Cautious Start

Elena
07 Sep, 2005
New York City

Stocks are trading down on profit-taking and economic data. Asian markets finished higher , boosted by the sharp pullback in oil prices, South Korea's Kospi climbed 1.8%, the Nikkai edged up 0.1%. European stocks gain on equity markets. CBO report showed that 400,000 people will become jobless, economic growth will be 1% down.

U.S. MARKET AVERAGES

U.S. stock markets were dragged downward in the first trading hour as investors locked in their profits from the Tuesday broad buying session when the three major averages rose by at least 1%. The telecom sector is trading down, while the material sector is up.In the first hour of trading, the Dow Jones industrial average fell 0.56, or 0.01 percent, to 10,588.68. On Tuesday, the Dow rose 141.87, its best one-day gain since July 8.

Investors were also cautious about the still uncertain range of consequences to the domestic economy left by Katrina. The first government estimate of Katrina’s impact, released by the Congressional Budget Office, which showed that 400,000 people will be made redundant in the coming months and the economic growth will be 1% down also weighed on the market. But the report made it clear that the impact of Katrina is significant but could be only temporary as gasoline prices have returned to their pre-hurricane levels and consumer spending gained ground.

A few stocks were trading higher in early morning. Best Buy, Shuffle Master , ADTRAN, UNOVA Inc., Maritrans were among the gainers.
Pacific State Bancorp, Gehl, Building Materials Holding Corp. were among the losers.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.12 percent from 4.09 percent late Tuesday.

MOVERS AND SHAKERS

Hewlett-Packard rose 2% after UBS raised its view on the company to buy from neutral.

Albertson's Inc. is expected to fall due to its earnings from continuing operations that fell short of analysts' estimates. On Tuesday, the stock rose 1.5%.

Alnylam Pharmaceuticals Inc. was up 30% after Swiss drugmaker Novartis agreed to buy a 19.9% stake in the company.

Ventiv Health plans to buy privately-held healthcare marketing firm inChord Communications. The company advanced 1.2% on Wednesday.

Time Warner Inc. rose 0.8% on Wednesday after receiving a vote of confidence from the world's fifth-richest man, Saudi Prince Alwaleed bin Talal, who is also an investor in the company.

Genentech Inc. was down 1.4% in pre-market trading after Friedman Billings Ramsey downgraded the company to market perform from outperform.

Yum Brands rose 1.9% after it was upgraded by UBS and Bear Sterns to buy from neutral.

ECONOMIC NEWS

The Department of Labor released a revised 2Q productivity report, showing 1.8% growth from originally reported 2.2%, compared with 3.2% in the firs quarter. Economists had expected a downward revision of 2.1%.

The downward revision reflected smaller than previously reported growth in productivity in the manufacturing sector. The report showed that productivity growth in the manufacturing sector was revised down to 3.6 percent from the 4.1 percent growth previously reported.

The report also showed that unit labor costs rose by 2.5 percent in the second quarter, up from the 2.2 percent growth reported for the first quarter. Economists had expected a more modest increase of about 1.5 percent.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed higher, gaining on continuously falling oil prices which dropped to $65.96 a barrel and reduced fears of the impact of energy costs on major export markets. The Japanese Nikkei gained 0.1%, lifted by exporter issues with Sony up 2.1%, TDK Corp. 1.65%, and Suzuki Motor also up 1.2%. Hong Kong’s Hang Seng rose 0.4%, South Korea’s Kospi added 1.8%, and Australia’s All Ordinaries climbed 0.8%. The dollar bought 109.46 yen.

European markets were sent higher in mid-day dealings by strong equity markets, multy-week high close of U.S. markets overnight and positive earnings news, headed by French Bank Credit Agricole and defense contractor BAE Systems. The German DAX 30 rose 0.5%, the French CAC 40 climbed 0.3%, and London’s FTSE added 0.3%.

ENERGY, METALS, CURRENCIES

Crude-oil prices further dropped on recovering oil production. Crude-oil is more than $5 down from its all-time peak on Aug 30. Light sweet crude October delivery fell 46 cents to $65.50 a barrel in European electronic trading on the Nymex. London Brent declined 49 cents to $64.18. Gasoline rose more than a cent to $2.0679 a gallon. Heating oil was down 1 cent to $2.0470.

Gold rose in European trading as the U.S. dollar declined. Gold for immediate delivery gained $1.06 to trade at $445.06 per troy ounce.

The U.S. dollar was trading mixed against other major currencies ahead of Fed Reserve news on the future direction of U.S. interest rates. The euro rose to $1.2490 from $1.2461. The dollar bought 109.83 yen, up from 109.65. The British pound stood at $1.8418, up from $1.8417.

EARNINGS NEWS

Navistar, diesel engine producer, announced that 3Q earnings net income rose to 83 cents per share, up from 66 cents per share for the comparable period last year on 27% revenue growth. The strong 3Q results were obtained despite one-time pre-tax adjustments amounting to nearly $14 million as the company settled a number of accounting issues within one of its foundry operations.

Albertson's, supermarket chain, reported 2Q earnings of 29 cents per share, up from 28 cents per share in the same period last year on total sales growth, missing analysts' forecasts of 34 cents per share. Earnings from continuing operations came to 30 cents per share, down from 34 cents per share in the comparable period a year ago.

Casey's General Stores, convenience store operator, posted 1Q net earnings of 41 cents a share, up vs. 32 cents a share for the same period last year on revenue growth, beating analyst estimate of 34 cents a share.

McData, storage-technology company, posted a 2Q net loss of 18 cents a share, down from a loss of 5 cents a share in the year-ago period despite 68% revenue growth, missing analysts’ expectations of 1 cent a share. Its pro forma earnings amounted to 3 cents a share.

Ruth's Chris Steak House, restaurant chain, posted 2Q earnings of 11 cents a share, up vs. a net loss of 7 cents a share in the same period last year on strong revenue growth. Same-store sales rose 10.3% at company-owned restaurants and 7.4% at franchised restaurants in 2Q.

Shuffle Master, gaming supply company, said that 3Q net earnings came to 22 cents a share, up 29% from 17 cents a share in the year-earlier period on revenue growth, beating analyst estimate by a penny. The company expects 81 cents to 82 cents a share for 2005.

CORPORATE NEWS

Northrop Grumman is expected to announce Wednesday that it is ready to work in a team with European Aeronautic Defence & Space to bid on the Air Force's next-generation aerial-refueling contract, joining efforts in the competition against Boeing.

Goodrich Corp., systems and services supplier to aerospace and security markets, has agreed to acquire Sensors Unlimited Inc, technology maker, for $60 million in cash. The acquisition is expected to close in the fourth quarter.


Novartis and Alnylam Pharmaceuticals will be working in cooperation for a multy-year period of time in which they will focus on discovering therapeutics based on RNAi.- a natural process for selective gene ‘silencing’ found in all cells. Under the terms of the alliance Novartis has to make initial payments totaling $56.8 million to Alnylam, consisting of upfront payments as well as the purchase of 4.2 million Alnylam common shares, representing a 19.9% stake, at a price of $11.11 each. Not including royalties, collective payments to Alnylam could surpass $700 million, the company said. Shares of Alnylam fell 10 cents, or 1%, to end at $9.56 on Tuesday, while U.S.-traded shares of Novartis added 18 cents to $49.28.