Tyco to Breakup in Three

Elena
13 Jan, 2001
New York City

Stocks opened higher on a report showing a tamer PPI which signaled for mild inflation. Producer prices rose 0.9% in Dec, rebounding from a 0.7% drop in Nov, well above economist expectations of an increase of 0.4%. Another report showed that retail sales rose 0.7% in Dec following an upwardly revised 0.8% growth in Nov, slightly below expectations of a 0.8% increase, compared to the 0.3% increase originally reported for Nov.

U.S. MARKET AVERAGES

Stock averages started higher on a government report showing a tamer core Producer Price Index for December. The upbeat data indicated milder inflation and signaled that the Federal Reserve may stop raising interest rates.

The Labor Department reported that its Producer Price Index rose 0.9% in December, the biggest increase since a 1.7% jump in September, reflecting a big surge in gasoline costs, over $3 per gallon due to the impact of Hurricane Katrina.

In other economic news, the Commerce Department said that retail sales climbed 0.7% in December after rising by 0.8% in November.

In corporate news, Tyco International ((TYC)) announced that its board approved a plan to separate the company into three separate, publicly traded companies- Tyco Healthcare, Tyco Electronics, and a combination of Tyco Fire & Security and Engineered Products & Services. The company intends to accomplish the separation through tax-free stock dividends to its shareholders. Tyco also lowered its Q1 earnings guidance to 38 cents a share, compared to a prior forecast for earnings of 40 cents to 42 cents a share.

In merger-and-acquisition news, Boston Scientific Corp. offered a higher $24.9 billion bid, increased by about $330 million, for Guidant Corp. On Thursday the medical device maker accepted Johnson & Johnson's $23.2 billion offer.

Lucent lowered its annual revenue growth outlook on a decrease in sales in the United States and China. The company expects its 2006 revenue will be flat or grow at a low single-digit rate.

In the first hour of trading, the Dow Jones industrial average advanced 21.25, or 0.19%. The Standard & Poor's 500 index was up 1.29, or 0.1%, and the Nasdaq composite index rose 0.94, or 0.04%.

Bonds rose further, with the yield on the 10-year Treasury note falling to 4.39% from 4.41% late Thursday.

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.

The Commerce Dept. said that retail sales rose 0.7 percent in December following an upwardly revised 0.8 percent increase in November. Economists had been expecting sales to increase 0.8 percent compared to the 0.3 percent increase originally reported for November.

The retail sales growth was partly due to a continued increase in sales by motor vehicle and parts dealers, which rose by 2.6 percent in December following a 5.7 percent increase in November. Sales at sporting goods, hobby, book and music stores also showed notable growth.

The report also showed that sales excluding auto sales rose 0.2 percent in December after falling 0.4 percent in November. The sales growth came in below economist expectations of an increase of about 0.4 percent.

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.