Airlines Drop on Broker Downgrade

Elena
27 Apr, 2007
New York City

U.S. stock market averages traded in a lackluster fashion, as investors weghed a weaker-than-expected GDP report against surging quarterly profit at Microsoft. The software giant traded up 4.3%. General Electric rose 2.3% after positive comments from Citigroup. The Dow was led down by General Motors, down 1.9%, J.P. Morgan Chase, down 1.4%, and Home Depot, falling 0.9%.

[R]11:30AM U.S. stock averages traded in a lackluster fashion. Airlines declined.[/R]
U.S. stock market averages traded in a lackluster fashion, as investors weighed a weaker-than-expected GDP report against surging quarterly profit at Microsoft ((MSFT)). The tech-heavy Nasdaq was given a boost by the software giant which traded up 4.3%.

Among other gainers, Flextronics International ((FLEX)), the world's largest contract electronics manufacturer, climbed 6.7% on higher quarterly profit. However, the chip sector came under pressure, led by Broadcom ((BRCM)), down 4.8% and SanDisk ((SNDK)), falling 2.3%. Among Internet shares, Amazon ((AMZN)) dropped 2% on brokerage downgrade.

The Dow was led down by General Motors ((GM)), down 1.9%, J.P. Morgan Chase & Co. ((JPM)), down 1.4%, and Home Depot ((HD)), falling 0.9%. At the same time, the downward move for the blue-chip average was limited by General Electric ((GE)) which rose 2.3% after positive comments from Citigroup.

Airlines stocks moved steeply lower after JP Morgan downgraded the whole sector. Continental Airlines Inc. ((CAL)) dropped 3.9%, UAL Corp. ((UAUA)) fell 4.4% and AMR Corp. ((AMR)) slipped 3%. The Dow Jones industrial average was up 3.25 points, or 0.02%, at 13,108.75. The Standard & Poor's 500 Index was down 2.09 points, or 0.14%, at 1,492.16. The Nasdaq Composite Index was up 3.05 points, or 0.12%, at 2,557.51.


[R]9:45AM U.S. markets opened mixed on weak GDP data.[/R]
U.S. stocks started trading mixed on Friday, after the government''s estimate of Q1 economic growth came in weaker than expected, while a measure of employment costs showed continued gains. After the data, the dollar dropped to an all-time low against the euro, which rose as high as $13682.

However, surging profit at Microsoft helped to limit the downside move. Microsoft ((MSFT)) posted 65% earnings increase, helped by sales of its new Vista operating system. The software giant offered support to the blue-chip average, as well as tech stocks, with its shares moving up 4.7%. Not all tech stocks were trading in the positive. SanDisk ((SNDK)) dropped 1.6% after saying weak prices for flash-memory chips will continue through the summer. Broadcom ((BRCM)) dropped 5% after it posted Q2 revenue forecast below expectations.

Among other earnings-related stocks, Cummins ((CMI)), diesel engine maker, surged 15% after it said its Q1 profit rose 6% to $143 million, or $1.42 per share, from $135 million, or $1.35 per share, during the same period last year. Revenue grew 5% to $2.82 billion from $2.68 billion. Quarterly results beat expectations of a profit of 86 cents per share on revenue of $2.62 billion.

Of stocks driven by analyst comments, Amazon ((AMZN)) lost 2.6% after being downgraded to hold, due to concerns over valuation. The Dow Jones Industrial Average dropped 20 points to 13,086, as 23 of its 30 stocks fell. The S&P 500 fell 4 points to 1,490, while the Nasdaq Composite gained 0.5 points to 2,555.

[R]Economic growth slowed to 1.3% in Q1.[/R]
Friday morning, the Department of Commerce released its highly anticipated advance report on gross domestic product in the first quarter, showing that the pace of GDP growth slowed more than expected compared to the previous quarter. The report showed that GDP grew at an annual rate of 1.3 percent in the first quarter compared to the 2.5 percent growth seen in the fourth quarter. Economists had expected a more modest slowdown in the pace of growth to 1.8 percent. The Commerce Department said that the slowdown in the pace of growth compared to the previous quarter reflected a downturn in exports, an upturn in imports, a slowdown in consumer spending on nondurable goods, and a downturn in federal government spending.

At the same time, the report showed that the weaker than expected first quarter growth primarily reflected positive contributions from consumer spending and state and local government spending. The growth was partly offset by negative contributions from residential fixed investment, private inventory investment, and federal government spending. The Commerce Department also said that its closely watched reading on core consumer prices, which exclude food and energy prices, rose 2.2 percent in the first quarter compared to a 1.8 percent rate of growth in the fourth quarter.

[R]9:00AM U.S. stock futures turned lower on weak GDP data.[/R]
U.S. stock futures declined on Thursday on weaker-than-expected GDP data and weakness in the tech sector which offset Microsoft gains. The Commerce Department reported Friday that the U.S. economy slowed to 1.3% real annualized growth in Q1, hurt by rising energy prices and a weak housing market, making the weakest expansion in four years.

The first estimate of Q1 real GD came in below the 1.7% expected by economists as well as down from the 2.5% rise in the previous quarter. An inflation gauge tied to the GDP report showed that core prices, excluding food and energy, rose 2.2% in Q1, up from 1.8% in Q4. Among companies in focus, Microsoft ((MSFT)) climbed 4.9% in pre-open trading after the computer software giant reported a 65% profit rise, lifted by sales of its new Vista operating system and Office 2007.

However, other tech stocks weighed on the sector, as SanDisk ((SNDK)) said weak prices for flash memory chips will continue through the summer and Broadcom ((BRCM)) posted Q2 revenue forecast below expectations. Shares in Amazon ((AMZN)) fell 1.8% after reaching a 7-year high on Thursday. The decline followed a broker downgrade on concerns over valuation. Dow futures expiring in June fell 49, or 0.37%, to 13,120. The Standard & Poor''s 500 index futures fell 6.10, or 0.41%, to 1,496.70, and Nasdaq 100 futures fell 8.50, or 0.45%, to 1,897.50.


[R]8:15AM Microsoft Q3 earnings surged 65%.[/R]
Microsoft Corp. ((MSFT)) announced late Thursday that its Q3 profit surged 65%, boosted by sales of new products including the Vista operating system. The world''''s biggest software maker reported earnings of $4.93 billion, or 50 cents a share, compared with $2.98 billion, or 29 cents a share, during the year-earlier period. Revenue rose 32% to $14.4 billion. Quarterly results beat expectations of earnings of 46 cents a share on revenue of $13.89 billion.

Microsoft had been widely expected to post solid growth for the quarter, when it saw significant new product releases including Vista and Office 2007, both released on Jan. 30. Microsoft said its business division, including Office 2007, reported Q3 revenue of $4.83 billion, compared with $3.6 billion a year earlier.

However, Microsoft posted disappointing Q4 outlook. The company said it expects Q4 earnings of between 37 cents a share and 39 cents a share, on revenue of between $13.1 billion and $13.4 billion. The stock rose 5.2% in pre-market trading.