Active Deal Making in Quiet Trading

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

Bond and gold markets were the only financial markets that showed normal level of activities. Bonds in thin trading rose as durable goods orders rose and new home sales declined. Gold advanced little but demand for gold remained high from India and Middle East. Pace of deal making did not slacken. Texas inst, Affiliated Computers, NBC, Tommy Hilfiger kept bankers busy. Natural gas price fell 10% for the week but copper traded at record and silver and gold traded near record levels.

U.S. MARKET AVERAGES

Broader stock market averages did not move in the light trading environment even though bond market reacted to the news on durable goods orders and new home sales. Yield on ten-year bond fell to 4.364% on the news at early closing ahead of holiday.

The drop in new home sales of 11.3% in November is the largest drop of 24% in home sales since Jan 1994. Most economists expect the homes sales to slow by 6% in the year 2006. Durable goods orders jumped 4.4% in November on the rise in transportation orders. Market has rewarded shares of Boeing ((BA)), Caterpillar ((CAT)) and others in the last three months as orders for these companies have been strong.

Deal making has been at feverish pitch even during the holiday period. NBC Universal is reported to acquire controlling stake of 82% in cable channel MSNBC. Microsoft has been partner in the joint venture with NBC for the last ten years. The channel has lagged FOX and CNN cable channels in ratings. NBC has an option to acquire 100% of the channel in two years and is likely to rename it at that time. Recently, Microsoft ((MSFT)) sold its stake in magazine Slate to Washington Post. It is another indication that Microsoft is refocusing on its core business.

Affilated Computer Services ((ACS)) is in talk to be acquired by private equity companies for $62 per share. Texas Instruments ((TXN)) is in talks to sell its sensor-and-controls business to private equity group Bain Capital for $2.5 billion.


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%.

Affiliated Computer Services, IT-services provider, advanced 4.2% on talks to be purchased by a group including Texas Pacific Group, Bain Capital and Blackstone Group.

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%.

General Motors ((GM)) stock bounced back 19 cents to $18.83 after six straight session of losses totaling 17% and lost 52% during the year 2005.

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.

The Commerce Dept. added that the seasonally adjusted estimate of new houses for sale at the end of November was 503,000, representing a supply of 4.9 months at the current sales rate.

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 finished mostly in the positive with averages reaching multi-year highs. The German DAX 30 rose 0.4%, hitting a three-year high, followed by the French CAC 40, up 0.1% on a four-year high. London’s FTSE 100 hit a four-year intraday high, but later rebounded and finished 0.03% under the flat line.

OIL, METALS, CURRENCIES

Crude oil prices declined in subdued pre-holiday trading and warm weather forecast. Light sweet crude for January delivery rose 15 cents to $58.43 a barrel on the Nymex. Natural gas fell 64 cents to $12.28 per 1,000 cubic feet. London Brent lost 47 cents to $56.08.

Gold prices climbed in European trading. In London gold was fixed at $505.15 bid per troy ounce, up from $501.40. The Zurich gold price was $505.10, up from $501.10. In Hong Kong gold rose $10.15 to close at $504.10. Silver closed at $8.59, up from $8.43. In New York gold closed up 20 cents to $505.20 per ounce, silver was up 7 cents $8.65 and copper closed up 4 cents to a record high of $2.1595.

The U.S. dollar traded mixed against its major counterparts in European trading. The euro was quoted at $1.1863, down from $1.1875. The dollar bought 116.40 yen, down from 116.55. The British pound traded at $1.7319, down 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.