Sluggish Opening

Elena
04 Oct, 2005
New York City

The U.S. Census Bureau reported that new orders for manufactured goods in August increased $9.7 billion or 2.5% to $395.2 billion, following a 2.5% decrease in July. The computer hardware sector is the biggest loser because of Lexmark's lowered Q3 earnings outlook. The upgrade by Goldman Sachs to Attractive from Neutral, did not help the sector. Chesapeake Energy has agreed to buy Columbia Natural Resources for $2.2 billion in cash and $75 million in debt.

U.S. MARKET AVERAGES

U.S. stock markets opened above the flat line just as futures had predicted, but for the last hour have been trading in the negative territory, dragged down by hardware, energy and housing stocks.

The computer hardware sector is the most notable loser in the early going, down 2.3% after Lexmark' posted lower Q3 earnings forecast. The early decline has reversed gains posted over the previous 2 sessions. The housing sector, showing over 1.2% decline, is another notable drag in the first half hour of trading.
Energy sector is down 1.2% on slipping oil prices. Tech sector also declines by 0.6%.

The airline sector is sharply higher in the early going, rising by 2.7% and reaching its highest level in 3 weeks. Continental Airlines is the best performer in the group. HMO and drug stocks are showing modest gains in the early going as well.

The U.S. Census Bureau released better-than-anticipated data, saying that new orders for manufactured goods in August increased $9.7 billion or 2.5%to $395.2 billion, following a 2.5% decrease in July. Economists had expected increase of 1.2%.

MOVERS AND SHAKERS

Printer maker Lexmark International Group Inc. ((LXK)) lost 22.4%, which is nearly a quarter of their value, after the company predicted third-quarter earnings and revenue would come in well below its forecasts. The company pointed decreasing laserjet and inkjet supplies revenue as a result of a reduction in channel inventories as well as lower end user demand. The prediction is likely to stimulate investors to take a look at rival Hewlett-Packard's ((HPQ)) outlooks for the rest of 2005. Hewlett-Packard dropped 1% yesterday.

Clorox Co. ((CLX)) also narrowed its earnings targets for the second quarter and fiscal year due to boosting energy-costs. The Oakland-based company announced it will raise prices on about 40% in order to partly compensate those higher costs. The company fell 1.7% yesterday.

General Motors Corp. ((GM)) and Ford Motor Co. ((F)) may attract attention after both were put on CreditWatch by Standard & Poor's after yesterday's close. Both companies are dependant on sport utility vehicles and trucks amid rising energy prices. The ratings agency's move follows the reports by the both automakers about a sudden drop in U.S. vehicles sales for the next month. General Motors added 1.4% while Ford gained 0.3% yesterday.

Procter & Gamble ((PG)) dropped 1.7% after Citigroup downgraded the company to hold from buy, worried over raw material pricing. The broker said it will limit upside to earnings-per-share estimates. The broker also cut its price target to $59 from $61.

J.P. Morgan downgraded Eastman Kodak ((EK)) to underweight from neutral, citing its concerns that digital profitability remains weak and its traditional business is declining quickly. The company fell 0.9% yesterday.

Deutsche Bank cut Kimberly-Clark Corp. ((KMB)) to hold from buy. The broker pointed as a reason that rearranging the health product company to drive asset rationalization and support higher R&D is the right way but the fast growing raw material costs, a still suffering business in Europe and the loss of synthetic fuel tax benefits are too exhausting to calm down until restructuring savings begin.

ECONOMIC NEWS

New orders for manufactured goods in August increased $9.7 billion or 2.5 percent to $395.2 billion, the U.S. Census Bureau reported today. This followed a 2.5 percent decrease in July. Shipments, up for the fourth consecutive month, increased $6.6 billion or 1.7 percent to $393.5 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.1 percent increase in July. Unfilled orders, up for the fourth consecutive month, increased $9.2 billion or 1.6 percent to $590.0 billion. This was at the highest level since the series began and followed a 1.0 percent July increase. Inventories, down following two consecutive monthly increases, decreased $0.6 billion or 0.1 percent to $463.7 billion. This followed a 0.6 percent July increase.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished higher on a third consecutive rise of U.S. markets overnight and strong dollar against the yen, giving a boost to exporter-related issues. The Nikkei advanced on strong world semiconductor sales data and reached a new four-year high at 13738.84 points to close at 1.6%. Canon, Kyocera Corp., and Honda Motor were among the leading gainers. In South Korea markets gained 1.8%, while in Hong Kong lost 0.1%. The dollar traded at 114.12 yen.

European markets gained ground at mid-day trading on strong auto sector with the German DAX 30 rising 0.4% and the French CAC 40, up 0.5%. Oil-heavy London’s FTSE 100 fell 0.2% after crude-oil prices dropped and BP warned that it wouldn’t be able fulfill its output goal. The euro was traded at 1.1933.

ENERGY, METALS, CURRENCIES

Oil prices declined below $65 a barrel on indications, given by the U.S. government, that heating oil stockpiles might be released to fight supply disruptions. Light sweet crude for November dropped 70 cents to $64.77 a barrel in electronic trading on the Nymex. Heating oil fell 1 cent to $2.0623 a gallon, while gasoline slightly fell to $2.9412a gallon. London Brent lost 86 cents to $61.94.

Gold prices climbed in European trading. In London the precious metal traded at $467.50 per troy ounce, up from $465.50. In Hong Kong gold gained $3.20 to close at $467.45. Silver traded at $7.40, up from $7.36.

In European trading the U.S. dollar traded mixed against the other major currencies The euro was quoted at $1.1934, up from $1.1909. The dollar changed hands at 114.26 yen, up from 114.20. The British pound was trading at $1.7571, down from $1.7540.

EARNINGS NEWS

Stolt-Nielsen S.A. ((SNSA)), specialty liquids services company, reported Q3 net income (and income from continuing operations) of $53.1 million, up from net income of $17.5 million ($12.2 million from continuing operations) for the same period last year. Operating revenue was $384.0 million for the quarter, down from operating revenue of $407.9 million for the same period last year (which included $84.8 million of Stolt Sea Farm (SSF) operating revenue from operations contributed to the new Marine Harvest).

CMGI Inc. ((CMGI)), a provider of electronic business services, reported a quarterly profit of $274,000, or break-even per share, up vs. a loss of $6.8 million, or 2 cents per share in the year-ago period on sales growth. The latest results incorporate $10.4 million in charges related to regulatory compliance, amortization of intangible assets and stock-based compensation.

Weider Nutrition International ((WNI)), seller of vitamins and other various nutritional supplements, posted Q1 earnings of 18 cents a share, up from a year-earlier profit of 14 cents a share on an increase in demand for branded products. Sales increased to $48 million from $43.7 million in the same period a year ago. No estimate has been published for the company's results. The company added though that gross margins declined by higher raw material costs.

CRYO-CELL International ((CCEL)), cord blood bank, announced Q3 net income of 5 cents per share, down from 16 cents per share in the year-ago period. Consolidated revenues for the quarter were approximately $3.8 million, up 17% from approximately $3.2 million for the comparable quarter last year. Net income for the 2004 period included $1.6 million from the reversal of all prior accruals related to the PharmaStem litigation during the third quarter
of 2004, as a result of the favorable ruling by the Court on post-trial motions in that case.
Without the accrual reversal, net income in the third quarter of 2005 increased approximately $300,000 compared to the 2004 period due to a 17% increase in revenue.

CORPORATE NEWS

Fox & Hound Restaurant Group ((FOXX)), operator of the Fox and Hound and Bailey's restaurant chains, said Tuesday it has signed a letter of intent to be acquired by Los Angeles private equity firm Levine Leichtman Capital Partners for $14 per share. The offer is valued at the total price of $145.6 million based on 10.4 million shares outstanding.

Chesapeake Energy has agreed to buy Columbia Natural Resources from Triana Energy Holdings for $2.2 billion in cash and $75 million in debt. The deal will amass the third largest gas reserves in the U.S. after Exxon Mobil and ConocoPhillips.

The second-largest global oil company BP warned it won't meet 2005 production targets. The disappointing forecast and the expected profit decline of $700 million are largely due to Hurricanes Rita and Katrina.

Adidas-Salomon said its $3.8 billion deal to acquire Reebok International won't require any more antitrust scrutiny in the U.S. after the Hart-Scott-Rodino waiting period ended. The deal is expected to close in the first half of 2006.

Citigroup Smith Barney cut household products maker Procter & Gamble Co to hold from buy, citing concerns over raw material pricing. The broker said it will limit upside to earnings-per-share estimates. In addition, Citigroup also cut its price target to $59 from $61.