Semis and Oil Lead

albena
22 Aug, 2005
New York City

Mergers and acquisitions news is driving the market higher, as there are no economic reports scheduled for today. CP Ships, PetroKazakhstan and SBS Broadcasting have each climbed to new 52-week highs on M&A news. Emmis Communications has also reached a new peak on the news that the company has agreed to sell 9 TV stations.

U.S. AVERAGES

Market spent the morning hovering around the middle of their intra-day ranges. In general, the tech sector is higher, the disk drive segment is less than 1% higher, while the semiconductor segment is up 1.1%.

Internet stocks posted a modest drop and the housing sector is also among the decliners on Monday, though it is down less than 1% only.

Climbing oil prices could weigh on the rally. Light, sweet crude recently advanced 36 cents to $66.15 a barrel on the New York Mercantile Exchange on reports of possible supply disruptions from the Middle East.

CP Ships ((TEU)), PetroKazakhstan ((PKZ)) and SBS Broadcasting ((SBTV)) have each climbed to new 52-week peaks on merger and acquisitions news. Emmis Communications ((EMMS)) reached a fresh high after the news that it has agreed to sell 9 TV stations.

OSI Pharmaceuticals ((OSIP)) hit a 52-week low, losing 20% after announcement of its deal to buy Eyetech Pharmaceuticals ((EYET)).

Northwest shares added about 4.5% as reports said the nation's No. 4 airline has suffered little damage from a strike by its mechanics that started Saturday.

Merck shares lost another 2% Monday after Friday's 8% decline on the $253 million verdict against the Vioxx maker.

Panacos Pharmaceuticals ((PANC)) surged more than 60% after the company announced that its experimental HIV drug cuts the level of the virus in the blood by 90%.

Treasury prices were lower, raising the yield on the 10-year note to 4.23% from the 4.21% level late Friday.

INTERNATIONAL MARKET NEWS

Asian markets closed higher Monday as Japanese shares reached their highest level since July 2001, led by gains in banking and oil companies. The Nikkei 225 index rose 160.78 points, or 1.3%, to 12,452. Among advancers, Hong Kong's Hang Seng index closed 1.2% higher, Sydney's All-Ordinaries index rose 0.7% to 4,462, Singapore's Straits Times index closed 0.6% higher to 2,300 and the Shanghai Composite index added 0.7% to 1,158.

Japanese stocks climbed to a new 4-year high Monday as continued confidence in the nation's economic recovery encouraged traders to buy issues sensitive to domestic demand. On the Tokyo Stock Exchange the Nikkei 225 index gained 160.78 points, or 1.30% to 12,452.51 points, its highest level since July 5, 2001 when it reached 12,607.30 points.

European stocks advanced at mid-day Monday, as oil and mining stocks gained strength, while drug makers were under pressure. The German DAX 30 added 0.24% to 4941, the French CAC 40 gained 0.09% to 4491 and the British FTSE 100 index advanced 0.15% to 5320.

ENERGY, METALS AND CURRENCIES MARKETS

The dollar weakened vs. the euro and the yen Monday, after the greenback had rallied last week on positive U.S. economic reports and expectations of higher interest rates. The greenback traded at 109.55 yen, off from 110.40 yen late Friday, while the euro advanced to $1.2232 vs. $1.2164.

Gold futures were higher in morning trade, reviving from Friday's drop. December gold gained $2.60 to $444.80 an ounce, while September copper added 1.8 cents, or 1.1%, to $1.677 a pound.

Gold closed at $437.55 an ounce on Monday in Hong Kong, down $1.2 an ounce versus Friday's close of $438.75.

The benchmark 10-year Treasury dropped 5/32, or $1.56 per $1,000 invested, to yield 4.23% Monday. The 30-year bond lost 7/32 to yield 4.44%.

EARNINGS NEWS

Heinz Company ((HNZ)) posted earnings for 1Q 2006, excluding special items, of 52 cents per share vs. 55 cents per share in the same period a year ago. Analysts expected earnings of 49 cents per share for the quarter. Sales for the first quarter totaled $2.110 billion vs. 2.003 billion prior in the year.

J. M. Smucker Company, jams, jellies and preserves producer, announced that its earnings per share from continuing operations for 1Q of 2006 were 51 cents, up vs. 50 cents the year-ago period with sales climbing some 23% in 1Q of fiscal 2006.The analyst estimate was for 63 cents per share.

LanVision Systems Inc. ((LANV)) posted 2Q net income of 6 cents per share vs. a net loss of 5 cents per share in the same quarter last year. Revenues for the quarter were up 59% to $4.06 million from $2.56 million in the year-ago quarter.

Benihana Inc. ((BNHN)) posted 1Q net income of 44 cents per share vs. 20 cents per share in the year-ago period. Total revenues rose 13% to $74.1 million vs. $65.4 million last year.

CORPORATE NEWS

Ripplewood Holdings has decided against lifting its bid for Maytag, providing an opportunity for Whirlpool's $1.7 billion rival takeover offer.

Merck was found liable in the sudden cardiac death of a man who had used Vioxx, the company's painkiller. A Texas jury awarded the man’s widow $253.4 million in damages.

PetroKazakhstan Inc. ((PKZ)) said it has entered into an arrangement agreement according to which a wholly-owned subsidiary of CNPCI would offer $55.00 per share in cash for all outstanding common shares of PetroKazakhstan. The aggregate value of the transaction is about $4.18 billion. The Board of Directors of PetroKazakhstan has recommended that its shareholders accept CNPCI's offer. The transaction is expected to be completed October 2005.

OSI Pharmaceuticals ((OSIP)) has agreed to buy Eyetech Pharmaceuticals ((EYET)) in a deal worth about $935 million. Under the agreement, each Eyetech share would be exchanged for $15 in cash and 0.12275 of an OSI share. The transaction is expected to be completed by the end of 2005.

Northwest Airlines Corp. is put to the test as it will try to keep planes flying on heavier weekday levels Monday with its mechanics still on strike. In anticipation of the strike, the nation's fourth-biggest carrier switched to its fall schedule Saturday, a week earlier than planned, making the schedule lighter by about 17%. No talks are scheduled between Northwest and the union, which is refusing to take pay cuts and layoffs that would have reduced their ranks almost by half.

SBS Broadcasting S.A. ((SBTV)) revealed that it has entered into a definitive deal for its business to be bought by funds advised by Permira and affiliates of Kohlberg Kravis Roberts & Co. in a transaction valued at about $2.549 billion, on an enterprise value basis. An acquisition company jointly held by Permira and KKR has agreed to pay SBS 1.691 billion euro in cash for substantially all of SBS's assets, and to assume substantially all of its liabilities, resulting in a total transaction value, excluding minorities, of approximately 1.864 billion euro. SBS's business activities would be continued under ownership of Permira and KKR.

German travel company TUI AG revealed Sunday it plans to acquire Canadian firm CP Ships for $2 billion in a deal to bolster the company’s container shipping business. According to TUI, the Canadian company's board of directors unanimously recommended that its shareholders accept the all-cash offer of $21.50 per share - a premium of 9.7% over CP Ships' closing share price on Friday.

Freescale Semiconductor Inc. ((FSL)) announced that it has acquired the assets of Seaway Networks Inc. The company said that Seaway Networks is a fabless semiconductor supplier of content processing technology and solutions for the data networking industry. The company did not reveal the financial terms of the deal.