Market out of Steam

Elena
04 Nov, 2005
New York City

On the earnings front, Quanta Services posted third-quarter tripled profit of 11 cents a share on 13% revenue growth, beating estimates. Alliant Energy reported Q3 38% net income jump on 36% higher revenue. Westar Energy released quarterly earnings of 97 cents a share, topping expectations of 82. Fashion company Polo Ralph Lauren reported Q2 31% profit rise on 15% revenue increase, exceeding estimates.

U.S. MARKET AVERAGES

Unimpressive employment data, accompanied by growing concerns about the economic growth and inflation sent stocks lower Friday. The major averages have consolidating recent gains, reflecting the lackluster report and the lack of a strong market driver. The Nasdaq is sitting near the flat line, while the Dow and S&P 500 are trading in the negative. Nine of the ten major sectors are posting losses.

A U.S. employment report showed a smaller-than-expected job creation in October. Employers added 56,000 workers to their payrolls last month, compared with a Wall Street forecast of 100,000.

The Labor Department report on Friday also showed the national unemployment rate eased to 5% from 5.1% in September. Analysts had forecast no change in unemployment.

Wall Street also focused on September''s job loss, which was just 8,000 from a previous 35,000 decrease, suggesting that the hurricanes'' impact was less than feared, although the department said their effect is still unclear.

Retreating oil prices brought some relief to the market A barrel of light sweet crude dropped 63 cents to $61.15 after expectations for greater demand this winter sent prices up more than $2 a barrel on Thursday.

Energy stocks continue moving too the downside with the natural gas sector leading the group falling about 2.8%. The gold sector is extending yesterday’s losses and is currently down about 1.4%.

The gaming sector is up 1.4% setting a new intraday high, despite disappointing earnings news from Scientific Games ((SGMS)).

Among the gaining stocks, Biovail ((BVF)), which announced a commercial alliance with Ortho-McNeil, has jumped to a new 52-week high. Hartford Financial Services ((HIG)) is climbing to a fresh peak on earnings inspiration.

Among the losers, Tenet Healthcare ((THC)) has fallen to a new 52-week low, dipping below a trading range. Macrovision ((MVSN)) has added to Thursday''s substantial sell off, expanding its nadir.

Bonds extended their slide after falling to eight-month lows a day earlier, with the yield on the 10-year Treasury note rising to 4.66% from 4.65% late Thursday.

MOVERS AND SHAKERS

Diversified industrial group Honeywell International ((HON)) announced it would buy back as much as $3 billion of its common stock. The transaction would stand for nearly 10% of the company''s 856 million shares outstanding. The company’s stock gained 1.5% yesterday and is likely to rise higher today.

Online travel agent Expedia Inc. ((EXPE)) reported third-quarter earnings and revenue that came above analyst expectations. The company gained from increased worldwide merchant hotel revenue, contributions from recent acquisitions and growth in its car rental business. Expedia’s stock added 11%.

Apple Computer Inc. ((AAPL)) was downgraded by Prudential Equity Group to ‘neutral-weight’ from ‘overweight’. The financial broker cited the recent valuation in the company''s stock and said it expects a strong first quarter and fiscal 2006, but it believes the stock has now fully ignored this reality. Apple’s stock dropped 2.3%.

ECONOMIC NEWS

Friday morning, the Department of Labor released its report on the employment situation in the month of October, showing that the U.S. economy added fewer jobs than economists had been expecting.

The report showed that non-farm payrolls rose by 56,000 jobs in October following a revised decrease of 8,000 in September. The increase came in well below economist expectations of an increase of about 110,000.

Additionally, Kathleen Utgoff, commissioner of the Bureau of Labor Statistics, noted that the relatively weak growth in the labor market was not attributable to the areas directly affected by Hurricane Katrina.

“Rather, job growth in the remainder of the country appeared to be below trend in October,” Utgoff said. However, she noted, “It is possible, of course, that employment growth for the nation could have been held down by indirect effects of Hurricanes Katrina and Rita.”

The report also showed that the unemployment rate edged down to 5.0 percent in October from 5.1 percent in September, reflecting a smaller labor force. Economists had been expecting the unemployment rate to remain unchanged at 5.1 percent.

The weaker than expected job growth may raise some concern about the strength of the labor market and the economy as a whole.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed generally higher with the Nikkei hitting a four-year high above 14,000, boosted by upbeat U.S. economic data and strong confidence in the domestic economy. The index climbed 1.3% on record gains in microchip and banking stocks. Across the region, South Korea’s Kospi rose 0.3%, Singapore Straits Times advanced 0.5%, while the only loser Hong Kong fell 0.3% on property stocks.

European markets finished lower, hurt by U.S. payroll data, showing weaker job growth in October. The German DAX 30 lost 0.2%, the French CAC 40 shed 0.3%, while London’s FTSE 100 remained flat, supported by oil majors like BP and royal Dutch Shell.

OIL, METALS, CURRENCIES

Crude oil prices pulled back below $62 a barrel after jumping $2 on Thursday. Light sweet crude December delivery fell 49 cents to $61.29 a barrel. Heating oil lost 2 cents to $1.8075 a gallon, and so did gasoline, presently trading at $1.6073. Natural gas tumbled 18 cents to $11.505 per 1,000 cubic feet. London Brent dropped 61 cent to $59.91.

Gold traded mixed in Europe. In London the precious metal was fixed at $461.35 per troy ounce, up from $460.50. In Zurich gold rose to $461.18 from $460.25. In Hong Kong gold fell $3.30 to close at $461.45. Silver opened at $7.56, up from $7.52.

The U.S. dollar grew stronger against its major counterparts. The euro was quoted at $1.1943, down from $1.1944. The dollar bought 117.60 yen, up from 117.12. The British pound traded at $1.7661, down from $1.7702.

EARNINGS NEWS

Quanta Services Inc. ((PWR)), network services company, reported that Q3 net profit more than tripled to 11 cents a share, beating analyst estimate of 7 cents a share on 13% revenue growth and improved spending in industries that company serviced as well as the infrastructure work needed after the major hurricanes boosted results. Quanta predicts Q4 earnings between 6 and 8 cents a share on revenue between $450 million and $480 million.

Redwood Trust, Inc. ((RWT)), specialty finance firm, reported a Q3 net income decline of 22% from the year-ago period to $2.21 a share on higher operating expenses caused primarily by continued growth in personnel. Core earnings came in at $1.22 a share, down vs. $2.29 a share.

Alliant Energy Corp. ((LNT)), electric and gas energy company, announced that Q3 net profit advanced 38% to 96 cents a share from the year-ago period. Earnings from continuing operations rose 8% and revenue jumped 36%. Alliant expects fiscal-year earning from continuing operations in the range of $1.10 to $1.30 a share.

Artesyn Technologies Inc. ((ATSN)), electronic products and power supplies producer, posted Q3 net income of 9 cents a share, up a bit from the same period a year ago on both higher sales of its rectifier and amplifier products and pressure in its server segment missing analyst estimate by a penny. Sales dropped to $102 million from $107 million

Westar Energy ((WR)), electric generation and distribution services company, posted Q3 earnings of 97 cents a share, up from 70 cents a share in the year-ago period on revenue growth, topping analyst estimate of 82 cents a share. If not for a gain on fuel supply contracts, the company would have earned 65 cents a share. Results were affected by higher fuel supply contract valuations, warmer weather and lower interest expenses.

Carrizo Oil & Gas Inc. ((CRZO)), oil and natural gas company, posted Q3 net income of 19 cents a share if not for one-time items, up on this basis versus last year’s profit of 15 cents a share on 43% revenue growth, matching analysts’ expectations of 19 cents a share. The results reflected both greater output of natural gas and higher energy prices. The company’s production volumes increased by 7% in Q3.

Polo Ralph Lauren Corp ((RL)), fashion company reported that Q2 profit advanced 31% to 97 cents a share, up from 77 cents in the year-ago period on 15% revenue growth, beating analyst estimate of 90 cents a share. The company affirmed its fiscal 2006 outlook at $2.85 to $2.92 a share.

FPL Group Inc. ((FPL)), power company, reported that Q3 net income advanced to 87 cents a share, down from 88 cents in the same period last year. On an adjusted basis, the company would have earned $1.01 a share, topping analysts'' estimate of 95 cents a share. The company said that according to its results to date and prior to the impact of Hurricane Wilma, adjusted earnings for fiscal 2005 would have been $2.50 to $2.60 a share.

Glatfelter, ((GLT)), manufacturer of specialty papers and engineered products, reported that quarterly net income advanced to 8 cents a share, up from 5 cents a share in the year-ago period, missing analyst estimate of 12 cents a share. If not for extraordinary items, adjusted earnings dropped to 9 cents a share from 13 cents.