Markets Slide on Intel

Elena
19 Oct, 2005
New York City

Asian markets closed with heavy losses on U.S. inflation fears, led by Seoul's Kospi, down 2.8%. The Nikkei shed 1.7%. European stocks sharply declined with the German DAX 30 in the lead, down 1.6%. Intel posted 5%rise in earnings in Q3. Forecasted disappointing revenue growth. JP Morgan reported 78% profit jump, missing estimates by a penny. Yahoo posted 47% revenue growth, beating earnings estimates. The housing starts in Sept. unexpectedly rose by 3.4%.

U.S. MARKET AVERAGES

U.S. stocks futures point to a sharply lower market opening on Wednesday on a disappointing quarterly report from Intel Corp., which raised fears of slowing corporate profit growth.

S&P 500 futures were down 6.50 points, below their fair value. Dow Jones industrial average futures were down 56 points, while Nasdaq 100 were down 10 points.

JP Morgan Chase & Co. ((JPM)), the third-largest U.S. bank, reported that its quarterly earnings rose and its revenue topped Wall Street forecasts. Another upbeat report came from Motorola Inc. ((MOT)) which posted a third-quarter earnings rise on strong sales of its mobile phones, beating Wall Street estimates.

EBay Inc. ((EBAY)), the largest Web auctioneer, is among companies scheduled to report results on Wednesday after the closing bell.

Investors may also focus on Cisco Systems Inc (((CSCO)),the largest maker of Internet equipment, which said on Wednesday it plans to invest up to $1.1 billion in India over the next three years, marking the company's largest investment outside the United States.

ECONOMIC NEWS

Wednesday morning, the Department of Commerce released its report on housing starts and building permits in the month of September. The report showed that housing starts and building permits both rose unexpectedly.

The report showed that housing starts rose 3.4 percent to a seasonally adjusted annual rate of 2.108 million units in September from a revised 2.038 million unit rate in August. Economists had expected housing starts to fall to a 1.950 million unit rate from the 2.009 million unit rate originally reported for August.

The unexpected increase in housing starts reflected strong growth in the South, where housing starts rose by 6.9 percent. Housing starts rose by 1.9 percent in the Midwest while coming in unchanged in the Northeast and West.

The Commerce Dept. also said that building permits rose 2.4 percent to a seasonally adjusted annual rate of 2.189 million units in September from a 2.138 million unit rate in August. The increase came as a surprise to economists, who had expected building permits to fall to a 2.075 million unit rate.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks dropped across the region, posting heavy losses on renewed inflation worries related to the U.S. economy. Intel Corp was another drag of the market as it released a disappointing revenue forecast. The Nikkei slid for a sixth consecutive session, losing 1.7% on tech shares. South Korea’s Kospi tumbled 2.8%, Hong Kong’s Hang Seng declined 1.6%, and Australia’s All Ordinaries ended down 1.7%.

European markets fell sharply at mid-day trading, reflecting lower close on Wall Street overnight, growing U.S. inflation fears, heavy losses in Asian markets, and a disappointing earnings report from tech giant Intel. The German DAX 30 slipped 1.6%, the French CAC 40 shed 1.4%, and London’s FTSE lost 1.2%.

ENERGY, METALS, CURRENCIES

Oil prices rose ahead of government report on fuel supply and later steadied over $63 a barrel on belief that the upgraded to category 5 Hurricane Wilma will not hit vulnerable oil production facilities in the Mexican Gulf. Light sweet crude December delivery gained 9 cents to $63.29 a barrel. London Brent climbed 13 cents to $59.41.

In European trading gold prices further declined. In London gold dealers fixed a recommended price of $468.40 per troy ounce, down from $472.20. In Hong Kong the precious metal lost $5.10 to close at $473.25. Silver opened at $7.71, down from $7.78.

In European trading the U.S. dollar rose against the euro and the yen, but fell against the pound. The euro was quoted at $1.1947, down from $1.1950. The dollar changed hands at 115.53 yen, down from 115.65. The British pound was trading at $1.7541, up from $1.7492.

EARNINGS NEWS

Yahoo Inc. ((YHOO)) Internet company, reported Q3 net earnings of 17 cents per share, unchanged from last year’s net earnings in the comparable period on 47% revenue growth, beating analyst estimate of 14 cents a share. Yahoo would have earned 15 cents per share, but the company gained $16 million from the sale of another investment and an unusually low tax rate during the three-month period.

Intel's third-quarter earnings rose 5% from a year ago to $2 billion, or 32 cents a share, on an 18% jump in revenue to $9.96 billion. Two special items complicated the comparison to Wall Street estimates but the top line was about $40 million ahead of forecasts. Intel reported a solid gross margin of 61.1% before charges in the quarter.

Knight Capital Group Inc. ((NITE)) securities market-making and asset management company posted Q3 earnings of 23 cents a share, up from the previous year's loss of 1 cent a share on revenue growth, beating analysts’ forecasts of 13 cents a share. Apart from charges taken for costs related to excess real-estate capacity in Jersey City, the company announced it would have posted operating earnings from continuing operations of 26 cents a share.

Eastman Kodak ((EK)), imaging products manufacturer, posted a Q3 loss of $3.58 a share, down vs. earnings of $1.60 a share in the same period last year despite 5% revenue growth, as a 47% rise in digital revenue helped offset a 20% drop in traditional revenue The results incorporated a 1-cent a share gain from discontinued operations and a $3.13 a share charge related to deferred tax assets.

Honeywell International ((HON)), industrial and aerospace conglomerate, reported that Q3 net income advanced to 55 cents a share, 26 % up from 43 cents a share in the year-earlier period on strong demand for aircraft parts and services, beating analysts’ expectations of 54 cents a share.

JPMorgan Chase & Co. ((JPM)), financial services company, posted Q3 net income of 71 cents a share, 78% up from 39 cents a share in the same time a year ago on strong trading and investment banking fees, missing analyst estimate by a penny. Apart from $221 million of charges related to its merger last year with Bank One Corp., operating earnings amounted to 75 cents a share, the company announced.

Office Depot, Inc. ((ODP)), provider of office products and services, reported Q3 net loss of 15 cents per share, down from earnings of 28 cents per share in the same period a year ago despite 5 % sales growth. Q3 of 2005 results incorporate the effects of charges related to asset impairments, exit costs and other operating items previously announced. Apart from those charges, it would have earned 36 cents a share, beating analysts’ forecasts by a penny.

General Dynamics ((GD)) defense contractor, reported Q3 net income of $1.84 a share, up from $1.60 a share in the same period last year on sales growth, beating analysts’ forecasts of earnings of $1.76 a share.

Bank of America Corp. ((BAC)), financial services provider, reported that Q3 net income advanced 10%, compared with the same time last year, to $1.02 a share on revenue growth, matching analyst expectations. Excluding pretax merger and restructuring charges of 2 cents per share, earnings would have been $1.04 per share. Bank of America announced that provisions for credit losses increased to $1.16 billion, up from $650 million a year ago, and that it also took $209 million in previously-reserved-for charge-offs connected with the domestic airline industry.