GDP Growth at 3.8%

Elena
28 Oct, 2005
New York City

The U.S. Commerce Department revealed that Gross Domestic Product for the third quarter grew at an annual rate of 3.8%, an acceleration from the 3.3% growth rate shown during the previous 3-month period, and above expectations of 3.6% increase. Personal consumption expenditures climbed by 3.7% in the third quarter, the government said, an acceleration from the 3.3% growth recorded in the previous period.

U.S. MARKET AVERAGES

Better-than-anticipated growth of Gross Domestic Product in the third quarter sent the three major averages higher with the Dow and S&P climbing 1.7%, and the Nasdaq rising 1.3%.The Commerce Department said economic activity expanded 3.8% in the July-September quarter, beating economists' forecast for 3.6% and rising over the 3.3% increase in the second quarter. The upbeat news brought a great relief to the market, signaling that the economy is strong enough to withstand the destructive impact of hurricanes Katrina and Rita.

The airline sector has expanded earlier advance and is now rallying 3.7%. The natural gas space has rebounded from yesterday’s weakness and is currently higher by about 2%. The retail and computer hardware sectors continue posting considerable gains.

Among the gaining stocks of the day, GlaxoSmithKline ((GSK)) is setting a 52-week high, adding gains to yesterday’s jump on upbeat earnings report. Express Scripts ((ESRX)) is also adding to Thursday''s earnings-inspired advance, expanding its peak.

Among the distingushed losers of the day Bristol-Myers ((BMY)) has dropped to a new 52-week low on disappointing quarterly results. Maxim Integrated Products ((MXIM)) and International Rectifier ((IRF)) have also declined on earnings news. News Corp. ((NWS)) has edged further lower, adding to its recent losses.

On the earnings front, Microsoft posted fiscal first-quarter earnings rise of 24% on strong demand, but lowered guidance. Baker Hughes Inc., oil services company, said third-quarter net profit rose 61% on price increases, productivity improvements, and a lower effective tax rate. Bristol-Myers Squibb, drug maker, reported Q3 27% net income increase, but adjusted earnings missed estimates. The company lowered its full-year outlook.Overseas, Deutsche Bank reported a 46% rise in net income during the third quarter on sales and trading revenue, as well as growing mutual fund sales in Germany

MOVERS AND SHAKERS

Software giant Microsoft ((MSFT)) reported a 24% increase in first-quarter profit, although it issued lower estimates. The company announced that profit for the three months ended September 30 increased to $3.14 billion, up from $2.53 billion for the same period a year ago. This year''s earnings include a charge of $361 million connected to the company’s legal settlement with RealNetworks Inc. ((RNWK)). Microsoft stock jumped 0.5%.

KLA-Tencor’s ((KLAC)) announced earnings and revenue outlooks that were lower than expectations. The company’s shares fell 5.4%.

ECONOMIC NEWS

Even with the impact of Hurricanes Katrina and Rita during the period, economic growth accelerated during the third quarter, according to government data released Friday.

The U.S. Commerce Department revealed that Gross Domestic Product, a broad measure of the economy, grew at an annual rate of 3.8% in the July-to-September quarter. This was an acceleration from the 3.3% growth rate shown during the previous 3-month period.

The government reported that a pick up in personal consumption expenditures and in federal government spending contributed to the acceleration of GDP growth, as did a smaller decrease in private inventory investment. These factors were partially offset by decelerations in exports, in residential fixed investment, and in state and local government spending.

Personal consumption expenditures climbed by 3.7% in the third quarter, the government said, an acceleration from the 3.3% growth recorded in the previous period. However, excluding the volatile food and energy sectors, personal consumption expenditures advanced by just 1.3%, a decline compared to the second quarter''s 1.7% growth rate.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed broadly down with the Nikkei falling 0.5% on disappointing industrial production report, showing 0.2% output increase versus expectations of a 2% growth. The other regional markets finished the session with heavy losses. South Korea’s Kospi dropped 2.2%, Hong Kong’s Hang Seng declined 1.2%, and Australia’s All Ordinaries lost 1.1%.

European markets rebounded from mid-day losses to close mostly higher, supported by stronger U.S. equity markets and gains from Deutsche Bank and GlaxoSmithKline. The German DAX 30 gained 0.4%, the French CAC 40 finished flat, and London’s FTSE 100 climbed 0.7%.

ENERGY, METALS, CURRENCIES

Crude oil prices steadied slightly over $61 a barrel on winter season worries. Light sweet crude December contract fell 7 cents to $61.02 a barrel on the Nymex. Heating oil fell marginally to $1.8529 a gallon. Gasoline inched down to $1.5900. London Brent lost 16 cents to $59.

Gold futures closed mixed in European trading. In London gold closed at $470.30 per troy ounce, down from $472.80. In Zurich it traded at $473.35, up from $473.15. In Hong Kong the precious metal rose 40 cents to close at $474.05. Silver closed at $7.70, up from $7.80.

In European trading the U.S. dollar gained ground against its major counterparts. The euro was quoted at $1.2104, down from $1.2143. The dollar changed hands at 115.46 yen, up from 115.31. The British pound was trading at $1.7783, down from $1.7843.

EARNINGS NEWS

Chevron Corp ((CVX)), integrated petroleum and chemical operations and coal mining company, posted Q3 earnings of $1.64 a share, up from of $1.51 a share in the year-ago period on revenue and sales growth, missing the analyst expectations of $1.91 a share. Q3 results included two months of operations from the former Unocal operations, while last year''s period included a gain of $500 million, or 23 cents a share, related to asset sales. Sales and other operating revenue reached $53.38 billion in the latest three months, up from $39.61 billion in the same period a year earlier. The company stated the adverse impact of Hurricanes Katrina and Rita more than offset the positive earnings contributions of the former Unocal operations. Chevron estimates are that the storms cut its crude oil and natural gas production by about 90,000 barrels of oil-equivalent per day in the quarter. This translated to an earnings reduction of roughly $600 million for the quarter, the company stated.

Anadarko Petroleum Corp ((APS)), oil and gas company, posted Q3 earnings of $2.51 a share, up from $1.58 a share in the year-ago period on revenue growth, missing analyst estimate for earnings of $2.89 a share. The latest results incorporate $90 million in unrealized loss on derivatives, a $19 million gain from the company''s firm transportation keep-whole agreement, and a charge of $13 million related to restructuring.

Microsoft Corp. ((MSFT)), software maker, reported quarterly net income of 29 cents per share, up vs. 23 cents per share in the year-ago period. The latest quarter results included a charge of 2 cents per share to account for a legal settlement with RealNetworks Inc. The results for the year-ago period included a one-time charge of 3 cents per share, to account for a legal settlement with Novell Inc. Excluding the one-time charge, the company would have gained 31 cents per share, topping on that basis analyst projections by a penny.

Bristol-Myers Squibb ((BMY)), drug maker, posted Q3 earnings from continuing operations of 49 cents a share, up from an equivalent profit of 38 cents a share in the prior year period, beating analyst estimate of 33 cents a share. If not for items, the company earned 31 cents a share in Q3, down from 44 cents a share in the year-ago time. Sales from continuing operations amounted to $4.77 billion, down slightly from $4.78 billion in the same period a year ago.

Archer Daniels Midland ((ADM)), agricultural commodities and products provider, posted Q1 net income of 29 cents a share, down from 41 cents a share in the year-ago period on revenue decrease. If not for a charge related to an accounting change, the company would have earned 32 cents a share, missing analyst estimate by a penny.

Gene Logic ((GLGC)), biotech company, announced that its Q3 net loss widened $1.24 a share, from 46 cents a share in the same time last year despite slight revenue growth.

Peoples Energy Corp. ((PGL)), oil and gas company, posted a Q4 loss of 6 cents a share, up from 27 cents a share in the year-ago period on almost 16% revenue growth. Peoples Energy recorded a mark-to-market accounting loss of $7.7 million during Q4, larger than anticipated.

R&B Inc. ((RBIN)), supplier of automotive replacement parts, announced that Q3 net income increased 4.8% to 25 cents a share, up from 24 cents in the prior year period on 15% higher sales. If not for the June acquisition of Automotive Edge/Hermoff, sales rose 13%. Gross-profit margin narrowed to 34.9% to 37.3%. Selling, general and administrative expense dropped to 24% of sales from 25.4%.

Baker Hughes Inc. ((BHI)), oil services company, announced Q3 net profit advanced 61% to 65 cents a share on price increases, productivity improvements, and a lower effective tax rate. Revenue rose 17%. The company missed the analyst estimate for Q3 of 67 cents.

CBOT Holdings ((BOT)), holding company, announced that Q3 net income advanced 63% to 40 cents a share on revenue growth, related to contributions from increased trading volume and a higher average rate per contract. Q3 trading volume advanced 9% while average daily volume also advanced 9%.

Radware Ltd. ((RDWR)), Internet software provider, posted Q3 net income of 8 cents a share, down vs. 19 cents a share in the same period a year ago despite 8% revenue growth, topping analysts’ forecasts of 5 cents a share.