Global Recovery

123jump.com Staff
19 Jan, 2006
New York City

Declining housing starts, higher crude oil inventory and falling claims of unemployment added to the market momentum created by a batch of positive earnings. After a disappointing earnings from tech companies markets digested positive earnings from Merrill Lynch, Harley davidson, IGT, Advanced Micro Devices and others. Motorola reported 47 cents vs. 26 cents, Capital One reported 97 cents vs. 77 cents and Rambus reported 9 cents vs. 6 cents a year ago.

U.S. MARKET AVERAGES

The U.S. markets joined in the recovery around the world.

Index in Japan led the advance with a rise of 2.3% and markets in Europe advanced as well. Emerging markets of India, Hong Kong, Mexico and Brazil advanced better than 2% each.

On the economic front December construction report was yet another evidence of slowing housing market. December single family housing construction fell more than 8%. Initial claims of unemployment for the previous week fell unexpectedly and crude oil inventory for the same week rose. Crude oil, gold, silver and natural gas still managed to rise during the day.

Merger news continue to dominate market talk today. Revival of deal involving Albertson’s, Disney and Pixar merger talks and on-again off-again merger talk involving Guidant kept traders busy. Mexican home builder Homex ((HXM)) priced secondary offering at the end of the day. Deal is oversubscribed by eleven times.

On earnings front eBay ((EBAY)), AMD ((AMD)), Union Pacific ((UNP)), Beazer Homes ((BZH)) and D.R. Horton ((DHI)) and Merrill Lynch ((MER)) delivered better-than-expected earnings.

MOVERS AND SHAKERS

Pfizer Inc ((PFE)) reported Q4 net income of $2.7 billion, or 37 cents a share, off from $2.8 billion, or 38 cents a year ago, missing estimates of 42 cents a share on revenue of $13.2 billion. Pfizer''s quarterly sales slipped 9% to $13.59 billion from $14.92 billion. Global sales of Lipitor, the world''s best-selling medicine, totaled $3.4 billion in the latest quarter, up 3% from the previous year, while Viagra sales skidded 8%. The stock rose 2.7%.

International Game Technology ((IGT)), maker of gaming machines, reported Q1 earnings of $120.6 million, or 34 cents a share, down from a year-ago profit of $122.4 million, or 33 cents a share, exceeding estimates of 27 cents a share on $562.3 million revenue. Revenue fell to $616.2 million from $641.2 million in the same period a year earlier. The company’s shares soared 9%.

Lehman Brothers ((LEH)), investment bank, increased its annual dividend by 20% to 96 cents a share from 80 cents a share. The dividend for Q1 is 24 cents a share. 10. The company approved of the repurchase of 40 million shares of stock in 2006, plus an additional 15 million shares for the possible acceleration of repurchases to offset a portion of 2007 dilution due to employee stock plans. The stock advanced 1.9%.

Merrill Lynch ((MER)) announced Q4 net income rise, citing growth in all three of its business segments. The company said it earned $1.5 billion, or $1.51 a shares in the fourth quarter, compared to $1.19 billion, or $1.19 a share a year ago, beating estimates of $1.30 a share. Total net revenue rose to $6.78 billion from $5.91 billion a year ago. The company also boosted its quarterly dividend by 25% to 25 cents a share. The stock gained 1%.

ECONOMIC NEWS

The Department of Energy''s Energy Information Administration revealed that crude oil inventories climbed by 2.7 million barrels for the week ended January 13, rising to 321.4 million barrels from the prior week''s level of 318.7 million barrels. This followed a decline of 2.9 million barrels in the previous week. Oil inventories were 12% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week increase of 2.8 million barrels, the government said, adding to the previous week''s increase of 4.5 million barrels. Gasoline stocks were 3% below their levels of last year. Inventories of distillate fuel oil rose by 900,000 barrels in the most recent week.

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. The Nikkei climbed 2.3% to on wholesale, insurance, real estate and brokerage issues. The index closed up 2.3%.

European stocks rebounded to close higher, lifted by a recovery of the Japanese Nikkei after the heavy losses and a positive start of U.S. markets. The German DAX 30 advanced 0.65%, the French CAC 40 gained 0.9%, and London’s FTSE 100 climbed 0.5%.

OIL, METALS, CURRENCIES

Crude oil prices hovered near $66 a barrel on continuous tensions in Nigeria and Iran, a new terrorist warning from al Qaeda to attack the U.S, and a reduced Russian export. Light sweet crude for February delivery gained 97 cents to $66.70 a barrel. London Brent climbed 16 cents to $64.35.

European gold prices climbed. In London gold traded at $552.20, 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 closed at $8.95,up from $8.85. In New York gold rose $14.50 to $559 per ounce.

The U.S. dollar declined against the yen, rose against the major currencies. The euro was quoted at $1.2104, down from $1.2107. The dollar bought 115.10 yen, down from 115.20. The British pound was quoted at $1.7598, 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%.

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%.

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.

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.

CORPORATE 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. For fiscal 2005, which is 2 weeks away from completion, Home Depot predicted a profit of $2.64-$2.67 per share.