Averages Fall Despite Strong Economic Reports

123jump.com Staff
15 Dec, 2005
New York City

Flood of economic reports suggested that labor market is steady, factory production is rising and consumer prices are in check. November CPI reported biggest monthly decline in 56 years. Bear Stearns and Goldman Sachs reported strong rise in earnigs following a similar rise reported by Lehman Brothers this week. Philip Morris registered victor as Illinois Supreme Court reversed lower court judgement of $10.1 billion, stock of the parent company jumps 4%.

U.S. MARKET AVERAGES

Investors decided to sell stocks in a disappointing trading session despite strong corporate earnings and biggest fall in consumer price index since 1949.

Market attempted a comeback at the opening after a lame session yesterday when record trade deficit was reported by Commerce Department. Strong earnings reported by home builder Lennar and financial services companies Bear Stearns and Goldman Sachs failed to inspire market in the morning.

Biggest fall in consumer prices in 56 years was reported by Labor Department of 0.6% in November, stable unemployment claims and nations factories and mines reported rising production. The positive economic news did convince traders to put more money to work and most sectors came under selling pressure during the day.

Declining issue outnumbered issues gaining ground by two to one ratio on a day when volume on New York Stock Exchange barely exceeded yesterday’s volume.

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 89 cents to $59.99 a barrel in electronic trading on the Nymex. Heating oil lost 5 cents to $1.7876, while gasoline fell 2 cents to $1.6168. Natural gas dropped 90 cents to $13.78 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. In New York gold declined to $2.90 to $506.60 per ounce but silver was up 17 cents to $8.63 and copper was up 17 cents to $2.081.

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.