Broader Averages Decline 1%

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

The difference in yield between short and long term yield shrank close to zero sparking a debate on probability of recession in the coming quarters. Retail stocks failed to rally on the news of stronger holiday sales than a year ago. Natural gas price fell 10% in the session and has dropped close to 25% in less than ten trading days.

U.S. MARKET AVERAGES

The familiar pattern of early morning rally fading in the afternoon was replayed again today. On a day when many traders were not present at several exchanges, trading volume was light in the stock and bond market. But the focus was on the bond market.

For the first time in five years the difference in yields between short and long term bonds, as represented by two and ten year bonds, shrank to 0.01 percent sparking worries of yield inversion. Most economists believe that such a phenomenon may represent if not economic than at least profit recession in the coming quarters.

Early morning trading was driven by rising stocks on strong holiday sales. MasterCard subsidiary reported that the holiday sales rose more than 8% compared to last year including gift card sales. However, retail stocks failed to participate in the rally and market started weakening in the afternoon as oil and gas prices fell. Natural gas price fell by 10% during the day on top of 5% drop in the previous session and gas price has dropped close to 25% in less than ten trading days. Energy stocks declined and stocks in transportation, freight, and airline sectors rose.

At close market three broad averages, S&P, Dow and Nasdaq dropped by one percentage point.

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 27 cents to $58.13 a barrel on the Nymex. Natural gas fell as much as $1.18 to $11.216 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. In New York gold advanced $4.10 cents at close to $510.10

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.