Rebounding Consumer Spending

Elena
31 Oct, 2005
New York City

Among the major companies reporting today, oil refiner Valero rose 5.5% on doubled Q3 income, citing high energy prices and 62% revenue growth. Food company Kellogg Co reported an income rise of 66 cents a share, beating estimates of 64. The company raised its full-year guidance. In merger deals, Novartis has agreed to buy Chiron for $5.1 billion. Steve Case resigned from Time Warner Board.

U.S. MARKET AVERAGES

U.S. stock market opened higher n accordance with expectations. The sentiment was boosted by merger-and-acquisition activity from Swiss drug maker Novartis, Sacks Inc., and semiconductor maker PMC-Sierra Inc and upbeat data on consumer income and spending for September The Commerce Department reported that personal income surged up by 1.7% in September , while personal spending rose by 0.5%.

Of the three maijor averages, The Nasdaq is in the lead, advancing 0.8%, followed by the Dow, up 0.5%.

In the day''s biggest deals, Barrick Gold ((ABX)) offered to acquire Placer Dome ((PDG)) for $9.2 billion.

Novartis ((NVS)) ahs agreed to acquire all the remaining public shares of Chiron it does not own, offering $45 per share in cash, or a total of $5.1 billion.

Saks Inc. ((SKS)) is expected to announce the sale of its northern department-store group for $1.1 billion to Bon-Ton Stores ((BONT)).

Semiconductors maker PMC-Sierra Inc. ((PMCS)) has agreed to buy Agilent Technologies Inc.''s] ((A)) storage semiconductor business for $425 million in cash.

The airline space is moving higher in the early going The sector is now above its recent range, reaching its highest level since mid-September.

Energy stocks are climbing in the early going as well, helped by earnings from Valero Energy ((VLO)). The retail sector is also strong, boosted by new monthly sales guidance from Wal-Mart ((WMT)).

MOVERS AND SHAKERS

Barrick Gold Corp. ((ABX)) uncovered today an offer for the Canadian gold miner Placer Dome Inc. ((PDG)). Barrick said it will pay up to $1.2 billion in cash and issue up to 303 million shares for Placer Dome at $20.50 a share. This buyout price represents a premium of about 24%. Placer Dome stock soared more than 20%, while Barrick Gold stock lost 1.3%.

Swiss drug maker Novartis AG ((NVS)) increased its offer for biotech company Chiron Corp. ((CHIR)) from $4.5 billion to $5.1 billion, winning the support of Chiron''s board. Chiron stock jumped 2.3%.

ECONOMIC NEWS

The Department of Commerce released its report on personal income and spending in the month of September on Monday, showing an increase in income that exceeded economist estimates while spending growth came in line with expectations.

The report showed that personal income surged up by 1.7 percent in September following a downwardly revised 0.9 percent drop in August. Economists had expected income to increase by 0.3 percent compared to the 0.1 percent drop originally reported for August.

The increase in income reflected an influx of insurance payments stemming from the damage caused by Hurricanes Katrina and Rita. Additionally, the decline in rental income that contributed to the decrease in August slowed significantly.

The Commerce Dept. also said that personal spending rose by 0.5 percent in September, rebounding after falling by 0.5 percent in August. The personal spending growth came in line with economist estimates.

The report also showed that the consumer spending price index rose 0.2 percent in September after edging up 0.1 percent in each of the three previous months. Price growth remained at an annual rate of 2.0 percent, the upper end of the Federal Reserve''s comfort zone

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks registered solid gains Monday on strong Friday close of U.S. equity markets, boosted by GDP growth, and ahead of an interest-rate increase from the U.S. Fed Reserve. The Nikkei surged 2% on domestic earnings and export-related issues. Other regional markets rising above 1% were Australia’s All Ordinaries, up 1.7%, followed by South Korea’s Kospi, up 1.5%, and Hong Kong’s Hang Seng, up 1.2%.

European markets posted solid gains at mid-day dealings, reflecting sharply higher U.S. markets close Friday, lower oil prices, as well as a merger-and-acquisition news from Spanish Telefonica which agreed to buy U.K.’s mobile operator Q2 for $13.5 billion. The German DAX 30 added 1.5%, the French CAC 40 climbed 1.4%, and London’s FTSE rose 1.1%.

ENERGY, METALS, CURRENCIES

Crude oil declined below $61 a barrel after OPEC declared there was enough capacity and on expectations of lower U.S. fuel demand. Light sweet crude December contract fell 77 cents to $60.45 a barrel on the Nymex. Heating oil fell 2 cents to $1.8265 a gallon. Gasoline lost over 2 cents to $1.5975. Natural gas shed 26 cents to $12.79 per 1,000 cubic feet. London Brent lost 62 cents to $58.80

Gold futures traded mixed in Europe. In London gold was fixed at $472.65 per troy ounce, up from $470.30. In Zurich it traded at $472.03, down from $473.35. In Hong Kong the precious metal lost $1.80 to close at $472.25. Silver opened at $7.75, up from $7.70.

In European trading the U.S. dollar was mixed against its major counterparts. The euro was quoted at $1.2057, down from $1.2059. The dollar changed hands at 115.94 yen, up from 115.61. The British pound was trading at $1.7776, up from $1.7740.

EARNINGS NEWS

Kellogg Co ((K)), food and cereal company, posted Q3 earnings of 66 cents a share, up from 59 cents a share in the year-ago period, topping analyst estimate of 64 cents a share on revenue growth. The company also lifted its 2005 earnings forecast to $2.32 to $2.34 a share from its prior estimate of $2.30 to $2.33 a share. The company rose its 2005 stock buyback program to $675 million, and authorized an additional $ 650 million program for 2006.

Mercury General Corp ((MCY)), an auto insurance underwriter, announced that Q3 net income increased 12% to $1.33 a share, up vs. net income of $1.19 a share in the year-earlier period, topping analysts’ expectations of $1.27 a share.

ABN Amro ((ABN)), Dutch banking group, posted 35% increase in Q3 net profit to 1.2 billion euros, beating analyst forecasts of 781 million euros ($948 million) and said the hard-fought acquisition of an Italian bank laid the groundwork for further growth. Second-half results are expected, at least, to match the first half''s profit of 1.88 billion euros, against previous expectations of a worse performance. ABN Amro announced that profit advanced from the second quarter on due the continued growth of the consumer and commercial banking activities, an improved performance of wholesale clients division, as well as proceeds from the sale of Real Seguros and Nachenius, Tjeenk & Co.

Encore Medical Corp. ((ENMC)), orthopedic devices manufacturer, posted Q3 net income of 5 cents a share, up from 3 cents a share in the year-earlier period on 171% revenue growth, matching analyst estimate of 5 cents a share.

Humana Inc. ((HUM)), health insurer, reported Q3 net income fell 41% to 30 cents a share despite 20% revenue growth on a class-action settlement and expenses relating to Hurricane Katrina. If not for those items, it earnings would have been 60 cents a share, topping analysts’ views of 51 cents a share.

Cognizant Technology Solutions Inc. ((CTSH)), IT designer reported Q3 net income of 28 cents a share, up from 18 cents in the year-ago period on 52% revenue growth.

Valero Energy Corp. ((VLO)), refining and marketing of environmentally clean products company, announced that Q3 net income rose to $4.37 a share, up from $1.57 a share in the same period last year, topping analysts’ forecasts of $4.23 a share. Including a $621 million pretax charge related to inventory valuation, net income came in at $2.94 a share.

CORPORATE NEWS

Comcast (((CMCSA, CMCSK)), cable company, has agreed to acquire Susquehanna Communications from Susquehanna Pfaltzgraff for $775 million with 30% of its stock acquired before the current deal. The transaction is scheduled to close in the first half of 2006. Before the deal Comcast owned about 30% of SusCom. The company reported that it will consolidate SusCom operations for a net cash investment of $540 million, or $440 million after certain tax benefits.