Earnings Sustain Rise in Averages

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

Traders showed interest in buying stocks on the rise in personal income, limited rise in inflation deflator, and unexpected fall in unemployment claims. Positive news on earings from RedHat, A G Edwards, General Mills, Paychex, ConAgra supported a broad rise in equities. American Greetings, Bed Bath & Beyond and Micron Tech disappointed the market.

Economic and earning news dominated a day of quiet trading.

Commerce Department reported rise in personal income and spending of 0.3% and an inflation metric, closely monitored by Federal Reserve, PCE deflator for the month of November, was reported at 0.1% matching October level. Unemployment claims fell by 13,000 to 318,000 for the week ending Dec 17th.

Market reacted positively in the morning as it digested the economic news. Strong earnings from several companies helped market to sustain the early gains in the mid-afternoon. Natural gas prices fell on the higher than expected inventories. Fall in energy prices helped to sustain the day’s momentum and broader averages for the day closed higher.

Barrick Gold ((ABX)) sweetened its offer to purchase Placer Dome in a deal valued at $10.5 billion. Gold sector has been consolidating in the face of multi-decade high gold prices.

General Electric ((GE)) also agreed to buy Arden Realty for $3.2 billion.

Shares of Albertson’s traded lower on the news reported by New York Times that the company has broken off talks with potential suitors. A group formed by CVS, hedge fund Cerberus capital management, Supervalu and Kimco Realty Trust had offered the company close to $9.5 billion.

Steady stream of earnings continue near the end of the year. Maker of Black Berry, Research in Motion ((RIMM)) reported 61 cents per share earning last evening. Earning for the quarter without one-time charge of 10 cents reflecting ongoing patent settlement talks were 71 cents per share.

The company added 645,000 subscribers in the third quarter, 25,000 lower than the company forecast. The company had 4.2 million Black Berry subscribers at the end of the quarter.

The company maintained its forecast of fourth quarter earning between 76 cents and 81 cents and lowered its subscriber addition target by 75,000 to 700,000 to 750,000.

General Mills Inc ((GIS)) reported second quarter earnings of 97 cents compared to 92 cents a year ago. The second largest cereal and snack food producer reported a 3% rise in domestic sales and 8% rise in international sales.

American Greetings Corp ((AM)) reported third quarter earnings of 19 cents vs. 78 cents a year ago on revenue decline of 5%. The company recorded one-time charge of 42 cents as goodwill impairment charge in the quarter.

Micron Technology ((MU)) stock fell 50 cents on what market considered a disappointing earnings report. The company reported earnings of 9 cents per share on revenue of $1.36 billion missing the estimates of 11 cents. The pricing environment for the DRAM market is expected to be tougher as analyst expect rise in supply in the coming months.

Red Hat ((RHAT)) reported third quarter earnings of 12 cents vs. 6 cents a year ago on revenue growth of 44%. The company’s stock jumped 4.7% and closed at $27.80, 52-week high.

Bed Bath & Beyond ((BBBY)) shares tumbled 12% to $36.27 despite rising earnings. For the fiscal third quarter the company reported earnings of 45 cent compared to 40 cents a year ago on revenue of $1.45 billion. The company said fourth quarter earnings would be 64 cents and for the full year would be $1.89. Both estimates are two cents below analyst’s forecasts.

Caterpillar ((CAT)) stock jumped close to 2.7% to $58.42 on recommendation from broker CSFB.