GM Hits a New Low

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

Better than expected decline at wholesale level inflation and stable housing construction report failed to excite the market. November PPI drops 0.7% and core PPI rose only 0.1%. Reflecting healthy construction market single family housing starts for November show robust gains. Nike and Morgan Stanley deliver strong earnings. General Motors shares drops below $20 for the first time since 1987.

U.S. MARKET AVERAGES

Broader market averages fell at close reflecting general worries related to inflation, fall in General Motors stock and tech stocks losing early firmness in the day.

General Motors fell below $20 and closed at $19.85, lowest level since October 1987, as report from J. D. Power Associates said that the company is still losing market share to Asian manufacturers. Also after the close investment arm controlled by investor Kirk Kerkorian reported to have sold 12 million shares of General Motors and register investment loss for tax purposes. This sale will reduce his stake close to 7.8% from 12%.

Housing stocks failed to respond to a better than expected November construction report. Oil rose for the most of the day but energy stocks did not rise reflecting general strength in the energy market.

Yield on ten year bond rose from 4.44% to 4.47% even though the wholesale inflation report suggested a decline.

After the close Nike reported second quarter earnings of $1.14 compared to 97 cents a year ago on revenue growth of 10%.

ECONOMIC NEWS

The Department of Commerce released its report on housing starts in the month of November on Tuesday, showing that housing starts rose unexpectedly. The report also showed a notable increase in building permits.

The report said that housing starts rose 5.3 percent to a seasonally adjusted annual rate of 2.123 million units in November from a revised 2.017 million unit rate in October. The increase came as a surprise to economists, who had expected starts to fall to a 2 million unit rate.

The increase in housing starts reflected growth in all regions but the South, with double-digit growth in the Northeast, the Midwest, and the West more than offsetting a 1.3 percent drop in housing starts in the South.

Producer prices fell more than expected in the month of November, according to a report from the Department of Labor, reflecting a significant decrease in energy prices. The report also showed that core prices rose less than expected.

The Labor Dept. said that its producer price index (PPI), a key gauge of wholesale inflation, fell 0.7 percent in November after rising 0.7 percent in October. Economists had been expecting the index to fall by a more modest 0.5 percent.

As mentioned above, the drop by the PPI was largely due to a steep drop in energy prices, which fell 4.0 percent in November after increasing by 4.1 percent in October. The Labor Dept. said that residential natural gas prices led the downturn in energy prices.

The report also showed that the core PPI, which excludes food and energy prices, rose 0.1 percent in November after falling 0.3 percent in October. The increase came in slightly below economist estimates of an increase of 0.2 percent.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished Tuesday session generally higher. The Nikkei climbed 1.6% on news that U.S. insurer American International Group will buy a Tokyo development property for $3.5 billion. Among other regional markets Sydney’s All Ordinaries rose 0.4%, South Korea’s Kospi gained 0.1%, while Hong Kong’s Hang Seng declined 0.4%.

European stocks traded in a tight range Tuesday to close steady as the downside trend was limited by upbeat U.S. economic data, higher opening on Wall Street and gains from mining and utility stocks. The German DAX 30 finished flat, the French CAC 40 added 0.1%, and London’s FTSE 100 was also flat.

OIL, METALS, CURRENCIES

Crude oil prices advanced ahead of petroleum report, expected to show a decrease in oil inventories. Light sweet crude for January delivery gained 8 cents to $58.17 a barrel on the Nymex. Heating oil advanced to $1.7495. Gasoline added less than a cent to $1.5350. Natural gas edged down to $14.10 per 1,000 cubic feet. London Brent climbed 32 cents to $56.43.

Gold traded mixed in European trading. In London gold closed at $502.10, down from $506.70 per troy ounce. In Zurich the precious metal rose to $507.30 from $506.95. In Hong Kong gold fell $2.65 to close at $505.95. Silver closed at $8.51, down from $8.55. In New York gold was down $3.20 to $493.80 per ounce and silver was down 8 cents to $8.315 at close.

The U.S. dollar climbed against its major counterparts in European trading. The euro fell to $1.1883 from $1.2010. The dollar bought 116.82 yen, up from 115.97. The British pound traded at $1.7602, down from $1.7628.

EARNINGS NEWS

Morgan Stanley ((MWD)), brokerage services company, reported Q4 net income of $1.68 a share, up 49% from $1.09 a share in the year-earlier period on 28% revenue growth, topping analyst estimate of $1.08 a share.

Progress Software Corp ((PGRS)), software company, reported Q4 net income of 33 cents a share, up from 28 cents a share in the year-earlier period on 12% revenue growth, missing analyst estimate of 37 cents a share. Pro forma earnings were 38 cents a share. The company announced it would pay $68 million to buy Neon Systems.

Park Electrochemical Corp. ((PKE)), printed circuit boards manufacturer, reported Q3 earnings per share before special items of.41 cents, up from 21 cents in the same period last year. The company topped analysts’ expectations of 34 cents per share. Earnings per share were 48 cents up from 38 cents per share for the comparable period.

FactSet Research Systems ((FDS)), provider of financial and economic data, reported Q1 earnings of 38 cents a share, up from 33 cents a share in the year-ago period. On a non-GAAP basis, the company earned 38 cents a share. Revenue advanced 21.1%. The company beat the analysts’ estimates for earnings of 35 cents a share.

Park Electrochemical Corp.], ((PKE)), printed circuit boards manufacturer, reported Q3 earnings per share before special items of.41 cents, up from 21 cents in the same period last year The company topped analysts’ expectations of 34 cents per share. Earnings per share were 48 cents up from 38 cents per share for the comparable period.