Market Gains on Rate Hopes

123jump.com Staff
22 Nov, 2001
New York City

Market rallied in the late afternoon driven by falling bond yields after the release of minutes of last FOMC meeting. The 10-year bond yield fell to 4.44% from 4.47% on the hopes that Fed may stop raising rates sooner than anticipated. Investors drove stocks of home builders, utilities, financials and other rate sensitive stocks higher. Oil climbed 2% taking with it stocks in the energy sector higher.

U.S. MARKET AVERAGES

Equities rallied on the perception that Fed may be closer than expected to the end of rate tightening cycle.

Morning trading was driven by investor’s desire to lock profits after gains for three weeks. With more than 95% of the S&P 500 index stocks have released earnings, investors focused their attention on the minutes of FOMC meeting. General Motors and Pfizer continued their losing streaks and dropped 1.3% and 1.7% respectively. Intel, Micron, SanDisk, and MEMC Electronics rose during the session on the chip sector upgrade from several brokers.

Later afternoon rally was sparked by investors’ perception that Fed may be near end to rate tightening cycle. FOMC minutes of last meeting showed that some policy makers were concerned that hikes in rates may not be necessary. The minutes also mentioned the rise in energy prices adding to broad inflation pressures. Investors believe that odds of rising interest rates are declining. Fed meets one more time this year on December 13th.

Tech sector saw another rising day with Intel up 3.6%, Google up 1.74%, SanDisk up 6%. Energy sector stocks also joined the rally as price of crude rose close to 1.8%. Shares of Valero and Tessoro were up 3.4% and 3.8% respectively.


MOVERS AND SHAKERS

Deere & Co. shares were 7.5% on better than expected fourth quarter earnings. Despite profit decline of 35% from a year ago, the company still beat the earnings and revenue estimates of the analysts. Stock closed up $4.40 at $67.40.

Tech Data Corp ((TECD)) posted Q3 income drop of $22.9 million, or 40 cents a share from $37.8 million, or 64 cents a year ago, missing expectations of 45 cents per share, despite sales growth of $5.08 billion. The company projected fourth-quarter earnings between 63 cents and 69 cents a share on sales from $5.3 billion to $5.45 billion. Company’s shares jumped 13%.

Goody’s Family Clothing Inc ((GDYS)) posted Q3 net loss widened to $23.5 million, or 71 cents a share, compared with $816,000, or 2 cents a share last year, with about $15.5 million bid transaction expenses included. Company failed to meet estimates of a loss of 14 cents a share. It announced it will not be able to meet full-year profit and same-store sales guidance. The stock dropped 4.2%.

Mother’s Work Inc ((MWRK)) reported wider Q4 net loss of $5.3 million, or $1.01 a share vs. a loss of $3.9 million, or 76 cents a share a year ago. Company’s revenue increased 11.8%, while same-store sales fell 1%, compared to a decline of 8.3% last year. The company projected comparable store sales in November will be from 3% to 4% higher vs. a year ago and said it is optimistic about delivering a improved results for 2006. The stock advanced 6%.

DaimlerChrysler AG ((DCX)), raising its profile in Canada’s auto industry, announced plans to expand its biggest North America assembly in order to invest more money in its research and development center. The stock lost 2.9%.

ECONOMIC NEWS

The release of minutes of the November 1 meeting of the Federal Reserve's rate-setting committee is due at 2 p.m.

According to Department of Commerce, retail electronic commerce (e-commerce) sales in the third quarter of 2005 were $22.3 billion, up 5.7% from the previous quarter and up 26.7% from one year ago. E-commerce sales in the third quarter accounted for 2.3% of total retail sales.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mostly lower with South Korea’s Kospi being the most notable decliner, falling nearly 2% with pressure from chipmakers and the steel sector. The Nikkei advanced 0.2% supported by strong dollar, automakers and other exporter issues. Among other regional markets, Hong Kong’s Hang Seng finished flat and Australia’s All Ordinaries lost 0.6%.

European markets traded in a narrow range to close mixed. Weaker Wall Street trading pressured stocks, but gains in resource stocks, and upbeat earnings reports from Enterprise Inns and EasyJet limited losses. The German DAX 30 traded at the unchanged mark with investors paying little attention to Angela Merkel’s taking the post of Germany’s chancellor. The French CAC 40 declined 0.2% and London’s FTSE 100 gained 0.3%.

OIL, METALS, CURRENCIES

Crude oil prices crossed $58 a barrel on chilly weather forecast and expectations of higher heating oil demand. Light sweet crude for January delivery rose $1.14 to $58.84 a barrel. Heating oil gained 2 cents to $1.7958 a gallon. Gasoline added 3 cents to $1.5484. Natural gas rose 28 cents to $11.61 per 1,000 cubic feet. London Brent jumped 80 cents to $56.15.

European gold prices surged to near an 18-year high on U.S. inflation speculations, increasing the appeal of the precious metal. In London gold closed at $491.20 per troy ounce, up from $484.70. In Zurich gold advanced to $490.90 from $487.75. In Hong Kong gold jumped $8.70 to close at $493.25. Silver traded unchanged at $8.13. Gold in New York closed at $492.90 up $3.40 per ounce.

The U.S. dollar turned mixed against other major currencies. The euro was quoted at $1.1727, up from $1.1720. The dollar bought 119.13 yen, up from 118.92. The British pound traded at $1.7118, down from $1.7178.

EARNINGS NEWS

Albertson's Inc ((ABS)), supermarket operator, announced that Q3 net income dropped 30% to 21 cents a share, from 29 cents a share in the year-ago period as revenue slipped 0.2%. Earnings from continuing operations adjusted for the storms in both periods fell 22%. Adjusted for the storms, earnings from continuing operations amounted to 24 cents, down vs. 32 cents in the comparable period last year, missing on that basis the analysts’ forecasts of 27 cents a share.

H.J. Heinz Co ((HNZ)), sauces and packaged-food manufacturer, posted a Q2 of fiscal 2006 net income of 60 cents a share, up from 56 cents in the same period in fiscal 2005, beating analyst estimate of 54 cents a share. Outside special items, the company would have earned 62 cents a share from continuing operations. The company’s quarterly sales totaled nearly $2.34 billion from $2.2 billion. This 6.3% sales growth came primarily from acquisitions; volume increased 0.6%.

Tech Data Corp. ((TECD)), distributor of information technology products, reported that Q3 net income dropped to 40 cents a share, from $ 64 cents, a year ago, missing analyst expectations of 45 cents a share. Sales for Q3 advanced to $5.08 billion from $4.77 billion a year earlier.

Fred's Inc. ((FRED)), general merchandise retailer, posted Q3 earnings of 16 cents a share, down from a profit of 19 cents a share a year-earlier. If not for the impact of an accounting standard change, the company would have gained 19 cents a share in Q3, well within the range of its previous outlook, beating on that basis analyst expectations by a penny. Sales rose about 8%.

Brown Shoe Inc. ((BWS)), shoe retailer, announced that Q3 net profit advanced to $1.04 a share, up from $1 a share in the year-ago period on sales growth. Adjusted for charges related to close some of its Naturalizer stores, its earnings of $1.21 a share topped analyst expectations of $1.04 a share.

Genesco Inc. ((GCO)), specialty footwear and headwear retailer, posted Q3 earnings of 61 cents a share, up from a profit of 47 cents a share a year-ago, beating analysts’ forecasts of 58 cents a share. On a continuing operations basis, the company earned 62 cents a share in Q3. Sales advanced to $316.3 million from $288.4 million in the same period a year ago. The company attributed its improved performance to gains in same-store sales and gross margin expansion.

Dollar Tree Stores Inc., ((DLTR)), retailer, posted Q3 earnings of 29 cents a share, a penny more than the same period last year’s result and beating analyst estimate of 27 cents a share. Sales advanced 10.1% but same store sales shed 1%.

Dollar General, ((DG)), off-price retailer, posted Q3 earnings of 20 cents a share, down from a profit of 22 cents a share a year-ago, beating the analyst estimate of 19 cents a share. Sales rose 9.5% and same-store sales increased 1.4% in Q3. The company attributed the decline in profits to lower sales of its seasonal home and basic clothing products, increased markdowns to reduce inventory, and the impact of its decision to increase the number of departments used for its retail inventory method gross profit calculation.