Robust GDP Growth

Elena
21 Dec, 2005
New York City

The U.S. economy grew at fastest pace in a year and a half according to a report, released by the Commerce Dept. The third-quarter GDP rose at an annual rate of 4.1%, despite surging oil prices and hurricanes, following a 3.3% rise in Q2. In earnings news, athletic footwear, Nike Inc reported that Q2 profit advanced 15% to $1.14 a share on 10 revenue growth, beating analyst estimate. ATI Technologies reported an 88% decline in quarterly profit, despite revenue growth, exceeding expectations.

U.S. MARKET AVERAGES

U.S. stock futures pointed to a positive opening of Wednesday session with expectations of a busy trading session. Market sentiment was boosted by merger-and-acquisition activity and overseas gains.

In takeover news, Allergan Inc. agreed to pay more than $3 billion for Inamed Corp., offering a deal that topped Medicis Pharmaceutical Corp.''s first bid.

Seagate Technology offered $1.9 billion in shares for Maxtor Corp., a hard disk making rival, that values each share at a 60% premium to Tuesday''s close.

Arden Realty Inc., a real estate investment trust valued at more than $3.1 billion, is near a deal to be bought by General Electric Co. and other investors.

Elsewhere, power generator Calpine Corp. filed for Chapter 11 bankruptcy protection, an expected move as its debt burden mounted.

Dow Jones futures were recently up 25 points, S&P 500 futures rose 3.10 points, and Nasdaq 100 futures were ahead 6 points.

ECONOMIC NEWS

Wednesday morning, the Department of Commerce released its final report on third quarter gross domestic product, showing that GDP growth was downwardly revised. The downward revision came as a surprise to economists.

The report showed that third quarter GDP rose at an annual rate of 4.1 percent, down from the previous estimate of 4.3 percent, although still above the 3.3 percent growth seen in the second quarter. Economists had expected third quarter GDP growth to be unrevised.

The Commerce Dept. said that the lower than previously reported growth reflected a downward revision to consumer spending for durable goods as well as several other smaller downward revisions that were partly offset by an upward revision to exports of services.

Despite the downward revision, the third quarter GDP growth remained the strongest rate of growth since the first quarter of 2004. The growth reflected strong consumer spending, equipment and software spending, federal government spending, and residential fixed investment.

However, the report also showed that the index of consumer prices excluding food and energy rose 1.4 percent in the third quarter, an upward revision from the previous estimate of 1.2 percent growth. The price growth still remained below the 1.7 percent increase seen in the second quarter.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished largely in the positive, led by the Nikkei which hit a fresh five-year high of 2.02% to 15,957.57, boosted by exporter issues like Honda Motor and other strong sectors, including the real estate sector with Mitsubishi Estates in the lead. Across the region, South Korea’s Kospi rose 1%, Hong Kong’s Hang Seng advanced 0.5%, and Sydney All Ordinaries climbed 0.9%.

European stocks advanced at mid-day trading, lifted by strong energy and metals stocks as well as corporate news from Philips Electronics. Both the German DAX 30 and the French CAC 40 broke through new highs, rising 0.5% and 0.6% respectively. London’s FTSE 100 gained 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices advanced after an attack on a pipeline and ahead of petroleum report, expected to show a decrease in oil inventories. Light sweet crude for January delivery gained 26 cents to $58.35 a barrel on the Nymex. London Brent climbed 26 cents to $50.43.

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.

The U.S. dollar lost ground against its major counterparts in European trading. The euro was quoted at $1.1870, up from $1.1863. The dollar bought 117.12 yen, down from 117.14. The British pound traded at $1.7567, up from $1.7531.

EARNINGS NEWS

Palm Inc., ((PALM)), maker of handheld devices, reported its fiscal Q2 net profit soared to $5.02 a share, up from 48 cents a share in the year-earlier period as it booked a tax-related gain and revenue climbed 18%. The results topped analysts'' estimates and the company issued an upbeat outlook for the current quarter. If not for the tax benefit and other items, earnings would have been 47 cents a share, down from 53 cents a share. Analysts expected the company to post a profit before items of 43 cents a share.

Nike Inc., ((NKE)), athletic footwear and apparel company, reported that Q2 profit advanced 15% to $1.14 a share, up from 97 cents in the year-ago period. Earnings beat analysts'' estimate by 11 cents a share. Revenue rose 10% from the comparable period. Strong sales and higher margins at its Nike brand businesses in the U.S. and the Americas drove the better-than-expected earnings.

Jabil Circuit Inc., ((JBL)), electronic systems company, reported a Q1 profit of 37 cents a share, up from 27 cents a share in the year-ago period on revenue growth. The company posted core earnings of 44 cents share, beating the analysts’ estimates for 42 cents a share.

Joy Global Inc., ((JOYG)), a provider of mining equipment and services, posted a Q4 net income of 45 cents a share, up from 16 cents a share in the year-ago period, in line with the analysts’ expectations. Net sales for Q4 advanced 36%. Coal prices in the U.S. remain strong, particularly in the Powder River Basin. The non-U.S. coal business will increasingly be driven by the emerging markets of China, Russia and India.

ATI Technologies, ((ATYT)), maker of graphics card, reported an 88% decline in quarterly profit. Adjusted earnings per share came to 10 cents a share, down from 28 cents a share a year ago despite revenue growth, beating analyst forecasts for earnings of 4 cents a share.