Averages Dig Deeper

Elena
20 Oct, 2005
New York City

In another flood of quarterly earnings reports, Pfizer Q3 net fell 52% to $1.52 billion on 5% decline in revenue., Ford Motor Co posted a third-quarter loss, missing estimates. Nokia released cautious outlook. eBay shares decline despite meeting estimates. SBC posted 40% income drop, but above estimates. Coca Cola's 37% income rise tops estimates. Danaher Corp. met profit growth estimates.

U.S. MARKET AVERAGES

The morning trading session was marked by a lack of momentum to give stocks a definite positive or negative direction and the three major averages are currently sitting near the flat line, despite the fact that six of the ten economic sectors remain in the green. Yesterday’s rally was not prolonged today, blaming disappointing earnings news from Pfzer, ebay and other major companies, as well as crude oil and natural gas prices drop.

The Labor Department released a report, saying that initial jobless claims fell to 355,000 from the previous week's revised figure of 390,000. The report showed a bigger drop of jobless claims than economists’ expectations of 370,000. However, investors ignored this piece of economic data in early hours trading and focused attention on a series of economic indicators.

Energy stocks have continued to move lower, dragged down by government statistics on natural gas inventories, showing a 5% decline in natural gas price on natural gas inventory increase. The oil and natural gas sectors are now each down by about 3.5%. The gold sector is one of the biggest decliners, falling by 1.7% after posting modest gains in earlier trading.

The chemical sector has climbed steadily throughout the morning session to reach its highest level since the beginning of the month and is now posting an advance of about 1.4%. The broker/dealer sector has also strengthened, currently up nearly 1%.

Among the gaining stocks, Intersil ((ISIL)) has broken to a new 52-week high on better-than-expected third-quarter earnings. Apple ((AAPL)) has ticked to a fresh peak. Boeing ((BA)) and Merrill Lynch ((MER)) are other notable gainers, reaching new highs during the morning.

PMC-Sierra ((PMCS)) has dropped to a new 52-week low on disappointing third-quarter earnings report. Earnings news has also sent A.C. Moore ((ACMR)) to a fresh nadir. Bristol-Myers ((BMY)), dragged lower by weakness in the drug sector, has dipped to a new low as well.

ECONOMIC NEWS

A series of indicators that tend to precede overall changes in the economy showed weakness in September, industry data showed Thursday, as hurricane damage began to take its toll on economic statistics.

The Conference Board revealed that its index of leading economic indicators, a measure of 10 pieces of data that tend to move ahead of the rest of the economy, dropped 0.7% in September. This followed revised declines of 0.1% in both August and July. Economists had expected September's leading index to drop 0.4%.

The organization stated that readings for consumer expectations and initial claims for unemployment insurance were the biggest contributors to September's decline. The leading index was also hurt by real money supply, the Conference Board reported, as well as by manufacturer's new orders for both nondefense capital goods and consumer goods.

There were some bright spots in the month, however, as the Conference Board's report showed that vendor performance, building permits, interest rate spread and stock prices all provided some support to September's leading index.

In the week ending Oct. 15, the advance figure for seasonally adjusted initial claims was 355,000, a decrease of 35,000 from the previous week's revised figure of 390,000. The 4-week moving average was 376,000, a decrease of 20,000 from the previous week's revised average of 396,000.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending Oct. 8, an increase of 0.1 percentage point from the prior week's unrevised rate of 2.2 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Oct. 8 was 2,894,000, an increase of 36,000 from the preceding week's revised level of 2,858,000. The 4-week moving average was 2,852,250, an increase of 59,000 from the preceding week's revised average of 2,793,250.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks rebounded from heavy losses yesterday to close generally higher, reacting to a broad U.S. markets rally on the back of positive news on the corporate and economic front. The Nikkei bounced off a six-day decline to finish up 0.5%. Across the region, Hong Kong’s Hang Seng added 0.3%, South Korea’s Kospi climbed 0.8%, and China’s Shanghai Composite gained 0.1% on economic growth data.

European markets rebounded from yesterday’s heavy losses, boosted by Nestle’s 3.8% surge on improved sales, and SAP’s gain of 3.1% on strong earnings report. The German DAX 30 rose 0.4%, the French CAC 40 climbed 0.4%, while London’s FTSE 100 slightly declined by 0.1%.

ENERGY, METALS, CURRENCIES

Crude oil tumbled below $60 a barrel on a huge increase in natural gas and gasoline stocks. Light sweet crude futures dropped $2.56 to $59.85 a barrel, its lowest prices since July 29. London Brent crude slid $1.06 to $57.54.

In European trading gold prices traded steadily, but still keeping the falling trend. In London gold traded unchanged at the recommended price of $464 per troy ounce. In Hong Kong the precious metal lost $4.20 to close at $463.95. Silver traded at $7.67, up from $7.66.

In European trading the U.S. dollar lost ground against its major counterparts. The euro was quoted at $1.1981, up from $1.1976. The dollar changed hands at 115.42 yen, down from 115.47. The British pound was trading at $1.7694, up from $1.7616.

EARNINGS NEWS

Coca-Cola Co. ((KO)), soft-drink producer, posted stronger-than-expected Q3 net income of 54 cents a share, up from 39 cents in the year-ago period on 8% revenue growth, beating analysts’ forecasts by a penny. The latest earnings incorporated a net charge of 3 cents. That breaks down to a 4-cent charge to write down Philippines assets and a 1-cent benefit related to the favorable resolution of tax matters.

Nokia Corp ((NOK)), mobile-phone maker, reported that Q3 net income advanced 29% to 20 cents a share, topping analysts’ forecasts by a penny. Sales increased 18% and mobile phone sales went up 15%, with network sales up 2%. Mobile phone operating margin dropped to 16.9% from 18.8% and the average selling price fell to 102 euros from 108 euros a year ago. The number of units sold in Q3 advanced to 66.6 million units. Owing to the strong volume growth, Nokia raised its global forecast for the fiscal year to 780 million units.

Danaher Corp ((DHR)), manufacturer of professional instrumentation and industrial technologies, posted Q3 net income of 70 cents a share, up from 62 cents in the same period a year ago on 12.5% sales growth, matching analysts’ forecasts of 70 cents a share.

Pfizer Inc. ((PFE)), healthcare products manufacturer, reported Q3 net profit dropped 52% to 22 cents a share on 5% revenue decline due to generic drug sales and lower sales of the selective COX-2 inhibitors. Worldwide Lipitor revenue increased 6%. Pfizer's adjusted earnings of 51 cents topped analysts’ forecasts of 48 cents a share, while revenue didn’t meet the $12.5 billion forecast. Pfizer reduced adjusted EPS to $1.92 to $1.94 range and diluted EPS to a $1.02 to $1.04 range. Analysts expected $1.98 a share in earnings for the year.

Bank of New York Corp ((BK)), commercial banking and financial services provider, announced that Q3 net income advanced 10% to 51 cents a share, up from 46 cents a share in the year-ago period on growth in securities revenue and net interest income, beating analyst estimate of 49 cents a share.

Ford Motor Co ((F)), auto maker, posted a Q3 loss of 15 cents a share, down from net profit 15 cents a share a year ago despite sales growth, missing analyst estimate of a loss of 10 cents a share. The operating loss in Q3 was 10 cents a share, down from an operating income of 27 cents a share in the year-ago period.

Eli Lilly Co. ((LLY)), drug producer, posted Q3 earnings of 73 cents a share, up from a profit of 69 cents a share in year-ago period on 10% sales growth, beating analysts’ forecasts of a profit of 71 cents a share. The company added that its new products gave its results a boost in Q3, contributing 18% of total sales.

Alaska Air Group, Inc. ((ALK)), airline business holding company, posted Q3 net income of $2.71 per share, up vs. $2.29 per share in Q3 of 2004. Both the 2005 and 2004 results include certain significant items related to mark-to-market fuel hedge accounting adjustments, refunds of navigation fees and restructuring activities that impact the comparability of the quarters. Apart from the impact of these items, net income would have been $2.16 per share for Q3 of 2005, up from net income of $1.58 per diluted share in Q3 of 2004.

Acme United Corporation ((ACU)), measuring instruments and cutting devices manufacturer, announced that Q3 net income was 5 cents per share, down from 26 cents per share for the comparable period last year despite 16% growth in net sales.. International sales rose by 17%, and 11% in local currency. During Q3 of 2005 the company recognized a $1.5 million non-recurring charge for the demolition of its former manufacturing buildings in Bridgeport, Connecticut.