Out of Gas

Elena
01 Sep, 2005
New York City

Stocks are higher on hopes of slowdown in the interst-rate hike. ISM report showed a slower pace of growth of the manufacturing sector.Retailers Costco Wholesale Corp., Wet Seal Inc., J.C. Penney Co. Inc., Kohl's Corp. and Nordstrom Inc. posted strong results in August. Wal-Mart Stores Inc.'s sales slightly disappointed views.

U.S. MARKET AVERAGES

After a lower opening and trading in the negative territory the major U.S. averages turned higher as traders think signs of economic slowdown due to hurricane damages might lead the Fed Reserve Board to slow its interest-rate hike.
In the first trading hour stock markets declined, affected by growing economic concerns after the Commerce Department released data, indicating the consumer spending for July exceeded personal incomes for the same month which happens for the second time during the last 46 years. The 1% growth in consumer spending contradicts the lower-than-expected personal incomes rise of only 0.3%.

A slower growth in the manufacturing sector, indicated by a report released by the ISM, as well as long-time recovery from Hurricane Katrina raised concerns among investors.

The market got a boost from the energy sector and the gold sector which was recently up 4.2% on weakness of the dollar which is explained with the report from the ISM. The airline sector fell 3.9%.

Healthcare, technology and telecommunication stocks also provided a lift to the market.

Auto stocks were down ahead of their monthly sales reports.

Retailers, led by Wal-Mart, Target Corp. and Costco Corp. posted better-than-expected sales for August.

Costco Wholesale posted a 9% growth in comparable August sales. Haggar Corp. said it has agreed to be purchased by Infinity Associates, Perseus and Symphony Holdings for $212 million.

IBM has signed a global contract with Dutch global bank ABN AMRO worth about 1.5 billion euro over 5 years.

Novartis, Swiss pharmaceutical company, offered $4.5 billion to gain full control of U.S. vaccines maker Chiron. Novartis already owns just over 42% of Chiron.

ECONOMIC NEWS

Construction spending in July was $1,099 billion, virtually unchanged from
June but up 6% from July 2004. Total non-residential construction spending
was $477 billion, down 0.3% from last month but up 3.1% from one year ago.

The Institute for Supply Management released a report, according to which the Purchasing Managers Index fell to 53.6 in August compared with 56.6 in July. It also showed that the Price Index rose to 62.5 in August from 48.5 in July on higher energy prices. The report indicated that the New Orders Index decreased to 56.9 in August from 60.6 in July. The Production Index fell to 55.9 this month vs. 61.2 in the previous. The employment Index declined to 52.6 in August against 53.2 in July.

The Department of Commerce released a report which indicates that personal spending in July has significantly increased to 1% compared with 0.8% in June matching economists’ expectations.
The report also showed 0.3% increase in personal income for July after an unrevised increase of 0.5% in June. Economists had expected growth of 0.6%.

In addition, the Commerce Dept. said that personal saving was a negative $58.8 billion in July compared to a positive $0.9 billion in June.

The Commerce Dept. also said that prices rose 0.3 percent in July after coming in unchanged in the two previous months. Excluding food and energy, prices rose by a more modest 0.1 percent in July after coming in unchanged in June.

The U.S. Department of Labor revealed Thursday that initial jobless claims came in at 320,000 for the week ended on August 27, an advance of 3,000 from the previous week's revised total.

The 4-week moving average for initial claims, which flattens out the week-to-week volatility, rose 1,250 to 316,750. Continuing claims for the week ended on August 20, the most recent week for which the government has data, rose 36,000 to 2.607 million.

Truck and auto sales for August are forecasted to drop vs. the previous month. Economists expect car and light truck sales dropping to an annual rate of about 14.1 million from July's 17 million, fueled by automakers' offer of employee discounts.


INTERNATIONAL MARKET NEWS

Tokyo hit a four-year closing high, following U.S. news that government would tap into oil reserves and after results from a poll implied the ruling coalition would win this month's general election. Tokyo's Nikkei 225 index added 0.8%, to 12,506.

Elsewhere in the Asian region markets advanced on oil’s retreat below $70 a barrel. Hong Kong's Hang Seng Index ended up 1.6% to 15,143 and Singapore's Straits Times Index gained 0.9% to 2,295. Australia's All-Ordinaries Index added 1.1% to 4.460, while Seoul's Composite Index climbed 2.1% to 1,106.

Indian markets finished at an all-time high Thursday, fueled by software stocks. The 30-share benchmark index of the Bombay Stock Exchange, the Sensex, closed up 7876.15, adding 0.9% vs. the closing level Wednesday. The previous all-time high was hit on August 17th when the Sensex ended at 7859.53.

European markets closed higher for the second consecutive session on declining oil prices, upbeat earnings news and resource stocks. The German DAX 30 finished up 0.3%, but off the intra-day high of 1.6%, the French CAC 40 gained 0.56%, and London’s FTSE 100 rose 0.6%. The euro gained 1% to trade at $1.2460.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil prices slipped but keep hovering round $70 a barrel. Light sweet crude for October delivery fell 24 cents to $68.70 a barrel. London Brent lost 2 cents to trade at $67.

Gold advanced in European trading on the back of weak U.S. dollar. In London gold closed at $444.20 per troy ounce, up from $433.00. In Hong Kong the precious metal gained $2.80 to close at $435.95. Silver closed at $6.96, up from $6.77.

The U.S. dollar fell against the other major currencies in European trading. The euro was quoted at $1.2464, up from $1.2325. The greenback bought 110.05 yen, down from 110.71. The British pound traded at $1.8269, up from $1.8016.


EARNINGS NEWS

The Hain Celestial Group, natural and organic food and personal care products company, posted a 4Q record $620.0 million net sales, a 14% rise against last year sales of $544.1 million. 4Q net income, including charges of 27 cents per share, were 7 cents per share, with net income excluding charges at 20 cents per share, up from 14 cents per share in the year-ago period.The Hain Celestial Group announced net sales of $151.3 million for 4Q, a 10.2% rise from $137.4 million in the last year period.

Costco, warehouse facilities operator, posted 4Q net sales of $16.37 billion, an increase of 10 % from $14.83 billion in the comparable period last year. For the full fiscal year ended August 28, 2005, the company posted net sales of $51.87 billion, a rise of 10 % from $47.15 billion during the same period last year.

NCI Building Systems, manufacturer of metal products, reported 3Q net income of 70 cents per share, up vs. 41 cents per share for the same period last year. Sales for the current quarter were $292.7 million and marked a slight decline vs. $295.8 million in the same quarter last year.Fiscal 3Q results for 2004 were influenced by a charge for debt refinancing costs of $9.9 million ($5.8 million, or $0.28 per diluted share, after tax).

Greif, industrial packaging company, reported 3Q net income of$1.71 per share up vs. 51 cents per share for the year-ago period. Net sales advanced 4 %(2 % aside from the impact of foreign currency translation) to $609.0 million for the 3Q of 2005 from $584.8 million for the same quarter of 2004. Greif 3Q results for the current year were positively influenced by higher timberland profits and lower restructuring charges compared to 3Q of 2004.

Ciena, the network specialist, posted 3Q net loss of 9 cents a share, up vs. a net loss of 25 cents a share for the same time a year ago on 46.2% revenue growth over the comparable period last year. Ciena reduced its long-term debt with the purchase of $41.2 million par value of its $690 million outstanding 3.75% convertible notes due in 2008 for $36.9 million.

SkillSoft , provider of content resources for integrated enterprise learning, reported 2Q of fiscal 2006 net income of 22 cents a share, up vs. a net income of 1 cent per share for the same period last year. 2Q net income incorporates $19.5 million, which come from the final settlement with the Company's insurance carriers concerning the 2002 securities class action lawsuit and related legal fees.

TJX Cos., off-price retailer, said same-store sales advanced 2% in August, while total sales for the four weeks ended August 27 climbed 8% to $1.2 billion versus $1.1 billion in the comparable period last year. Comparable sales performance met the company’s estimates.

Family Dollar Stores Inc., discount retailer, announced that August same-store sales climbed 1.8%, while total sales for the four weeks ended Aug. 27 rose 9.4%. The company reiterated its guidance for 4Q earnings of about 17 cents a share. Several hundred stores of the company were hit by Hurricane Katrina, but it is likely that only 50 - 60 stores might be closed for an extended period.

Gap Inc. reported a 9% drop in same-store sales in August. Total sales for the four weeks ended August 27 declined 5% to $1.17 billion compared with $1.23 billion last year. The company said that August sales results were disappointing and merchandise margins were slightly below last year’s.

Kohl's Corp. said Thursday that same-store sales in August climbed 4.6%, while total sales for the four weeks ended Aug. 27 added 14% to $1 billion. The retailer backed its 3Q forecast for earnings of 43 - 46 cents a share.

Del Monte Foods, provider of assorted food and pet products, posted 1Q earnings from continuing operations of 8 cents a share, up vs. 4 cents a share a year ago. Sales added 7.2% in the latest quarter to $671.1 million. Analysts expectations were centered around a profit of 5 cents a share in the July period on sales of $642.3 million. Sales increase was mainly attributed to higher pricing, while earnings were bolstered by lower integration costs, reduced interest expenses, lower commodity costs, and volume increase for new and existing company’s products. Del Monte backed its target for earnings of 75 to 80 cents a share in 2006 with sale increase of 1% - 3% vs. $3.18 billion in 2005. The company expects earnings of 16 to 21 cents a share for the second quarter, while analysts expect a profit of 76 cents a share.

The Gymboree Corp. said same-store sales in August dropped 1%. Total sales added 3% to $44.1 million. The company still sees 3Q comparable sales unchanged to modestly higher versus the previous year, and backed forecast for earnings from continuing operations tof 20 -22 cents a share in 3Q and 30 - 33 cents a share in 4Q. Gymboree targets earnings from continuing operations for the full year to come in the range of 55 - 60 cents a share.

Corinthian Colleges, education company, posted 4Q earnings of 2 cents a share down vs. 20 cents a share last year. Excluding items, the company earned $13.1 million, or 13 cents a share, in the June period. Revenue advanced 10.6% in the latest quarter to $239.3 million vs. $216.4 million a year ago. Analysts expected a profit of 13 cents a share in the June period. Total student population grew 2% in the latest three months to 66,114 and total student starts dropped 1,090 to 20,168. Corinthian expects earnings of 8 - 10 cents a share for 1Q, including a reduction of a penny a share due to a change in the company's revenue recognition policy. For fiscal 2006 the company projects earnings of 60 - 66 cents a share.

Wal-Mart Stores, retailer, said same-store sales climbed 3.3% in August. Total sales at the company advanced 10% to $23.33 billion in the four weeks ended August 26 versus $21.2 billion a year ago. Wal-Mart sees a rise of between 2% and 4% in same-store sales in the U.S. for the five-week September period.

Stein Mart Inc., apparel designer, announced that same-store sales added 5.3% in August versus a year earlier. Total sales for August jumped 7.1% to $98.1 million. 13 stores of the company were closed ahead of Katrina but were re-opened once the storm had passed.

Chico's FAS Inc. reported Thursday that August same-store sales jumped 14%, while total sales for the four weeks ended August 27 climbed 32% to $101.5 million vs. $76.9 million in the same period last year.

Wilsons The Leather Experts Inc. said Thursday that same-store sales declined 7.9% in August compared with last-year period. Sales came in at $19.1 million versus $21.1 million in August 2004. The company said it had expected the weak results as mall outerwear sales were sluggish on the extremely warm weather during the first two weeks of August.

Limited Brands reported Thursday that same-store sales dropped 3% in August versus the year-ago comparable period. Net sales amounted to $575.3M compared with $577.8 million a year earlier.

CORPORATE NEWS

ISwiss pharmaceutical giant Novartis AG proposed $4.5 billion to gain total control over Chiron Corp., U.S. vaccines maker. Novartis, which already owns a little more than 42% of Chiron, submitted a proposal to Chiron to buy the rest of the company for $40 a share in cash. Chiron shares closed Wednesday at $36.44.

SBC Communications Inc., which has been debating what to do with the AT&T Corp. name after acquiring the company, is inclined at present to call itself by the name of its former parent. As a final decision hasn't been reached, SBC executives still could decide to keep the SBC name or think of another name.