Stocks Run out of Inspiration

Elena
18 Nov, 2005
New York City

At mid-day stocks settled at the unchanged mark. Merger-and-acquisition news has been the major market driver in early going. Cisco Systems Inc announced plans to buy Scientific-Atlanta Inc for $6.9 billion. Another giant, General Electric said it will sell most of its Insurance Solutions reinsurance division to Swiss Re for $8.5 billion. The company made that decision after losing $700 million from the insurance business over the last five years.

U.S. MARKET AVERAGES

The major averages have kept to narrow trading ranges during the late morning, holding near the unchanged mark. Enthusiasm early in the session allowed the major averages to extend Thursday''s rally, but stocks have settled down during the middle of the day

U.S. stock markets advanced at opening, extending yesterday’s broad rally, boosted by Hewlett-Packard’s earnings and news from General Electric which announced increased 2006 profit outlook, a raised dividend and a deal to sell most of its Insurance Solutions business. Market sentiment was also lifted by better-than-expected profit from computer maker Hewlett-Packard Co late Thursday and news from automaker General Motors Corp. that it does not see itself headed for bankruptcy.

The semiconductor sector rallied sharply at the beginning of the trading session, but has been drifting off its intraday highs throughout the rest of morning session. The space is still holding a notable advance, however, showing a gain of 1.4%. Biotech and transportation stocks remain strong as well.

Despite an early advance, the airline sector has been falling steadily through most of the morning and is now posting a decline of 1.9%. The gold and energy groups remain notable losers as well. Utility and software stocks are also posting losses.

Scientific-Atlanta ((SFA)) has jumped to a new 52-week high on its deal to be acquired by Cisco ((CSCO)). Earnings-inspired, AnnTaylor Stores ((ANN)) has broken to a fresh peak of more than 5%. Amazon ((AMZN)) has ticked to a new high, with RealNetworks ((RNWK)) and Union Pacific ((UNP)) among the other noteworthy stocks setting fresh peaks.

Patterson Companies ((PDCO)) has dropped to a new 52-week low of over 15%, dragged by an earnings warning. Movie Gallery ((MOVI)) is extending its low.

In corporate news, Swiss Re, the world''s second-largest reinsurer, said it agreed to buy Insurance Solutions from GE for $6.8 billion. GE also said it now expects faster earnings growth in 2006 and will increase its dividend and stock buyback plan.

Cisco Systems Inc. Has announced plans to buy Scientific-Atlanta Inc, the top U.S. maker of cable television set-top boxes, for $6.9 billion.

MOVERS AND SHAKERS

General Electric ((GE)) said it will sell most of its Insurance Solutions reinsurance division to Swiss Re for $8.5 billion. The company made that decision after losing $700 million from the insurance business over the last five years. General Electric said it will also lift its share-buyback plan to $25 billion through 2008 from an earlier announced plan of $15 billion through 2007. The company’s stock gained 2.4%.

The computer maker Hewlett-Packard ((HPQ)) increased its profit forecast after reported earnings, excluding restructuring charges, that were high above expectations. The company''s strong performance came due to steady sales of its personal computers, servers and storage gear. Hewlett-Packard‘s stock added 5%.

The media giant Walt Disney Co. ((DIS)) posted net income for the fourth quarter that decreased more than 25% mostly because of underperforming films. However, the company’s profit per share beat analyst expectations. Walt Disney’s stock lost 3.2%.

Cisco Systems ((CSCO)) announced it is going to buy Scientific Atlanta ((SFA)), a cable television set-top maker, for $6.9 billion. Cisco shares were down 0.5%, while Scientific Atlanta''s stock upped 2.5%.

The apparel company Liz Claibourne ((LIZ)) announced it has offered to buy J. Jill Group''s ((JILL)) for about $366 million, or $18 a share in cash, which represents a 40% premium to Thursday''s closing price. Shares of the both companies are expected to be active today.

The apparel retailer The Gap Inc. ((GPS)) lowered its fiscal year guidance after fashion miscues and a decrease in its same-store sales made earnings dropped 20%. The company’s stock fell 10.9%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed higher, making solid gains on the back of economic optimism, Wall Street rally Thursday and falling crude oil prices. The Nikkei opened sharply up and extended gains to hit a five year high of 1.5% to 14,623,12, buoyed by optimism of economic recovery. Across the region, Singapore’s Straits Times rose 1.4%, Hong Kong’s Hang Seng gained 0.6%, and Sydney’s All Ordinaries climbed 0.9%.

European markets finished in the green, boosted by falling crude oil, gains in the automotive and airline sectors, as well as merger-and-acquisition news. Nestle, which advanced on announcing a plan to buy back $2.3 billion in stock, also provided support. The German DAX 30 gained 0.5%, the French CAC 40 advanced 0.7%, and London’s FTSE 100 climbed 0.7%.

OIL, METALS, CURRENCIES

Crude oil prices slipped on oil production recovery and easing supply concerns. Light sweet crude December delivery fell 24 cents to $56.10 a barrel on the Nymex. Heating oil traded at $1.695 a gallon. Gasoline edged up to $1.472. Natural gas dropped 55 cents to $11.39 per 1,000 cubic feet.

Gold prices hovered near an 18-year high on strong physical demand, central-bank buying and inflation worries. In London the precious metal closed at $484.70 per troy ounce, up from $484.60. In Zurich gold advanced to $486.25 from $484.40. In Hong Kong gold rose $8.80 to close at $488.45. Silver traded unchanged at $7.73.

Copper futures reached a record $1.961 a pound, up $1.50. Copper prices have surged this week on speculation that China is being forced to buy large quantities of the metal to cover a position taken by a Chinese copper dealer in London.

The U.S. dollar climbed against other major currencies. The euro was quoted at $1.1706, down from $1.1749. The dollar bought 119.26 yen, up from 118.72. The British pound traded at $1.7127, down from $1.7189.

EARNINGS NEWS

Hewlett-Packard Co., ((HPQ)), provider of solutions for individual consumers, posted a Q4 profit of 14 cents a share, down from 37 cents a share in the year-ago period. If not for $1.57 billion in restructuring charges, H-P would have earned 51 cents a share, thus beating analyst estimate of 46 cents a share.

Starbucks,((SBUX)), high-quality whole bean coffee producer, reported Q4 net earnings of 16 cents a share, up 21% from the 13 cents a share in the year-earlier period on 23% revenue growth and a penny ahead of analyst estimate.

Nordstrom Inc, ((JWN)), retailer, reported that its Q3 profit advanced 38% to 39 cents a share, up from 27 cents a share a year ago on higher sales, beating analyst estimate of 35 cents a share. In Q4, Nordstrom expects earnings in the range of 60-65 cents a share, on same-store sales growth in a low single-digit percentage range.

Sports Authority Inc., ((TSA)), retailer, swung in Q3 to net earnings of 13 cents a share, up from a net loss of 11 cents a share in the year-ago period on revenue growth and a 1.2% same-store sales increase.. The company stated it is comfortable with analysts'' estimate for Q4 earnings of $1.07 a share, and forecast Q4 revenue of $730 million to $740 million.

H&R Block Inc., ((HRB)), financial services provider, reported a Q2 loss of 22 cents a share, down vs. a loss of 15 cents a share, in the same period a year ago. The company reduced its 2006 profit target after competition and rising rates in the mortgage market crimped the performance of the tax preparation company''s home-loan business.

Autodesk Inc., ((ADSK)), software company, announced that Q3 profit soared 28% to 38 cents a share, up from 30 cents a share in the year-ago period on 26% revenue growth, reflecting strong demand across its product lines and markets. Outside a tax benefit, the company would have gained 31 cents a share, beating analyst expectations by a penny.

Barnes & Noble Inc., ((BKS)), bookseller, posted Q3 net income of zero cents a share, down from 11 cents a share in the year-earlier period, beating analysts’ forecasts of a net loss of 2 cents a share. Sales advanced 4%.

BEA Systems Inc., ((BEAS)), software maker, reported net income of 9 cents a share, a penny up vs. 8 cents a share for the same period a year ago. If not for one-time charges, earnings would have been 11 cents a share, topping on that basis analysts’ expectations by a penny.

Foot Locker Inc., ((FL)), retailer, posted Q3 net earnings of 42 cents a share, down 12% from 47 cents a share in the same period last year on revenue and same-store sales growth, missing the analyst forecasts by a penny. The company expects Q4 income from continuing operations in a range of 53 cents to 61 cents a share, and for same-store sales growth in the low-to-mid single-digit range.

Cost Plus Inc., ((CPWM)), off-price retailer, reported a Q3 loss of 12 cents a share, down from a profit of a penny a share a year-ago, in line with analyst estimate of a loss of 12 cents a share. Sales rose 5.4% in Q3 compared to the same period a year ago and same-store sales dropped 4.7%. The company said the results were due to weak customer traffic and its decision not to repeat a promotion that took place in the year-ago period. Cost Plus envisages earnings of 98 cents to $1.08 a share in Q4, topping estimate of $1.06 a share.

Ann Taylor Stores Corp, (ANN)), apparel retailer, announced that Q3 net profit more than doubled to 42 cents a share, from the same period last year, topping analyst forecast for earnings of 37 cents a share. Sales jumped 11.6% and same-store sales were up 0.2%.

Infineon Technologies AG, ((IFX)), German chipmaker, reversed to a Q4 net loss of 14 euro cents a share, down vs. a net profit of 6 euro cents a share in the year-ago period after booking 64 million euros in charges for the phase-out of its Munich-Perlach plant and impairment charges in its communications business. Sales dropped 13% to 1.73 billion euros but advanced 8% sequentially