Fortress, AirTran Rise; Cintas, US Auto Fall

123jump.com Staff
21 Mar, 2007
New York City

Stocks in the U.S. jumped as traders welcomed the latest Federal Reserve statement on the economy. Software companies showed gains. Oracle advanced 2.2%. Adobe Systems rose 5.5%. FedEx quarterly revenue climbed more than 7% year over year. Recently listed IPO, U.S. Auto Parts fell 45% on loss compared to a profit a year ago. Cintas dropped nearly 10% on disappointing third quarter and lower 2007 outlook. Market averages continue to rise after the Fed Decision to not change the target rate.

[R]2:30PM NY, U.S. Market Movers[/R]

AirTran Holdings ((AAI)) shares gained 6.7% after a JPMorgan said the stock is priced attractively following an extended skid.

Fortress Investment Group ((FIG)) rose 6% on the possible takeover target. The company raised $634 million when it completed its highly anticipated IPO last month. Fortress has $30 billion in assets under management: private equity, hedge funds and publicly traded real estate vehicles known as castles. Investors are betting that the hedge fund''s IPO will open the floodgates for more hedge funds and alternative investment vehicles to go public.

Last week speculation swirled that private equity giant Blackstone Group was preparing for a public offering of about 10% of the company. Reports speculated that the deal could value the company at anywhere from $20 billion to $40 billion.

Fremont General Corp. ((FMT)) is selling a $4 billion portfolio of sub-prime home loans to unnamed buyers, which should result in a $140 million pretax loss. Shares jumped 15.3%. The company said it''s received a first installment of $950 million in the deal, with other sales agreements expected over the next several weeks.

GSI Commerce ((GSIC)) was upgraded to buy from neutral at Goldman Sachs and the stock climbed 13.5%.

ICF International Inc. ((ICFI)) shares climbed 18.8% after the announcement that its fourth-quarter revenue more than doubled, driven by a large Hurricane Katrina-related contract. The company swung to a fourth-quarter profit of $9.21 million, or 65 cents per share, from a loss of $1.03 million, or 11 cents per share, a year earlier.

Stein Mart Inc. ((SMRT)) posted essentially flat earnings for its fiscal fourth quarter, as higher expenses offset a more modest rise in sales. Net income came in roughly flat at $21.1 million, or 48 cents per share. Sales rose 8% to $461 million compared with $427.4 million in the same period a year earlier. Same-store sales rose 0.9%. Shares climbed 9.8%.

Telestone Technologies Corp. ((TSTC)), which sells wireless network services and communications gear in China, shares surged 17.4% after it reported strong fourth-quarter profit and sales. The company reported net income of $1.6 million, or 19 cents per share, compared with $1.4 million, or 17 per share, a year ago. Sales jumped to $7.4 million versus $5.5 million in the year-ago period.

Velocity Express Corp. ((VEXP)) signed a multi-year contract renewal, representing more than $13 million in annual revenue, with its largest financial services customer. The company didn’t name the customer. Shares jumped 19.2%.

WSI Industries ((WSCI)) shares jumped 15.7% after the maker of parts for the avionics and defense industries said that its second-quarter net earnings increased to $155,000, or 6 cents per share compared with $69,000, or 3 cents per share, in the year-ago period. Revenue climbed to $4.44 million versus $3.57 million in the same period a year earlier.

AAR Corp. ((AIR)), aerospace supplier and maintenance provider, said that its fiscal third-quarter profit surged 68%, driven by increased revenue, outsourcing and better industry conditions. Quarterly net income rose to $15.3 million, or 36 cents per share, compared with $9.1 million, or 24 cents per share, in the prior year. Revenue grew to $271 million, up 21% from $223.4 million in the previous year. The quarter''s results included $16.5 million from the sale of two aircraft at book value.

Cintas Corp. ((CTAS)) fell 8.6% after the company posted disappointing third-quarter results and cut its 2007 guidance. For the quarter, the uniforms maker earned $76.7 million, or 48 cents per share, on revenue of $905.4 million compared with the year-earlier quarter when the company earned $76.6 million, or 45 cents per share, on revenue of $836.4 million. The company cut its revenue projection to a range of $3.68 billion to $3.73 billion from an earlier view of $3.77 billion to $3.85 billion.

FSI International ((FSII)), a maker of equipment used in microelectronics fabrication, shares got stung 15% after the company projected a third-quarter loss, partly due to a weak semiconductor market. The company said it expects a third-quarter loss of $3 million to $4 million.

U.S. Auto Parts Network ((PRTS)) shares plunged 40.6% after the company reported a fourth-quarter net loss of $20,000, or breakeven per share, compared with net income of $2.06 million, or 16 cents per share, in the year-ago period. Revenue, more than doubled, reached $36.8 million from $15.7 million in the prior-year period. The company forecast first-quarter results in a range of a 2 cent-loss to breakeven on revenue of $39 million to $41 million, and forecast 2007 earnings of 5 cents to 17 cents on revenue of $170 million to $185 million.

[R]2:15PM NY – The Fed left its target for short term rates unchanged at 5.25%.[/R]

For the sixth meeting in a row, the Federal Open Market Committee left its target rate for the fed fund rates unchanged at 5.25%. The Fed lifted the target rate to 5.25% on June 29th, 2006 and since then for six meetings the Fed has left the target rate unchanged.

Recently estimate of GDP for the fourth quarter of the year 2006 was revised lower to 2.2% from 3.5%. Weakening consumer spending and reluctance to increase capital spending by businesses played a part in the lowering the estimate for the economic growth.

The Fed officials have issued upbeat assessment of the economy as late as January of this year, but since then the sub prime lending problems have emerged and housing starts and home sales have been anemic. Retails sales have also been lower than expected for the last two months in a row.

Core CPI and wholesales inflation are still running above the target level of most officials and private economists’ estimates. Core CPI for February was reported at 2.7% above the Fed comfort level of 2% and Producers Price Index was reported at 1.3% for the month of February.


[R]1:00PM NY European markets closed higher, helped by property stocks.[/R]
European stocks ended moderately higher on Wednesday, helped by strength in the real estate sector, which helped offset cautiousness ahead of a decision on U.S. interest rates. Declines from retailers Metro and Inditex also put a floor on gains. Shares in Hammerson, Anglo-French property developer, rose 4.8% on speculations that the company may be in line for a bid either from Unibail of France or a private equity consortium. Among other rising stocks, ABN Amro and its possible merger partner Barclays advanced on analyst comments. However, Bank of Ireland dropped 3.8% after the company said it sees fiscal-year earnings in line with estimates. Retail companies also attracted attention. Inditex closed down 3%, reversing from earlier strength on the back of better-than-expected annual profit. The group plans to invest 850 million to 950 million euros to renovate or open stores. Also on the downside, shares of German retailer Metro lost 3.8%. The company said that its annual profit nearly doubled, helped by the sale of a stake in a home-improvement chain. The U.K. FTSE 100 closed up 0.6% at 6,256.80. The German DAX Xetra 30 added 0.2% at 6,712.06, the French CAC-40 index finished virtually flat at 5,502.18.

Crude oil prices advanced, following a government report which showed another decline in gasoline stockpiles. Light, sweet crude May delivery gained 13 cents to $59.89. The U.S. dollar traded mixed against its major currency rivals. The euro traded unchanged at $1.3307. The dollar bought 117.80 yen, up from 117.25. The British pound traded at $1.9592, down from $1.9609. European gold prices declined. In London gold traded at $658.50 per troy ounce, down from $659.50. In Zurich, the precious metal traded at $656.70, up from $652.85. Silver rose to $13.20, down from $13.34.


[R]11:30AM U.S. stocks traded in a lackluster fashion. FedEx fell 2% on earnings drop.[/R]
U.S. stocks lost direction in early Wednesday trading, with many traders staying on the sidelines ahead of the Federal Reserve''s announcement on interest rates. Software and computer hardware stocks moved notably higher. Adobe Systems ((ADBE)) climbed 3.7% after it reported a 37% profit rise. Oracle ((ORCL)) rose 3.7% after reporting a better-than-forecast 35% jump in quarterly profit. Semiconductors were helped by SanDisk ((SNDK)) which gained 3.7%, as the company and Hynix Semiconductor announced a patent cross-license pact. Among other stocks in the spotlight, Morgan Stanley ((MS)) rose 4% on better-than-expected Q1 earnings and revenue.

On the side of the losers, FedEx Corp. ((FDX)) slipped 2% after its Q3 earnings came in stronger than expected but the company warned profits in the coming fiscal year could fall below its expectations. Shares of aluminum producer Alcoa ((AA)) were the biggest drag on the Dow, falling 1.5%. At the same time, shares of AT&T ((T)) offered the strongest help to the blue-chip average, posting an advance of 1.6%. In late morning trading, the Dow Jones industrial average fell 17.95, or 0.15%, to 12,270.15, after two sessions of gains. The Standard & Poor''s 500 index rose 0.36, or 0.03%, to 1,411.30, and the Nasdaq composite index advanced 0.88, or 0.04%, to 2,409.09. Bonds fell ahead of the Fed decision. The yield on the benchmark 10-year Treasury note rose to 4.57% from 4.55% late Tuesday.

[R]Crude oil inventories gained, while gasoline stockpiles dropped.[/R]
Government data released Wednesday showed that crude oil inventories rose in the most recent week, adding to a gain posted in the previous period. Meanwhile, gasoline and distillate stockpiles fell once again. The Department of Energy''s Energy Information Administration said that crude oil inventories rose 4 million barrels in the week ended March 16. Specifically, the measure climbed to 329.3 million barrels from the previous week''s level of 325.3 million barrels. This added to a gain of 1.1 million barrels recording in the previous week. Oil inventories for the week were 3.7% below last year''s level. Meanwhile, gasoline inventories showed a week-over-week decline of 3.4 million barrels. This extended a recent streak of declines, including a slide of 2.5 million barrels in the previous week. The level of gasoline inventories was 3.4% below last year. Distillate fuel oil had an inventory decline during the week ended March 16 as well. Stockpiles of these products, which include heating oil, slipped by 1.7 million barrels. This added to recent declines, with a draw down of 2.8 million barrels taking place in the previous week.


[R]10:30AM UK equity market was higher on Wednesday on BoE decision.[/R]
The UK market was higher on Wednesday. By late lunchtime, the benchmark index was 43.2 points higher at 6,263.5.

Advancers

Barclays kept gaining on hopes its move for ABN Amro of the Netherlands could leave it open to a bid. Barclays rose 1.9%. Hammerson gained 4.1% as takeover speculation continued to boost the property group.

Weir Group was up 3.9% as the engineering group announced a 40% rise in annual profits. British Airways rallied 3.4% on speculation about consolidation in the sector, as rumours continue that Iberia is being eyed by Lufthansa.

Decliners

Whitbread lost 2.4% on profit taking after the stock rallied on Tuesday in the wake of rumors of private equity bid interest in the owner of the David Lloyd chain of fitness centres and Costa Coffee shops. UK security and medical equipment maker Smiths Group fell 0.2 as it reported a 7% rise in first-half operating profit.

Inter Link Foods slumped 57% as the cake maker issued yet another profit warning. Engineer Smiths declined 0.7%, despite posting a 7% in underlying earning to 148 million pounds in its first half, though pre-tax profits fell slightly to 134 million pounds.


[R]10:00AM Asian markets ended mostly higher Wednesday with HK leading gainers.[/R]
Asian markets ended mostly higher on Wednesday. The market in Japan was closed for public holiday. Hong Kong benchmark index Hang Seng Index rose 0.8% to 19,516.41. Property shares rose on expectations of strong 2006 financial results and hopes that the Federal Reserve will not raise interest rates. Hang Lung Properties rose 2.9%, Henderson Land gained 1.9% and Wharf Holdings advanced 1.1%.

The Weighted Price Index of the Taiwan Stock Exchange rose 0.3% to close at 7,757.03 and Singapore''s Straits Times Index advanced 1.25% to finish at 3,155.69. In Australia, the benchmark S&P/ASX 200 index fell 0.3% at 5,861.9 after hitting 5,906.7 in early trading.

South Korean shares ended flat as losses in LG.Philips LCD and LG Card countered strong gains by Hynix Semiconductor and shipbuilders. The Korea Composite Stock Price Index, or Kospi, closed down 0.1%, at 1,442.85.


[R]9:45AM Wall Street opened slightly up ahead of Fed Reserve’s rate decision.[/R]
Wall Street opened slightly higher Wednesday, reflecting positive sentiment generated by strong earnings reports from Morgan Stanley and Oracle, as well as cautiousness ahead of the Fed Reserve''s interest-rate decision. Wall Street largely expects the Fed will leave short-term interest rates unchanged at 5.25%. Morgan Stanley ((MS)) gained 2.3% after the bank posted a 70% rise in profit in Q1, well above estimates. Software stocks showed considerable strength, pushing the Nasdaq higher. Oracle ((ORCL)) rose 3.7% after reporting a better-than-forecast 35% jump in quarterly profit. Among other earnings-related gainers in the sector, Adobe Systems ((ADBE)) climbed 3.7% after it reported a 37% profit rise, although sales dropped more than predicted. In contrast, shares in FedEx ((FDX)) stock dropped 1.9%, as the company said its Q3 earnings fell 2% to $1.35 a share, from $1.38 a share a year earlier

Airline stocks moved higher after JetBlue Airways ((JBLU)) confirmed its outlook of a minus-2% to minus-4% operating margin in Q1. It also predicted that its 2007 operating margin would be 7% to 9%. The stock rose 1.7. SanDisk ((SNDK)) gained 3.9%, as the chipmaker and Hynix Semiconductor announced a patent cross-license pact. In the first hour of trading, the Dow Jones industrial average fell 7.69, or 0.06%, to 12,280.41. The Standard & Poor''s 500 index rose 0.80, or 0.06%, to 1,411.74, and the Nasdaq composite index advanced 3.84, or 0.16%, to 2,412.05. Bonds fell ahead of the Fed decision. The yield on the benchmark 10-year Treasury note rose to 4.59% from 4.55% late Tuesday.


[R]9:00AM NY-7:00PM Mumbai Sensex surges Wednesday, ICICI Bank rallies.[/R]
The Sensex on BSE finished 239.94 points, or 1.89%, higher at 12,945.88. The market-breadth was not strong though. For 1,155 stocks that advanced, 1,370 declined and 103 remained unchanged. Of the 30 stocks in the Sensex 24 advanced, while the rest declined. The turnover on BSE was Rs 2,729.96 crore, lower than Rs 2,910.12 crore on Tuesday, while on NSE the turnover was Rs 5,839.09 crore, also lower than Rs 6,056.26 crore on Tuesday.

Economic news

Idea Cellular today signed an outsourcing deal with IBM valued at $600-$800 million (Rs 2,640 – Rs 3,520 crore). The 10-year pact is designed on an innovative risk-reward revenue sharing model and covers all of the existing operations and potential new additions of Idea. The contract starts from April 1, 2007 and will be completed in phases.

The Telecom Regulatory Authority of India said on Wednesday it had reduced the fee paid by all telecoms users to fund loss-making rural network expansion by state-run Bharat Sanchar Nigam Ltd. Besides, the regulator also abolished the ADC on all outgoing international calls from a previous 0.8 rupees per minute.

Finance Minister Palaniappan Chidambaram announced on Wednesday that the current cash squeeze in the banking system was due to the quarterly tax payments and it will ease in the coming days.

Earnings news

After trading hours on Tuesday, Nestle India reported a 15.7% decline in net profit in the December 2006 quarter to Rs 62.46 crore, compared to a net profit of Rs 74.16 crore for the same period the previous year.

Trading highlights

MindTree was the most-active stock with a turnover of Rs 204.70 crore followed by Reliance and Reliance Communications.

Advancers

Banking stocks led the advancers on renewed buying interest. The shares extended the rally on Tuesday for the second consecutive session. ICICI Bank was the major gainer in BSE. The stock gained 5.6% to Rs 870.3. State Bank of India gained 3.1% to Rs 982.2, and HDFC Bank rose 1.2% to Rs 966.

Telecom shares also rose after the decision of TRAI to reduce Access Deficit Charge, or ADC, to Rs 2,000 crore from Rs 3,200 crore for the next financial year. Bharti Airtel rose 3.2% to Rs 762 and Reliance Communication climbed 2.4% to Rs 410. The other market advancers in the Sensex were Hindustan Lever which rose 3.7% to Rs 190 and Reliance Energy jumped up 3.1% to Rs 491.

IT shares gained ahead of a robust set of March quarter results and some large order wins. Satyam Computer was up 1.8% to Rs 453.90, TCS gained 1.2% to Rs 1,268, Wipro added 1.5% to Rs 582 and Infosys advanced 2.1% to Rs 2,098. Index heavy Reliance Industries advanced 1.59% to Rs 1,342.

Decliners

Gujarat Ambuja led the decliners, plunging 4% to Rs 106. HDFC dropped 1.5% to Rs 1,543, and Ranbaxy slipped 1.2% to Rs 332. Grasim fell 0.9% to Rs 2,105.8 and Dr Reddy fell 0.2% to Rs 678.


[R]7:30AM European equities were broadly higher Wednesday on financials.[/R]
European markets were broadly higher on Wednesday morning. Frankfurt Xetra Dax was fractionally lower at 6,699.01, the CAC 40 in Paris gained 0.1% to 5,505.61, and London FTSE 100 climbed 0.2% to 6,235.0. National benchmarks advanced in all of the 16 western European markets that were open except Ireland.

Advancers

Barclays, the third-biggest U.K. bank, gained 1.6% while ABN Amro, the largest Dutch bank, added 0.5%. Both companies agreed to some initial merger terms, for the takeover.

Goldman Sachs upgraded some of the banking sector including Royal Bank of Scotland, which climbed 1.5%, Santander, up 0.1%, and Bank of Piraeus, which added 0.5%. Intesa Sanpaolo, the Italian bank, gained 1.7% as two brokers started coverage of the stock. Sal Oppenheim started the stock with a buy rating, while Morgan Stanley resumed coverage with an overweight rating.

CNP Assurances SA advanced 3.7%. The biggest life insurer in France, reported a 55% rise in second- half net income to 875.9 million euros, or $1.2 billion, supported by lower taxes and investment gains. SAP AG, the world biggest business-management software maker, gained 0.8%. Valeo SA gained 1.8%. Morgan Stanley raised its recommendation on shares of third-largest maker of car parts in the Europe, to overweight from underweight.

Decliners

Bank of Ireland fell 1.6% after its forecast of a 22% rise in underlying earnings per share for the current year failed to please investors. Hochtief AG fell 2.3%. August von Finck, the biggest shareholder of the company, sold his entire 25% stake in the German builder.

Total, the French oil company, bucked the generally stronger trend in the sector after Christophe De Margerie, chief executive, was detained for questioning by police investigating alleged corruption in Iran. Total shares fell 0.2%

Gold and oil

Oil prices climbed in Asian trading Wednesday on expectations that the weekly U.S. oil inventory picture will show a decline in domestic supplies of gasoline and distillates such as heating oil. Crude oil for May delivery gained 25 cents to $59.50 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude contract for May delivery rose 23 cents to $60.43 a barrel on the ICE Futures exchange in London.

Gold in Asia traded near a two-week high as rising inflation concerns in the U.S. weakened the dollar. Gold for immediate delivery rose as much as $1.13, or 0.2%, to $659.92 an ounce and traded at $659.38. Silver for immediate delivery gained 3 cents, or 0.2 %, to $13.33 an ounce. Platinum gained $2 to $1,231 an ounce, while palladium fell $1 to $351.50 an ounce.

Currencies

The dollar was little changed against the euro before the Federal Reserve finishes a two-day meeting on interest rates policy. The dollar traded at $1.3307 against the euro in early trade. in London from $1.3318 in New York yesterday. It was at 117.73 yen from 117.29. Japanese markets were closed for a holiday. The pound climbed to 1.4747 against the euro, from 1.4728 yesterday. Against the yen, it rose to 230.98 from 230.05. The pound rose to $1.9627 from $1.9609.