Market Lacks Direction

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

Directionless market meandered for the entire session and in the end closed at flat level. The rebound of oil prices, more warnings from retailers, and dollar strength in Europe was all that market had to digest. Apparel retailer, Limited delivered yet another quarter of disappointment. JDS Uniphase delayed earnings filing for the quarter.

U.S. MARKET AVERAGES

The economic data, including unemployment level, earnings warnings from retailers including Limited and rise in bond prices, did not have much traction in the market. In fact, market looked uninterested in any news.

The Labor Department reported that first-time filings for state unemployment benefits rose by 6,000 to a seasonally adjusted 316,000 last week, marking the highest level since the week ended July 9. The increase was larger than expected. Economists were expecting claims to rise to about 310,000 from the initial estimate last week of 308,000.

The index of leading indicators increased slightly in July as the Conference Board reported, following a sharp increase in June, which keeps it on a slightly rising trend. Over the last six months the index has advanced at 2.2% annual rate, but compared to a peak of 10% growth at the end of 2003, it is a down.

Limited, apparel retailer, reported second quarter profit of 27 cents compared to 31 cents a year ago on 4% rise in revenue. The gross margins slipped to 34.6% from 36%. The company also lowered the 3Q guidance between loss and profit of one cent. The stock was down $1.17 at close.

Investors’ attention is focused on a few major companies such as:

Google filed with the Securities and Exchange Commission to sell 14.2 million new Class A shares in an underwritten public offering. At current market prices this would raise over $4 billion. According to analysts the offering would roughly double Google’s earnings and revenue for 2005 in comparison with last year. Since the IPO Aug last year, Google’s stock has more than tripled. Company’s shares closed Wednesday at $285.10. In early trading today the shares fell $5.11 to $279.99.

Salesforce, software company, posted quadrupled 2Q profit of $5 million, or 4 cents a share vs. $1.1 million, or 1 cent a share last year, meeting analysts’ expectations. The favorable quarterly results are due to 77% rise in revenue to $71.9 million with subscribers increase by 41,000.

Medtronic, medical device maker, reported 1Q earnings of $615.9 million, or 50 cents a share on revenue of $2.69 billion. Analysts had expected profit of $598.9 million, or 49 cents a share on sales of $2.67 billion.

Hot Topic, retail chain, posted 2Q profit drop of $900,000, or 2 cents a share compared with $4.5 million, or 9 cents a share a year ago, missing estimates of 3 cents a share. Same-store sales fell 3.5%. The company lowered its 3Q earnings forecast to the range of 15 to 18 cents a share.

Gap is expected to report 2Q profit of 21 cents a share.
JDS Uniphase, world’s largest maker of fiber-optic parts, was supposed to report 4Q earnings. Analysts expected a wider loss of 2 cent a share vs. 1 cent a year ago, but the company delayed the announcement of its 4Q results because it has to complete the year-end audit of its financial statements. The company expects to top analysts’ expectations on revenue growth by several millions.

Bebe Stores, retailer, is expected to post 4Q earnings of 19 cents a share.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished the session mostly in the red with Hong Kong’s Hang Seng leading the losers. The index tumbled over 300 points to close down 1.95% on energy stocks and profit-taking. The Japanese Nikkei enjoyed high levels in early trading, helped by banking, auto and steel sectors which were given a boost by the recovering U.S. equities and the climbing dollar vs. the yen. South Korea’s Kospi was another sharp decliner, down 1.85%. In Tokyo the dollar traded at 110.28 yen, up 0.13 yen.

European markets closed the trading session lower as losses in the energy sector outweighed gains in the U.S. equity markets and several broker upgrades. In the market’s focus was the Royal Bank of Scotland which said that is leading a consortium buying 10% stake in the Bank of China. Germany’s DAX 30 lost 0.41%, France’s CAC 40 declined 0.22%, and London’s FTSE fell 0.44%.

ENERGY, METALS AND CURRENCIES MARKETS

Oil steadied over $63 a barrel a day after it tumbled nearly $3 on higher inflation and lower demand in U.S. Light, sweet crude traded at $63.10 a barrel, down 15 cents. London Brent fell 12 cents to $62.44.

Gold declined in European trading on strengthening dollar. In London the precious metal closed at $441.30 per troy ounce, down from $441.80. In Hong Kong gold dropped $5.10 to close at $439.25. Silver closed at $6.98, up from $6.96.

Copper recovered slightly from its 3% drop in the previous session. September copper was up 0.9 cents to $1.666 a pound.

The U.S. dollar made further advance against its major counterparts in European trading. The euro was quoted at $1.2167, down from $1.2269. The dollar changed hands at 110.54 yen, up from 109.83. The British pound traded at $1.7927, down from $1.8056.

EARNINGS NEWS

JDS Uniphase, maker of broadband optical equipment, delayed the announcement of its 4Q results because it has to complete the year-end audit of its financial statements. The company expects to top analysts’ expectations on revenue growth by several millions.

C-Cor, communications equipment provider, posted a fiscal 4Q loss of 12 cents a share, down vs. a profit of 10 cents a share in the comparable period last year despite sales growth, missing analysts’ expectations of 7 cents a share. The latest results include charges from restructuring and amortization of intangible assets that amounted to 4 cents a share.

Stein Mart, apparels merchandiser, posted 2Q net income of 26 cents a share, up from 13 cents a share in the year-earlier period on net sales growth.

Stage Stores, retailer, posted a 2Q net income of 33 cents a share, a rise of 20.4% from the year-ago period. Sales for the period advanced 10.5%, with same-store sales up 7%.

ShopKo, retailer, announced that's agreed to be taken over by a private equity firm and posted a 2Q net profit increase of 38.6% to 38 cents a share despite a decline in revenue

Ciba, manufacturer of chemicals, announced 2Q net income excluding restructuring charges advanced 10%. Including the charges, net income amounted at SFr79 million, down from SFr99 million in the year-ago period but beating analyst estimate of SFr69 million.

Flowers Foods, producer and marketer of packaged bakery foods, posted 2Q earnings of 28 cents per share, up from 22 cents per share for the year-ago period on strong net income growth. Sales for the same period increased 12.4%.


CORPORATE NEWS

Tommy Hilfiger Corp. is preparing an auction of itself in the coming weeks. A potential buyer approached the Hong Kong-based company last few weeks but as the deal proved unsuccessful, the company is considering bids from both private-equity and trade buyers. Tommy Hilfiger presently carries a market capitalization of $1.5 billion without debt.