Guidant Opts for J & J's Bid

Elena
13 Jan, 2006
New York City

A sequence of profit-taking sessions, disappointing December retails sales and lowered outlooks from Lucent and Tyco kept averages flat Friday. Better-than-expected wholesale inflation data provided some support. Commodities, energy, health care stocks posted solid gains. Guidant accepted an increased $24.2 B buyout offer from J & J, declining a larger bid of nearly $25 B from Boston Scientific. After the long holiday weekend Intel, IBM and Yahoo will report quarterly results.

U.S. MARKET AVERAGES

Stocks traded near the flat level Friday as better-than-expected wholesale inflation figures countered a slowdown in retail sales and lowered guidance from Lucent Technologies Inc. and Tyco International Ltd.

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.

The gold sector rallied during the mid-morning, showing an advance of more than 3% and reaching the high end of its recent trading range.

The airline sector posted a decline of 1.4%, falling to its lowest level since mid-December. AMR ((AMR)) and Continental ((CAL)) were two of the biggest drags on the group, falling by more than 2.5%.

Dow component Hewlett-Packard ((HPQ)) was the most conspicuous advancer, reaching a new 52-week high. JDS Uniphase ((JDSU)) set a fresh peak, adding to gains posted earlier in the week. Seagate Technology ((STX)) and 3Com ((COMS)) were also notable movers to the upside, hitting fresh peaks.

Lear ((LEA))moved to a new 52-week low, extending recent losses. NitroMed ((NTMD)) added to recent weakness to establish a new low.

MOVERS AND SHAKERS

Advanced Micro Devices ((AMD)) was downgraded to sell from hold at Deutsche Bank. The stock dropped 5%.

Dominion Homes ((DHOM)) reported Q4 home sales drop of 41%, to 230 from 392 last year, while full-year 2005 home sales dropped by 21%, to 1,944 from 2,450 in 2004. Fourth-quarter home closings fell 6%, to 571 from 605, while 2005 home closings decreased by 24%, to 2,146 from 2,837. The company said its backlog as of Dec. 31 was 430 sales contracts, vs. last-year backlog of 632 contracts. The company’s shares fell 6.6%.

General Motors Corp. ((GM)), the world''s largest automaker, said it expects $4 billion of savings in 2006 from restructuring measures aimed at lowering annual structural costs by $6 billion and material expenses by $1 billion. Company’s shares lost 1.8%.

Lucent ((LU)), communications network equipment maker, 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. Previously, the company had predicted annual revenue growth in the mid-single digits. Lucent said it now expects revenue for the Q1 of $2.05 billion, down from $2.43 billion in the Q4. The stock fell 1.8%.

Phazar Corp ((ANTP)), antenna systems company, announced Q2 net income of $699,000, or 31 cents a share, compared with $505,000, or 22 cents a share, during the year-earlier period with quarterly revenue of $3.77 million, compared with $3.3 million last year. The stock surged 46.9%.

ECONOMIC NEWS

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 closed in the negative, rebounding from lower levels as U.S. markets opened higher. Stock averages were weak Friday on brokerage downgrades and falling energy stocks, dragged by lower oil prices. The German DAX 30 dipped 1%, the French CAC 40 slipped 0.9%, and London’s FTSE 100 declined 0.6%.

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 as investors bought the metal to diversify their portfolios. In London gold closed $556.10 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 $9.14,up from $8.96.

The U.S. dollar declined against most major currencies. The euro was quoted at $1.2104, up from $1.2032. The dollar bought 114.32 yen, up from 114.20. The British pound stood at $1.7709, up from $1.7585.

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.

Boston Scientific Corp. ((BSX)) 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 ((LU)), communications network equipment maker, 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. Previously, the company had predicted annual revenue growth in the mid-single digits. Lucent said it now expects revenue for the Q1 of $2.05 billion, down from $2.43 billion in the Q4.