Mild Recovery in Averages

Elena
07 Oct, 2005
New York City

Alcoa Inc., the world's biggest aluminum maker, will start the new earnings season on Monday after closing the bell. The company lowered its Q3 earnings forecast to the range of 27 to 31 cents a share, blaming hurricanes and energy costs. The stock fell 23% Thursday. Nonfarm payroll data release showed that 35,000 jobs were lost in September following an upwardly revised increase of 211,000 in August.

U.S. MARKET AVERAGES

U.S. market averages have been trading mainly in the positive territory, posting modest gains. Upbeat economic data, released by the Labor Dept., helped them rebound from a week of heavy losses when markets declined on inflation worries, speculations over interest-rate increases and energy costs.

The market eagerly awaited September nonfarm payroll data release, expected to show the real impact of Katrina on the labor market. The Labor Department released better-than-anticipated data, showing that the U.S. economy lost 35,000 jobs in September, far less than the decline of 143,000 jobs anticipated by economists. This piece of news raised hopes of still growing economy, despite Katrina’s and Rita’s impact.

Oil prices started climbing after a five-day decline, suggesting that traders shrugged off signs of faltering U.S. consumption and expect higher demand on the approaching winter season. Heating oil, gasoline, and natural gas also advanced.

Both the oil and natural gas sectors climb by about 2% on the back of higher oil prices.
The chemical sector is among the best performers in early trading. After reaching its lowest level in a year Thursday, the sector is currently higher by more than 1.6%. Energy, housing and semiconductor stocks, which were notable decliners Thursday, are now posting gains.

The airline and health care sectors post modest losses. The gold sector is sitting near the unchanged mark, after some volatile trading in the past couple days.The biotech sector is continuing its recent string of losses, moving modestly lower.

Merck ((MRK)) is the best Dow performer, rising by 2.5% after had a choppy session on Thursday. Caterpillar ((CAT)), Exxon Mobil ((XOM)) and IBM ((IBM)) are posting notable advances as well, each climbing by more than 1.5%.

Verizon ((VZ)) is lower by 1.5%. Boeing ((BA)) and McDonald's ((MCD)) are other notable decliners, each falling by about 1.4%.

MOVERS AND SHAKERS

Auto-parts producer Delphi Corp. ((DPH)) could file under Chapter 11 of federal bankruptcy law today, according to the Detroit News, pointing a confidential update to United Auto Workers members from the union's International Bargaining Team. The report comes as Delphi is pressing the UAW for a package of concessions including a two-thirds cut in wages and benefits, according to the Wall Street Journal. Delphi fell 25%.

Time Warner Inc. ((TWX)) and Microsoft Corp. ((MSFT)) have proceeded discussions about forming a connection of their Internet divisions, according to the Wall Street Journal. The companies are looking for ways to combine MSN's search engine technology with AOL's Web content. The two companies originally began talks about a sort of Internet deal earlier this year. Time Warner shares dropped 0.4% while Microsoft added 0.2% yesterday.

Office supply retailer Staples ((SPLS)) could be active after the company announced a stock repurchase program for $1.5 billion. Staples also reapeated its fiscal third-quarter earnings expectations. The company said it expects third-quarter earnings of 32 cents a share and full-year profits of $1.11 a share. Staples gained 4%.

Telecom equpment producer UTStarcom ((UTSI)) lost almost a quarter after the company said it has been alerted of a formal inquiry by the Securities & Exchange Commission into its financial statements during previous reporting periods. The company said it is cooperating with the inquiry. UTStarcom also narrowed its third-quarter revenue outlook. The company fell 31%.

Apple Computer Inc. ((AAPL)) was down 2.4% due to a report of a critical note from SG Cowen. The company is going through a more fruitful period, but it's not immune from macroeconomic storms, according to the broker. SG Cowen downgraded Apple to neutral.

ECONOMIC NEWS

The U.S. economy lost jobs for the first time in more than two years in the month of September, according to a report from the Labor Dept., with the decrease largely due to the impact of Hurricane Katrina.

The report showed that non-farm payroll employment fell by 35,000 jobs in September following an upwardly revised increase of 211,000 in August. Economists had been expecting a more significant decline of about 150,000.

The Labor Dept. noted that the job losses caused by Hurricane Katrina may have been offset in some industries by developments in the rest of the country.

However, the report also showed that the unemployment rate rose to 5.1 percent in September from 4.9 percent in August. Economists had expected the unemployment rate to edge up to 5.0 percent.

While the smaller than expected drop in jobs may offset some of the fears about the impact of Hurricane Katrina, it may add to concerns about higher interest rates. If the economy is able to digest the storms with relative ease, the Fed will likely not hesitate to continue raising rates to battle inflation.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed broadly lower on weak U.S. equity markets, speculations of interest-rate hikes and expectations of U.S. September nonfarm payroll data. The Nikkei was the leading decliner, falling down by 1% on high tech issues sell-off, followed by South Korea’s Kospi, down 0.1% on exporter-related stocks. Hong Kong’s Hang Seng ended up 0.1%. The dollar bought 113.34 yen.

European markets finished in the negative territory after a day of volatile trading. The U.S. nonfarm payroll data release weighed on the market sentiment, as well as some corporate news, saying that BP is selling one of its units for $9 million and Reckitt Benkister is buying beauty retailer Boots. The German DAX 30 shed 0.2%, the French CAC 40 lost 0.2%, and London’s FTSE 100 fell 0.2%.

ENERGY, METALS, CURRENCIES

Oil prices steadily hovered round $62 a barrel. Light sweet crude for November delivery rose 34 cents to trade at $61.70 a barrel on the Nymex. London Brent gained 35 cents to $58.72.

Gold prices further climbed in European trading. In London the precious metal closed at $475 per troy ounce, up from $471.40. In Hong Kong gold rose $6.40 to close at $472.55. Silver traded at $7.67, up from $7.51.

In European trading the U.S. dollar traded higher against all major currencies The euro was quoted at $1.2121, down from $1.2154.The dollar changed hands at 113.76 yen, up from 113.36. The British pound was trading at $1.7610, down from $1.7719.

EARNINGS NEWS

GenCorp Inc. ((OXM)), automotive, aerospace fine chemicals and real estate company, posted a Q3 net loss of 53 cents a share, down from the loss of $1.05 a share in the year-ago period. The company's Q3 loss from continuing operations went down to 8 cents a share vs. 33 cents last year. Sales from continuing operations soared to $134 million, up vs. $116 million in Q3 year-ago.

GenCorp Inc. ((GY)), automotive, aerospace fine chemicals and real estate company, posted a Q3 net loss of 53 cents a share, down from the loss of $1.05 a share in the year-ago period. The company's Q3 loss from continuing operations went down to 8 cents a share vs. 33 cents last year. Sales from continuing operations soared to $134 million, up vs. $116 million in Q3 year-ago.

Lone Star Steakhouse & Saloon ((STAR)), restaurant chain, posted Q3 net earnings of 2 cents a share, vs. 17 cents a share in the same period last year on a flat revenue compared with the year-ago period.

Accenture Ltd ((ACN)), provider of management consulting and technology, posted Q4 net earnings of 38 cents a share, vs. 30 cents a share in the same period last year on revenue growth, beating analysts’ expectations of 36 cents a share. The company also reported revenue including reimbursements of $4.31 billion vs. $3.81 billion. Accenture announced that it expects first-quarter net earnings of between 32 cents and 34 cents a share. The company also forecast fiscal 2006 earnings of $1.45 to $1.50 on revenue growth of 9% to 12%.

Burlington Coat Factory Warehouse Corp. ((BCF)), retailer, reported a Q1 net loss of 36 cents a share, vs. 42 cents a share in the same period last year on revenue growth, missing analyst estimate of 30 cents a share.

Net2Phone ((NTOP)), provider of Internet protocol communications services, posted a Q4 net loss of 13 cents a share, down vs. a net loss of 8 cents a share in the same period last year on slight revenue decline, missing analysts forecast by a penny.