Flat Start ahead of Earnings

Elena
09 Jan, 2006
New York City

U.S. stocks opened flat Monday with investors awaiting the first flood of fourth-quarter earnings reporsts to provide further upward momentum for stocks to continue their rally. Aluminum Alcoa is expected to kick off the new earnings season. In corporate news, Tyco International Ltd. is planning to split off from the $60 billion conglomerate both its electronics and health-care businesses in tax-free transactions.

U.S. MARKET AVERAGES

U.S. stock averages started Monday session near the unchanged mark with traders awaiting the first flood of fourth-quarter earnings reports to provide further boost to the market's strong 2006 start and hopefully push the Dow through the much anticipated 11,000 mark for the first time since June 2001. Aluminum giant is expected to kick off Q4 earnings season as it is the first company to post fourth-quarter results.

A few downgrades weighed on pre-market sentiment. IBM was downgraded to neutral from overweight at J.P. Morgan, with the broker citing risks in services and hardware.

In corporate news, Boston Scientific Corp. ((BSX)) said it formally bid to acquire Guidant Corp. ((GDT)) for $25 billion cash and stock offer. The purchasing price includes $36 in cash and $36 in Boston Scientific stock, or $72 a share, the same terms it had proposed in an informal bid made on Dec. 5. Boston Scientific also revealed details of its formal bid for Guidant, which it said represented a 12% premium over the price offered by existing merger partner, Johnson & Johnson.

Tyco International Ltd. is considering a plan that would split off from the $60 billion conglomerate both its electronics and health-care businesses in tax-free transactions. The slimmed-down version of Tyco would consist of its security, fire-protection, pump and valve operations.

Duke agreed to sell much of its North American wholesale power generation assets to LS Power Equity Partners for about $1.48 billion, an amount that could rise to as much as $1.54 billion if certain performance targets are met. The energy company will keep its Midwest facilities.

The networking, computer hardware and Internet sectors moved to the downside in early going, while the disk drive group added to recent gains, extending its multi-year high. Sandisk ((SNDK)) rose 2.9% on positive analyst comments. Maxtor ((MXO)) and M-Systems ((FLSH)) also extended their highs.

The HMO sector was among the very few sectors moving to the downside Chemical, airline and utility stocks were modest decliners as well.

The Dow Jones industrial average was up 1.05 points, or 0.01%. The Standard & Poor's 500 Index was up 0.29 of a point, or 0.02%. The technology-laced Nasdaq Composite Index was up 2.11 points, or 0.09%.

Bonds declined, with the yield on the 10-year Treasury note rising to 4.39 percent from 4.37 percent Friday.

MOVERS AND SHAKERS

Amazon.com Inc. was also downgraded by J.P. Morgan to underweight from neutral, citing concerns that U.S. growth will continue to be below that of the broader electronic commerce market. The stock fell 2.1%.

Prudential Equity Group upgraded Merrill Lynch & Co. to overweight from neutral weight on increased capital markets activity and revenue growth prospects. The stock gained 1.4%.

Investment Technology Group ((ITG)) climbed 8.1% after it was upgraded at Sandler O'Neill to buy from hold.

Abbott Laboratories ((ABT)) was upgraded to overweight from neutral by J.P. Morgan, on expectations that it Abbott will acquire the vascular and endovascular businesses of Guidant as a result of the Boston Scientific deal. The company’s shares rose 2.1%.

INTERNATIONAL MARKETS NEWS

Most Asian-Pacific benchmarks reached new highs, boosted by continuing tech rally, climbing commodity prices and expectations of the Chinese Lunar New Year holiday. Hong Kong’s Hang Seng hit a five-year peak of 1.3% to 15,547.43, Taiwan’s Weighted index gained 0.7%, China’s Shanghai Composite rose 0.5%, while Australia’s All Ordinaries reached an all-time high of 0.8% to 4,775.80. Japan was closed for a national holiday.

European stocks traded higher at mid-day, extending recent highs with Adecco and easyJet among the leading advancers. Strong close of U.S. markets provided support. The German DAX 30 gained 0.1% to 5,540, the French CAC 40 added 0.1% to 4,873, and London’s FTSE 100 edged up to 5,734. The euro fell 0.5% to $1.2085.

OIL, METALS, CURRENCIES

Crude oil prices hovered over $64 a barrel. Light sweet crude for February delivery gained 19 cents to $64.40 a barrel. Gasoline slightly fell to $1.8061 a gallon. Heating oil edged down to $1.7960. Natural gas dropped 13 cents to $9.64 per 1,000 cubic feet on mild winter weather. London Brent climbed 15 cents to $62.57.

European gold climbed, boosted by inflation worries and weakening dollar against the yen. In London gold rose to $541 per troy ounce from $536.30. In Zurich the precious metal advanced to $540.45 from $537.40. In Hong Kong gold climbed $13.20 to close at $542. Silver opened at $8.99, up from $8.96.

The U.S. dollar traded mixed against major currencies. The euro was quoted at $1.2085, down from $1.2155. The dollar bought 114.10 yen, down from 114.39. The British pound traded at $1.7677, down from $1.7708.

EARNINGS NEWS

Benihana Inc ((BNHNA)), operator of Japanese and sushi theme restaurants announced same-restaurant sales advanced 7.4% in Q3. Total sales for period rose 11.6% compared to last year’s period.

Triad Hospitals Inc.] ((TRI)), healthcare company, reported Q4 earnings will be in the range of $0.65 to $0.67 a share on revenue of $1.3 billion, compared to earnings of $0.66 a share on revenue of $1.14 billion in 2004, missing on that basis analysts’ expectations of Q4 earnings of $0.69 a share. The company expects to report a provision for doubtful accounts of 9.4% to 9.6% of net revenue for the quarter and added that earnings for 2005 will be in the range of $2.78 to $2.80 a share on revenue of $4.7 billion.

Emmis Broadcasting Corp, ((EMMS)), broadcasting company, posted Q3 net income of $5.30 a share, including $197.5 million, or $5.29 a share, from discontinued operations primarily reflecting results from the company''s TV business. Income from continuing operations was to 1 cent a share, down from 7 cents for the year-ago quarter, beating analyst estimate for a loss of 1 cent a share. Emmis adjusted revenue came to $100.5 million for Q3, up 11% from the prior year''s $90.2 million. The lower profit from continuing operations stemmed from higher interest costs incurred as a result of borrowings to finance the company''s Dutch auction tender completed last June.

Helen of Troy Ltd ((HELE)), maker of curling irons, skin care products and garden tools, reported that Q3 net earnings fell to 72 cents a share, down from 97 cents a share in the year-earlier period, missing analyst estimate of 77 cents a share. Sales in Q3 fell 4%. Analysts, on average, had expected to post earnings of 77 cents a share. The company blamed weakness in its personal care segment for the earnings shortfall, as well as a number of economic factors that may continue to pressure fourth-quarter results.

Schnitzer Steel Industries Inc, ((SCHN)), steelmaker, reported Q1 net income of $1.34 a share, compared with $1.41 a share in the year-earlier period. Revenue in Q1 advanced to $281.4 million from $144.5 million as the company said it sold some assets and recorded a charge of $11 million to settle federal investigations into past payment practices in Asia.