Construction Spending Declines

Elena
19 Jan, 2006
New York City

The Japanese shares rebounded from the 3-day declines when they lost 1,100 points and $300 billion in market value. The Nikkei rose 2%,lifted by wholesale, brokerage, insurance issues. European stocks also recovered from losses, led by the German DAX 30, up 0.6%. In earnings news, D.R. Horton reported Q1 29% profit rise to 98 cents a share on higher revenue, beating estimates. Home Depot posted Q4 50% dividend rise and announced a long-term plan,including the opening of 400-500 new stores.

U.S. MARKET AVERAGES

U.S stock market futures slightly advanced in pre-market trading, pointing to a positive opening after yesterday’s decline of the major averages, hurt by losses at Intel Corp., Yahoo Inc. and heavy losses in Tokyo. Still, the U.S. market finished off session lows. Thursday investors got a relief from the rebound of the Tokyo Stock market and news of possible mergers-and-acquisition activity. Strong earnings reports also helped to encourage some bargain hunting.

Investors awaited an earnings report from Pfizer Inc., in which the drugmaker is expected to report a 27% profit decline on generic competition and slowing sales of its best-selling cholesterol drug.

In merger-and-acquisition news, Walt Disney Co. is in talks to buy Pixar Animation Studios and pay a ‘nominal’ premium to Pixar's current $6.7 billion market capitalization. The deal would leave Pixar Chief Executive Steve Jobs as Disney's largest individual stockholder.

A consortium of private-equity firms and Supervalu made a new bid for grocery chain Albertson's The new bid is priced ‘a few cents’ above $26 a share and is structured differently to lessen antitrust worries.

Philips Electronics agreed to buy Framingham, a provider of personal emergency response services, for $690 million, or $47.75 a share. The share offer amounts to $750 million, but Lifeline has $60 million in cash and cash equivalents, Philips said.

Home Depot ((HD)), home improvement retailer, gave a long-term growth plan and provided guidance for 2006. The company announced a 50% increase in its Q4 dividend. It expects to post annual sales growth of 9%-12% over the next 5 years, driven by 400-500 new store openings, as well as growth in its services business and in Home Depot Supply.

On the economic news front,information on December housing starts is due out before the start of Thursday's trading with housing starts for December expected to fall to 2.04 million from 2.12 million in November.Weekly employment data are also due out today. Jobless claims are seen rising to 316,000 from 309,000. Crude inventories are seen falling and gasoline and distillate inventories are seen climbing, as was the case last week.

Dow industrials futures recently rose 14 points, S&P 500 futures were up 2.2 points and Nasdaq 100 futures were up 2.5 points.

ECONOMIC NEWS

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended January 14, showing an unexpected decrease. With the decrease, jobless claims fell to their lowest level since April of 2000.

The report showed that jobless claims fell to 271,000 from the previous week's revised figure of 307,000. The decrease came as a surprise to economists, who had expected jobless claims to increase to 315,000 from the 309,000 originally reported for the previous week.

Additionally, the four-week moving average fell to 299,000 from the previous week's revised average of 311,000. This marked the third consecutive decline for the less volatile moving average, which fell to its lowest level since October of 2000.

The Labor Dept. also said that continuing claims fell to 2.534 million in the week ended January 7 from the preceding week's revised level of 2.692 million.

INTERNATIONAL MARKETS NEWS

The Japanese shares gained ground Thursday after the sharp declines with an estimated loss of $300 billion in market value in the Nikkei’s 3-day 1,100 point plunge. The stocks were supported by the better-than-anticipated reaction on Wall Street to yesterday’s earlier closure of the Tokyo Stock Exchange. By mid-morning the Nikkei climbed 2% to 15,649.91 on wholesale, insurance, real estate and brokerage issues.

European stocks rebounded from recent declines, lifted by a recovery of the Japanese Nikkei after the heavy losses and an off-lows close of the U.S. markets overnight. The German DAX 30 advanced 0.6%, the French CAC 40 gained 0.5%, and London’s FTSE 100 climbed 0.5%.

OIL, METALS, CURRENCIES

Crude oil prices advanced ahead of the weekly petroleum report. Light sweet crude for February delivery gained 6 cents to $65.79 a barrel. London Brent climbed 43 cents to $64.62.

European gold prices climbed. In London gold traded at $547.70, up from $547.30. In Zurich the precious metal traded at $547.05, up from $546.85. In Hong Kong gold rose $5.10 to close at $549.80. Silver opened at $9.04,up from $8.85.

The U.S. dollar traded mixed against major currencies. The euro was quoted at $1.2084, down from $1.2107. The dollar bought 115.16 yen, down from 115.20. The British pound was quoted at $1.7574, down from $1.7617.

EARNINGS NEWS

D.R. Horton, ((DHI)), homebuilder, reported that Q1 net profit increased 29% to 98 cents a share with homebuilding revenue up 15% to $2.8 billion, beating analysts’ expectations of 94 cents a share. The company''s backlog at Dec. 31 was up 30% from a year ago. The company expects 2006 earnings between $5.25 and $5.35 a share on revenue of more than $15.5 billion.

Novartis AG, ((NVS)), Swiss drugmaker, reported that Q4 net earnings were flat at 58 cents per U.S.-listed share, while revenue advanced 14%, missing analysts’ expectations of 71 cents per share. A charge of $266 million for its NKS104 drug and other one-time items flattened profits. Volume increases contributed nine percentage points and acquisitions ten percentage points to net sales growth. The company is planning to raise its 2005 dividend by 10%. For 2006, it sees high single digit sales growth at local currencies, compared to the 13% growth it achieved in 2005, and record net and operating income.

Charlotte Russe Holding Inc, ((CHIC)), apparel retailer, reported a Q1 net profit of 29 cents a share, up from 9 cents, in the same period last year, beating analyst estimate by a penny. The quarterly sales reached $201.5 million from $150 million, as comparable-store sales increased 15.6%.

Avocent Corp, ((AVCT)), switching systems and remote access products manufacturer, reported Q4 net income of 38 cents a share, up 58% from 23 cents a share in the year-ago period. Adjusted earnings totaled 49 cents a share, up from 40 cents a share, beating on that basis analysts’ forecasts of 43 cents a share. Sales increased 6.8%.

Wachovia Bank, ((WB)), banking services, reported Q4 net income of $1.09 a share, up 18% from 95 cents a share in the year-earlier period. If not for after-tax net merger-related expenses of 2 cents a share, and 4 cents a share in the year-ago period, earnings were $1.11 per share, up from 99 cents per share in the same period last year, in line with analysts forecasts of $1.11 a share in the latest period.

Harley-Davidson Inc., ((HDI)), motorcycle manufacturer, reported that Q4 net income advanced to 84 cents a share, up from 71 cents a share in the year ago period on revenue growth, beating analysts’ forecasts of 81 cents a share. The company expects strong retail growth and anticipates wholesale unit growth rate in the range of 5% to 9% annually and annual earnings per share growth rate of 11% to 17%.

International Game Technology, ((IGT)), maker of gaming machines, reported Q1 net earnings of 34 cents a share, up from a profit of 33 cents a share in the year-ago period despite revenue decline, topping analyst estimate of 27 cents a share. Both period reflect share-based compensation expenses of $6.1 million and $700,000, respectively.