GM Lifts Dow

Elena
09 Jan, 2006
New York City

U.S. stocks traded slightly higher Monday morning with investors awaiting the first flood of Q4 earnings reports to provide further upward momentum for stocks to continue their rally. Alcoa is expected to kick off the new earnings season, reporting Q4 results after the bell. A brokerage upgrade for General Motors to in-line from underperform boosted the Dow. Boston Scientific Corp. said it formally bid to acquire medical device maker Guidant for $25 billion, or $72 a share in cash and stock.

U.S. MARKET AVERAGES

U.S. stock averages traded 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. The Nasdaq outperformed its peers during the morning session, posting a gain of 0.4%.

Merger-and-acquisition news led the day's headlines, including Boston Scientific Corp.'s renewed bid for rival Guidant Corp. and Duke Energy Corp.'s agreement to sell some of its North American power plants to private investors. Aluminum giant Alcoa was in the spotlight, expected to kick the new earnings season, releasing its fourth-quarter profit report.

Following a steady rise throughout the morning, the housing sector rose 2.5%, moving to its highest level since mid-September with Champion Enterprises ((CHB)) the biggest gainer in the group, rising by 6.7%. DR Horton ((DHI}) and Toll Brothers ((TOL)) climbed 6.3% and 4.5%, respectively.

A decline in oil prices led to some profit taking, sending energy stocks lower. The oil service sector was the most notable loser with a decline of 1.8%.

SanDisk ((SNDK)) extended its 52-week high on positive analyst comments, continuing its mid-December rise. Rambus ((RMBS)) advanced 15%, reaching a new peak.

Sanderson Farms ((SAFM)) dropped Monday morning, continuing last week''s weakness and setting a new 52-week low. Spatialight ((HDTV)) dropped sharply on negative analyst comments, also establishing a fresh low.

In late morning trading, the Dow rose 4.57, or 0.04%. Broader stock indicators were also at their highest levels since May 2001. The Standard & Poor''s 500 index was up 0.13, or 0.01%, and the Nasdaq composite index added 4.90, or 0.21%.

Bonds declined, with the yield on the 10-year Treasury note rising to 4.38% from 4.37% Friday.

MOVERS AND SHAKERS

Goldman Sachs upgraded General Motors ((GM)) to in line from underperform due to valuation, given Analyst Robert Barry's belief that a Chapter 11 bankruptcy filing by the automaker is very unlikely in the near term. Even though the company’s long-term fundamentals are still negative, there are potential catalysts that could improve sentiment and ease bankruptcy fears enough to get the stock to bounce to the mid-$20s during the first half of 2006. The stock rose 5.4%.

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

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%.

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%.

Alkermes Inc. ((ALKS)) agreed to partner with Eli Lilly on the development and commercialization of inhaled parathyroid hormone for the treatment of osteoporosis. Financial terms weren't disclosed. Alkermes Inc’s shares rose 7.3%.

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 closed little changed with averages retreating from multi-year highs on mixed start of U.S. markets. The auto sector provided support. The German DAX 30 gained 0.01% to 5,537, the French CAC 40 added 0.16% to 4,875, and London’s FTSE 100 edged down 0.01% to 5,731. The euro fell 0.75% to $1.2061.

OIL, METALS, CURRENCIES

Crude oil prices fell below $64 a barrel on profit taking and mild winter weather. Light sweet crude for February delivery dropped 71 cents to $63.50 a barrel. Gasoline fell 4 cents to $1.7725 a gallon. Heating oil traded down 4 cents to $1.7610. Natural gas dropped 34 cents to $9.29 per 1,000 cubic feet. London Brent slipped 57 cents to $62.15.

European gold climbed on inflation worries and weaker dollar against the yen. In London gold rose to $542.60 per troy ounce from $536.30. In Zurich the precious metal advanced to $541.55 from $537.40. In Hong Kong gold climbed $13.20 to close at $542. Silver closed at $9.08, up from $8.96.

The U.S. dollar traded mixed against major currencies. The euro was quoted at $1.2072, down from $1.2155. The dollar bought 114.31 yen, down from 114.39. The British pound traded at $1.7636, 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.

CORPORATE NEWS

Boston Scientific Corp. ((BSX)) said it formally bid to acquire Guidant Corp. ((GDT)) for $25 billion. 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.