Retails and Techs Rise

Elena
06 Dec, 2005
New York City

Time Warner Inc. slid on news that the company''s America Online division is close to a deal with Microsoft Corp. to create an online advertising service in competition with Google Inc. Sears Holdings Corp. posted sharp quarterly profit drop from the prior year, but beat estimates. UBS analyst raised estimates for both Apple''''s stock price and Q1 earnings because of the great popularity of iPods with consumers.

U.S. MARKET AVERAGES

U.S. stock averages advanced Tuesday, boosted by strong productivity data which helped inflation worries ease and robust retail and technology stocks like Apple and Sears Holding. Currently all 3 major U.S. equity indices are showing gains of nearly 0.6%.

A sharp jump in industrial productivity, the biggest surge in two years, lifted market sentiment today. Investors welcomed data, released by the Labor Department that the third-quarter productivity rose 4.7 %o versus the summer. This news helped labor costs go lower, easing fears of inflation on Wall Street.

The semiconductor sector recovered from yesterday’s profit-taking, approaching a high set last week. The computer hardware sector was also strong, advancing by 1.6%.

Apple ((AAPL)) advanced on a positive analyst comment, extending its 52-week high. Adobe Systems ((ADBE)) extended last-week gains, setting a fresh peak. AMR ((AMR)) reached a new high as well, ticking above recent resistance.

ConAgra ((CAG)) fell on earnings guidance, dropping to a new 52-week low. Comstock Homebuilding Companies ((CHCI)) dropped after releasing new fourth-quarter guidance. The stock extended its low.

In corporate news, Time Warner Inc.''s talks with Microsoft Corp. and Google Inc about a number of possible deals largely don''t involve either company buying a stake in the AOL Internet-service unit. The deal ideas center on Web search, ad sales and possibly other fields. Time Warner plans to drop Google as its primary provider of Internet search and use Microsoft''s MSN instead. Microsoft and Time Warner are considering creating a joint advertising sales force to sell ads across AOL and MSN.

Cephalon Inc. said it''ll pay around $360 million in cash to buy Zeneus Holdings to speed into entry in the European oncology market.


MOVERS AND SHAKERS

Apple Inc. ((AAPL)) rose 3.6% to $74.39 after UBS raised its price target on the stock to $86 from $74 because of its iPod product.

FedEx Corp. ((FDX)) rose 3.2% to $98.82 after Merrill Lynch upgraded the stock to ‘buy’ from ‘neutral’.

Dillard's Department Stores ((DDS)), retailer, reported narrower Q3 loss of $2.7 million, or 3 cents a share vs. $18.7 million, or 23 cents a year ago, exceeding analyst estimates of 21 cents quarterly loss. Company’s sales rose to $1.73 billion with same-store sales 2% higher compared with last-year figures. The stock gained 7.1%.

G-III Apparel Group Ltd. ((GIII)), sportswear maker, reported Q3 net income rise of $14.8 million, or $1.73 a share compared with $9.9 million, or $1.33 a share a year ago. Sales climbed 62% to $186.6 million largely due to the acquisition of Marin Richards stock and assets from Winlit. The company projected 2006 net income in the range of 85 cents to 90 cents a share, including an 11-cent non-cash charge. The stock gained 8.4%.

ConAgra Foods Inc. ((CAG)) projected Q2 pro forma earnings of 38 cents a share compared with analyst expectations of 45 cents a share on revenue of $4.03 billion. ConAgra cited lower-than-expected shipment volume and revenue and increased input and operating costs, among other factors, for its expected quarterly shortfall. The stock fell 3%.

ECONOMIC NEWS

Tuesday morning, the Department of Commerce released its report on factory orders in the month of October, showing that orders rebounded after a notable decline in September. The strength of the rebound came as a surprise to economists.

The report showed that new orders for manufactured durable goods rose 3.4 in October following a 2.0 percent decrease in September. Economists had been expecting a much more modest increase of about 2.2 percent compared to the 1.7 percent drop originally reported for September.

The growth in October was largely due to a rebound by orders for transportation equipment, which rose by 11.4 percent in October after falling 6.4 percent in September. Excluding orders for transportation equipment, new orders increased 0.3 percent.

The U.S. Department of Labor released its revised reading for third-quarter productivity on Tuesday, with the measure now showing a 4.7% seasonally adjusted annual growth rate. When the statistics were first reported in early November, the government said productivity increased by a rate of 4.1%. Unit labor costs were revised to a decline of 1%, compared to the previous-reported estimate of a 0.5% slide.

Meanwhile, factory orders data are due out after the start of trading. Economists expect the measure to increase by about 2% for October, reversing September's 1.7% decline.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed mostly lower after the Nikkei retreated from multi-year highs, losing 0.8% on profit taking. High-tech stocks declined on concerns that the sector gained rather fast during the rally, financial shares attracted investors. Among other regional markets, Hong Kong’s Hang Seng dropped 1.1% on rising oil, Australia’s All Ordinaries lost 0.2%, while South Korea’s Kospi gained 0.5%.

European markets closed higher, supported by strong U.S. trading on productivity data, as well as financial and telecom stocks. The German DAX 30 gained 0.7%, the French CAC 40 advanced 0.6%, and London’s FTSE 100 rose 0.5%.

OIL, METALS, CURRENCIES

Crude oil prices slipped below $60 a barrel after rally, despite cold weather forecast. Light sweet crude for January delivery fell 20 cents to $59.77 a barrel on the Nymex. Heating oil lost 2 cents to $1.7695 a gallon. London Brent dropped 25 cents to $57.48.

European gold retreated from 25-year highs as investors took profit from the surge. In London the precious metal closed at $507 per troy ounce, up from $505.05. In Zurich gold traded at $506.55, up from $505.45. In Hong Kong gold rose $2.30 to close at $508.55. Silver traded at $8.62, up from $8.55.

The U.S. dollar advanced against other major counterparts. The euro was quoted at $1.1765, down from $1.1790. The dollar bought 121.04 yen, up from 120.79. The British pound traded at $1.7364, down from $1.7421.

EARNINGS NEWS

Kroger Co ((KR)), supermarket chain, announced that Q3 profit advanced to 25 cents a share, from 19 cents a year earlier, matching analysts'' estimate. Sales rose to $14.02 billion from $12.85 billion in last year''s third quarter. Identical supermarket sales rose 6.6% with fuel and 3.7% without fuel.

Brocade Communications Systems, ((BRCD)), server and storage company, posted Q4 earnings of 8 cents a share, breakeven on a per share basis in the same period a year earlier. If not for non-recurring items, earnings would have been 7 cents a share, topping the analysts’ estimate of 5 cents a share.

Sears Holdings, ((SHLD)), retailer, announced that Q3 net income fell to 35 cents a share, from $5.45 a share in the same time last year, despite revenue growth. On a proforma basis Sears stated earnings dropped to 35 cents a share from 93 cents a share in the comparable period last year, with revenue down 5%. Analysts were waiting for earnings of 28 cents a share.