Quiet Day of Trading

albena
26 Aug, 2005
New York City

Stocks declined at the open Friday after the weaker-than-expected consumer sentiment data. The August sentiment index declined to 89.1 from an initial read of 92.7 on surging oil prices fears. Merck & Co. is in focus due to reports it may settle some of its Vioxx-related lawsuits. WPP Group posted a 41% rise in first-half net profit and lifted its operating margin target for the year. No major companies are scheduled to report earnings Friday.

U.S. AVERAGES

The biotech sector is modestly down in early dealings. Techs are also weaker, with the disk drive, networking and semiconductor segments declining.

The gold segment edged to the upside, though by less than 1%. Utility and energy segments are also making slight gains in the first hour of trade.

Merck & Co. ((MRK)) announced it may consider settling some of some 5,000 pending cases, related to Vioxx, according to reports.

Hewlett-Packard Co. ((HPQ)) said it would allocate $4 billion to buy back the tech giant's common stock.

Pixar ((PIXR)) is the subject of an informal inquiry by the SEC over heavier-than-expected returns of DVDs of its hit film 'The Incredibles', problems with which caused the company to lower guidance earlier this year.

WPP Group ((WPPGY)), the world's second-largest advertising agency, reported a 41% increase in first-half net profit Friday and boosted its operating margin full-year target.

Novell Inc. ((NOVL)) said late Thursday its quarterly profit tumbled as the company reported weaker sales on higher tax and restructuring costs.

Chico's Fas Inc. posted 2Q sales above expectations. Omnivision Technologies Inc. targeted 2Q revenue above estimates.

Raycom Media agreed to acquire TV-station operator Liberty Corp. for about $867 million in cash.

ECONOMIC NEWS

The consumer sentiment index of the University of Michigan declined to 89.1 in late August from 96.5 in July and 92.7 in early August. It's the first drop since May and the lowest level since May. Economists were expecting the index to fall to 92.6.

INTERNATIONAL MARKET NEWS

Asian markets closed higher on Friday benefiting from modest gains on U.S. market and firm crude-oil prices. Tokyo's Nikkei Average closed up 0.28%, at 12,439.48 on interest in steel and auto shares. Elsewhere in the region, Hong Kong's Hang Seng index gained 0.63% to 14,983.89, Australia's All Ordinaries index added 0.35% to 4,419.10 and in Singapore, the Straits Times index rose 0.09% to 2,286.55. Seoul's Kospi index went against the upward trend shedding 0.98% to 1.086.55 on broad foreign selling of financial stocks and surging oil fears.

The Chinese yuan reached its highest level since a July 21 revaluation, closing at 8.0965 yuans per $1. It finished at 8.1002 per $1 Thursday.

European markets advanced Friday, with metals and mining stocks trimming some of Thursday's losses. Crude oil remained stable over $67 a barrel. The German DAX 30 gained 0.2% to 4,863, the French CAC 40 added 0.2% to 4,386 and the U.K.'s FTSE 100 index rose 0.2% to 5,265.

GDP in the U.K. in the second quarter climbed 0.5% vs. the previous quarter, revised up from the previous estimate of 0.4%, the Office of National Statistics announced. Year-on-year, the Office said the U.K. economy grew 1.8%, up vs. the previous estimate of 1.7%.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices were slightly lower as Hurricane Katrina took a course that would probably miss most of the oil platforms in the region. Light, sweet crude for October delivery shed 19 cents to $67.30 a barrel on the Nymex by afternoon in Europe. Gasoline lost nearly half a cent to $1.9600 a gallon while heating oil slid to $1.8675. In London, October Brent crude oil futures on the International Petroleum Exchange added 3 cents at $66.30 a barrel.

Major currencies were higher against the dollar on surging oil and expectations for higher U.S. interest rates. The euro added 0.1% vs. the greenback to $1.2303. Against the Japanese yen, the dollar dropped 0.5% to 109.62. The greenback also declined vs. the British pound after UK reports showing the economy grew 0.5% in 2Q vs. the previous quarter, revised up from the previous estimate of 0.4%. Last, the British pound was up 0.3% at $1.8040.

The benchmark 10-year Treasury lost 2/32, or 63 cents per $1,000 invested, to yield 4.171%. The 30-year bond was down 4/32 to yield 4.376%.

Gold futures retreated from early morning gains, with the benchmark December contract down 80 cents at $442.30 an ounce.

EARNINGS NEWS

No major companies are scheduled to report earnings Friday.

ProSiebenSat.1, German television company, reported that first-half net profit advanced 38% to 47 euro cents a share despite a tough advertising market. The company expects the net television advertising market to fall by about 2% in 2005 and added that it relies on a better than the market in fiscal 2005 performance after an increase in revenue and profit.

WPP, British advertising company, announced that first-half net profit increased to 11.4 pence a share, from 8.2 pence a share in the year-ago period on strong revenue growth. Adjusted pretax profit advanced 38% to 221.5 million pounds. The results are an indicator for a significant improvement from last year . Looking ahead, the company lifted its headline IFRS operating margin target to 13.7% from 13.2% for 2005 and to 14.2% for 2006.

CORPORATE NEWS

Hewlett-Packard Co. ((HPQ)) announced that the company’s board authorized an additional $4 billion to repurchase its common stock. Through the repurchase, the company plans to offset the dilution of shares issued under employee benefit plans, and return cash to its shareholders. Hewlett-Packard said it repurchased $2.1 billion in stock in the three fiscal quarters ended July 31, and has about $800 million left under its $3 billion repurchase program approved last September. According to reports, HP plans to invest $150 million over the next 5 years to boost its capabilities in radio frequency identification technology, to compete with Sun Microsystems and Symbol Technologies.

Brazil's Companhia Vale do Rio Doce, the world’s largest iron ore mining company, is in talks to acquire French metals and mining company Eramet SA for more than $2 billion, according to reports Friday. The French state has a 28% holding in Eramet and the company's largest shareholder is the Duval family with a 37.2% stake. Paris-based Eramet with a market value of about $2.8 billion, has large nickel, manganese and alloy businesses. The companies didn’t issue any comments on the matter.

UAL Corp., the parent of United Airlines, could receive $3 billion in debt financing, to emerge from bankruptcy by late 2005 or early 2006, according to Friday reports. The exit financing amount is $500 million more than airline’s expectations. The group of lenders includes Citigroup, Deutsche Bank, GE and J.P. Morgan Chase. United is reported to be still working on the financing terms.