Energy and Retail Stocks Fall

Elena
28 Nov, 2005
New York City

Retail stocks fell on mixed sales reports with Wal-Mart, J.C. Penney and Target Corp. being among the decliners. The earlier market sentiment was lifted by a report, which said that sales increased 22% to $27.8 billion over the post-holiday weekend but later turned gloomy as some traders said traffic has dipped heavily since then. The Energy sector dropped 2%, reflecting a 2.5% drop in crude oil prices.

U.S. MARKET AVERAGES

U.S. stock markets opened lower, making a pause after a five-week rally. Higher opening was expected after retail sales surged 22% over the weekend, the beginning of the busy holiday shopping season, but stocks drifted lower after drug maker Merck & Co announced a restructuring plan, involving job cuts. The Nasdaq is the worst performer, down 0.6%, while the Dow is hovering near the flat line.

Wall Street''s upbeat mood turned gloomy on Merck''s plan to slash 11% of its work force and shut five manufacturing plants by 2008 as the company struggles with thousands of lawsuits over its Vioxx painkiller and faces losing patent protection for another top-selling drug

Retail stocks fell as traders digested mixed sales reports, though many are waiting for storeowners to release November results later this week. Wal-Mart lost 30 cents to $50.19 and J.C. Penney fell 49 cents to $53.61, while Target Corp. also sank 23 cents to $55.

Energy stocks have continued to decline on falling oil prices. The oil service space is now down nearly 3%. The housing and biotech sectors have also fallen through most of the morning, with each now showing a loss of about 2%.

The disk drive sector has come off its intraday highs, but continues to hold most of the gains it recorded in early trading. The space is up about 1.8%, ticking above a recent trading range to set a new high. The airline sector also erased earlier gains and is now rising about 1%.

First Data ((FDC)) rose 5%, lifted by a CEO change, reaching a new 52-week high. Apple ((AAPL)) has also set a fresh peak. Circuit City ((CC)) is expanding a high set over the past couple weeks.

Shanda Interactive ((SNDA)) has broken to a new 52-week low after announcing the adoption of a new revenue model for its MMORPGs. Alexion Pharmaceuticals ((ALXN)) is extending its low.

In late morning trading, the Dow Jones industrial average lost 9.84, or 0.09%, following seven straight winning sessions. The Standard & Poor''s 500 index was off 5.29, or 0.42%, and the Nasdaq composite index fell 15.41, or 0.68%.

Bonds advanced, with the yield on the 10-year Treasury note falling to 4.42% from 4.43% late Friday

MOVERS AND SHAKERS

Legg Mason cut Yahoo, Inc ((YHOO)) to hold from buy, citing valuation. The broker told clients that the company''s shares are up more than 25% since October and are now within 1% of its $42.50 target price. At current valuations, Legg Mason said it continues to favor Yahoo over Google, Inc. The stock slipped $2.7%

Merck & Co ((MRK)) announced a global restructuring plan, including the elimination of 7,000 jobs by the end of 2008 and the close of 5 of its 31 manufacturing plants. The company expects to record restructuring related charges of $1.8 billion to $2.2 billion, with the bulk completed by 2008. The drugmaker expects the program to lead to total savings of $3.5 billion to $4 billion from 2006 through 2010. The company now expects 2005 earnings, excluding non-recurring items, to be close to analyst expectations of $2.50 a share. The stock is currently down 4.2%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks advanced across the region, lifted by higher Wall Street close Friday, positive U.S. retail revenue data, and continuously strengthening dollar. The Nikkei gained 1.4%, hitting a fresh high of 14,986,96 on exporter issues, boosted by the stronger dollar. Among other regional markets, Australia’s All Ordinaries rose 0.4%, Hong Kong’s Hang Seng added 0.2%, while South Korea’s Kospi was flat at 0.04%.

European markets finished in the positive territory, boosted by strong opening of U.S. equity markets, corporate news, and auto stocks gains on the back of strong dollar and lower oil prices. The German DAX 30 advanced 0.5%, the French CAC 40 climbed 0.2%, and London’s FTSE 100 was flat. The euro steadied at $1.723.

OIL, METALS, CURRENCIES

Crude oil prices declined almost $1 on mild weather forecast and lower fuel demand. Light sweet crude for January delivery dropped 96 cents to $57.75 a barrel. Heating oil lost 3 cents to $1.6585 a gallon. Gasoline fell 2 cents to 41.4375. Natural gas slipped 5 cents to $11.567 per 1,000 cubic feet. London Brent gained 19 cents to 455.20.

European Gold traded mixed. In London the precious metal closed at $495.20 per troy ounce, down from $495.70. In Zurich gold traded unchanged at $495.95. In Hong Kong gold climbed $1.80 to close at $497.75. Silver traded unchanged at $8.13.

The U.S. dollar rebounded from early highs to finish down against its major counterparts. The euro was quoted at $1.1796, up from $1.1723. The dollar bought 119.25 yen, up from 119.58. The British pound stood at $1.7210, up from $1.7141.

EARNINGS NEWS

Hillenbrand Industries, Inc ((HB)) announced that Q4 loss from continuing operations narrowed to $1.56 a share, from $3 a share in the year-earlier period on 6% revenue growth. The company envisages fiscal-year earnings from continuing operations in the range of $3.30 to $3.40 a share.

CORPORATE NEWS

Applied Films Corp. ((AFCO)) announced that it has agreed to sell its 50% stake in its Chinese joint venture, Suzhou NSG AFC Thin Films Electronics Co., Ltd to its joint venture partner Nippon Sheet Glass for $14.6 million. Applied Films stated that it will take an impairment charge of $1.7-$1.9 million related to the deal.