Market Lacks Drivers

Elena
14 Nov, 2005
New York City

U.S. stock averages have been flat in the morning session amid some caution ahead of key inflation and retail sales data later in the week, though solid results from Wal-Mart and Lowe''s Cos. soothed concerns over slowdown in consumer spending. Wal-Mart posted Q3 3.8% net income rise on 10% higher revenue, in line with estimates. Same-store sales rose 3.8%. Lowe''s Cos reported Q3 profit rise of 81 cents a share, beating estimates and 6% same-store sales growth.

U.S. MARKET AVERAGES

Since opening, stocks have been sitting near the flat line with the three major averages struggling to find a solid ground and a definite direction. The lack of real market-moving news and three weeks of broad-based gains led to profit-taking and light trading only, accompanied by anticipation of another three weeks of heavy economic calendar.

Today’s market drivers have been merger-and-acquisition news and upbeat earnings news from retailers Lowe’s Cos and Wal-Mart.

Wal-Mart Stores reported third-quarter net income rose 3.8% to $2.4 billion, or 57 cents a share, with revenue up 10% to $76.25 billion, met analyst estimates. The world''s largest retailer projected Q4 between 82 cents and 86 cents a share.

Lowe’s Cos reported third-quarter profit rise of 81 cents a share vs. 65 cents a year ago, beating estimates of 77 cents. Sales increased by 16.5% with same-store sales up 6.2%.

A few important merger and acquisition deals were announced today. Georgia Pacific ((GP)) said privately-held Koch Industries has offered $48 a share for the maker of branded paper goods, or $13.2 billion in cash and $7.8 billion in assumed debt. The offer is a 38.5% premium to Friday''s close.

Knight Ridder ((KRI)) announced that its board has decided to explore strategic alternatives, including the possible sale of the company. The media firm stated that Goldman Sachs, its long-time financial advisor, is helping with the process.

Most of the leading sectors in early going have come off their intraday highs. The leadership belongs to the Materials sector, up 1.1% on the merger of Georgia Pacific with Koch-Industries. The retail sector is currently posting a gain of less than 1%. The energy group is now sitting just above the unchanged mark. Within the group, the natural gas sector is showing a decline, offset by gains in the oil and oil service spaces.

The gold sector has been edging lower during the morning and is now showing a decline of just over 1%. Drug, bank and utility stocks are showing modest weakness as well.

Georgia Pacific ((GP)) has reached a 52-week high on its deal to be acquired by privately-held Koch Industries. Enterasys ((ETS)) has also hit a new peak on an agreement to be taken private. Ameritrade ((AMTD)) is adding to Friday''s gains, extending its high. Genentech ((DNA)) is edging above resistance levels to set a fresh peak.

EchoStar ((DISH)) is extending its 52-week low. Competitor DIRECTV ((DTV)) is also moving to a fresh low. Education Realty Trust ((EDR)) has broken to a new nadir on quarterly results.

MOVERS AND SHAKERS

Wal-Mart Stores Inc. ((WMT)) reported third-quarter results that came above analyst expectations, excluding costs of $40 million connected to Hurricanes Katrina, Rita and Wilma. The company also offered a fourth-quarter outlook equal to recent Wall Street expectations. Wal-Mart’s stock gained 6%.

The retailer Lowe''s Cos. Inc. ((LOW)) also posted earnings that came in ahead of analyst forecasts. The company’s shares added 3.9%.

The maker of branded paper goods Georgia Pacific Corp. ((GP)) said it has received an offer of $48 a share, or $13.2 billion in cash and $7.8 billion in assumed debt, from privately-held company Koch Industries. Georgia Pacific’s shares soared almost 40%.

Starwood Hotels & Resorts Worldwide ((HOT)) agreed to sell 38 of its properties to Host Marriott Corp. ((HMT)) for nearly $4 billion, including debt assumption. Host Marriott said it expects the acquisition to lift earnings in 2006. Starwood shares lost 0.3% while Host Marriott''s stock added 1.1% on Friday.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished the session mixed. The Nikkei advanced in the morning but reversed course in the afternoon to close down 0.3% largely due to losses in the financial sector which overweighed gains in tech stocks. South Korea’s Kospi rose 0.1% and hit a fresh peak of 1,257,63. Among other regional markets, Hong Kong’s Hang Seng lost 0.8%, while Australia’s All Ordinaries climbed 0.7%.

European markets closed little changed, supported by resource stocks and oil companies which gained on the back of higher oil prices. Investors also digested a lot of deal talk. The German DAX 30 gained 0. 03%, the French CAC 40 rose 0.3%, and London’s FTSE 100 added 0.09%.

OIL, METALS, CURRENCIES

Crude oil prices briefly crossed $58 a barrel on weather forecast, predicting a cold snap in the US. Light sweet crude December delivery rose 57 cents to $58.10 before slipping to $57.95, up 42 cents. Heating oil traded at $1.75 a gallon. Gasoline added a cent to $1.50. Natural gas gained 2 cents to $11.93 per 1,000 cubic feet. London Brent advanced 58 cents to $55.47.

Gold prices advanced in European trading. In London the precious metal closed at $467.50 per troy ounce, up from $467.20. In Zurich gold advanced to $467.25 from $466.35. In Hong Kong gold rose $4.60 to close at $470.55. Silver traded at $7.80, up from $7.46.

The U.S. dollar traded higher against most major currencies. The euro was quoted at $1.1707, up from $1.1706. The dollar bought 118.76 yen, up from 117.97. The British pound traded at $1.7372, down from $1.7395.

EARNINGS NEWS

Lowe''s Cos ((LOW)), home improvement products retailer, posted Q3 earnings of 81 cents a share, up from a profit 65 cents a share in the year-ago period, beating analyst estimate of 77 cents a share. Sales rose 16.9% in Q3 and same-store sales with 6.2%. The company said it recorded positive same-store sales in all 20 of its product categories, and 19 of its 21 geographic regions during the quarter.

Tyson Foods Inc ((TSN)), chicken, beef and pork producer, posted Q4 net income of 28 cents a share, up from 19 cents a share in the same period last year, missing analysts’ forecasts of 30 cents a share. Q4 sales amounted to $6.5 billion, down from $7.1 billion. Operating income was $190 million, compared to $178 million.

Outdoor Channel Holdings, Inc. ((OUTD)), television network operator, reversed to a Q3 net profit of one penny a share, up from a net loss of $1.75 a share in the same period last year on 4.2% revenue growth. Subscriber fees climbed 11.5% from the year-ago period on an greater number of paying subscribers.

Wal-Mart Stores Inc. ((WMT)), retailer, announced that Q3 earnings increased 3.8% to 57 cents a share, from 54 cents in the year-ago period on 10% higher revenue, in line with analyst forecasts of 57 cents a share. Same-store sales for the quarter advanced 3.8%, reflecting rises of 2.9% at Wal-Mart outlets and 8.1% at Sam''s Club.

Rockwood Holdings Inc. ((ROC)), producer of specialty chemicals and advanced materials, reported a Q3 loss of 25 cents a share, narrower than last-year’s loss of $1.50 a share in the comparable period, missing analyst estimate of 18 cents a share. Q3 earnings included $31.8 million in after-tax charges related mainly to its initial public offering. Sales jumped 44.6%, buoyed by a strong performance in its advanced ceramics and specialty chemicals businesses.

EPlus Inc ((PLUS)), information technology company, reported that its Q3 net income shed a penny to 21 cents a share, from 22 cents a share in the same period last year despite revenue growth compared with the year-ago period.

Eagle Bulk Shipping Inc. ((EAGLE)), a dry-bulk tanker shipper, posted net income of 27 cents a share and revenue of $21.1 million. The company announced it expects to pay a Q4 dividend of 57 cents a share to stockholders in February 2006.

[Five Star Quality Care, ((FVE)), operator of senior living centers, posted a Q3 loss of $5.64 a share, down from profit of 10 cents a share in the same period last year. Excluding charges, Five Star would have gained 11 cents a share. During the quarter, Five Star terminated 12 management agreements with Sunrise Senior Living.