Industrial Output Rises

Elena
15 Dec, 2005
New York City

Industrial output at the nation''s factories, mines and utilities rose 0.7% last month, following a 1.3% rise in October. November CPI fell 0.6%, below an expected 0.4% decline, while the more closely watched core rate rose 0.2%, matching expectations. 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.

U.S. MARKET AVERAGES

U.S. stock averages opened higher on CPI data generating optimism that the pace of inflation has been contained, lending support to the view that the Federal Reserve may not need to raise interest rates much further. Later in the session the three major averages lost their initial advance and fell as investors adjusted their derivative positions ahead of Friday which marks the end of the two-day quarterly settlement and expiration of four types of December futures and options contracts.

In economic news, the U.S. Labor Department reported that the consumer price index, a key gauge of consumer inflation, dropped by 0.6% in November versus expectations of 0.4% decline. This is the sharpest decline in CPI in 56 years and is largely attributale to an 8% drop in energy prices, including a 16% slide in gasoline prices. Core CPI, which excludes the volatile food and energy sectors, ticked up by 0.2% in November, matching both October increase and economist expectations.

In a separate report, the Labor Department announced that initial jobless claims came in at 329,000 in the week ended December 10, up 1,000 from the last-week revised level of 328,000. Economists had expected a decline in claims for the week.

Dow''s losses were limited by Altria Group ((MO)) which jumped 6% as the Illinois Supreme Court reversed a $10.1 billion verdict against the company''s tobacco unit, Philip Morris, which had been accused of defrauding customers into thinking 'light' cigarettes were safer than regular smokes.

In earnings news, Bear Stearns ((BSC)) released Q4 earnings of $2.90 per share, up from $2.61 per share last year, exceeding Wall Street’s estimates of $2.63 per share. Revenues for the period rose 3% to $1.9 billion. In addition, Bear Stearns revealed a 12% increase in its quarterly dividend to a level of $0.28 per share. The company also authorized up to $1.5 billion for stock repurchases.

Goldman Sachs ((GS)) reported Q4 profit of $3.35 per share, up from $2.36 per share last year and in line with analyst estimate. The company said net revenues for the period came in at $6.29 billion, up from last year''s mark of $4.58 billion.

Merck ((MRK)) revealed a series of measures, including changes in marketing and sales meant to drive greater efficiency and a focusing of R&D efforts in 9 priority disease areas. The drug giant predicted an additional $1 billion in savings through 2010 from its business process redesign, raising its total expected savings by the end of the decade to $4.5 to $5billion. Merck reaffirmed its 2005 and 2006 earnings guidance.

Tobacco stocks moved notably to the upside, boosted by Altria''s rally. The gold sector pushed further higher, trying to rebound from recent losses. The airline sector steadily advanced to post a gain of 1.3%.

Energy stocks dropped in early going, but natural gas inventories released during the mid-morning prompted a reversal. The natural gas sector showed only a modest loss on the day.

Abgenix ((ABGX)) jumped to a new 52-week high on its deal to be acquired by Amgen ((AMGN)). Altria ((MO)) set a new peak following its court victory and E*TRADE ((ET)) hit a fresh high on positive 2006 guidance. United Technologies ((UTX)) extended recent gains. AMR ((AMR)) jumped to another high, resuming its lost momentum.

Pier 1 Imports ((PIR)) dropped 13% to a new 52-week low on quarterly results NBTY ((NTY)) was sent to a fresh low by its earnings release. PowerDsine''s ((PDSN)) guidance-related 23% decline took the stock to a new low as well.

The Dow Jones industrial average was up 11.69 points, or 0.11%. The Standard & Poor''s 500 Index was down 3.01 points, or 0.24%. The technology-laced Nasdaq Composite Index was down 9.75 points, or 0.43%.

MOVERS AND SHAKERS

Abgenix ((ABGX)) agreed to be acquired by Amgen ((AMGN)) for $2.2 billion, including debt. Under the terms of the agreement, shareholders of Abgenix will receive $22.50 in cash per common share. The deal is expected to close by the end of the first quarter of 2006. The stock jumped 48%.

Bear Stearns ((BSC)) posted record Q4 earnings of $407 million, or $2.90 a share, up from $352.6 million, or $2.61 a share. Revenue rose 3% from the year-ago period to $1.9 billion. Quarterly results beat expectations of $2.63 a share on revenue of $1.8 billion. Company’s shares rose 2.6%.

ECONOMIC NEWS

Industrial production increased 0.7 percent in November after an upward-revised gain of 1.3 percent in October. Further recoveries in petrochemical and energy-related industries affected by the hurricanes again contributed significantly to the increase in output in November. The upward revisions to the October production estimates were widespread. The largest contributor to the revision was the index for air conditioners, which was higher than previously estimated. Another notable upward revision was in the estimate of production of manufactured homes.

At 109.0 percent of its 2002 average, output in November was 2.8 percent above its year-ago level. Manufacturing output moved up 0.3 percent in November after an increase of 1.8 percent in October. The output at mines surged 4.8 percent in November after having fallen in the previous four months, and the output at utilities rose 0.3 percent. Capacity utilization for total industry increased to 80.2 percent, a rate 0.8 percentage point below its 1972-2004 average.

The number of people filing for first-time unemployment benefits ticked up in the most recent week, according to government data released Thursday, disappointing economists, who had, on average, expected the measure to fall.

The U.S. Department of Labor revealed Thursday that initial jobless claims came in at 329,000 for the week ended on December 10, an advance of 1,000 from the previous week''s revised total. Economists had expected the number of claims to moderate during the week.

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 closed mixed on weaker energy sector and corporate news from Philips Electronics. The German DAX 30 advanced 0.2%, the French CAC 40 was flat at 0.04%, and London’s FTSE 100 fell 0.5%.

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 for a third consecutive session, but kept above $500. In London gold slipped as far as $500.25 per troy once to recover to $506.70.

The U.S. dollar] fell against the yen, but rose against the euro and pound on strong CPI data. In European trading the euro was quoted at $1.1965, down from $1.2002. The dollar bought 116.58 yen, down from 117.31. The British pound stood at $1.7652, down from $1.7734.

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..