Rise in Averages Indicates Santa Rally

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

News from GM fails to impress market. Even the talk of job losses of 30,000 and 12 plant closures in North America fail to support the stock price. Stock drops another 2% in the session. SanDisk stock drops 16.7% on the news that a joint venture between Intel and Micron will produce flash memory for Apple. The $2.5 billion joint venture is likely to drive flash memory prices down in the next nine months hurting SanDisk''''s profit margin.

U.S. MARKET AVERAGES

Market surged in the final hour of trading after trading for the most of the day in the positive zone. The early morning news from General Motors’s management detailed the plan to slash operating cost and terminate 30,000 jobs in North America gave a positive start to the market and the GM’s stock. During the session while market gained further but GM stock lost the gains and closed lower by 2% or 47 cents.

Boeing’s announcement of orders at Dubai air show provided a 3% lift to the stock to a new 52-week high. SanDisk stock lost close to 16.7% on the news that Intel and Micron has entered into a joint venture to produce flash memory for Apple’s iPods. Analysts worried that SnaDisk will be forced to cut prices at retail level and hurt its operating margins.

Intel and Micron agreed to invest $1.25 billion each in a joint venture to produce flsh memory with an order to supply $250 million of flash memory to Apple as early as next year.

Shares of home builders were on the rise with the falling yield for the 10-year treasury market to 4.46% from 4.5%. Lennar, Hovnanina, Toll Bros. stocks were up at least 2%.

Market extended mild gains in averages in Dow and S&P at the close and Dow closed for the first time since March in the positive and S&P closed at four-year and five month high.

MOVERS AND SHAKERS

General Motors ((GM)) announced a plan to eliminate 30,000 manufacturing positions from 2005 through 2008 in order to reduce its assembly capacity in North America. The company expects to reduce capacity by an additional 1 million units by the end of 2008, bringing its target down to 4.2 million units, a level that would represent a 30% decrease from 2002 levels. Company’s stock climbed 1.6%

Boeing ((BA)) received a $780-million order for six 787-8 Dreamliners from Low-Cost Aircraft Leasing. The company said that deliveries are set to begin in September 2009. Boeing’s shares rose 1.5%..

Viragen ((VRA)) released initial studies of its Multiferon treatment that showed significant antiviral activity against the H5N1 strain of the avian flu virus. The early-stage in vitro studies found Multiferon to be significantly more active against the virus than recombinant alpha interferon, recombinant beta interferon or ribavirin, the Plantation. The stock jumped 12.3%.

ECONOMIC NEWS

The Conference Board released its report on leading economic indicators in the month of October on Monday, showing that its index of leading indicators rose in line with economist estimates.

The report showed that the leading index rose 0.9 percent in October, offsetting the 0.8 percent decrease seen in September. Economic had been expecting the index to increase by 0.9 percent.

The Conference Board said that the increase by the index reflected fewer initial jobless claims and an increase in average weekly hours in manufacturing.

The report also showed that the coincident index increased 0.1 percent in October following a 0.3 percent increase in September. The lagging index increased 0.8 percent in October.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed on continuous decline of oil prices and solid U.S. markets gains Friday. In early trading the Nikkei hit a five-year high of over 14,800 to close up 0.4%, led by technology and automakers stocks, also supported by stronger dollar. Across the region, Hong Kong’s Hang Seng finished flat, South Korea’s Kospi fell 0.3%, and Singapore straits Times lost 0.5%.

European markets closed generally in the positive on strong resources sector and mildly positive U.S. trading. Gains were limited by British drug maker GlaxoSmithKline, which fell 0.4% on new labels for its asthma drugs, proposed by the FDA. The German DAX 30 added 0.3%, CAC 40 gained 0.4%, and London’s FTSE inched down 0.1%.

OIL, METALS, CURRENCIES

Crude oil prices climbed on snowy weather forecast and expectations of higher heating oil demand. Light sweet crude for January delivery rose 47 cents to $57.57 a barrel. Heating oil was unchanged at $1.7734 a gallon. Gasoline after trading higher closed unchanged at $1.518. Natural gas lost 8 cents to $11.33 per 1,000 cubic feet. London Brent advanced 58 cents to $55.46.

European Gold closed mixed after climbing close to $500 on renewed investor interest as rally in precious metal continues. In London the precious metal finished unchanged at $484.70 per troy ounce. In Zurich gold advanced to $487.75 from $486.25. In Hong Kong gold fell $3.50 to close at $484.95. Silver traded at $8.13, up from $7.73. At close in New York, gold was up $3.30 to $489.50 per ounce.

The U.S. dollar traded in a mixed fashion against major currencies. The euro was quoted at $1.1753, down from $1.1764. The dollar bought 118.78 yen, down from 119.15. The British pound traded at $1.7193, up from $1.7169.

EARNINGS NEWS

Perry Ellis International, Inc. ((PERY)), apparel company, reported Q3 net income of 80 cents per share, up from 72 cents per share in the year-ago period on 37% revenue growth.

G. Willi-Food International Ltd ((WILCF)), food products distributor, announced Q3 net income of NIS 0.41($ 0.09) per share, an increase of 52% year-over-year, and declared a cash dividend of 12 cents per share on 2% revenue growth. Gross margins for the latest quarter were 26.5% compared to 21.8% in the year-ago period.

CBRL Group Inc. ((CBRL)), restaurant chain operator, reported a Q1 for fiscal 2006 net income of 51 cents a share, down from 57 cents in the same period in fiscal 2005 on 3.4% revenue growth, missing analyst estimate of 53 cents per share. Earnings for the latest quarter included 4 cents related to stock option expense; the company also had 5% fewer weighted average shares outstanding than in Q1 of fiscal 2005.

Hastings Entertainment Inc ((HAST)), retailer, posted Q3 earnings of 80 cents a share, up from 72 cents a share in year-ago period on 37% revenue growth, beating the analyst estimate of 78 cents a share. The company lowered its financial outlook for revenue for fiscal 2006 to reflect uncertainty related to industry consolidation and certain macroeconomic factors.

Campbell Soup Co ((CPB)), food products company, reported Q1 of fiscal 2006 adjusted net earnings of 58 cents a share up from 56 cents in the year-ago period, beating analyst view of 56 cents a share. Sales reached $2.11 billion from $2.09 billion, as U.S. soup, sauce and beverage sales slipped 2% to $970 million. Campbell Soup also affirmed its full-year growth forecast of 5% to 7% for earnings per share.

The Valspar Corp, coatings manufacturer, reported Q4 net income of 50 cents a share up from 38 cents a share in the same period last year, topping analysts’ forecasts of 42 cents a share. If not for a one-off tax gain and a lower Q4 tax rate, the company would have gained 44 cents a share. The company also added that sales rose 12.4%. Valspar announced that it continues to implement its plan to rationalize its manufacturing capacity.

CORPORATE NEWS

General Motors ((GM)) announced a plan to eliminate 30,000 manufacturing positions from 2005 through 2008 in order to reduce its assembly capacity in North America. It expects the staff reduction to come mostly through attrition and early retirees. The company expects to reduce capacity by an additional 1 million units by the end of 2008, bringing its target down to 4.2 million units, a level that would represent a 30% decrease from 2002 levels. GM lifted its target for structural cost reductions to $6 billion by the end of 2006 from a previously indicated level of $5 billion.

Boeing ((BA)), aircraft maker, revealed that Emirates has placed a firm order for 42 Boeing 777 airplanes with purchase rights to another 20 planes. The company said the deal would be worth $9.7 billion at list prices. Low-Cost Aircraft Leasing has also placed an order with Boeing for 6 of its 787-8 Dreamliners, valued at about $780 million.