Sharp Decline in New Homes

Elena
23 Dec, 2005
New York City

Stock markets ticked up at opening on Ford Motor''''s health-care deal, merger-and-acquisition news, as well as economic data. Ahead of the Christmas holiday investors seem reluctant to make significant moves and only thin trading is expected. In earnings news, General Mills posted Q2 earnings rise of 97 cents a share, exceeding estimates, while American Greetings Corp missed estimates reporting Q3 profit decline, reflecting charges.

U.S. MARKET AVERAGES

U.S. stocks advanced at the start of Friday session on Ford Motor Co.''s health-care deal, further mergers-and-acquisitions activity and economic data. However, low-volume trading is expected with investors reluctant to make any significant moves ahead of the long holiday weekend The Nasdaq leads the averages, although they post modest gains only, failing to build a significant upward momentum.

The Commerce Department reported that orders for durable goods in November rose by 4.4% to a record $223 billion last month, well above expectations of a 1.5% increase, following a 3% gain in October. The increase is due to orders for civilian aircraft and excluding orders for transportation equipment, orders fell 0.6% in November.

Final reading of December consumer sentiment is expected to remain unchanged at 88.7. November new home sales data is expected to show 1.31 million sales from 1.42 million the previous month.

Ford Motor announced a health-care deal with the United Auto Workers that it expects to result in savings of $850 million year before tax. The group has also injected $2.1 billion into its ailing Jaguar unit.

In merger-and-acquisition news, Luxembourg-based Arcelor SA raised its hostile offer for Canada''s Dofasco Inc. to $4.2 billion. Analysts believe Germany''s ThyssenKrupp AG will come back with a higher bid.

Tommy Hilfiger agreed to be bought by Apax Partners for $16.80 a share, or $1.6 billion. Hilfiger has been named principal designer of his namesake company as well as chairman of the strategy and design board.

Private equity group, Bain Capital is in talks to buy Texas Instruments Inc.''s sensors-and-controls business for between $2 billion and $2.5 billion. Apax Partners is expected to pay more than $1.5 billion for Tommy Hilfiger Corp with the offer valued at $16.75 a share.

In the drugs sector Wyeth agreed to pay up to $416.5 million for rights to a constipation and post-operative bowel dysfunction drug from Progenics Pharmaceuticals Inc.

AstraZeneca agreed to buy privately held U.K. biotech KuDOS Pharmaceuticals for $210 million in cash.

Technology posted modest gains in the first half hour of trading, including advances in networking, semiconductor and Internet stocks. With help from trucking and airline stocks, the transportation group extended its recent advance; the Dow Jones Transportation Average is expanding its all-time high.

Energy stocks were among the worst performers in the early going. The natural gas sector fell 1.3% and the oil service sector declined 1.1%.

The Dow Jones industrial average is up 7.36 points, the S&P 500 is ahead 0.78 of point and the Nasdaq 100 is up 3.45 points.

Treasury yields were slightly higher, including a 1.3 basis point rise in the 10-year yield, which now stands at 4.446%.

MOVERS AND SHAKERS

Applied Signal Technology Inc. ((APSG)) reported Q4 net income of $3.1 million, or 26 cents a share, compared with $2.4 million, or 21 cents, in the year-earlier period on $57.6 million revenue, beating expectations of 21 cents. The stock climbed 22.2%.

Cephalon ((CEPH)), the Frazer, Pa., drug developer, was upgraded to overweight from equal-weight at Morgan Stanley and its price target upped to $70 from $56. The stock gained 5.1%.

Forward Industries ((FORD)), carrying-case maker, cut its fiscal first-quarter revenue forecast to $8.3 million to $8.7 million from a prior expectation of more than $8.9 million. Company’s shares dropped 26.4%.

ECONOMIC NEWS

The Department of Commerce released its report on new home sales in the month of November on Friday, showing that sales fell even more than economists had expected. The data may raise some concerns about the strength of the housing market.

The report showed that new home sales fell 11.3 percent to a seasonally adjusted annual rate of 1.245 million units from a revised 1.404 million unit rate in October. Economists had been expecting a more modest decline to a 1.300 million unit rate.

The drop in new home sales reflected notable decreases in sales in the Midwest and the West as well as a more modest decrease in the South. The decreases more than offset a 13.4 percent increase in sales in the Northeast.

The report also showed that the median sales price of new houses sold in November was $225,200, while the average sales price was $283,300.

Friday morning, the Department of Commerce released its report on durable goods orders in the month of November, showing a much bigger than expected increase. Durable goods are goods that are meant to last for at least 3-years.

The report showed that new orders for manufactured durable goods rose 4.4 percent in November following a downwardly revised 3.0 percent increase in October. Economists had expected a much more modest 1.0 percent increase in November.

The increase in durable goods orders was largely due to a continued increase in orders for transportation equipment, which rose by 15.6 percent in November after rising 11.2 percent in October. Excluding orders for transportation equipment, orders fell 0.6 percent in November.

The Commerce Dept. also said that shipments of durable goods fell 0.2 percent in November following a 1.2 percent increase in October. At the same time, inventories of durable goods rose 0.5 percent in November, matching the increase seen in October.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished Friday session mixed with the Japanese Nikkei closed in honor of the Emperor’s birthday. Across the region, Taipei’s Weighted index surged 1.5% reversing from recent losses, South Korea’s Kospi climbed 0.6%, led by Samsung Electronics which marked an all-time high of 645,000 won. Hong Kong’s Hang Seng ended unchanged.

European stocks advanced at mid-day trading, boosted by strong U.S. markets close overnight with London’s FTSE 100 hitting a four-year high of 0.1% to 5,600. The German DAX 30 advanced 0.2%, followed by the French CAC 40 also rising 0.2%.

OIL, METALS, CURRENCIES

Crude oil prices declined in subdued trading and warm weather forecast. Light sweet crude for January delivery slipped 25 cents to $58.03 a barrel on the Nymex. Heating oil traded over 1 cent down at $1.7255 a gallon. Gasoline traded at $1.5375. Natural gas fell 36 cents to $12.560 per 1,000 cubic feet. London Brent lost 17 cents to $57.38.

Gold prices climbed in European trading. In London gold was fixed at $503.60, up from $501.40 bid per troy ounce. The Zurich gold price was not available. In Hong Kong gold rose $10.15 to close at $504.10. Silver opened at $8.52, up from $8.43.

The U.S. dollar traded mixed against its major counterparts in European trading. The euro was quoted at $1.1872, down from $1.1875. The dollar bought 116.56 yen, up from 116.55. The British pound traded at $1.7369, up from $1.7364.

EARNINGS NEWS

A.G. Edwards Inc, ((AGE)), financial services holding company, reported Q3 net earnings of 71 cents a share, up from63 cents a share in the same period a year ago on revenue growth, matching analysts’ expectations. The company’s results reflected a benefit of 5 cents a share, resulting from the resolution of certain tax matters related to technology research and development tax credits.

Solectron Corp, ((SLR)), electronics contract manufacturer, reported a Q1 profit of 2 cents a share, down from 5 cents a share in the year-ago period. Excluding one-time items and charges, the company earned 3 cents a share, matching analysts’ expectations.

Ashworth Inc, ((ASHW)), golf sportswear company, posted a fiscal Q4 net loss of 16 cents a share, down from net earnings of 14 cents a share in the year-ago period on revenue growth, in line with analysts’ estimate. Additionally, the company affirmed its previous fiscal 2006 forecast of earnings between 48 cents and 56 cents a share.

General Mills, ((GIS)), market packaged consumer food products producer, posted Q2 net income of 97 cents a share, up from 92 cents a share in the year-earlier quarter, beating analyst estimate by a penny. Sales for Q2 went up 3%, while unit volume grew 2% worldwide. General Mills affirmed its recently-raised forecast of 2005 earnings in the range of $2.80 to $2.85 per share.

American Greetings Corp., ((AM)), maker of greeting cards, reported Q3 profit of 19 cents per share, down from 78 cents per share in the year ago period, missing analyst estimate of 58 cents per share. The quarter''s results included a goodwill impairment charge of $33 million, which reduced earnings by 42 cents per share.