Motorola Falls on Profit Warning

Elena
22 Mar, 2007
New York City

Wall Street moved to the downside on Thursday, giving up some of the previous sessions''s buying interest. Investors awaited more economic data to see if market rally could extend or profit-taking will be the course of action. The Conference Board said that the index of leading economic indicators fell 0.5% in February, close to the 0.4% drop expected by economists, with four of the 10 indicators increasing.

[R]9:45AM U.S. stocks opened lower.[/R]
Wall Street moved to the downside on Thursday, giving up some of the previous sessions's buying interest. Investors awaited more economic data to see if market rally could extend or profit-taking will be the course of action. The Conference Board said that the index of leading economic indicators fell 0.5% in February, close to the 0.4% drop expected by economists, with four of the 10 indicators increasing.

A notable increase by the price of oil helped inspire traders to cash in on the recent gains. Crude, oil May delivery climbed $1.86 to $61.47 a barrel. The higher price led to significant weakness in the oil-sensitive airline sector, while energy stocks pushed notably higher, helping to limit the downside trend for the broader markets. Oil service stocks posted particularly strong gains.

Computer hardware stocks also came under pressure, with Palm ((PALM)) helping to lead the sector lower with a decline of 9.5%, following a profit warning from Motorola ((MOT)), which offset speculation that Motorola is considering a takeover of Palm. Shares of the cell phone maker dropped 5% after Motorola lowered its Q1 earnings and revenue guidance. In midmorning trading, the Dow Jones industrial average was down 4.08, or 0.03%, at 12,433.44, while the Nasdaq composite index fell 4.17, or 0.17%, to 2,451.75. The Standard & Poor's 500 index fell 0.15, or 0.01%, to 1,434.89.

[R]Initial jobless claims dropped 4,000.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended March 17, showing that jobless claims unexpectedly fell compared to the previous week. The report showed that jobless claims fell to 316,000 from the previous week's revised figure of 320,000. Economists had expected jobless claims to increase to 325,000 compared to the 318,000 originally reported for the previous week. This marked the third consecutive weekly drop in jobless claims, which fell to their lowest level in six weeks. The Labor Department also said that the less volatile 4-week moving average fell to 326,000 from the previous week's revised average of 329,750. The report also showed that continuing claims for the week ended March 10 fell to 2.501 million from the preceding week's revised level of 2.570 million. In the first hour of trading, the Dow Jones industrial average was down 12.33, or 0.10%, at 12,435.19, while the Nasdaq composite index fell 6.54, or 0.27%, to 2,449.38. The Standard & Poor's 500 index fell 0.57, or 0.04%, to 1,434.47. Bonds fell after the jobs data, with the yield on the benchmark 10-year Treasury note rising to 4.56% from 4.54% late Thursday.


[R]9:00AM Wall Street to open flat after Fed Reserve’s rate decision.[/R]
U.S. stock futures predicted a flat market opening, following a strong rally on Wednesday, inspired by the Fed Reserve’s decision to hold interest rates unchanged at 5.25%. Overseas markets gained on Thursday, with the Nikkei 225 up 1.5% and the German DAX 30 up 1.7%. Investors’ attention is expected to return to subprime mortgage lending, as the Senate Committee on Banking, Housing, and Urban Affairs convenes a hearing. The Labor Department reported that weekly figures on unemployment benefit claims dropped by 4,000 last week. The Conference Board’s index of leading indicators is due out today.

Among pre-market highlights, shares in Motorola ((MOT)) dropped 4.5% after the maker of mobile phones warned it will swing to a Q1 loss amid a further decline in sales. At the same time, Nokia ((NOK)), Motorola''s larger rival, climbed 1.9% in the pre-open. On the earnings news front, General Mills ((GIS)) posted a better-than-expected 9% profit rise in Q3 and lifted its forecast. Shares gained almost 1% in pre-market trading. Williams Sonoma ((WSM)) climbed 2.6% after reporting an above-forecast Q4 profit. It also raised its dividend by 15 and announced a 5 million share buyback. Earnings reports are expected from retailer Barnes & Noble ((BKS)), Nike ((NKE)), Palm ((PALM)), and Homebuilder KB Home ((KBH)).

Analyst comments affected several major companies ahead of market opening. Procter & Gamble ((PG)) rose 1% after it saw an upgrade to outperform by Bear Stearns. Alcatel-Lucent ((ALU)) dropped 2.3% as it was downgraded to neutral from buy at Goldman Sachs. Dow futures expiring in June rose 5 points, or 0.04 percent, to 12,528 on Thursday. Standard & Poor''s 500 index futures slipped 0.10 points, or 0.01 percent, to 1,444.90, while Nasdaq 100 index futures remained unchanged at 1,825.00.


[R]8:30AM NY-7:00PM Mumbai Sensex zooms over 300 points in a broad rally.[/R]
The Sensex on BSE finished 362.15 points, or 2.80%, higher at 13,308.03. The market-breadth was strong as there were almost two advancers for every decliner. For 1,658 stocks that advanced, 933 stocks declined and 84 remained unchanged. Of the 30 stocks in the Sensex, only Grasim declined, while the rest advanced. The turnover on BSE was Rs 3,571.80 crore, higher than Rs 2,730 crore, while on NSE, the turnover was Rs 7,865.08 crore, also higher than Rs 5,839.09 crore on Wednesday.

Economic news

The rupee retreated from 19-month highs on Thursday as a cash squeeze in the money market was relieved, and traders settled short positions in the dollar on concerns of provoking Reserve Bank of India intervention. In morning trade, the rupee stood at 43.685/695 per dollar, dropping from Wednesday close of 44.4450/4550.

India has threatened to withdraw from the seven billion dollar Iran-Pakistan-India gas pipeline project if Islamabad did not reduce the fee it wants to charge for allowing flow of natural gas from Iran to India.

Crude oil imports plunged 3.5% to 8.7 million tons in February despite a 4% growth in consumption of petrochemical products.

Trading highlights

MindTree was the most-active stocks with a turnover of Rs 162.25 crore followed by SBI and Reliance Communications.

Advancers

BHEL led the Sensex advancers, up 6% to Rs 2,230. Bank shares extended their gains from Wednesday. HDFC Bank gained 5.9% to Rs 1,023 and ICICI Bank rose 3% to Rs 987. State banks also surged. State Bank of India rose 4.7% to Rs 1,029, Bank of India gained 11% to Rs 174, Canara Bank surged 7.5% to Rs 207 and Punjab National Bank added 7%, to Rs 485. Banks had rallied on Wednesday on value-buying, as well as on short-covering in the derivatives.

IT large-caps advanced on the rupeedip against the US dollar. Wipro gained 2.8% to Rs 598, Satyam Computer advanced nearly 3.4% to Rs 467, TCS added 3% to Rs 1,307 and Infosys rose 1.1% to Rs 2,117.

Oil large-cap ONGC surged nearly 4.9% to Rs 852. Auto shares also surged. Maruti Udyog gained almost 5% to Rs 831, Hero Honda advanced 4.7% to Rs 681, Tata Motors gained 3.8% to Rs 806, and Bajaj Auto rose 3% to Rs 2576. Mahindra & Mahindra rose 3.4% to Rs 781. Engineering & construction company L&T surged 4.7% to Rs 1,573. The company is sitting on a strong order-book.

Reliance Industries rallied nearly 3% to Rs 1,378. Reliance Industries announced on Thursday that Rohm and Haas Co, US, and itself were exploring joint construction of an acrylic-monomer plant in India. The plant in question will be in Jamnagar and will be able to produce 2 lakh tons of acrylic acid and its esters annually.

Decliners

Grasim was the only decliner in the Sensex stocks. Its shares dipped 1.2% to Rs 2,081. Reportedly, cement makers have declined a request by the government to cut prices. A meeting was held today between the finance minister and cement makers,



[R]8:00AM European markets were higher on Thursday on bid talk.[/R]
European markets were higher on Thursday. By midday, Frankfurt Xetra Dax rose 1.7% to 6,826.46, the CAC 40 added 1.4% to 5,576.27 and London FTSE 100 climbed 0.8% to 6,303.9.

Advancers

ING gained 2.4%, as the news that a cross-border deal in the financial services sector was in progress helped underpin broader gains for European equities. The news came as Barclays of the UK continued merger talks with Dutch peer ABN Amro. Although there were still no financial details, Barclays moved 2% higher and ABN gained 0.7%.

Eiffage added a further 13% to the previous session 7% gain. Sacyr Vallehermoso of Spain may sell its stake in oil company Repsol to help fund a purchase of Eiffage, in which it already owns 32.6%. In the other scenario, French rival Vinci might fend off approaches. Shares in Sacyr gained 1.7 %, while Vinci edged 0.2% higher.

In the banking sector, shares in Unicredit, the Italian bank, gained 1.9% after it reported a forecast-beating 61% rise in full-year net profit. Broker comment supported Dutch group Aegon, up 2.7%, France Axa, 3.5% stronger, Allianz of Germany, 3% higher and Zurich Financial, up 1.5%.

Decliners

Health-care companies were underperforming. Shares in AstraZeneca slipped 0.7%, while GlaxoSmithKline was almost flat, up 0.1%. Alcatel-Lucent shares lost 0.3%. The company was downgraded to neutral from buy at Goldman Sachs

Oil and gold

Oil advanced for a third day in New York on signs of increasing demand from U.S. refineries. Crude oil for May delivery rose as much as $1.20, or 2%, to $60.81 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for May settlement rose as much as $1.28, or 2.1 %, to $62.05 a barrel in electronic trading on the ICE Futures exchange.

Gold for immediate delivery was little changed at $664.25 an ounce in early trade in London. Silver gained 5 cents to $13.375 an ounce. Platinum rose $3 to $1,236.50 and palladium was unchanged at $353.50.

Currencies

The dollar rebounded from a two- year low versus the euro before speeches by Federal Reserve officials today. The dollar traded $1.3359 against the euro in early trade in London, rebounding from $1.3385 late yesterday in New York. The U.S. currency was at 117.60 yen, from 117.54. Against the dollar, the British pound was at $1.9710 in early trade in London, from $1.9678 late yesterday.