Stock Futures Flatten on Inflation Data

Elena
15 May, 2007
New York City

U.S. stock futures were flat Tuesday, reflecting in-line core inflation data and lackluster earnings reports from Wal-Mart Stores and Home Depot. U.S. consumer prices rose 0.4% in April, boosted by increases for energy and groceries. Excluding food and energy, the core consumer price index rose 0.2%, meeting forecasts. The Home Depot posted Q1 earnings drop of 29.5% to 53 cents per share, compared with 70 cents last year, missing estimates of 59 cents a share. The stock dropped 2.2%.

[R]9:00AM Stock futures traded flat after inflation data.[/R]
U.S. stock futures were flat Tuesday, reflecting in-line core inflation data and lackluster earnings reports from Wal-Mart Stores and Home Depot. The Labor Department said that U.S. consumer prices rose 0.4% in April, boosted by increases for energy and groceries. Excluding food and energy, the core consumer price index rose 0.2%, meeting forecasts.

Among pre-market earnings highlights, Wal-Mart ((WMT)) declined 0.8% in pre-open trading as it met expectations with an 8% profit rise, with revenue rising 8.5% to $86.41 billion in Q1. The Home Depot ((HD)), the world's largest home improvement retailer, posted Q1 earnings drop of 29.5% to $1.0 billion, or 53 cents per share, compared with $1.5 billion, or 70 cents per share last year, missing analyst estimates of earnings of 59 cents. The stock dropped 2.2%. Agilent Technologies ((A)) rose 3% in pre-open trade on better-than-expected quarterly earnings per share and revenue outlook.

On the merger-and-acquisition news front, Reuters Group ((RTRSY)) and Thomson Corp. ((TOC)) agreed to merge in a deal worth about $17.2 billion. shares in Reuters Group rose 3.6% in the pre-open. In other corporate news, General motors ((GM)) and DaimlerChrysler ((DCX)) were upgraded after DaimlerChrysler's move to sell 80% of Chrysler. DaimlerChrysler also said that its Q1 profit more than doubled due to the sale of its stake in Airbus owner EADS. S&P 500 futures edged up 1.6 points at 1,510.30 and Nasdaq 100 futures were flat at 1,896.25. Dow industrial futures rose 17 points.


[R]8:30AM Wal-Mart stores posted Q1 earnings in line with estimates.[/R]
Wal-Mart Stores ((WMT)), the world''s largest retailer, posted 8% increase in Q1 net income, coming in line with analyst estimates and 8.5% revenue growth, slightly missing expectations. The retailer reported quarterly earnings $2.83 billion, or 68 cents a share, up from $2.62 billion, or 63 cent a year ago, with revenue rising 8.5% to $86.41 billion from $79.68 billion. Analysts had expected the company to earn 68 cents a share on revenue of $86.94 billion.

Chief Executive Lee Scott said they were not pleased with their overall performance, but international operations had a strong quarter, especially Mexico operations and Asda in the U.K. The retailer''s consolidated profit margin thinned by 0.08% in the quarter. The company projected Q2 earnings from continuing operations to be 75 cents to 79 cents a share, compared with analyst expectations of 79 cents a share. U.S. comparable-store sales are seen higher by 1% to 2%.


[R]8:00AM NY-7:00PM Mumbai Sensex edges lower with IT and oil & gas stocks leading decliners.[/R]

The Sensex on BSE finished 36.53 points, or 0.26%, lower at 13,929.33.

The market-breadth was slightly positive as there were 1,330 stocks which advanced, 1,271 stocks, which declined, and 78 stocks which remained unchanged. Of the 30 stocks in the Sensex, 15 advanced, while the rest declined. The turnover on BSE was Rs 4,131 crore, almost unchanged from Rs 4,136.23 crore on Monday. On NSE, the turnover was Rs 9,135.04 crore, higher than Rs 8,472.51 crore on Monday.

Economic news

The rupee continued its advance and was quoted at 40.83 against the US dollar in late morning deals supported by weak dollar overseas and sustained dollar selling by exporters, despite capital outflows.

The finance ministry announced today that the government is not intending to raise rates on small savings scheme. Prevailing interest rates on small savings are within the range of 3.5% for the post office saving account and 8% under the post office monthly income account. Rates for Public Provident Fund and Senior Citizen savings scheme are 8% and 9% respectively.

The unavailability of spectrum has affected the telecom industry so sharply that the Department of Telecom is about to limit the number of operators in each service area to maintain a minimum quality of service. There are 23 telecom circles in the country.

Trading highlights

Indiabulls Real Estate was the most-active stock with a turnover of Rs 131.20 crore followed by SBI and Reliance Natural.

Advancers

BHEL led the gainers, surging 2.5% to Rs 2,519. BHEL intends to enhance its manufacturing capacity to 15,000 MW per annum with total investment of around Rs 3,200 crore during the Eleventh Plan, spread over the period 2007-2012.

Banking and financial stocks also rallied on fresh buying interest and on market talk that CRR, or cash reserve ratio, may be cut down by 50 basis points shortly. ICICI Bank rallied 2% to Rs 887. SBI advanced 1.7% to Rs 1,227, and HDFC Bank added 1.4% to Rs 1,010.

Other stocks which advanced included Hero Honda, up 1.4%, at Rs 700. Bharti Airtel, Dr.Reddy and ACC advanced around 1% each at Rs 833, Rs 657 and Rs 875, respectively.

Decliners

IT large-caps led the decliners on a stronger rupee against the dollar as any advance in the rupee directly influences revenue and profit of IT companies. Satyam shed 2% at Rs 452. Wipro dropped 1.8% to Rs 534. Infosys slipped 1.5% to Rs 1,973, and TCS was down 1% at Rs 1,237.

ONGC declined 1.8% to Rs 890. Index heavy Reliance Industries slipped 1.4% to Rs 1,598. Reliance was off from a high of Rs 1623.25 tracking reports that it has got a tax benefit of Rs 376.17 crore in 2002-03 because of unreasonable concessions due to under-assessment by tax authorities.

The other major decliners were Reliance Communications dropping 1.4% to Rs 475 and Bajaj Auto losing 1.2% at Rs 2,635.


[R]6:30AM European markets inch lower Tuesday in subdued trading.[/R]

National benchmarks declined in 10 of 18 markets in western Europe. The U.K. FTSE 100 index rose 0.1% at 6,562.50 and the German DAX Xetra 30 index inched up less than 0.1% to 7,461.36. The French CAC-40 index slipped 0.2% at 6,015.82.

Advancers

Nokia led the gainers, up 3.9% on Monday, firming up as the world top mobile handsetmaker, after the groupannounced it was winning greater market share. Nokia envisages having more than 36% of the global cellphone market in the second quarter, benefiting from strong growth in emerging markets.

DaimlerChrysler gained 1.8% after the German carmaker sold 80.1% of its loss-making Chrysler unit for $7.4 billion to Cerberus, the private equity group. DaimlerChrysler strength lifted Renault, up 2.5%.

More talk about consolidation in the Italian banking sector pushed Capitalia up 1.4% on talks of an imminent bid from rival UniCredit, 0.9% higher.

Decliners

Atos Origin dropped 13.8% as the French IT company stated that all discussions regarding a possible sale of the business had been terminated. Atos will continue with its restructuring plans, moving more staff offshore. The group is expected to look for Asian acquisitions.

Alstom announced better-than-expected full-year results with net income up by 152% to 448 million euros. But the French transport and power group dipped 1.7% amid disappointment with guidance on future profit margins.

Endemol slipped 0.6% after Telefonica sold its remaining 75% stake in the television production company which makes Big Brother for 2.63 billion euros to a consortium which include Mediaset.

Deutsche Postbank fell 1.1% amid disappointment at its first-quarter results which came in below consensus expectations.

Merck KGaA eased 0.7% after agreeing to sell its generics division to Mylan Laboratories of the US for 4.9 billion euros.

Commodities

Gold for immediate delivery shed $1.20, or 0.2%, to $668.55 an ounce, while silver for immediate delivery lost 3 cents, or 0.2%, to $13.13 an ounce. Aluminum for immediate delivery in London yesterday fell 1.9%, copper fell 3.1 %, lead, 0.6%, nickel, 2.6%, and zinc, 2.6%.

Crude oil for June delivery advanced 9 cents to $62.55 a barrel, in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement fell 20 cents to $66.63 a barrel in electronic trading on the ICE Futures exchange. Gasoline for June delivery fell for the second day and was trading at $2.2816 a gallon, down 1.96 cents in New York.

Currencies

The U.S. dollar was mixed against other major currencies in European trading Tuesday morning. The euro traded at $1.3533, down from $1.3541 late Monday in New York. The British pound traded at $1.9758, up from $1.9732. The dollar fetched 120.41 Japanese yen, up from 120.29.