At Open Markets Consolidate

Elena
10 Jan, 2006
New York City

Stock averages started lower Tuesday on profit taking after a rally in the first five trading days of 2006 when all three major indexes hit four-and-a-half year highs. Phelps Dodge cut its Q4 earnings outlook from the range of $4.15 to $4.40, sharply down to the range of $1 to $1.30 a share, citing higher copper prices, production and sales decrease. Alcoa posted disappointing Q4 earnings of 24 cents a share vs. 39 cents a year ago, or a 16% drop, missing estimates of 37 cents a share.

U.S. MARKET AVERAGES

Stock averages opened in the negative on profit taking following the Dow’s Monday close at four-and-a-half-years peak of 11,011 and disappointing earnings reports from major companies like Alcoa, Phelps Dodge and Guidant Corp.

After the closing bell Monday Alcoa Inc ((AA)), the world's biggest aluminum producer, kicked off the fourth-quarter earnings season. The company’s quarterly results disappointed and the stock slipped 4.7% in Frankfurt trade after it reported a 16% Q4 earnings drop to 24 cents a share vs. 39 cents a year ago, missing estimates of 37 cents a share. The Dow component posted a sharply lower fourth-quarter profit due to a long list of production outages, strikes and restructuring costs.

Copper producer, Phelps Dodge cut its Q4 earnings outlook from the range of $4.15 to $4.40 sharply down to the range of $1 to $1.30 a share, citing higher copper prices, production and sales decrease.

Guidant Corp. ((GDT)), medical device manufacturer, announced that its Q4 sales would fall by 15% in comparison with the year-ago period.

Cyclical stocks fell on Alcoa's disappointing earnings report and Phelps Dodge's lowered forecast, with the Morgan Stanley Cyclical Index falling about 1.2%. The gold sector declined by 1.3% in early trading.

Energy stocks extended gains, including a 2.1% advance in the oil service sector. Retail stocks remain strong as well. The semiconductor sector slightly recovered to move into positive territory.

Accentia Biopharma ((ABPI)) was a notable gainer in the early going after it revealed positive data for a phase II trial of an anti-cancer vaccine, BiovaxID. The stock rose more than 50%.

Lifepoint Hospitals ((LPNT)) was one of the most conspicuous losers after it gave 2006 guidance that was below analysts' expectations. The stock slipped 15%.

In the first hour of trading, the Dow Jones industrial average fell 44.16, or 0.4%. The Standard & Poor's 500 index fell 4.23, or 0.33%, and the Nasdaq composite index fell 9.74, or 0.42%.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.40% from 4.38% late Monday.

INTERNATIONAL MARKETS NEWS

Most Asian-Pacific benchmarks lost ground Tuesday, posting heavy losses on worries that recent rally may have gone too far, especially currency-rate gains with exporter issues benefiting from them. The decliners were led by The Nikkei which tumbled 1.9% to 16,124.35, followed by South Korea’s Kospi, down 0.9%, and Taiwan’s Weighted index, down 0.5%. China’s Shanghai Composite and Hong Kong’s Hang Seng reversed from recent weakness to finish higher by 0.4% each.

European stocks were weak at mid-day dealings with investors selling sensitive stocks like insurers after the Dow Jones Industrial average crossed the 11,000 level for he first time in four years and a half. The German DAX 30 lost 0.3%, the French CAC 40 slipped 0.3%, and London’s FTSE 100 declined 0.2%.

OIL, METALS, CURRENCIES

Crude oil prices advanced on worries that giant oil-producer Iran will be pressured by Western countries in connection with nuclear fuel. Light sweet crude for February delivery gained 50 cents to $64 a barrel. Gasoline slightly fell to $1.7665 a gallon. Heating oil traded up to $1.7715. Natural gas added 3 cents to $9.387 per 1,000 cubic feet. London Brent rose 49 cents to $62.50.

European gold climbed on inflation worries and weaker dollar against the yen. In London gold rose to $545.25 per troy ounce from $541.50. In Zurich the precious metal advanced to $546.78 from $541.55. In Hong Kong gold climbed $4.50 to close at $546.50.

The U.S. dollar traded mixed against major currencies. The euro was quoted at $1.2075, down from $1.2083. The dollar bought 114.25 yen, down from 114.35. The British pound traded at $1.7664, up from $1.7645.

EARNINGS NEWS

Guidant Corp. ((GDT)), medical device manufacturer, announced that its Q4 sales would fall by 15% in comparison with the year-ago period. Quarterly defibrillator sales in the U.S. and worldwide would decline 23% and 19%, though the sales level remained above Guidant''s previous outlook.

AmerisourceBergen Corp. ((ABC)), pharmaceutical services company expects Q1 earnings of 37 cents to 43 cents per share, in line with the analyst estimate of 40 cents per share. The company increased its expectations for fiscal-year revenue growth, but backed its prior profit outlook for Q1 and full year. The company expects Q1 revenue growth of 10% to 11 %, due to greater sales to its larger customers.

Alcoa Inc. ((AA)), aluminum producer, reported a 16 % decline in its Q4 profit, or 26 cents per share, down from 30 cents per share in the year-ago period, missing analysts’ projections of 37 cents per share as the company was racked by setbacks from hurricane-related refinery slowdowns to restructuring costs. Earnings from continuing operations were 24 cents per share.

SUPERVALU INC. ((SVU)), grocery company, reported record Q3 results Net sales amounted to $4.7 billion up from $4.6 billion last year, earnings per share were 53 cents compared to 46 cents in the year-ago period. Q3 results include net after tax charges of approximately 4 cents per share related to growth initiatives and costs related to terminated acquisition activities. Last year''s Q3 results include net after tax restructure and other charges of 9 cents per share primarily related to increased liabilities associated with employee benefit related costs from previously exited distribution facilities, as well as changes in estimates on exited real estate. Q3 retail net sales were $2.5 billion, a 1.9 % increase in comparison with last year''s Q3. Comparable store sales growth for the quarter was negative 0.9 %, with positive comparable store sales at company-operated Save-A-Lot stores. Reported retail operating earnings for Q3 were a record $104.5 million compared to $101.3 million in last year''s Q3.

Tiffany & Co ((TIF)), jeweler, reported that its same-store sales for the holiday period rose 6% in the U.S. and 7% in Japan. Net sales for the same period advanced 6%. On a constant currency basis, net sales increased 9% and worldwide same-store sales increased 6%. The company expects its earnings for 2005 to be in the range of $1.60 to $1.62 a share, slightly missing Analysts’ estimate of $1.64 a share for the year.

Icon ((ICLR)), clinical research company, reported that Q2 profit advanced 20.5% to 49 cents a share on an 11% increase in net revenue. The company announced that it raised its Q2 operating profit margin to 10.2% from 8.8% in the comparable period last year.