Record Trade Deficit

Elena
14 Dec, 2005
New York City

Asian-Pacific benchmarks closed mixed with the Nikkei at its sharpest decline in two months, down 2% on disappointing business sentiment survey. European stocks also traded mixed at mid-day with the German DAX 30 and the French CAC 40 dragged by strong euro and weak exporters. In corporate news, General Dynamics agreed to acquire Anteon International for $2.1 billion, or $55.50 a share. Apple declined after Bear Stearns cut its rating on the company to peer perform from outperform.

U.S. MARKET AVERAGES

U.S. stock futures indicated a lower opening of Wednesday session, with investors still digesting the Fed Reserve decision to increase interest rate to 4.25% and with technology shares expected to come under pressure as a rating downgrade sent Apple Computer Inc. lower before the bell.

In addition, the Fed signaled its cycle of interest rate hikes may be nearing an end. Tuesday's hike was the Fed's 13th straight rate increase.

On the economic news front, the focus will be on Thursday's consumer price index. However, a couple economic reports are due out on Wednesday, with the pre-market release of information on October international trade and on November import and export prices.

In corporate news, Bear Stearns cut its rating on Apple to peer perform from outperform. Citigroup cut its rating on video game publisher Electronic Arts to hold from buy.

Defense contractor General Dynamics Corp. ((GD)) agreed to acquire Anteon International Corp. ((ANT)) for $2.1 billion, or $55.50 per share in order to expand its training and technology services to the U.S. military. The deal includes $100 million debt and is expected to close by the end of the second quarter of 2006.

Boeing Co. ((BA)) won a $10 billion order from Qantas Airways Ltd. for 65 Boeing 787 Dreamliner jets, with an option for an additional 50 planes.

FPL Group Inc. ((FPL)), the parent of utility Florida Power and Light, is in advanced talks to acquire Constellation Energy Group Inc. for more than $11 billion.

Standard & Poor''s 500 futures were down 2.8 points, a shade above fair value. Dow Jones industrial average futures were off 27 points, and Nasdaq 100 futures were down 5.5 points.

ECONOMIC NEWS

The U.S. Commerce Department revealed that the trade deficit widened to $68.89 billion in October, compared to a revised $66 billion in September. In a separate report, the Commerce Department said that import prices dropped 1.7% in November, compared to a revised 0.3% increase in October. Excluding petroleum, November's import prices edged down 0.2%. Export prices slipped 0.9% in the month.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed, following U.S. central bank interest rate increase. The Nikkei had its sharpest drop in two months, falling down nearly 2% on disappointing business sentiment survey and steel stocks sell-off. Across the region South Korea’s Kospi fell 0.25, while Australia’s All Ordinaries advanced 0.2%, followed by Hong Kong’s Hang Seng, up 0.2%.

European stocks traded mixed at mid-day, reflecting stronger euro and weak exporter-related issues and auto stocks. The German DAX 30 fell 0.4%, the French CAC 40 lost 0.2%, while London’s FTSE 100 advanced 0.2%, boosted by retailers like Marks & Spencer, Kingfisher and aerospace companies like BAE Systems. The euro rose 0.7% to $1.2025.

OIL, METALS, CURRENCIES

Crude oil prices hovered over $61 a barrel ahead of oil inventory report, expected to show declines. Light sweet crude for January delivery gained 2 cents to $61.39 a barrel on the Nymex. Heating oil slightly fell to $1.8210, while gasoline edged up to $1.6493. Natural gas dropped 14 cents to $15.235 per 1,000 cubic feet. London Brent futures gained 3 cents to $59.55.

Gold prices declined nearly $10 despite a drop in the U.S. dollar as investors kept digesting the increased interest rate. In European trading gold February delivery lost $9 to trade at $515.10 per troy ounce.

The U.S. dollar sharply dropped against other major currencies on record trade deficit and after the Fed Reserve hinted it might soon stop interest rate hikes. In European trading the euro was quoted at $1.2018, up from $1.1940. The dollar bought 118.60 yen, up from 119.90. The British pound stood at $1.7724, up from $1.7696.

EARNINGS NEWS

Cubic Corp. ((CUB)), service electronic products manufacturer, reported Q4 earnings of 19 cents a share, down from 35 cents a share in the year-earlier period, missing analysts’ expectations of 21 cents a share Sales rose to $219 million from $185 million.

Winnebago Industries Inc. ((WGO)), motor homes and self-contained recreation vehicles manufacturer, reported Q1 earnings of 44 cents a share, down from 57 cents a share in the year-earlier period, beating analyst estimate of earnings of 42 cents a share. Sales fell to $232.3 million from $266.1 million.

Charles River Laboratories International, Inc. ((CRL)), research tools and integrated support services provider, restated its 2005 guidance and announced it envisages 2006 earnings in the range of $2.07 to $2.13 a share on revenue up 7% to 9%. In addition, the company intends to repatriate up to $150 million of its accumulated income earned outside the U.S.

Powell Industries, Inc. ((POWL)), electrical energy systems maker, announced it reversed to a Q4 net profit of 17 cents a share, up from a net loss of 2 cents a share in the year-ago period on 70% sales growth.

Argon ST, Inc. ((STST)), a maker of systems and sensors for military applications, announced that Q4 net income soared 95% to 29 cents a share from the year-ago period matching analysts’. Sales more than doubled. Argon envisages fiscal 2006 revenue in the range of $330 million to $345 million.