Circuit City Swings to Net Loss

Elena
04 Apr, 2007
New York City

U.S. stocks traded in a volatile fashion, reflecting weaker-than-expected reports on the service-sector, employment, and on factory orders. The ISM reported that the nation''s service economy expanded at a slower pace in March, with index coming in at 52.4, down from 54.3 in February. Also, factory orders rose by a disappointing 1% in February, below expectations of an increase of 1.9%.

[R]11:30AM U.S. markets traded in a volatile fashion.[/R]
U.S. stocks traded in a volatile fashion, reflecting weaker-than-expected reports on the service-sector, employment, and on factory orders. The ISM reported that the nation's service economy expanded at a slower pace in March, with index coming in at 52.4, down from 54.3 in February. Also, factory orders rose by a disappointing 1% in February, below expectations of an increase of 1.9%. Among companies releasing quarterly results, Monsanto ((MON)) rose 4.3% on higher Q2 profit. Circuit City ((CC)) fell 1.8% on Q4 net loss. Best Buy ((BBY)) slid 1.7% after the retailer said it expects margin pressures. The Dow Jones Industrial average was strongy supported by 3% gain for Microsoft ((MSFT)). Walt Disney ((DIS)) was the biggest drag among blue chips, falling 1%.

In corporate news, Bristol Myers Squibb ((BMY)) added 1% and ImClone Systems ((IMCL)) rose 2.8% after they said a 400-patient first-line Phase III study of Erbitux plus platinum-based chemotherapy met the primary endpoint of increasing overall survival in patients with recurrent and metastatic squamous cell carcinoma of the head and neck. Among companies driven by analyst comments, Deutsche Bank upgraded telecommunications company Global Crossing ((GLBC)) to buy from hold, sending its stock up 4%. In late morning trading Wednesday, the Dow rose 13.98, or 0.11%, to 12,524.98. The Standard & Poor's 500 index fell 0.12, or 0.01%, to 1,437.65, and the Nasdaq composite index rose 2.60, or 0.11%, to 2,452.93. Bonds rose sharply as investors looked past mixed economic data for the security of Treasuries. The yield on the benchmark 10-year Treasury note fell to 4.64% from 4.67% late Tuesday.

[R]Factory orders gained 1%.[/R]
The Department of Commerce released its report on new orders for manufactured goods in the month of February on Wednesday, showing that orders increased by less than economists had been expecting. The report showed that orders for manufactured goods rose 1.0 percent in February following a revised 5.7 percent decrease in January. Economists had been expecting orders to increase by about 1.9 percent compared to the 5.6 percent decrease originally reported for the previous month. The smaller than expected increase in orders was partly due to a downward revision to the pace of growth in new orders for durable goods, which was revised down to 1.7 percent from the previously reported 2.5 percent growth. The Commerce Department also said that shipments of manufactured goods fell 0.5 percent in February following a 1.7 percent decrease in January. At the same time, the report showed a slight increase in inventories of manufactured goods. Subsequently, the inventories-to-shipments ratio edged up to 1.25 in February from 1.24 in January.

[R]Crude oil inventories rose, gasoline stockpiles declined.[/R]
Government data released Wednesday showed that crude oil inventories rose in the most recent week, resuming their advance after a mild decline in the previous period. Meanwhile, gasoline stockpiles fell again. The Department of Energy''s Energy Information Administration said that crude oil inventories rose 4.3 million barrels in the week ended March 30. Specifically, the measure rose to 332.7 million barrels from the previous week''s level of 328.4 million barrels. This resumed gains after a decline of 900,000 barrels in the previous week. Oil inventories for the week were 2.8% below last year''s level. Meanwhile, gasoline inventories showed a week-over-week slide of 5 million barrels. This extended a recent streak of declines, including a drop of 300,000 barrels in the previous week. The level of gasoline inventories was 2.6% below last year. Distillate fuel oil had an inventory decline during the week ended March 30 as well. Stockpiles of these products, which include heating oil, were unchanged for the week. This followed a recent streak of declines, with a draw down of 700,000 barrels taking place in the previous week.

[R]Service sector growth slowed down in March.[/R]
Wednesday morning, the Institute for Supply Management released its report on activity in the service sector in the month of March. The report showed that the pace of growth in the sector unexpectedly slowed compared to the previous month. The ISM said that its index of activity in the sector fell to 52.4 in March from an unrevised 54.3 in February, with a reading above 50 indicating growth in the sector. Economists had expected the index to edge up to 54.7. The unexpected slowdown was partly due to slower new orders growth, with the new orders index falling to 53.8 in March from 54.8 in February. The report also showed a slowdown in employment growth, as the employment index fell to 50.8 from 52.2. At the same time, the report showed a significant acceleration in the pace of price growth, as the prices index surged up to 63.3 in March from 53.8 in the previous month.


[R]9:45AM U.S. stocks opened little changed.[/R]
U.S. stocks opened little changed Wednesday, reflecting mixed reports from electronics retailers and a disappointing estimate on U.S. employment. Stocks received help from news of easing global political tensions, with Iran promising to release 15 detained sailors and marines. In corporate news, Best Buy ((BBY)) rose 1% after reporting 19% rise in Q4 profit to $1.55 a share, compared with $1.29 a year ago. The earnings increased due to higher sales of flat-panel television sets, video-gaming hardware and notebook computers. Rival Circuit City Stores ((CC)) posted an unexpected loss because of lower sales. The stock lost 0.3%. Panera Bread ((PNRA)) dropped 4% after it said Q1 revenue rose 24% to $240 million. Panera said it expects Q1 profit to be at or slightly below the previous target of 47 cents to 50 cents a share. Panera estimates that its comparable bakery-cafe sales in the first quarter were lower than expected by about 1% due to extreme weather experienced in its core markets.

Further on the earnings news front, Greenbrier Companies Inc. ((GBX)) slipped 14% after reporting Q2 drop of 38 cents a share, compared to a gain of 54 cents a share in the year-ago period, missing estimates. Automakers were also in focus as DaimlerChrysler AG ((DCX)) Chairman Zetsche said the automaker is in talks with potential buyers for its Chrysler unit. In merger-and-acquisition speculation, Goldman Sachs Group ((GS)) and JPMorgan Chase & Co. ((JPM)) have been hired by private equity firm Apollo Management LP about a possible public offering. In the first hour of trading, the Dow rose 1.38, or 0.01%, to 12,511.68. The Standard & Poor''s 500 index fell 0.39, or 0.03% to 1,437.38, and the Nasdaq composite index rose 3.14, or 0.13%, to 2,453.47. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.65% from 4.67% late Tuesday.


[R]9:00AM Asian markets advanced on Wednesday with Australia at record.[/R]
Asian markets ended higher on Wednesday. Sydney S&P/ASX 200 rose 1.3% to a record close of 6,092.9. Coles Group jumped 4.7% after Wesfarmers set a takeover offer of 16.47 Australian dollars or $13.39 a share for the second-largest retailer in the country. The Reserve Bank of Australia on Wednesday held short-term interest rates steady at 6.5%, stunning expectations for a quarter-point increase.

Japanese Nikkei 225 average ended 1.7% higher to 17,544.09. Toyota Motor again posted strong sales in the U.S., rose 1.6%, while Honda Motor added 2.4%. Digital-camera and office-equipment maker Canon added 2.7%.

Other indexes around the region also advanced. Chinese Shanghai Composite Index set an intraday all-time high in the morning session, before retreating slightly in the afternoon session. The benchmark closed almost flat at 3,291.54. Hong Kong Hang Seng Index finished 1% higher at 20,209.71. South Korean Kospiadded 1.4% to 1,483.41 and Singapore Straits Times Index ended up 1.4% 3,332.92, Taiwan Weighted Price Index gained 0.9% to 8,004.61.

The energy sector ended lower after crude-oil prices slipped 2% in U.S. trading. Japanese oil explorer, Inpex Holdings, shed 3%. PetroChina, largest-listed oil company in China by production, fell 0.7%. Anglo-Australian miner BHP Billiton gained 1.8% after copper futures advanced more than 4% Tuesday to close at their highest level in five months.


[R]8:15AM Daimler Chrysler confirmed talks to sell its Chrysler unit.[/R]
DaimlerChrysler AG ((DCX)) confirmed on Wednesday that it is in talks to sell its Chrysler unit or only a part of it. Chairman Dieter Zetsche announced on Feb. 14 that due to continued losses and severe competition in the United States, the German-American automaker was considering all options for its Chrysler unit. He also said that a recovery plan including 13,000 job cuts in the U.S. and Canada was moving forward.

Zetsche said the automaker is in talks with unidentified buyers about a possible sale. However, according to reports, Canadian auto-parts supplier Magna International Inc. ((MGA)) submitted a bid to buy the business for as much as $4.7 billion. In addition, Cerberus Capital Management LLC and a consortium of investors led by Blackstone Group each have reviewed Chrysler''s finances and are expected to make bids.

Zetsche also said that between now and 2009, Chrysler will release on the market 20 all-new vehicles and 13 renewed models. At Mercedes, the company will able to achieve at least a 7% return on sales for 2007 on the third year of its restructuring program. He said the company will give estimates on DaimlerChrysler''s 2007 performance in May, along with Q1 results.


[R]8:00AM NY-7:00PM Mumbai Sensex against 162 points in a broad rally.[/R]
The Sensex on BSE finished 162.19 points higher, or 1.28%, higher to 12,786.77. The market-breadth was very strong as there were three advancers for every two decliners. As 1,581 stocks advanced, 899 declined and 79 were unchanged. Of the 30 stocks in the Sensex, 21 advanced, while the rest declined. The turnover on BSE was Rs 3,218 crore, higher than Rs 2,890.28 crore on Tuesday. On NSE, the turnover was Rs 6,971.64 crore, compared with Rs 6,745.48 crore on Tuesday.

Economic news

The Rupee surged to its highest level in nearly eight years today, breaching 43 to a dollar as banks sold the US unit to raise funds to meet statutory reserve requirements. In morning trade, the rupee was at 42.925/42.935 per dollar, off an early high of 42.84, its strongest since June 1, 1999.

The government has eliminate the 16% countervailing duty and 4% special additional duty on Portland cement imports, which may put margin pressure on domestic cement companies waiting for a respite on dual excise duty structure. The government is also likely to restrict the maximum area for a Special Economic Zone at 5,000 hectares and to announce more rules for SEZs after the Empowered Group of Ministers on SEZs meet on Thursday.

Trading highlights

HDFC Bank was the most-active stock with a turnover of Rs 112.70 crore followed by Renuka Sugar and Indiabulls Real Estate.

Advancers

HDFC soared over 5% to Rs 1,497. The stock had lost 6.3% over the past two days, after lifting the lending rate by 75 basis points after a hike in a short-term rate by the Reserve Bank of India. NTPC surged 4.5% to Rs 161 and BHEL rallied 4.4% to Rs 2,353. BHEL continued the trend from Tuesday when it reported 42% growth in provisional net profit for the fiscal 2007.

Banking stocks gained ahead of the weekly inflation data, due on Thursday. ICICI Bank gained 2% to Rs 821 and State Bank of India rose 0.5% to Rs 931.80. The wholesale price inflation rate is expected at 6.29% for the 12 months to March 24 2007, dropping from an annual rise of 6.46% a week earlier. The data will be released on Thursday, as Friday will be a public holiday.

Dr.Reddy rallied 3.7% to Rs 746 on the rally in its ADR on Tuesday. Wipro gained 2.8% at Rs 549 and Cipla advanced 2.3% to Rs 229. IT large-cap Infosys added 1.4% to Rs 1,993. The stock had retreated in morning trade from the early gains, as the rupee today struck its highest level in nearly eight months. Index heavyweight Reliance Industries advanced 1.6% to Rs 1,364, after it became clear that it was planning to set up two gas-based projects.

Decliners

Hero Honda dropped 2.3% to Rs 644 and Grasim was off 1.9% to Rs 2,064. Maruti shed 1.5% to Rs 745. Ashok Leyland’s dropped 1.6% to Rs 35.50, after its vehicle sales in March 2007, fell 1.6% to 8,444 units from 8,577 units a year earlier. Satyam and Reliance Communications slid around 1% each to Rs 453 and Rs 398, respectively.


[R]6:30AM European stocks advanced Wednesday on autos and travel stocks.[/R]
European markets were slightly higher on Wednesday. By mid morning, Frankfurt Xetra Dax added 0.2% to 7,061.71, the CAC 40 in Paris was flat at 5,710.52, while London FTSE 100 fell 0.1% to 6,358.4. National benchmarks rose in 14 of 18 markets in western Europe

Advancers

DaimlerChrysler gained 0.5% after the company chief executive, Dieter Zetsche, for the first time revealed that there are talks with interested parties regarding future options for Chrysler. Sodexho, the French contract catering group, advanced 0.3% after reporting revenue growth matching forecasts, and raising its fiscal 2007 sales forecasts thanks to new business contracts.

Utilities continued their upward trend. Italian Enel, which along with Spanish construction group Acciona will bid for Endesa, was up 0.6%. Acciona added 0.1%. Other perceived takeover targets in the sector added to their recent gains. Union Fenosa climbed 0.4 %, Iberdrola rose 1% and Gas Natural gained 1.1%. The prospect of a takeover battle for Telecom Italia drove its shares up 3.7%. Miner Xstrata increased 1.4%.

Decliners

Oil stocks declined as crude prices dropped on expectations of a diplomatic solution to the Iran hostage affair. Total shed 0.6% after US authorities stated they intended to interview Christophe de Margerie, chief executive, as part of an inquiry into the activities in Iran and Iraq of the company. BP, the second-largest energy company in Europe, dropped 0.7%.

Shares in U.K. pharmacy chain Alliance Boots lost 0.1% after the U.K. competition watchdog, the Office of Fair Trading, announced Wednesday that it has initiated a market study into the distribution of medicines in the U.K.

Banking hogged the limelight after Bear Stearns reassessed their ratings in the U.K. banking sector. Bear Stearns downgraded Barclays to peer perform from outperfom, on the company proposed combination with ABN Amro and also downgraded mortgage bank Northern Rock to peer perform from outperform.

Oil and gold

Crude oil dipped because some traders expected Iran and the U.K. to reach a compromise over 15 captive British sailors and marines. Crude oil for May delivery shed 76 cents, or 1.2%, to $63.88 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for May settlement fell 69 cents, or 1%, to $67.12 a barrel in electronic trading on the ICE Futures exchange.

Gold rose as declines in the dollar may increase investor demand for the precious metal. Gold for immediate delivery advanced $1.95, or 0.3%, to $665.90 an ounce in early trade in London. Silver climbed 6 cents to $13.46 an ounce, platinum gained $2.50 to $1,243.50 and palladium advanced 50 cents to $352.50.

Currencies

The dollar was lower against most other major currencies in European trading Wednesday. The euro traded at $1.3351, up from $1.3331 late Tuesday. The British pound traded at $1.9748, up from $1.9746. The dollar fetched 118.83 Japanese yen, down from 118.88.