Oil and Tech Stocks Fall

Elena
27 Dec, 2005
New York City

A decline in oil and natural gas prices, optimism on holiday shopping season, and a $2.5 billion aircraft order for Boeing sent averages modestly higher at the opening of Tuesday session. At mid-day stocks changed direction as investors locked in early gains and the major averages moved into the negative territory with the Nasdaq being the biggest decliner.

U.S. MARKET AVERAGES

U.S. stocks ticked up at the start of the session after the long holiday weekend, but then investors locked in the day's early gains and averages drifted off to the sidelines.

In early trading stocks were lifted by a decline in oil prices, a report of a $2.5 billion-order for Boeing Co. from Russian carrier Aeroflot, and news that retailers had respectable holiday sales.

During the holiday shopping period U.S. consumer spending increased 8.7% compared to a year ago. Specialty retailers like Best Buy Co. and Bed Bath & Beyond Inc. rose on early reports of increased sales of electronics and home furnishings.

Shares of medical device maker Guidant Corp. ((GDT)) were in the spotlight after the company warned that its Q4 and 2006 profit will fall short of estimates after a product recall in June. Company’s shares fell after it said it received a warning letter from the Food and Drug Administration about its manufacturing, research and sales center in St. Paul, Minn.

With a decline in oil and natural gas prices, energy stocks steadily declined with the oil sector down by nearly 3.3%. The natural gas sector posted a loss of 2.9%.

Technology stocks were weak as well with the Internet sector leading the decline. Semiconductor and networking stocks were also notable losers.

The airline sector moved sideways. Although the sector fell off intraday highs, it posted an advance of 3%. Housing stocks were holding modest gains, rebounding from Friday''s slide. Chemical, bank and gold stocks were also strong.

The rise in the airline sector sent a number of notable stocks to new 52-week highs. JetBlue ((JBLU)), AMR ((AMR))) and Continental ((CAL)) hit fresh peaks. AMD ((AMD)) also added to its recent gains, extending its peak.

Among the very few stocks moving to a 52-week low was OfficeMax ((OMX)) which dropped nearly 10% amid news that an investor will not wage a proxy fight, taking the stock to a fresh low.

The Dow Jones industrial average rose 17.93, or 0.17%. Broader stock indicators barely changed. The Standard & Poor''s 500 index fell 0.21, or 0.02%, and the Nasdaq composite index fell 0.36, or 0.02%.

Bonds were flat, with the yield on the 10-year Treasury note at 4.38.

MOVERS AND SHAKERS

Foamex International Inc. ((FMXIQ)), a cushioning producer, filed a proposed joint reorganization plan and accompanying disclosure statement with the bankruptcy court. Subject to the plan''s approval, Foamex expects to emerge from Chapter 11 in the spring of 2006. Under the proposed plan, Foamex's financial restructuring will be primarily achieved through a debt-for-equity conversion, reducing about $500 million of total indebtedness from pre-petition amounts. A hearing on the adequacy of the disclosure statement has been scheduled for Jan. 26. Company’s shares dropped 12.5%.

Applied Biosystems Group ((ABI)) agreed to buy the research products division of Ambion Inc., a supplier of RNA-based reagents in the life science research and drug development field, for about $273 million in cash. On a GAAP basis, the acquisition is expected to be dilutive in fiscal 2006 and 2007 and possibly breakeven or accretive in fiscal 2008. The deal is expected to close in the first quarter. The stock fell 1.2%.

Regeneron Pharmaceuticals ((REGN)) was upgraded to overweight from equal-weight at Lehman Bros. Company’s shares soared 7%.

Charter Financial Corp. ((CHFN)) declared a special dividend of 35 cents a share, payable Feb. 1 to holders of record Jan. 13. First Charter MHC, a mutual holding company that controls 80% of Charter Financial, filed a regulatory notice saying it intends to waive dividends paid on the shares it owns. Charter Financial shares rose 2.1%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed with bourses in Hong Kong and Australia closed. The Nikkei retreated from record highs, declining 0.9% on news that consumer prices rose for the first time in two years, sparking speculation that the Bank of Japan may reverse its ultra-easy monetary policy. South Korea’s Kospi gained 0.4%, Taiwan’s Weighted index added 0.05%, and Shanghai’s Composite inched up 0.07%.

European stocks closed higher after the long holiday weekend, supported by positive U.S. equity trading and gains in Belgium brewing company InBev. The German DAX 30 rose 0.5%, the French CAC 40 gained 0.2%. London’s FTSE 100 was closed on Tuesday.

OIL, METALS, CURRENCIES

Crude oil prices declined on mild U.S. weather and sufficient supplies. Light sweet crude for February delivery slipped 93 cents to $57.50 a barrel on the Nymex. Natural gas fell as much as $1.027 to $11.256 per 1,000 cubic feet.

Gold prices advanced in European trading. In Zurich gold closed at $506.60 per troy ounce, up from $505.10 in late Friday trading. Markets in London were closed for a public holiday.

The U.S. dollar gained ground against its major counterparts in European trading. The euro was quoted at $1.1862, down from $1.1863. The dollar bought 117.06 yen, up from 116.40. The British pound traded at $1.7324, up from $1.7319.

EARNINGS NEWS

Guidant Corp ((GDT)), medical device company, expects to report Q4 earnings of 17 cents to 23 cents a share on revenue of $790 million to $820 million. The company also expects 2006 earnings of $1.48 to $1.58 a share or $1.65 to $1.75 a share on an adjusted basis, on revenue of $3.8 billion to $4 billion. Guidant announced that domestic implantable defibrillator implant rate, an indicator of the company''s progress in regaining market share, averaged 80% of the implant rate experienced in March through May 2005. The implant rate declined to 70% in October and has increased somewhat since then.

Tommy Hilfiger Corp, ((TOM)), apparel retailer, posted Q2 net earnings of 59 cents a share, down 8.8% from 65 cents a share in the year-earlier period on 6.1% revenue decline. With the filing of its Form 10-Q for Q2, the company announced that it is now current with its Securities and Exchange Commission reporting requirements.