GM to Drag Market

Elena
27 Oct, 2005
New York City

Asian-Pacific markets closed broadly down, but the Nikkei ended up 0.2%. European stock markets posted heavy losses at mid-day, led by the German DAX 30, down 1.3%. GlaxoSmithKline, pharmaceutical manufacturer, advanced 1.9% after raising 2005 earnings guidance, reporting Q3 profit growth of 21% on a 11% rise in revenue.

U.S. MARKET AVERAGES

Troubles at the world’s biggest carmaker General Motors dragged sharply down U.S. stock futures. Markets are seen to open lower on the news that SEC is probing Dow component GM and even strongly positive news is not likely to offset the sentiment.

S&P 500 futures were down 5 points, below their fair value. Dow Jones industrial average futures were down 41 points, while Nasdaq 100 futures lost 8 points.

Major companies, expected to report quarterly results today are the blue-chip Exxon Mobil Corp. ((XOM), Verizon Communications ((VZ)) and Hilton Hotels ((HLT)).

After the close, all eyes will be on Microsoft Corp. ((MSFT)) when it reports first-quarter figures.

A rise in oil prices may add to inflation concerns. U.S. crude futures for December delivery were trading 64 cents higher at $61.30 a barrel on worries over rising heating oil demand ahead of winter.

Investors expect government report on weekly jobless claims and September durable goods figures. Economists forecast on average that claims would fall to 340,000 and durable goods would decline by 1.1 percent.

ECONOMIC NEWS

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended October 22, showing a bigger than expected decrease.

The report showed that initial jobless claims in the week ended October 22 fell to 328,000 from the previous week's revised figure of 356,000. Economists had expected jobless claims to fall to about 340,000 from the 355,000 originally reported for the previous week.

About 24,000 of the new jobless claims were people that were put out of work by Hurricanes Katrina and Rita. The increase lifted the total number of claims resulting from the storms to 502,000.

The Labor Dept. also said that the 4-week moving average fell to 366,500 from the previous week's revised average of 376,500. This marks the third consecutive decrease by the less volatile moving average.

The report also said that continuing claims in the week ended October 15 rose to 2.904 million from the preceding week's revised level of 2.862 million.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mostly weak. The Nikkei ended up 0.2%, erasing earlier gains, pressured by concerns over General Motor’s financial stability. The index was helped by Toyota Motor, but gains were limited by weak Advantest Corp. Among the other regional markets, South Korea’s Kospi was the most notable loser, down 1.1%, Hong Kong’s Hang Seng declined 0.3%, and Taipei’s Weighted index fell 0.7%.

European markets lost ground at mid-day dealings, reflecting lowered outlooks by France Telecom and Alcatel, General Motors worries, as well as weaker Wall Street close Wednesday. The German DAX 30 led the decliners, dropping 1.3%, followed by the French CAC 40 which slipped 1.4%, and London’s FTSE 100 down 0.9%%.

ENERGY, METALS, CURRENCIES

Crude oil futures advanced on winter weather forecast. Light sweet crude December contract rose 49 cents to $61.15 a barrel on the Nymex. Heating oil climbed 2 cents to $1.8815 a gallon. Gasoline added 2 cents to $1.6050. Natural gas lost 12 cents to $13.918 per 1,000 cubic feet. London Brent gained 51 cents to $59.38.

Gold advanced in European trading. In London gold traded art the recommended price of $473.25 per troy ounce, up from $471.80. In Zurich it traded at $473.03, up from $472.90. In Hong Kong the precious metal rose $1.30 to close at $473.65. Silver opened at $7.82, down from $7.83.

In European trading the U.S. dollar declined against its major counterparts. The euro was quoted at $1.2122, up from $1.2072. The dollar changed hands at 115.25 yen, down from 115.84. The British pound was trading at $1.7858, up from $1.7739.

EARNINGS NEWS

PotashCorp. ((POT)), industrial and feed products producer, reported Q3 net income of $1.17 per share, 72% up from 68 cents per share in the year-ago period on the continuing growth in prices for potash, phosphate and nitrogen. Total income for Q3 was $130.3 million, a 73 % increase from the $75.2 million in the comparable period last year. Gross margin of $279.5 million was advanced 48 % from last year's third quarter and raised year-to-date gross margin to $882.8 million, surpassing gross margin of $681.4 million for all of 2004. Cash flow from operations rose by 87 % quarter over quarter. A portion of the funds was used to complete the repurchase of 5.5 million outstanding common shares by September 1, 2005, and to begin the purchase of up to 4 million additional shares.

Alcatel SA ((ALA)), French telecommunication equipment maker, announced Q3 net profit advanced 36% to19 euro cents a share on 8.8% revenue growth. The latest quarter's results included 7 euro cents a share in one-time capital gains. If not for one-time items, the company would have gained 12 cents a share, missing analysts’ forecasts of14 euro cents a share.

Baidu.com Inc. ((BIDU)), Internet portal, reported Q1 earnings of 8.5 million yuan ($1.06 million), nearly triple the net income of 2.9 million yuan in the year-ago period, but the results fell short of investors’ expectations of faster growth for company in the booming Chinese market. Excluding compensation expenses, Baidu.com would have earned 0.59 yuan (7 cents) per share, a penny above the analyst estimate.

AirTran Holdings Inc ((AAI)), transportation services company, posted Q3 net loss that amounted nil on a per-share basis, narrower than the previous year's loss of 11 cents per share despite 52.5% revenue growth. Load factor for Q3 improved by more than 6 %, to 76.3%, as capacity grew by 31.1%. AirTran managed to narrow its quarterly loss even as operating costs including fuel rose by 10.5%, to 9.56 cents.

Canon Inc. ((CA)), maker of printers and cameras, announced that its net profit dropped 1.1 % in July-September quarter from the year-ago period. The company reported a profit of 100.62 billion yen ($869 million) for latest quarter, down vs. 101.78 billion yen the same quarter last year, when its earnings gained from the return of pension funds. Sales for the quarter rose 4.8 % to 878.50 billion yen ($7.6 billion) from 838.30 billion yen.

IHOP Corp. ((IHP)), restaurant chain, announced that Q3 net profit advanced 56% to 62 cents a share from the year-ago quarter on reduced expenses. The company announced as well that system-wide same-store sales increased 4.5%. IHOP raised its earnings outlook for the year to the range of $2.15 to $2.20 from an earlier estimate of between $2.02 and $2.15 a share.

ImClone Systems ((IMCL)), therapeutic products manufacturer, posted Q3 earnings of 35 cents a share, down from 44 cents a share in the year-ago period despite 9% revenue growth, beating analyst estimate of 29 cents a share.

ITT Industries ((ITT)) diversified industrial and technology company, posted Q3 earnings of $2 a share, up vs. $1.16 a share in the same period last year on revenue growth. If not for non-recurring items, the company would have earned $1.37 a share, beating analyst estimate of $1.35 a share.

Raytheon Co. ((RTN)), defense systems producer, reported Q3 net income of 50 cents a share, up from 34 cents a share a year ago in line with analyst expectations. Q3 included a 1 cent a share after-tax loss in discontinued operations vs. a 7 cents a share after-tax loss in the year-ago period.

Trammell Crow ((TCC)), diversified commercial real estate services provider, reported Q3 earnings of 40 cents a share, up from 15 cents a share on 20% revenue growth, beating analyst estimate of 34 cents a share.