Stocks Rise After Morning's Weakness

123jump.com Staff
15 Aug, 2005
New York City

Ahead of several economic data on inflation, labor market and housing starts this week, market showed little in interest in bidding share prices higher. The tech sector had few winners including Apple, Agilent, Qualcomm, Texas Instruments and Komag. Lowe's confident outlook for the rest of the year may help housing market in the coming days.

U.S. MARKET AVERAGES

The stocks made a mild come-back in the afternoon’s trading on falling oil prices. The oil still near its all-time high of $67 had shaken market confidence and several traders were taking profit in the morning. The rise in tech sector, better earnings from Lowe’s and sales of chip unit by Agilent Technologies put market into the positive territory. Investors however remain cautious ahead of CPI and PPI index releases and housing starts data this week


The Congressional Budget Office projected lower 2005 federal deficit of $331 billion, 2.7% of GDP, an improvement over earlier forecasts and far below last year’s $368 billion.

Wall Street has been fluctuating for weeks on healthy economy assurances and soaring crude-oil prices. Last week investors were soothed by strong corporate earnings and upbeat Fed. Reserve report, but constantly rising crude prices, which surpassed $67 a barrel, undermined their confidence.

The Labor Department is releasing a consumer and producer price reports this week and Wall Street could face another streak of volatility.

Crude futures opened the week lower on eased refinery concerns without reports of new refinery breakdowns. Crude traded recently 49 cents down at $66.37 on the NYMEX. Gasoline fell nearly 2 cents a share to $1.9858 a gallon, while heating oil lost a cent to $1.8965. Demand for gas will remain high in August but is expected to drop after the Labor Day.

Lowe’s, Apple Computer and Sysco reported strong quarterly results which lifted their stocks. Lowe’s reported 20% jump in earnings on 17% rise in revenue on the back of 6.5% same-store sales growth. Apple shares jumped 10% in the three trading days on two analysts upgrade and one setting the target of $52.

Delta Airlines was trading lower ahead of imminent bankruptcy speculations.

Wal-Mart is expected to report Tuesday a profit rise of 65 cents a share, up from 62 cents a year ago. Wal-Mart expects August sales increase to meet forecasts of 3 to 5% rise, but its shares fell 2 cents to $48.68.

Home Depot, home improvement shop, is due to post Tuesday quarterly income of 80 cents a share, up from 71 cents a year ago on improved sales due to do-it-yourself spending.

Hewlett-Packard, computer and printer maker, is due to release a quarterly report Tuesday afternoon. According to analysts’ expectations earnings will be 31 cents a share vs. 24 cents last year. The company announced its decision to cut another 10% of its 150,000 workers on rivalry with Dell Inc. and IBM Corp.

Apple Computer was named by Piper Jaffray a top recommended large capitalization stock for the rest of 2005. The stock rose $2.10 to an all-time high of $46.10.

British Airways rose 7 cents to $62.74 after announcing that it resumed 80% of its scheduled international flights and 85% of its domestic flights.


ECONOMIC NEWS

The government is set to release several economic indictors this week including the index for inflation, housing starts and building permits, producer’s price index, capacity utilization and weekly unemployment level.

The index in the last six months has shown low inflation as measured by the Consumer Price Index. The CPI for July, ex food and energy cost, is likely to be at or below 0.2% following 0.1% rise in June.

Higher food and energy prices are passed on to consumer by gasoline and groceries stores but manufactured goods are still discounted. The computers, electronics and automobiles are still selling at or below prices registered last year. Commodities including oil, copper, iron ore and coal are trading near all-time high.

July prices paid to producers for finished goods is likely to jump 0.5% and prices paid to factories and farmers is likely to be 0.1% higher after declining 0.1% in June.

Despite Fed’s raising short-term interest rates for the 10th time in less than 30 months the long-term mortgage rates are at the same level when the Fed began raising interest rates. Housing starts to be released this week on Tuesday is to reflect higher activity at more than 2 million units.

Following is the schedule of economic data releases.

On Tuesday morning, the Department of Labor will report the Consumer Price Index, which tracks the change in retail prices for a fixed group of consumables. The index was flat in June, but is forecast to increase a slight 0.4 percent for July.

Setting aside the volatile costs of food and energy, the ""core"" CPI for July is estimated to inch up 0.2 percent compared with a 0.1 percent increase the month before.

The Labor Department will also publish the Producer Price Index, which measures wholesale prices and is sometimes considered a meter of future inflation. The index, to be released Wednesday, is expected to increase 0.5 percent in July after coming in unchanged for June. ""Core"" PPI is projected to rise 0.2 percent after declining 0.1 percent the month before.

Also Wednesday, the Department of Commerce reports on housing construction and building permits. Economists see July housing starts growing by 1.5 percent, while permits are forecast to decline about 1.1 percent.

Lastly, the Fed on Wednesday will release data on the nation's monthly industrial output, with production estimated to be 0.5 percent higher after rising 0.9 percent in June.


INTERNATIONAL MARKET NEWS

Asian-Pacific markets traded mixed in the morning session but closed mostly lower. The Nikkei erased early-session losses to finish morning session up 0.22% after hitting a four-year high last week on positive economic data, but eventually fell in the negative territory 0.04%. The trade is expected to slow down this week as Japan begins its summer ‘obon’ holiday to honor the dead. Among the other regional markets, Singapore dropped 1%, while South Korea added 0.6%. The dollar bought 109.40 yen.


European stocks closed lower with takeover talk being in the focus. Assumption Day holiday kept liquidity on the low side through much of Europe. The German DAX 30 fell 0.3%, the French CAC 40 lost 0.2%, while London’s FTSE 100 declined 0.05% The euro lost ground against the dollar to trade at $1.2377 ahead of busy economic data release this week.


ENERGY, METALS AND CURRENCIES MARKETS

Oil prices edged lower on easing refinery problems. Light sweet crude for September delivery slipped 60 cents to $66.20 a barrel at close on NYMEX. September London Brent futures rose 13 cents to $66.58 at close.

Gold prices declined in European trading. In London gold traded at a recommended price of $441.35 per troy ounce, down from $446.10. In Hong Kong gold lost $5.80 to close at $442.75. Silver traded at $6.95, down from $7.09.

The U.S. dollar gained against the other major currencies in European trading. The euro stood at $1.2367. The dollar changed hands at 109.46 yen. The British pound was quoted at $1.8091.

EARNINGS NEWS

Sysco, foodservice distributor, posted 4Q earnings rise of 44 cents a share vs. 43 cents a year ago on lower costs and expenses, meeting analysts’ estimates.

Cytori Therapeutics, a biotechnology company, announced a 2Q net loss of $5,359,000, down from $3,810,000 for the same period last year on increase in research and development related to the cell-based therapeutics and systems.

Channell Commercial, a designer and manufacturer of telecommunications equipment, posted 2Q net income of 13 cents per share, up from 10 cents per share for the same quarter last year on higher net sales and continued growth in the core telecommunications business.


Goodrich Petroleum, oil and gas company, reported a 2Q net loss of 2 cents per share, down vs. a profit of 15 cents per share for the same period last year despite strong revenue growth.

Lowe's Companies, home improvement retailer, posted 2Q net earnings of $1.05 per share, up from 87 cents per share for the same period last year on strong sales growth.

eMagin, OLED virtual imaging technology producer, announced a 2Q net loss of 5 cents per share, down vs. a net loss of 2 cents per share for the same period last year on decline of revenue growth.

Agilent Technologies, measurement company, posted 3Q earnings of 21 cents per share, up from 20 cents per share in the same period last year despite a slight decline in revenue growth.

Human Pheromone Sciences, mood enhancing compounds developing company, reported 2Q net loss of 6 cents per share compared with a net loss of 7 cents a share for the same period last year on a decline in revenue growth.

Double Eagle Petroleum, oil and gas company, reported 2Q earnings of 9 cents per share, down vs. 16 cents per share for the same period last year despite strong revenue growth due to higher operating costs and certain non-cash expenses.

Radica Games, electronic games maker, reported 2Q net loss of 18 cents per share compared to a net profit of 1 cent per share in the year-ago period despite an increase in sales due to the decline of the VGA business.

iVOW, a provider of disease management services for the treatment of chronic and morbid obesity, posted a 2Qnet loss of 5 cents a share, up vs. a net loss of 10 cents per share for the same period a year earlier on revenue growth.

Electric City, developer, manufacturer and integrator of energy savings technologies, reported a 222% increase over revenue in the same quarter last year.2Q net loss was 5 cents per share, down vs.4 cents per share for the year-ago period.

CORPORATE NEWS
Investing firm Kohlberg Kravis Roberts & Co. and Silver Lake Partners have won an auction to acquire the semiconductor business of Agilent Technologies Inc. for about $2.6 billion.The deal finalizes months of bidding by private-equity firms for the Palo Alto, Calif., technology company's chip unit, which designs and makes semiconductors used in fiber optics, computer storage and mobile phones.
Warburg Pincus LLC is expected Monday to announce a new private-equity fund with approximately $8 billion in capital, the latest in a line of big-ticket fund raising.

OTHER NEWS

Macquarie Bank, Australia’s biggest investment bank, announced it is considering making a cash bid for London Stock Exchange PLC as part of consortium.

China’s broadest measure money supply expanded to $3.42 trillion at the end of July, up 16.3% compared with last-year same period. The increased figures followed the decision of the central bank to let growth exceed its target ahead of a move to revaluation of the yuan. Meanwhile foreign-exchange deposits declined compared with the previous month.