Afternoon Sell-off Drags Stocks Down

123jump.com Staff
15 Nov, 2005
New York City

AFTER THE CLOSE: Abercrombie reported earningsof 79 cents vs. 42 cents a year ago on 35% sales growth. Analog Devices earnings fell to 18 cents from 34 cents a year ago on fall in revenue of 2% and on restructuring charges and earnings repatriation. La-Z-Boy reported a loss of 12 cents vs profit of 17 cents a year ago.

U.S. MARKET AVERAGES

Market traded in a narrow range during the session.

Strong retail sales, falling oil price, and higher than expected producer prices, all caught up market in a trading range.

Strong retail sales and better than expected earnings from Home Depot were not enough t overcome weak sales outlook from Target. Retail stocks declined as number of companies in the sector are expected to release earnings this week.

Higher than expected producer price index put market in the in the defensive mood even as the oil prices declined during the session. Most energy related stocks fell and market seemed more focused on inflation worries.

On the earnings front Home Depot delivered better than expected earnings so did J.C. Penney Co but Staples failed to spark market’s imagination.

MOVERS AND SHAKERS

The retailer Home Depot ((HD)) reported third-quarter results that exceeded analyst estimates and raised its full-year profit outlook The company’s stock added 2.8%.

The department store operator JC Penney ((JCP)) posted earnings from continuing operations that came above Wall Street forecast. The company attributed its strong results to an improved operating performance, lower interest expense and the positive impact of its ongoing buyback program. The company’s stock fell 1.8% on Monday.

The discount retailer Target Corp ((TGT)) lowered its November sales outlook. The company said that it had been looking for a same-store sales gain of 4%-6%, but due to current trends, it now expects that sales will come in below that estmated range. The company’s shares fell 4.2%.

Standard & Poor said the online retailer Amazon.com Inc ((AMZN)) will replace AT& T Corp ((T)) in the S&P 500 Index. Fund managers, which track the index, have to add the company to their portfolio, which will boost demand for its shares. Amazon’s stock gained 7.1%.

ECONOMIC NEWS

Tuesday morning, the Department of Commerce released its report on retail sales in the month of October, showing that sales fell modestly. Economists had been expecting a more significant decline.

The report showed that retail sales fell 0.1 percent in October following an upwardly revised 0.3 percent increase in September. The drop in sales was smaller than the 0.7 percent decrease that economists had expected.

Wholesale prices rose more than expected in October, according to a report from the Department of Labor, although the report also showed an unexpected decrease in core prices.

The report showed that the Producer Price Index rose 0.7 in October following a 1.9 percent increase in September. Economists had been expecting a more modest 0.1 percent increase in prices.

The increase was partly due to a continued increase in energy prices, which rose 4.1 percent in October after surging up by 7.1 percent in September. While gas prices turned lower in October, prices for residential natural gas and home heating oil advanced at faster rates than in September.

The report also showed that core prices, which exclude food and energy prices, fell by 0.3 percent in October, reversing the 0.3 percent increase seen in September. The decrease surprised economists, who had expected another 0.3 percent increase.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed lower, reflecting domestic worries and lackluster U.S. markets session Monday. The Japanese Nikkei shed 0.12% on bank shares and other overvalued stocks sell-off. Across the region, Hong Kong’s Hang Seng finished flat, South Korea’s Kospi declined 0.3%, and Singapore Straits Times lost 0.7%.

European markets fell across the region, pressured by disappointing outlooks from telecom company Vodafone and drinks maker Diageo. Weaker U.S. markets also weighed on sentiment. The German DAX 30 lost 0.2%, the French CAC 40 shed 0.2%, and London’s FTSE 100 declined 0.7%.

OIL, METALS, CURRENCIES

Crude oil prices dropped close to $57 a barrel as unusually warm weather encouraged refiners to stockpile winter fuel. Light sweet crude December delivery fell 71 cents to $56.98 a barrel for the first time since June 30th price of $56.50 per barrel. London Brent lost 37 cents to $54.36.

Gold traded mixed in Europe. In London the precious metal closed at $467.90 per troy ounce, up from $467.50. In Zurich gold fell to $466.95 from $467.25. In Hong Kong gold fell $2.30 to close at $468.25. Silver traded at $7.70, down from $7.80.

The U.S. dollar strengthened against its major counterparts. The euro was quoted at $1.1688, down from $1.1693. The dollar bought 119.15 yen, up from 118.71. The British pound traded at $1.7349, down from $1.7383.

EARNINGS NEWS

Home Depot Inc. ((HD)), home-improvement retailer, posted a Q3 net income of 72 cents a share, up from 60 cents in the same period a year ago, beating analyst estimate of 68 cents a share. Sales increased 10.5%, as comparable-store sales rose 3.6%. Operating margin grew to 11.9%, as the company''s average ticket rose to $58.92. Home Depot also revised higher projected growth range for full-year sales to 10% to 12%, up from 9% to 12% previously, and raised its growth target for earnings per share to 17% to 18% from a range of 14% to 17%.

Group ((VOD)), British mobile operator, lowered its interim dividend by 15% to 2.20 pence a share as it posted first-half net profit down 23.5% to 4.36 pence a share on an impairment charge of 500 million pounds. Sales for the period rose 9% to, beating analysts'' expectations, as Vodafone added 10 million new subscribers, bringing its total customer base to 171 million. The group announced it envisages fiscal-year sales between the 6% to 9% range previously indicated.

BJ''s Wholesale Club Inc. ((BJ)), retailer, posted Q3 net income of 41 cents a share, up 20% from 33 cents a share in the year-earlier period on 9.3% revenue growth and 4.1%. same-store sales rise. Q3 adjusted net income was 38 cents a share, topping analysts’ forecasts of 36 cents a share.

Staples Inc. ((SPLS)), office products retailer, reported Q3 net income of 32 cents a share, up from 28 cents in the same period last year, matching the analysts’ forecasts. Sales increased 11% , above the analyst estimate. Same-store sales jumped 3%, while North American retail sales increased 9%.

J.C. Penny Co. ((JCP)), department store operator, posted Q3 earnings from continuing operations of 94 cents a share, up from 50 cents a share, earned in the year-ago period on an improved operating performance, lower interest expense, and the positive impact of its ongoing buyback program, beating analyst estimate of 92 cents a share. Sales rose 2% in Q3 while same-store sales advanced 2.5%.

American Eagle Outfitters Inc ((AEOS)), specialty apparel retailer, reported that Q3 net income advanced to 47 cents a share, from 38 cents in the year-ago period, beating analyst estimate by a penny. Q3 sales advanced to $577.7 million from $479.6 million in the comparable period. Same-store sales, rose 14%.

Dick''s Sporting Goods Inc ((DKS)), retailer, reported Q3 net income of 8 cents a share up from a loss of 4 cents a share. If not for merger integration and store closing costs, the company would have gained 8 cents a share, beating analysts’ forecasts by a penny. Q3 sales rose 8%. Same-store sales increased 2.9% over year-ago levels.

Prestige Brands Holdings, Inc ((PBH)) reported Q2 of fiscal 2006 net income of 15 cents a share, down from a net income of 23 cents a share a year ago. The company added it''s revising financial reports for the years 2003 through 2005 and has deferred its quarterly filing with the U.S. Securities and Exchange Commission.

ArvinMeritor Inc ((ARM)), manufacturer of components for commercial vehicles, posted Q4 loss of 27 cents a share, up from a loss of $2.23 a share in the year-earlier period. Earnings from continuing operations dropped to 17 cents a share from 44 cents a share in the comparable period last year. If not for items, operating income amounted to 41 cents a share, missing analyst estimate by a penny. Sales increased 6%.

CORPORATE NEWS

Johnson & Johnson ((JNJ)) announced a new offer to acquire Guidant Corp. ((GDT)). The company has lowered the price to $21.5 billion in cash and stock, about $ billion less than last year’s original deal of $25.4billion. Last week, Guidant sued Johnson & Johnson for trying to back out of the agreement as Guidant came under scrutiny for recalls of its implantable heart devices.

Allergan ((AGN)) has made an offer to acquire Inamed ((IMDC)) for about $3.2 billion in cash and stock. The company reported that the deal would represent a premium of about $450 million over the bid made by Medicis. Allergan stated that under its offer, each Inamed share would be exchanged for $84 in cash or 0.8498 of an Allergan share, subject to proration such that a total of $1.45 billion in cash and 17.9 million shares were exchanged.