Oil, Bernanke Trim U.S. Averages

123jump.com Staff
17 May, 2007
New York City

U.S. market averages consolidated after gaining to a record level yesterday. Alliance Data agreed to be bought by Blackstone for $7.4 billion and 24,7 Right Media was purchased by WPP Group. J C Penney, Kohl and Nordstorm reported rising sales and earnings. Oil jumped more than 3% on worries that gasoline supplies may not meet the demand. Bernanke comments on mortgages and current boom in leveraged buyout restrained traders. Weak metals trimmed market averages in Latin America.

[R]5:00PM NY; 11:00PM Frankfurt; 3:30AM Mumbai - GLOBAL MARKETS[/R]

Yield on 10-year U.S. bond closed at 4.740% and the 30-year U.S. bond closed at 4.899%.

Gold lost $4.300 to close at $661.500 a troy ounce, silver decreased 4.7 cents to end at $12.883 a troy ounce and copper declined $153.000 to close at $7646.000 per metric ton.

Oil gained $2.310 to close at $64.860 a barrel and heating oil advanced 6.970 cents to finish at 193.670 cents a gallon. Natural gas increased 21.7 cents to close at $8.107 per MMBtu. Gasoline went up 9.900 cents to end at 243.600 cents a gallon.

Asian markets closed higher led by consumer electronics companies, although Japan fell slightly after the government released gross-domestic product figures that failed to impress investors. The advancers were led by China with an advance of 2.32%, Indonesia with an increase of 1.27% and India with a gain of 1.22%. The only decliner was Japan with a loss of 0.17%. Australia gained 1.10%.

European markets finished higher, fueled by oil giants, airlines, insurers. The advancers were led by Netherlands with an increase of 0.75%, Italy with an advance of 0.37% and Belgium with a gain of 0.36%. The only decliner was Switzerland with a loss of 0.36%.

Latin America markets finished higher. The advancers were led by Argentina with an increase of 0.81%, Mexico with an advance of 0.59% and Brazil with a gain of 0.28%. There were no decliners. Canada gained 0.39% although weakness in technology and metal stocks countering strength in the energy group.

[R]2:30PM NY, U.S. Market Movers[/R]

Gerber Scientific Inc. ((GRB)), sign-making equipment and apparel maker, shares surged 28.5% after the company lifted its fourth-quarter earnings and sales forecast above analyst expectations. Gerber raised its outlook for the period to an earnings range between 22 cents per share and 26 cents per share on revenue between $153 million and $155 million.

J.C. Penney ((JCP)) reported a 13% increase in first-quarter income on strong sales of exclusive fashions, and the department store chain also raised its profit outlook for the year. Earnings rose to $238 million, or $1.04 per share, up from $210 million, or 89 cents per share, during the same period a year ago. Revenue increased 3%, to $4.35 billion from $4.22 billion a year earlier. Analysts had expected $4.39 billion. Shares surged 5.8%.

Sun Microsystems Inc. ((SUNW)), network equipment maker, approved a $3 billion program to buy back its own stock. Shares of Sun Microsystems Inc. rose 4.3%.

Caterpillar ((CAT)) posted a loss on the Dow Jones Industrial Average after the stock was downgraded by Stifel Nicolaus & Co. Stifel said he doesn''t expect Caterpillar''s recent strong growth to continue as the company''s U.S. market gets weaker, and the company''s shares aren''t far from his $81 price target. The stock fell 1.8%.

Dow Jones & Co. ((DJ)) board met but took no action on a $5 billion bid by Rupert Murdoch''s News Corp. buy the company, a source familiar with the matter said. Shares in Dow Jones & Co. slipped 1.7%.

Micron Technology Inc. ((MU)), flash and other memory chips maker, said it plans to offer $1.1 billion in convertible senior notes due June 1, 2014. The company granted the underwriters of the offering an option to buy up to another $165 million of additional notes to cover any excess demand. Shares in Micron Technology Inc. slipped 3.8%.

New York Times Co. ((NYT)), newspapers, broadcast outlets and Web sites owner, said its April sales dropped 2.2% on weakness in all of its print media groups. Ad revenue from continuing operations slipped 3.6% to $196 million from $203.4 million last year. Total revenue from continuing operations fell to $303.2 million versus $309.8 million in the prior year. Shares in New York Times Co. slipped 1.2%.

24/7 Real Media ((TFSM)) is being bought by WPP Group Plc. ((WPP.L)), marketing services company by revenue, for $649 million to beef up its presence in the fastest growing segment of the advertising market. WPP said on Thursday its GroupM agency expects online advertising to exceed $33 billion this year, or more than 8 percent of global ad spending, and is seen growing strongly in the future. 24/7 Real Media’s shares gained 3.8%.

[R]1:00PM NY, 5:00 PM Frankfurt European stocks closed higher, fueled by oil giants, airlines, insurers.[/R]
European stock markets gained ground on Thursday, boosted by gains for oil giants such as Royal Dutch Shell and advancers on the back of broker upgrades like British Airways and Old Mutual. However, weakness on Wall Street helped limit gains. Cairn Energy climbed 3.7% on takeover speculation and Shell rose 3%. British Airways shares rose 2.4% on positive comments from Goldman Sachs. Shares of insurer Old Mutual rose 2.5% after Deutsche Bank upgraded the company to buy from hold.

Of stocks in focus, BT Group shares declined 2.9% as quarterly sales slightly disappointed. Shares of SABMiller fell 1.6% after the brewer reported a 14.5% annual profit rise. Emap rallied 5.2% after its CEO Tom Moloney resigned. Shares of Kaufman & Broad dropped 2.7% after controlling shareholder KB Home received an offer for its stake at €55 a share from PAI Partners. The U.K. FTSE 100 rose 0.3% to 6,579.30, the German DAX 30 added 0.2% at 7,499.50 and the French CAC 40 improved 0.2% at 6,027.00.

[R]11:30AM Market averages traded in the negative on profit-taking.[/R]

U.S. stocks continued to trade in the negative territory as investors locked in profit taking after the recent strong rally. Market also digested data that signaled slower economic conditions in the coming months. The Conference Board said its index of leading economic indicators dropped 0.5%, higher than the 0.1% decline analysts were expecting. In addition, Federal Reserve Chairman Ben Bernanke gave a stern speech on sub-prime mortgage markets and their impact on housing. However, he pointed out that these problems are not likely to affect the broader economy to a great extent.

Among the most notable movers, Dow component Caterpillar Inc. ((CAT)) weighed on blue chips with a decline of 1.9% after a downgrade from a buy to a hold. Micron Technology ((MU)) weighed on tech shares, losing 3.7% after filing to sell $1.1 billion in convertible notes. However, Sun Microsystems ((SUNW)) provided support, posting an advance of 4.3% after it announced its board has authorized a buyback of up to $3 billion.

By sector, disk drive, gold, and semiconductor stocks moved notably lower. Meanwhile, airline, oil, and computer hardware stocks advanced, helping to limit the downside for the markets. The Dow Jones industrial average fell 4.39, or 0.03%, to 13,483.14, after reaching its 23rd record close of the year on Wednesday. The Standard & Poor''s 500 index fell 1.63, or 0.11%, to 1,512.51, and the Nasdaq composite index fell 4.33, or 0.17%, to 2,543.09.


[R]Leading indicators index dropped 0.5% in April.[/R]

Thursday morning, the Conference Board released its report on leading economic indicators in the month of April, showing that its leading indicators index unexpectedly fell following an upwardly revised increase in the previous month. The report showed that the leading index fell 0.5 percent in April compared to an upwardly revised 0.6 percent increase in March. Economists had expected the index to come in unchanged compared to the 0.1 percent increase originally reported for the previous month. The unexpected decrease by the index was partly due to a notable drop in housing permits, although the Conference Board noted that weaknesses among the leading indicators have been somewhat more widespread than the strengths over the past few months. The Conference Board also said that the coincident index increased 0.2 percent in April, with the largest positive contribution coming from industrial production followed by personal income. The lagging index also increased 0.2 percent in April.


[R]9:45AM U.S. markets opened lower on profit taking ahead of economic data.[/R]

U.S. stocks opened lower on Thursday, with investors taking profit after recent rally ahead of data on leading economic indicators. Wall Street also awaited a speech by the Fed Reserve Chairman Ben Bernanke that could provide clues to whether problems with subprime mortgage loans could affect the broader economy. An increase by the oil price also weighed on market sentiment, as light sweet crude rose 47 cents to $63.02 on the Nymex.

Merger-and-acquisition news failed to lift market sentiment. Alliance Data Systems ((ADS)) surged 26% after the provider of transaction, credit and marketing services agreed to be acquired by Blackstone Group in a deal worth $7.8 billion. The private-equity firm is paying $81.75 a share, a 30% premium to Wednesday''s closing price of Alliance Data, including debt assumption. In other deal news, Acxiom ((ACXM)) surged 16% after the company agreed late Wednesday to be acquired by Silver Lake and ValueAct Capital for $3 billion, or $27.10 per share in cash, including the assumption of $756 million in debt.

On the earnings news front, J.C. Penney Co. ((JCP)) rose 4.5% after it posted a 13% increase in Q1 profits that fell slightly below analyst estimates. The retailer also raised its profit outlook for the year. Hewlett-Packard ((HPQ)) posted Q2 results that included an extra $3 billion in sales. The Dow Jones industrial average was down 18.04 points, or 0.13%, at 13,469.49. The Standard & Poor''s 500 Index was down 2.11 points, or 0.14%, at 1,512.03. The Nasdaq Composite Index was down 2.75 points, or 0.11%, at 2,544.67.


[R]9:30AM The FTSE 100 trades higher Thursday on oil stocks and deal talks.[/R]

The FTSE 100 in London added 12 points, or 0.2%, to 6,571.9 in lunchtime exchanges.

Advancers

The oil sector led the advance in London. Royal Dutch Shell rallied 2.5 per cent, as crude prices climbed towards $69 a barrel. BP was up 1.4 per cent and BG Group added 0.5 per cent.

Prudential advanced 1% on rumours that it may be broken up. Mark Tucker, chief executive of the insurer, is expected to come under pressure at the annual meeting of the company today to address calls to break up the business. Ratings agency Moody''s put a negative outlook on the UK arm.

Old Mutual gained after Deutsche Bank upgraded the insurer from hold to buy and its price target. It traded 2.5 per cent higher.

Credit information group Experian surged 2.4 per cent on reports that it could be a potential bid target after US peer Acxiom Corp agreed to be bought for $3 billion.

Emap shares were 6.2 per cent higher after the media group said that Tom Moloney was to resign as chief executive and step aside from the board by mutual agreement.

Decliners

BT Group lost 2.1 per cent after it reported fourth quarter results, largely in line with expectations. The company also announced details of a 2.5 billion pound share buyback. Underlying earnings for the three months to 31 March were up 3% on revenue 3% higher.

InterContinental Hotels shares declined tracking a strong rally in the previous session on renewed talk of bid interest. The stock shed 2 per cent.

[R]9:00AM Stock futures pointed to a lower opening.[/R]

U.S. stock futures declined Thursday following solid gains in the previous session. Market sentiment was hurt by profit taking amid expectations for a quiet day of economic news. Before the opening bell, the Labor Department said that U.S. initial jobless claims fell for a fifth-straight week.

In earnings news, Hewlett-Packard ((HPQ)) gained 1.7% in the pre-open after it posted Q2 results that included well-received extra $3 billion in sales. J.C. Penney Co. ((JCP)) reported a higher Q1 profit to $238 million, or $1.04 a share, up from $210 million, or 89 cents a share a year earlier, coming in slightly above a profit of $1.03 a share. The quarterly results were attributed to private-label brands which helped margins. The department store operator also lifted its full-year earnings forecast.

In other corporate news, Sun Microsystems ((SUNW)) rose 3.3% after announcing its board approved a buyback of up to $3 billion in outstanding shares. BT Group ((BT)) announced a buyback of nearly $5 billion along with its Q4 profit. Acxiom Corp.((ACXM)), an information technology company, agreed to be bought in a deal worth $2.24 billion by private equity firms Silver Lake Partners and ValueAct Capital. The deal represents more than a 14% premium over Acxiom''s closing price Wednesday. S&P 500 futures fell 1.3 points at 1,516.70 and Nasdaq 100 futures fell 1.5 points at 1,899.75. Dow industrial futures declined 18 points.


[R]8:30AM Asian markets gain Thursday, while Japan finishes lower.[/R]

Asian markets finished mostly higher on Thursday.

Japanese Nikkei 225 settled down 0.2% to 17,498.60. Japanese economy grew at an annual 2.4% rate in the three months ended March 31, lower than the fastest pace in three years as companies reduced spending on cooling U.S. growth. Analyst expected the growth to be around 2.7%. Export-driven companies benefited from the rise of the dollar against the yen. Sony rose as much as 3.3% a day after reporting strong earnings and Canon added 1.3%.

Hong Kong Hang Seng closed 0.3% higher at 20,994.61. Overnight gains on U.S. markets aided Hong Kong rise, with Cheung Kong, Citic Pacific and China Mobile leading the gainers. Cheung Kong rose 2%, outpacing the benchmark index, while Citic Pacific advanced 2% after the company announced Wednesday that it is in talks to sell its 25% stake in Air China Cargo to partner Air China. Citic Pacific also added it is interested in issuing Class A shares. China Mobile finished 0.1% higher on a report about its Class A-share listing plan.

Shanghai Composite advanced 1.6% to finish at 4,048.29. In Shanghai, the attractive valuations of Class B shares kept attracting market interest. The Shanghai B Share Index rallied 8% to 357.14 on top of the 6.4% gain on Wednesday, and Shenzhen B shares added 2.8% to 767.72 after advancing 1% in the previous session. Guangxi Hechi Chemical gained the daily 10% limit, and Guangxi Guidong Electric Power also rose 10%.

Other markets which ended higher were the Australian S&P/ASX 200 which added 1.1% to close at 6,365.90, South Korean Kospi which closed 0.9% higher at 1,615.58, and the Singapore Straits Times Index which rose 0.7% to end at 3,525.51. Taiwan Weighted Index advanced 0.6% to 8,037.96.


[R]8:15AM Hewlett-Packard posted 27% quarterly increase on 13% sales growth.[/R]

Hewlett-Packard Co. ((HPQ)) reported later Wednesday underlying quarterly profit growth of 27%, helped by broad cost cutting and strength in its personal computer and printer businesses. Hewlett-Packard said net income was $1.78 billion, or 65 cents per share, vs. $1.90 billion, or 66 cents per share, including a tax settlement gain of 15 cents. Second-quarter revenue rose by 13% to $25.5 billion. Company’s CEO said the revenue growth was its strongest since 2000 and HP continued to gain share in a number of markets.

Revenue in HP personal systems group rose 24% to $8.7 billion and operating profit was $417 million, or 4.8% of revenue, versus 3.6% a year ago. In imaging and printing, revenue rose 6% to $7.2 billion. Operating profit was $1.2 billion, or 16.3% of revenue, up from 15.5% a year ago. Software business grew 58% to $523 million, led by strong growth from Mercury Interactive. Operating profit was $42 million, or 8% of revenue, up from 0.9% of revenue a year ago.

HP projected Q3 revenue of $23.7 billion to $23.9 billion, and narrowed its forecast range for Q3 earnings per share to 64 cents to 65 cents from a prior 63 cents to 65 cents. HP added that third-quarter results would exceed analyst estimates at the time.


[R]8:00AM NY-7:00PM Mumbai Sensex surges Thursday on banks, Reliance Industries.[/R]

The Sensex on BSE finished Thursday 1712.40 points, or 1.22%, higher at 14,299.71.

The market-breadth turned negative in late session. For 1,272 stocks that advanced, 1,337 declined and only 76 stocks remained unchanged. Of the 30 stocks in the Sensex, 27 advanced, while three declined. The turnover on BSE was Rs 5,715 crore, compared to Rs 5,178 crore on Wednesday. On NSE, the turnover was Rs 12,372.07 crore, much higher than Rs 10,684.34 crore on Wednesday.

Economic news

Information and Broadcasting Minister P R Dasmunsi said in the Parliament proceedings that license of cable operators will be cancelled if they charge for cable services mandated by the government.

Private GSM mobile telephone operators are opposing telecom regulator TRAI''s recommendation to allow Internet telephony to Internet Service Providers on the grounds that this will lead to an unauthorized entry for voice telephone services.

Trading highlights

Unitech was the most-active stock with a turnover of Rs 247 crore followed by new issue Bhagwati Banquets and Bajaj Auto.

Advancers

SBI soared over 3% to Rs 1,328 aided by its plans to consolidate ownership in associate banks, dilution of stake in unlisted associates, and a further dilution of its holding in the already listed arms to strengthen its resources.

Other shares from banking and financial sector including ICICI Bank advancing 1.8% to Rs 936, HDFC gaining 0.44% to Rs 1,705 also took part in the rally. These shares have been consistently gaining in the past few days, supported by market rumors of a reduction in the cash reserve ratio.

Reliance surged 3% to Rs 1,685. It also hit a record high of Rs 1,688.15 in late afternoon session of trade. The stock saw sustained buying interest after it found natural gas in the Krishna-Godavari basin and Gujarat-Saurashtra basin on May 12 2007.

Other gainers included Dr.Reddy''s and Tata Motors which rallied around 2% each to Rs 678, Rs 751, respectively.

Decliners

Bajaj Auto declined 6.7% at Rs 2,500. Bajaj Auto posted today a 13% rise to Rs 1,248.28 crore in consolidated income in the 2007 fiscal year compared with Rs 1,104.60 crore in 2006 fiscal year. Bajaj Auto reported profit after adjustments of Rs 308.31 crore in the current fiscal year lower than Rs 346.97 crore in the same period a year earlier. Total income increased to Rs 2,471.25 crore from Rs 2,268.95 crore in a year earlier. The board has recommended a dividend of Rs 40 per share for the 2007 fiscal year.

The other two large-cap decliners were Hindustan Lever, down 1.1% to Rs 195 and Cipla, off 0.7 to Rs 208.


[R]6;30AM European markets gain Thursday on takeover speculation.[/R]

European markets advance on Thursday. The U.K. FTSE 100 rose 0.3% to 6,578.30, the German DAX 30 rose 0.5% to 7,519.75 and the French CAC 40 improved 0.4% to 6,043.02.

Advancers

Prudential gained 1.5% as the insurer was due to hold its annual meeting. Prudential has already sold its Egg online banking unit to Citigroup but fund-management group Hermes has asked for a break-up, and the decision by rating concern Moody’s to put a negative outlook on its U.K. arm will raise the pressure on the company.

Old Mutual rose 1.8% after Deutsche Bank upgraded the Anglo-South African company to buy from hold. Emap rallied 4.2% after Tom Moloney, its chief executive, resigned. The company reiterated its earnings outlook for the year.

Cairn Energy, an oil explorer in India, gained 4.1% as a bid could be imminent. Cairn spokespeople could not be reached for comment.

British Airways climbed 2.2 % after Goldman, Sachs & Co. commented that third-largest airline was the jewel in the crown for private equity investors.

Decliners

BT Group declined 1% after the U.K. fixed-line operator reported a 10% increase in adjusted profit before tax and a below-forecast 3% rise in quarterly revenue. BT also announced it would buy back 2.5 billion pounds of shares and lift its dividend 27%.

SABMiller shed 0.3% lower after the brewer posted a 14.5% annual profit rise. In North America, operating profit dropped 17% to $375 million due to rising commodity costs, declining Miller Lite volume, and price competition in the economy segment.

Sainsbury dropped 0.9% after JPMorgan Chase & Co lowered its recommendation for the third-largest supermarket chain in the UK to underweight from neutral.

Commodities

Crude oil for June delivery rose 45 cents, or 0.7%, to $63 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for July settlement rose 77 cents to $68.78 a barrel in electronic trading on the ICE Futures exchange.

Gold traded in London at $663.20, down from $666.40 late Wednesday. Silver opened in London at $12.84, down from $13.05.

Currencies

The dollar was mixed against other major currencies in European trading Thursday morning. The euro traded at $1.3526, up from $1.3520 late Wednesday in New York. The British pound traded at $1.9773, down from $1.9781. The dollar fetched 120.96 Japanese yen, up from 120.74.