Weak Rally on Light Volume

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

Oil market took stocks on the ride. Stocks gyrated with oil and as oil settled lower at close stocks traded higer but not by much. Light volume on this summer day was reflected across all exchanges with NYSE showing only 1.4 billion shares.

U.S. AVERAGES

During a light trading day most stocks closed unchanged barring few tech stocks and home builders. The strength in tech and energy stocks reflected buying in semiconductors and in oil related stocks. Airline stocks continued their downward spiral with no end in sight.

Several mining stocks rose in NY in sympathy with mining stocks rise in Europe. Two of the largest mining companies in the world, Corus and BHP Billiton are expected to release earnings this week. CVRD, Brazilian iron ore, BHP, and several Canadian miners gained by more than 1%.

Of several mergers announced today, Maytag deal led the headlines. Maytag has agreed to be acquired by Whirlpool for $21 in cash and stock.

Maytag shareholders will receive, for each share held, $10.50 in cash and between 0.1144 and 0.1398 of a share of Whirlpool stock. The amount of Whirlpool stock to be issued in exchange for each Maytag share will depend upon the volume-weighted average trading price of Whirlpool's stock during a 20 trading-day period ending shortly before the merger.

Whirlpool currently has a $1.2 billion, five-year committed credit facility, scheduled to mature in 2009. There have been no borrowings under this agreement. The acquisition and upcoming debt maturities of the combined company are expected to be financed through current bank agreements and with new committed bank facilities.

In addition to reimbursing the $40 million termination fee paid by Maytag to Triton, Whirlpool has agreed to pay up to $15 million to assist Maytag in retaining key employees. Whirlpool also has agreed to pay Maytag a ""reverse break-up fee"" of $120 million under certain circumstances in the unlikely event of failure to obtain regulatory clearance.

Climbing oil prices has dragged the market averages from its intra-day highs. Light, sweet crude recently advanced 36 cents to $66.15 a barrel on the NYMEX on reports of possible supply disruptions from Iraq.

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%.


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 Monday close, 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 lost 0.04% and the British FTSE 100 index advanced 0.11%.

ENERGY, METALS AND CURRENCIES MARKETS

At close oil dropped 14 cents to $65.65 per barrel in New York.

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. ((BNHNA)) 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

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.

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.

OTHER NEWS

Iraq's oil exports were shut down Monday by a power cut that left parts of central and southern Iraq dark, including the country's only functioning oil export terminals. Sabotage was also blamed for Monday's blackout, which prevented oil from being pumped into tankers waiting at berths, according to Iraqi officials. There was no electricity Monday morning in Basra and in the port city of Umm Qasr, too. Exports through the country's other main route, the northern exp