Natural Gas Rebounds

Elena
06 Jan, 2006
New York City

U.S. stocks gained Friday morning on disappointing employment report, which gave investors ground to consider it a sign that the Fed Reserve will stop raising interest rates. The Labor Department report showed 108,000 gain in payrolls in Dec., far below expectations of a rise by 215,000 and prior month''s growth of 305,000. Market sentiment was also supported by earnings upgrades for Google and Yahoo. The technology giant IBM lifted the Dow, rising 2% on a decision to change its pension plan.

U.S. MARKET AVERAGES

U.S. averages extended rally Friday, lifted by disappointing job growth in December which was interpreted by traders as a sign that the Fed Reserve will stop rate hikes. Broker’s higher earnings estimates for Google and Yahoo Inc. also provided support. The technology giant IBM Corp. supported the Dow component.

The Labor Department released payrolls data, showing 108,000 gain in payrolls registered in December. Figures came far below analyst expectations of non-farm payrolls to rise by 215,000 in December and November's growth of 305,000. The unemployment rate slightly declined to 4.9% from 5%.

IBM announced it would be freezing its U.S. pension plan, starting in 2008.

Microsoft was downgraded by Credit Suisse First Boston to neutral from outperform, with the broker saying the stock only is 10% shy of its price target.

J.P. Morgan upgraded Yum Brands Inc., the restaurant group that includes Pizza Hut and KFC, to overweight from neutral.

Homebuilders M.D.C. Holdings and Brookfield Homes reported declines in fouth-quarter home orders, raising concerns that the housing industry is weakening.

The gold sector was one of the most notable movers to the upside with a gain of about 3%. Energy stocks extended gains with he oil service sector reaching a new high with a 2.8% advance.

Transportation and housing stocks were the most notable decliners of the day. The HMO sector moved modestly below the unchanged mark, erasing earlier gains.

Accenture ((ACN)) jumped to a new 52-week high on better-than-expected Q1 earnings and raised full-year guidance. Google ((GOOG)) set a new peak, building on recent gains. Broadcom ((BRCM)) and SanDisk ((SNDK)) also set fresh highs.

Dollar General ((DG)) dropped to a 52-week low on a downgrade from Bear Stearns, extending losses on lowered Q4 guidance. Delta & Pine Land ((DLP)) broke to a new low on quarterly results and guidance.

In late morning trading, the Dow gained 15.37, or 0.14%. The S&P 500 was up 4.02, or 0.32%, at 1,277.50, and the Nasdaq rose 7.66, or 0.34%.

Bonds extended their decline, with the yield on the 10-year Treasury note rising to 4.37% from 4.36% Thursday.

MOVERS AND SHAKERS

International Business Machines Corp. ((IBM)) announced a plan to freeze its current pension plan in order to save millions of dollars. The stock gained 1.9%.

Goldman Sachs raised its implied value estimate for Google Inc. ((GOOG)) to $500 from $400 on higher earnings expectations. The stock rose 2%.

CalAmp Corp ((CAMP)), wireless equipment company, reported Q3 earnings of $5.44 million, or 23 cents a share, compared with $1.79 million, or 8 cents a share a year ago, exceeding estimates of 19 cents a share. However, the reported quarterly revenue of $64.5 million, compared with $57.1 million last year, came below expectations of $65 million. The company’s shares dropped 10%.

Avanex Corp ((AVNX)) cut its estimate for Q2 revenue to a range of $35 million to $37 million from its previous expectation of $41 million to $45 million, reflecting the company''s closure of its Erwin Park, N.Y., manufacturing facility in early December and transfer of manufacturing to a contract manufacturer. The stock dropped 18.5%.

ECONOMIC NEWS

The Department of Labor released its closely watched report on U.S. employment in the month of December on Friday, showing weaker than expected growth. At the same time, the report also showed a significant upward revision to November employment growth.

The report showed that the U.S. economy added 108,000 jobs in December following an upwardly revised increase of 305,000 jobs in November. Economists had been expecting jobs to increase by 215,000, which would have matched the increase previously reported for November.

The Labor Dept. noted that the increase in December reflected gains in manufacturing, health care, food services and drinking places, and professional and business services. A decrease in employment in the transportation and warehousing industry helped to offset the gains.

The report also showed that the unemployment rate unexpectedly edged down to 4.9 percent in December from 5.0 percent in November. The decrease in the unemployment rate came as some people left the labor market.

INTERNATIONAL MARKETS NEWS

Most Asian-Pacific benchmarks rallied, continuing a week-long winning streak on the back of strong tech shares and growing optimism about strong Japanese corporate results in 2006. South Korea’s Kospi hit an all-time high of 1.2% to 1,412.79 with Samsung Electronics, up 1.3%. Shanghai Composite rose 1%, while the Nikkei reached a five-year high of 16,428.21. Hong Kong ended up 0.5% on property and banking stocks.

European stocks closed in the positive, reaching new highs, lifted by strong tech stocks and U.S. payrolls data. The German DAX 30 rose 0.4%, the French CAC 40 gained 0.7%, and London’s FTSE 100 advanced 0.7%. The euro climbed 0.4% to $1.2156.

OIL, METALS, CURRENCIES

Crude oil prices advanced over $1 as natural gas prices gained ground. Light sweet crude for February delivery gained $1.16 to $63.95 a barrel. Gasoline added to $1.7959 a gallon. Heating oil gained a cent to $1.8000. London Brent climbed $1.28 to $62.41.

European gold climbed. In London gold rose to $536.30 per troy ounce from $526.90. In Zurich the precious metal advanced to $537.40 from $526.85. In Hong Kong gold fell $3.30 to close at $528.80. Silver closed at $8.96, up from $8.84.

The U.S. dollar declined against most major currencies. The euro was quoted at $1.2155, up from $1.2104. The dollar bought 114.54 yen, down from 115.85. The British pound traded at $1.7717, up from $1.7545.

EARNINGS NEWS

AZZ Inc. ((AZZ)), manufacturer of electrical products, reported a Q3 net income of 30 cents a share, up from 22 cents in the same period in fiscal 2004, beating analyst estimate of 23 cents per share. Quarterly revenue was up 16% from the prior year''s result.

The Great Atlantic & Pacific Tea Company Inc. ((GAP)), supermarket chain, announced that net loss for Q3 of fiscal 2005 narrowed to $1.74 a share, from $1.96 a share. Its loss from continuing operations narrowed to $1.80 a share vs. $1.89 a share in the comparable period last year. Total sales dropped 37% to $1.58 billion due to $850 million in year-ago sales from A&P Canada, which the company sold in August, but U.S. comparable sales advanced 1.8%. The company said it intends to pursue the implementation of the cost cutting initiative and invest in upgrading its stores.

The Shaw Group Inc. ((SGR)), engineering and construction company, reported Q1 net income of 41 cents a share, up from 17 cents a share in the same period last year on 40% revenue growth, beating analyst estimate of 36 cents a share. The company attributed the revenue increase to emergency response and disaster relief work in the aftermath of two hurricanes, Katrina and Rita.

Wendy''s International Inc. ((WEN)), restaurant operator, announced that its U.S. Wendy''s Q4 same-store sales dropped 2.9% at company stores, and 1.9% at U.S. restaurants. Tim Hortons fourth-quarter same-store sales increased 5.8% in Canada, and 6.7% in the U.S. Baja Fresh Mexican Grill Q4 same-store sales dropped 2.9%. Wendy''s announced its strategic initiatives were on track with its original timeline.

Best Buy Co ((BBY)), home electronics retailer, reported that its December domestic same-store sales advanced 5.6%, and international same-store sales increased 6.6%. Revenue for the month ended Dec. 31, increased 12% to $5.7 billion. The retailer announced that it is well-positioned for Q4.