Wholesale Prices Rise 5.4%

Elena
13 Jan, 2006
New York City

Tyco lowered its Q1 outlook for earnings from continuing operations. The diversified industrial conglomerate expects to earn about 38 cents a share for the period, down from a projected range of 40 cents to 42 cents a share. It also cut its 2006 earnings projection.

U.S. MARKET AVERAGES

U.S. stock futures pointed to a lower opening with investors digesting U.S. retail sales, PPI data and Tyco International Ltd. announced a break up into three businesses and lowered its earnings outlook.

U.S. stock futures trimmed losses as a government report showed tamer December core inflation, suggesting the Federal Reserve may well be on course to wrap up its 18-month campaign of interest-rate hikes.

The Labor Department reported that its Producer Price Index, which measures price pressures before they reach the consumer, rose 0.9 percent in December, the biggest increase since a 1.7 percent jump in September. The culprit in both months was a big surge in gasoline costs, which spiked above $3 per gallon in early September, reflecting lost Gulf Coast production following Hurricane Katrina.

In other economic news, retail sales posted a 0.7 percent increase in December after rising by 0.8 percent in November.

Standard & Poor''s 500 index futures were down 0.6 of a point, about even with fair value. Nasdaq 100 index futures were down 2.50 points, and Dow Jones industrial average futures fell 2 points.

ECONOMIC NEWS

Producer prices rose much more than economists had expected in the month of December, according to a report from the Department of Labor. The increase in prices was largely due to a rebound in energy prices.

The Labor Dept. said that producer prices rose 0.9 percent in December, rebounding after falling 0.7 percent in November. The increase came in well above economist expectations of an increase of about 0.4 percent.

The rebound by producer prices came as energy prices moved back to the upside after moving sharply lower in November. The report showed that energy prices rose 3.1 percent in December following a 4.0 percent decrease in November.

The report also showed that core producer prices, which exclude food and energy prices, rose 0.1 percent in December, matching the increase in the previous month. Economists had been expecting core prices to increase by about 0.2 percent.

While the bigger than expected increase in producer prices may raise some concerns about inflation and higher interest rates, the modest increase in core prices suggests that core inflation remains well contained.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed Friday mixed. The Nikkei finished flat at 0.06%, despite upbeat economic assessment from the Bank of Japan. South Korea’s Kospi led the gainers with a 1% advance to 1,416.28, followed by Hong Kong’s Hang Seng, up 0.4%. Among the losers, Taiwan’s Weighted index declined 0.6% and Shanghai Composite fell 0.4%.

European stocks traded deeply in the red at mid-day, hurt by sharply lower U.S. markets close overnight, brokerage downgrades and declining oil prices. The German DAX 30 dipped 1.2%, the French CAC 40 slipped 1.1%, and London’s FTSE 100 declined 0.7%.

OIL, METALS, CURRENCIES

Crude oil prices advanced on supply concerns. Light sweet crude for February delivery gained 6 cents to $64 a barrel. Heating oil gained slightly slipped to $1.7106 a gallon. Gasoline was flat at $1.7185. Natural gas dropped to a five-month low at $8.935 per 1,000 cubic feet. London Brent rose 30 cents to $62.19.

Gold prices climbed in European trading. In London gold traded at the fixed price of $547.25 per troy ounce, up from $545.60. In Zurich the precious metal rose to $547.15 from $545.55. In Hong Kong gold gained 20 cents to $546.60. Silver traded at $8.95, down from $8.96.

The U.S. dollar declined against major currencies. The euro was quoted at $1.2062, up from $1.2132. The dollar bought 114.50 yen, up from 114.20. The British pound stood at $1.7671, up from $1.7585.