Inflation Worries Ease on Oil and Data

Elena
16 Nov, 2001
New York City

Homebuilder D.R. Horton reported Q4 net income rise of 61% on 45% increase in revenue, beating analyst estimate. Tyco posted nearly doubled fourth-quarter earnings on lower tax rate,but revenue misses estimates. Teenage fashion retailer Too reported Q3 profit jump of 40% on improved sales. Zale Corp posted Q1 wider-than-expected loss, despite a revenue growth.

U.S. MARKET AVERAGES

U.S. stocks advanced at opening of Wednesday session , supported by easing inflation worries and falling oil prices ahead of oil report, expected to show growing inventories. Recently stocks have fallen to the unchanged mark, failing to build greater upward momentum.

Wall Street was cheered by news of lower inflation rate due to oil prices decline.The Labor Department reported that consumer prices edged up just 0.2% in October, the best showing in four months. September consumer prices had soared by 1.2% on record energy prices. That inflation increase was the largest one-month jump in 25 years.

In the first hour of trading, the Dow Jones industrial average rose 20.25, or 0.19%.The Standard & Poor's 500 index rose 2.81, or 0.23% and the Nasdaq composite index rose 4.25, or 0.19%.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.53% from 4.56% late Tuesday.

The gold sector is one of the most conspicuous movers to the upside, climbing by over 3%. The utility space is also strong, with the Dow Jones Utilities Index higher by about 1%. Energy stocks are posting gains, including a 1% rise in the oil service sector.

There are few notable decliners. The retail sector is edging lower, continuing its Tuesday's slide. The drug and software sectors are also weak. There is some weakness in disk drive and networking stocks. Housing stocks are also showing a modest retreat, with DR Horton ((DHI)) edging slightly lower on cautious guidance for the next fiscal period.

IntercontinentalExchange ((ICE)) is a significant gainer in its debut on the NYSE. Following an IPO of 16 million shares at $26 per share, shares of the energy futures exchange are about $14.75, or 57%, higher than the offering price.

Blue Coat Systems ((BCSI)) is a notable decliner on earnings and outlook. The stock is currently down by 13%.

ECONOMIC NEWS

The Department of Labor released its closely watched report on consumer prices in the month of October on Wednesday, showing that prices rose modestly after surging higher in the previous month.

The report showed that consumer prices rose by 0.2 percent in October following a 1.2 percent increase in September. Economists had been expecting a slightly more modest increase of about 0.1 percent.

The significant slowdown in the pace of price growth compared to September came as energy prices fell 0.2 percent in October after surging up a record 12 percent in the previous month. Transportation prices also showed a notable decrease.

The report also showed that core consumer prices, which exclude food and energy prices, rose 0.2 percent in October after rising 0.1 percent in each of the five previous months. The increase in core prices came in line with economist estimates.

The modest increase in core prices suggests that the increase in energy prices is not being passed on in the prices of other products. Subsequently, core inflation has remained relatively subdued, rising at an annual rate of 2.1 percent.

MOVERS AND SHAKERS

The homebuilder D.R. Horton ((DRI)) raised its 2006 profit outlook after posting fourth-quarter results that beat expectations. The company's strong performance could help relieve the worries that the sector is suffering a downturn caused by a profit warning from Toll Bros ((TOL)) last week. D.R. Horton’s stock closed 0.3% down on Tuesday, but is expected to gain today.

The fashion retailer Abercrombie & Fitch ((ANF)) boosted its full-year profit outlook after third-quarter results increased 79% to $71.6 million as compared to a year ago values. Sales during the quarter rose 35% to $704.9 million. The company’s shares added 4.3%.

The specialty apparel retailer The Talbots Inc. ((TLB)) reported forecast-beating third-quarter profit and said its store traffic and sales performance made a significant progress in the second half of October. The stock fell 4.3% on Tuesday, but is likely to increase slightly today.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks advanced to close higher as the Japanese Nikkei rose 0.6%, rebounding from two-day losses and reaching a four-year record high of 14,170,087 on stronger dollar, exporter issues and financial stocks buy-back. Across the region, South Korea’s Kospi climbed 1.1% on surging Korean Exchange Bank, Hong Kong’s Hang Seng gained 0.2%, and Singapore Straits Times added 0.6%.

European markets traded lower at mid-day, pressured by U.S. stock markets, weaker resource stocks and earnings from the German power giant RWE, and Swiss Adecco. The German DAX 30 lost 0.8%, the French CAC 40 shed 0.9%, and London’s FTSE 100 fell 0.7%.

OIL, METALS, CURRENCIES

Crude oil traded below $57 a barrel after slipping to a four-month low yesterday ahead of petroleum inventory report. Light sweet crude December delivery lost 19 cents to $56.79 a barrel. Heating oil traded at $1.6831 a gallon. Gasoline rose marginally to $1.4605. Natural gas gained 5 cents to $11.61 per 1,000 cubic feet. London Brent fell 23 cents to $54.95.

Gold prices advanced in European trading. In London the precious metal was fixed at $470.65 per troy ounce, up from $467.90. In Zurich gold advanced to $470.35 from $466.95. In Hong Kong gold rose $4.40 to close at $472.65. Silver traded at $7.72, up from $7.70.

The U.S. dollar traded higher against other major currencies. The euro was quoted at $1.1687, up from $1.1694. The dollar bought 119.42 yen, up from 118.99. The British pound traded at $1.7269, down from $1.7343.

EARNINGS NEWS

Charming Shoppes, Inc. ((CHRS)), apparel retailer, announced that Q3 net profit soared 70% to 9 cents a share, from the comparable period last year, topping the analysts’ forecasts by a penny. Sales rose 22%. The company envisages Q4 earnings between 13 cents and 14 cents a share on same-store sales up 2% to 4%.

Tyco International ((TYC)), industrial conglomerate, reported Q4 net income rose to 44 cents a share, double from 22 cents a share in the year-ago period on lower restructuring and divestiture charges at its fire and security division. Revenue was up 2% on a comparable basis. Earnings from continuing operations totaled 42 cents a share but missed analyst expectations of 46 cents a share.

D.R. Horton ((DHI)), homebuilder, reported that Q4 net income rose 61% to $1.77 compared with last year’s result on 45% increase in revenue, beating analyst estimate of $1.63 cents a share. The company added that fiscal year 2006 earnings should be in a range of $5.22 to $5.32 a share on revenue of more than $15.5 billion, but kept its earnings forecast for the first quarter unchanged at between 90 cents and 95 cents a share.

Big Lots, Inc. ((BLI)), retailer of closeout merchandise, posted Q3 net loss of 17cents per share, up from a net loss of 29 cents per share in the year-ago period. Net sales for Q3, increased 6.2% Comparable store sales increased 1.7% for Q3 consisting of a 5.0% increase in the value of the average basket and a 3.3% decrease in customer transactions. On a year to date basis, net sales rose 6.6%. Comparable store sales increased 1.5% for the year to date period with the value of the average basket increasing 4.4% and the number of customer transactions declining2.9%.

Zale Corp. ((ZLC)), jewelry retailer, posted Q1 loss of 47 cents a share, down from a loss of 21 cents a share in the year-ago period, despite 1.2% revenue growth, missing analysts’ forecasts of a loss of 35 cents a share The latest results include a charge of 10 cents a share, related to the closing of about 30 of the company's Bailey Banks & Biddle locations. If not for this charge the company lost 36 cents a share. Same-store sales shed 1.2%. The company declared that its performance was hurt by its efforts to reposition the Zales brand.

The Talbots Inc ((TLB)), specialty apparel retailer, posted Q3 earnings of 37 cents a share, down from profit of 49 cents a share in the same period last year, beating analyst estimate by a penny. The year-ago results include a tax benefit of or 8 cents a share. Sales increased 3% in Q3. Same-store sales dropped 2% in the period.

Helmerich & Payne Inc. ((HP)), oil and gas company, posted Q4 earnings of 68 cents a share, up from a loss of 25 cents a share in the same period a year ago on revenue growth, missing analyst estimate of 71 cents a share. The latest results include a gain of a penny a share on the sale of certain securities, while the year-ago performance reflects an asset impairment charge of 63 cents a share, and a gain of 16 cents a share from securities sales.

Too Inc. ((TOO)), specialty retailer of young girls' apparel, posted Q3 earnings of 48 cents a share, up from 33 cents a share in the year-ago on higher sales and merchandise margin improvement, beating analyst estimate of 43 cents a share. Sales rose 16% in Q3 and same-store sales advanced 8%.