November CPI Down 0.6%

Elena
15 Dec, 2005
New York City

Consumer prices fell 0.6% in November, the biggest drop in more than half a century due to record-low gasoline prices. In the week ending Dec. 10, the advance figure for seasonally adjusted initial claims was 329,000, an increase of 1,000 from last-week revised figure of 328,000. In earnings news, homebuilder Lennar posted Q4 profit jump of 53% on improved building process and higher revenue.

U.S. MARKET AVERAGES

The stock futures pointed to a flat to slightly lower opening, awaiting a large amount of economic news, including data on consumer inflation and initial jobless claims. On Wednesday, the major averages recorded a mixed performance with the S&P 500 reaching a new multi-year closing high.

Other economic reports are due out later in the day. Just before the start of trading, information on November industrial production is scheduled to be released. In the middle of the day, the Philadelphia Fed is set to announce its survey of regional business activity for December.

On the corporate news front, Microsoft Corp. ((MSFT)) is expected to be in the spotlight, too after the world''s largest software maker raised in its quarterly dividend 12.5% and reiterated confidence in its growth prospects.

Altria Group ((MO)) will be in focus during the session, as the Illinois Supreme Court is expected to rule on a $10.1 billion judgment levied against the firm''s Philip Morris USA unit. Shares of Altria rose sharply on Tuesday after an analyst said that a positive outcome was likely in the case.

Standard & Poor''s 500 futures were down 1.4 points, but still above fair value. Dow Jones industrial average futures were off 17 points, and Nasdaq 100 futures were down 1.5 points.

ECONOMIC NEWS

The Department of Labor released its report on consumer prices in the month of November on Thursday, showing that prices fell more than economists had expected due largely to a steep drop in energy prices.

The Labor Dept. said that its consumer price index (CPI) fell 0.6 percent in November following a 0.2 percent increase in October. The decrease marked the steepest drop in prices in over 50 years. Economists had been expecting a more modest decrease of about 0.4 percent.

The drop in consumer prices was largely due to a steep decline in energy prices, which fell 8 percent in November after falling 0.2 percent in October. The decline in energy prices seen in the past two months comes after significant increase in July, August, and September.

The core CPI, which excludes food and energy prices, rose 0.2 percent in November, matching the increase seen in the previous month. The increase by the core CPI came in line with economist estimates.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished generally higher with the Nikkei falling for a second consecutive session. The Japanese bellwether dropped 1.4%, hurt by weaker dollar and declining exporter-related issues. The dollar slid to 115.83 yen. Among other regional markets, Hong Kong’s Hang Seng advanced 0.6%, South Korea’s Kospi rose 0.3%, and Australia’s all Ordinaries gained 0.2%.

European stocks slightly advanced at mid-day trading, supported by chemical stocks like BASF and Laanxess, but gains were limited by weaker mining stocks like BHP Billiton and Rio Tinto. The German DAX 30 inched up 0.1%, followed by the French CAC 40 and London’s FTSE 100 which also added 0.1%. The euro was 0.3% higher against the dollar at $1.2010.

OIL, METALS, CURRENCIES

Crude oil prices slipped on increased crude oil inventories, easing winter supply concerns. Light sweet crude for January delivery fell 43 cents to $60.42 a barrel in electronic trading on the Nymex. Heating oil lost 2 cents to $1.8217, while gasoline marginally fell to $1.6350. Natural gas dropped 49 cents to $14.190 per 1,000 cubic feet. London Brent declined 24 cents to $59.36.

Gold prices declined despite a drop in the U.S. dollar as investors kept digesting the increased interest rate. In London gold closed at $510.85 per troy ounce, down from $522.80. In Zurich the precious metal fell to $511.45 from $522.95. In Hong Kong gold dropped $7.30 to close at $515.60. Silver closed at $8.41, down from $8.59.

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 $1.2028, up from $1.1962 The dollar bought 117.24 yen, up from 119.90. The British pound stood at $1.7743, up from $1.7697.

EARNINGS NEWS

Lennar Corp., homebuilder, reported its Q4 profit advanced 53 % to $3.54 per share, up from $2.29 per share in the year-ago period, well above analysts’ estimates of $3.34 per share, as the company improved its building process and generated higher revenue.

Pier 1 Imports, Inc. ((PIR)), home-furnishings retailer, reversed to a Q3 loss of 8 cents a share, down from a year-ago profit of 22 cents a share and is likely to report negative comparable sales on heavy promotional environment. Sales fell 2.4%, with comparable sales going down 6.5%. The company announced it now expects to post December comparable sales down in the negative mid-single digit range.

Viad Corp ((VVI)), trade show and event organizer, announced full year income for 2006 will be $1.51 to $1.62 per share, excluding an expected stock option expense of 6 cents a share. The company''s 2005 previous guidance was for $1.38 to $1.42 a share, if not for a 2 cents a share impairment loss. The company stated Q1 income in 2006 will drop from 2005 because of negative show rotation but show rotation should go up in the Q2 and Q3.

Nordson Corp ((NDSN)), provider of precision dispensing equipment, reported Q4 earnings of 80 cents a share on sales growth, beating analyst estimate for a profit of 66 cents a share. The company stated that its strong results were due to volume growth, particularly in its advanced technology business.