Major Averages at 1%

Elena
24 Oct, 2005
New York City

In another earnings-dominated session, drug maker Merck posted higher third-quarter profit, despite 2% sales drop, beating estimates. Another drug manufacturer Shering-Plough reported higher Q3 earnings on 15% top line growth.

U.S. MARKET AVERAGES

The three major averages are sitting at their intraday highs, posting gains of 1%. The initial rise was a result of strong earnings news. A temporary decline was caused by news of violence in Iraq, but soon after that the market resumed its positive sentiment as President Bush named Ben Bernanke the next Fed Reserve Chairman.

Another $1-slip in crude oil prices sent the Energy sector up 1.9%. Financials sector is another conspicuous gainer, climbing 1.3%.

Trucking stocks have been posting solid gains throughout the morning session, led by Arkansas Best ((ABFS)), which is up about 15% on positive earnings report. As a result the transportation sector went higher, with the Dow Jones Transportation Index now at its highest level since the beginning of the month.

The health care provider sector is currently down 1% on earnings and guidance from Triad Hospitals ((TRI)).

After a dip on Friday, treasury yields spent Monday's early session slightly above the unchanged mark. Yields advanced sharply as reports came out that President Bush will name Ben Bernanke as the next Fed chairman. The 10-year yield is currently up 6 basis points to 4.45%.

MOVERS AND SHAKERS

Taser International ((TASR)) was upgraded by Jefferies & Co. to “buy”. The financial broker pointed opportunities to expand revenue and market share. Stun gun manufacturer’s stock jumped 14.5%.

Cendant ((CD)) announced that it will split itself into four companies by 2006. The name of the controversial conglomerate will vanish. The company will set up the new companies out of its four main lines of business: real estate, travel, hotels and car rentals. Cendant’s stock was up 8.7%.

Schering-Plough ((SGP)) said its third-quarter earnings increased, as compared to the profit a year ago, due to contributions from its turnaround program and strong sales of anti-cholesterol agents. The company’s stock gained 4.2%.

Merck ((MRK)) reported third-quarter earnings of $1.42 billion, or 65 cents a share, up from $1.33 billion, or 60 cents a share, a year ago. The company’s sales declined 2%. Merck’s stock fell on Friday.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed the session mostly in the red ahead of major companies’ earnings releases. The Nikkei declined 0.7%, awaiting quarterly reports from Sony and other giants. It was also pressured by tech companies like NEC Corp. and Pioneer Corp. Across the region, Hong Kong’s Hang Seng lost 0.7%, Taipei’s Weighted index fell 0.4%, while South Korea’s Kospi edged up 0.1%, supported by steelmaker Posco.

European markets closed with solid gains on the back of steady oil prices below $60 a barrel, upbeat earnings report from German drug maker Shering, and strong U.S. markets. Oil-sensitive chemicals sector and resource stocks were among the leading gainers. The German DAX 30 climbed 1.3%, the French CAC 40 rose 1.3%, and London’s FTSE 100 also advanced 1.3%.

ENERGY, METALS, CURRENCIES

Crude oil dipped more than $1 after Hurricane Wilma struck Florida, avoiding the key oil producing and refining facilities in the Gulf of Mexico. Light sweet crude December contract dropped 2%, or $1.18 to $59.45 a barrel on the Nymex. Gasoline lost over 4 cents, falling to a three-month low of $1.5965 a gallon, while heating oil lost more than 5 cents to $1.8125.

In European trading gold gained ground. In London gold closed at $466.20 per troy ounce, up from $464.80. In Zurich it climbed to $466.75, up from $461.25. In Hong Kong the precious metal rose $1 to close at $463.75. Silver closed at $7.68, up from $7.58.

In European trading the U.S. dollar ended lower against other major currencies. The euro was quoted at $1.1973, up from $1.1934. The dollar changed hands at 115.37 yen, down from 115.92. The British pound was trading at $1.7679, up from $1.7645.

EARNINGS NEWS

Merck & Co. ((MRK)), drug producer, posted Q3 earnings of 65 cents a share, up from 60 cents a share a year-ago, beating analyst estimate of 62 cents a share. Sales shed 2% in Q3. The Dow component estimates its withdrawal of the drug Vioxx from the market lowered sales by 3% in Q3. Merck also announced that it hasn't established any reserves for potential liability related to the Vioxx lawsuits and investigations, and that unfavorable outcomes in these cases could have a material adverse impact of its financial position, liquidity and operating results.

Kimberly Clark Corp. ((KMB)), maker of Kleenex tissues, Huggies diapers and other consumer goods, reported Q3 net income of 68 cents a share, down vs. 89 cents in the same period last year. If not for charges, earnings would have been 95 cents a share, matching analysts' forecasts. Sales advanced to $4 billion from $3.78 billion in Q3 last, ahead of analysts' view for $3.99 billion in sales. For the fiscal year, the company announced it remains comfortable with its previous range for earnings before items of $3.77 to $3.83 a share, in line with analysts' forecasts.

Archstone-Smith ((ASN)), real-estate investment trust, reported Q3 net earnings of 80 cents a share, up from 70 cents in the same period last year on revenue growth, beating analyst estimate of 43 cents a share. Excluding gross gains from asset sales, the company’s funds totaled 65 cents a share, up vs. 56 cents in the year-ago period. The company lifted its 2005 financial targets and now envisages earnings in the range of $2.50 to $3.00 a share while FFO is now pegged at $2.10 to $2.13 a share.

Barnes Group Inc. ((B)), industrial supplies manufacturer, reported that Q3 net income rose 81 % to 70cents per share, up vs. 40 cents per share in the same period last year. Q3 net sales came in at $271.5 million, up 11 % from $243.9 million in the year-earlier period. Excluding retroactive tax benefits and a positive out-of-period adjustment related to accounts payable, net income would have been 55 cents per share, a 42 % rise from.40 cents per share in the comparable period last year.

Ethan Allen Interiors Inc. ((ETH)), manufacturer of home furnishings and accessories, reported Q1 earnings per share, including pre-tax restructuring and impairment charge, came in at.49 cents, down from 51 cents per share in the comparable period last year. Apart from the impact of the restructuring and impairment charge, Q1 earnings per share were 57cents per share. Operating income, also including the aforementioned restructuring and impairment charge, declined 8.9%. Excluding the restructuring and impairment charge, operating income advanced 4.8% of net sales.

Bank of Hawaii ((BOH)), financial services company, posted Q3 earnings of 85 cents a share, up versus 78 cents a share in the year-ago period, beating analysts’ forecasts of 83 cents a share. Net interest income advanced to $102 million from last year's $98.8 million and non-interest income rose to $55.5 million from $53.1 million. Return on average assets dropped to 1.74% from 1.77%, while return on average equity rose to 24.61% from 23.42%.

Johnson Controls Inc. ((JCI)), automotive group designer, reported that Q4 net profit advanced 4% to $1.45 a share on 7.2% revenue growth, helped by 37% growth in power solutions division sales. Apart from a 5 cent per share hit from tax adjustments, the company would have gained $1.50 a share, beating analyst forecasts by a penny. For fiscal 2006, it envisages sales advancing approximately 15% to $32 billion with earnings from continuing operations ranging from $5 to $5.15 a share.

Veeco Instruments, Inc. ((VECO)), semiconductor equipment maker, reported a Q3 net profit of 5 cents a share, up from a loss of 7 cents a share in the same time last year. Apart from one-time items, the company would have gained 14 cents a share, beating analysts’ forecast for earnings of 12 cents a share. Sales for the period advanced 4% to $100.1 million.
Bookings for the period increased 6% to $84.6 million, lower than Veeco's guidance of between $95 million and $100 million.

Carpenter Technology Corp. ((CRS)), specialty alloy company, posted Q1 earnings of $1.54 a share, up from 80 cents a share in the year-ago period, beating analysts’ forecasts of $1.26 a share. Sales jumped to $346 million for Q1 from $297.6 million in the same time a year earlier. The company envisages free cash flow of more than $125 million for fiscal 2006.between $95 million and $100 million.

Ashland ((ASH)), chemicals, construction, and cars company, reported that Q4 net income was almost three-fold lower than last year’s in the comparable period at $1.24 a share vs. $2.76 a share on the sale of its interest in Marathon-Ashland Petroleum to Marathon Oil Co.

Taubman Centers Inc. ((TCO)), real estate investment trust, posted Q3 loss of 18 cents a share, down from a loss of 6 cents a share in the same period last year. Funds from operations came in at 44 cents a share, down from 48 cents a share the year-ago period, missing analyst estimate of 44 cents a share.

Meredith Corp. ((MDP)) media company, announced that Q1 profit advanced to 52 cents a share, up from 46 cents in the year-ago period on revenue growth, beating analysts’ forecasts by a penny. For Q2, the company estimates earnings at 56 cents a share, matching analysts'
estimate.