit and sales and guidance for the year that exceeded analyst expectations. Chevron Corp. ((CVX)) said its Q4 profit dropped 9% to $3.77 billion, or $1.74 per share, compared with net income of $4.14 billion, or $1.86 per share a year earlier. The earnings beat the average estimate by a penny. Revenue for the period totaled $47.7 billion, down 11% from $53.8 billion in the previous year. The stock inched up 0.01% in pre-opening trade.

Electronic Arts Inc. ((ERTS)) rose 6.5% in premarket trading after the company said Q3 profit exceed expectations, despite a 38% decline in sales. On the downside in the early session, American depositary shares of Swedish company LM Ericsson (((ERIC)) fell 6.2% after the world''s largest wireless networking company gave a disappointing outlook. S&P 500 futures rose 3.4 points at 1,454.20 and Nasdaq 100 futures improved 2.75 points at 1,806.00. Dow industrial futures rose 24 points.

[R]Jobs growth in January came in below expectations.[/R]
Friday morning, the Department of Labor released its closely watched report on the employment situation in the month of January, showing that the U.S. economy added fewer jobs than economists had been expecting. The report showed that non-farm payroll employment rose by 111,000 in January following an upwardly revised increase of 206,000 in December. Economists had expected payrolls to increase by 150,000 compared to the increase of 167,000 originally reported for the previous month. The Labor Department said that the job growth was largely due to a continued increase in jobs in service-providing industries, which added 104,000 jobs in January following an increase of 209,000 in December. The growth in service jobs reflected notable increases in jobs in the education and health services, professional and business services, and leisure and hospitality industries.

However, the report also showed a continued decline in manufacturing jobs, which fell by 16,000 in January after falling by 18,000 in December. A decrease of 23,000 jobs in the motor vehicles and parts industry contributed to the drop in manufacturing jobs. Additionally, the Labor Department said that the unemployment rate edged up to 4.6 percent in January from 4.5 percent in the previous month. The increase came as a surprise to economists, who had expected the unemployment rate to remain unchanged. The higher unemployment rate was partly due to an increase in the size of the labor force, although the number of people that were unemployed also rose. The report also showed that employees'' average hourly earnings rose $0.03 or 0.2 percent to $17.09 in January. Economists had been expecting a slightly larger increase in wages of about 0.3 percent. With the increase, wages were up 4 percent compared to January of 2006.


[R]8:00AM NY-7:00PM Mumbai Sensex surges to an all-time high Friday on large-cap rally.[/R]
The Sensex on BSE closed 136.59 points, or 0.96%, higher, at 14,403.77. The market-breadth was strong as 1,396 shares advanced, 1,274 declined and 52 remained unchanged. Of the 30 stocks in the Sensex, 23 advanced, while the rest declined. The turnover on BSE was Rs 5,433 crore, compared to Rs 4,012 crore on Thursday. On NSE, the turnover amounted to Rs 10,257.56 crore, higher than 8,033.66 crore on Thursday.

Economic news

Wholesale inflation in India rose to 6.11% in the week ending January 20, slightly higher than the expected 6%, on an increase in the prices of manufactured products and foods.

The rupee touched one-year high in the morning trading supported by the rally in the stock market and weaker dollar. One dollar fetched Rs 44.10/11.

IBM announced a 37% growth in 2006 in India, compared with the same period earlier led by sale of computer servers, storage, software and services.

Trading highlights

BF Utilities was the most active stock with a turnover of Rs 232.32 crore followed by Gitanjali Gems and Auto Industries.

Advancers

Bharti Airtel led the gainers, up 5.39% to Rs 771.05, on a volume of 5.72 lakh shares. Reliance Communications also advance 3.54% to Rs 490.55, as it is expected to report strong growth in new subscriptions.

L&T surged 4.89% to Rs 1,679, rallying to an all-time high of Rs 1,690. HDFC was up 3.74% to Rs 1,735.05, and Reliance Energy gained 1.83% to Rs 534.10.

IT stocks were in focus. Wipro gained 3.38% to Rs 643.45, TCS added 0.53% to Rs 1,299.40 and Satyam Computer added 3.53% to Rs 490.90.

Gujarat Ambuja Cements surged 2.48% to Rs 142.80, as it posted its Q3 results. Net profit quadrupled to Rs 337 crore from a year ago. Net sales rose 90% to Rs 1,329 crore from the previous period.

Tata Steel rebounded after plunging sharply by around 12% in the past two sessions, on worries that may have over paid for British steel company Corus. Tata Steel gained 1.14% to Rs 462.95. Maruti Udyog finished 0.61% higher to Rs 945.05, as the company lifted the prices of its cars by up to Rs 12,000.

Decliners

NTPC led the decliners, dipping 2.30% to Rs 142.35, on a trading volume of 6.33 lakh shares. SBI, which had surged yesterday, lost 2.20% to Rs 1,177, while Hero Honda shed 1.22% to Rs 715.25. Index heavy Reliance Industries declined 0.24% to Rs 1,372.30.


[R]7:45AM Amazon Q4 profit declined, despite 34% sales increase.[/R]
Internet retailer Amazon.com Inc. ((AMZN)) reported a decline in Q4 earnings along with quarterly sales increase. The company posted net income of 98 million, or 23 cents per share, down from $199 million, or 47 cents per share a year ago. However, results exceeded the average analyst estimates for earnings of $90.4 million, or 21 cents per share, on $3.77 billion in sales. Amazon said Q4 results were hurt by $91 million in income tax expenses in the quarter, compared with a tax benefit of $38 million in the comparable 2005 period.

Although profits dropped by half, quarterly sales jumped 34% during the holiday shopping season. Net sales for the period were $3.9 billion, up from $2.98 billion in the same period last year, helped by the $122 million impact of changes in foreign exchange rates. The company said it expects Q1 sales of between $2.85 billion and $3 billion, a growth rate of 32% from a year earlier. Amazon.com also predicted 28% annual sales growth of between $13 billion and $13.7 billion.

For the whole fiscal year, Amazon.com reported a 47% profit drop to $190 million, down from $359 million in 2005. Revenue was up 26% to $10.71 billion, compared with $8.49 billion in the previous year. The results were released after the market closed Thursday. Shares of Amazon.com closed up $1.03, or 2.7% at $38.70 on the Nasdaq.


[R]7:30 AM Asian shares closed higher Friday with Japan up while China was down.[/R]
Asian markets finished higher on Friday. In Tokyo, the Nikkei closed 0.2% higher at 17,547.11. Shares of Sony rose 1.6%, adding to gains from Thursday on a broker upgrade. Sumco advanced 3%, as the world second-largest maker of silicon wafers intends to spend $3 billion to more than triple its capacity for producing advanced wafers by 2010. Nikko Cordial, Japanese third largest brokerage house, gained 12.5%. Bucking the market uptrend, Matsushita Electric shed 0.6% on profit-taking.

Hong Kong Hang Seng Index ended 0.7% higher at 20,563.68. Lenovo Group led the advance, as it jumped 7% after posting quarterly net profit rise of 23% from the prior year. The gains came as Credit Suisse downgraded the share to underperform from neutral. The Shanghai Composite index swung from early gains to close 4% lower at 2,673.21. Citic Securities Co., the biggest publicly traded brokerage, dipped 7.3%, Baoshan Iron & Steel Co., No. 1 steelmaker in China, declined 6.5%.

The Kospi index gained 30.24, or 2.2%, closing at 1,413.14 in Seoul. The index advanced 3.1% this week, the largest weekly gain since June 30. Hyundai Heavy surged to a record, adding 5.4% on record growth in Q4 results and Samsung Heavy Industries Co., the world second-largest shipbuilder, gained 4.8%. Other indexes around the region also advanced. Australian S&P/ASX 200 closed 0.3% higher at 5,831.50, while the Singapore Straits Times Index finished 1.6% higher at 3,217.68. Taiwan Weighted Price Index closed 0.9% higher at 7,777.03.


[R]6:30AM European stocks were higher Friday on strong utility sector.[/R]
European markets were higher on Friday. By mid morning, the FTSE 100 in London gained 0.4% to 6,309.8, Frankfurt Xetra Dax added 0.2% to 6,863.03, and the CAC 40 in Paris gained 0.3% to 5,678.51.

Advancers

Eon, the German utility, gained 3.2% on expectations that the company would be spared a costly bid battle for Endesa of Spain after rival bidder Gas Natural abandoned the race. Sainsbury advanced after a group of investors announced they were considering a bid for the supermarket. Sainsbury shares jumped 14.5%. Carrefour added 3.2% as it stated it was close to signing an agreement with the Indian government to set up retail operations in the country. Ahold, the Dutch retailer which posted a drop in Q4 sales in the previous session, gained 1.7%, while French Casino Guichard added 1.6%.

Q4 profit of Volvo missed forecasts, but an improved outlook from the company and the announcement of an extraordinary pay-out helped boost the shares 2.4%. Domestic rival Scania advanced 3.3%.

Decliners

Ericsson, the Swedish telecoms equipment and networks group, led the decliners, down 5.8%, after reporting Q4 earnings that missed expectations and lowering its 2007 growth forecasts. Nokia, which recently merged its networks systems with that of Siemens, fell 0.9%, while Siemens fell 1%.

Shares in Endesa were down 0.6%, while Acciona, the Spanish construction group that holds 21% of Endesa shares, was 2.2% lower.

Oil and gold

Oil prices recovered Friday on continued cold weather in the United States. Crude oil for March delivery rose 18 cents to $57.48 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude for March delivery gained 29 cents to $57.01 a barrel on the ICE Futures exchange in London. Gold opened Friday at a bid price of $656.64 a troy ounce, down from $658.29 late Thursday.

Currencies

The euro was little changed against the U.S. dollar Friday, declining slightly despite signs that the U.S. manufacturing sector was tightening. The euro bought $1.3018 in morning European trading, down from $1.3021 in New York late Thursday. The British pound shed $1.9672 from $1.9677, while the dollar rose to 120.88 Japanese yen from 120.66 yen.