Starbucks Rises on Earnings

Elena
02 Feb, 2006
New York City

Stocks traded in the negative, hurt by inflation worries as a government report showed high labor costs. Retailers posted strong January sales with 80% of them posting sales growth above estimates. The gainers were led by Wal-Mart, standing out with a same-store sales rise of 4.7%, followed by Costco with sales up 9%, Target Corp. 5.2%, American Eagle Outfitters 11.3% and Bebe Stores sales higher by 9.8%. Starbucks posted Q1 profit rise of 20% above esimates.

U.S. MARKET AVERAGES

A surprising jump in labor costs and growing concerns about the Middle East sent stocks in the negative with a drop in initial jobless claims failing to spark much enthusiasm. A heavy selloff of small-cap and technology stocks sent the Dow Jones industrials down more than 100 points.

Retail stocks fell despite strong January sales reports on profit taking after investors bid them higher earlier in the week in anticipation of good news.

Wal-Mart Stores reported that January same-store sales climbed 4.7%, marking the highest monthly increase of the fiscal year. Sales at the company's Sam's Club bulk discount chain rose 8.2%. Total sales for the month grew 14.5% to $22.675 billion. The company predicted 2%-4% comparable sales growth in February.

Costco, Nordstrom and J.C.Penny posted same-stores sales that beat Wall Street forecast.

Federated and Talbots Inc reported same-store sales rise in line with expectations.

Teen retailers including Bebe Stores, Pacific Sunwear, and American Eagle Outfitters made a strong performance in January same-store sales.

Energy stocks steadily moved to the downside, as traders reacted to weekly natural gas inventories. Technology stocks weighed on market sentiment with the disk drive sector down about 1.8% and the software sector posting a decline of 1.6%.

There were no conspicuous standouts to the upside during the morning. Airline and retail stocks were sitting near the flat line.

Genta ((GNTA)) broke to a new 52-week high on a stock-price gain of more than 20%. Starbucks ((SBUX)) climbed to a new peak, lifted by earnings news. 3Com ((COMS)) extended recent advance to set a fresh high.

Tyco ((TYC)) dropped to a new 52-week low on disappointing guidance for 2006. Home builder Toll Brothers ((TOL)) also dipped to a fresh nadir as well. XM Satellite Radio ((XMSR)) was another noteworthy stock moving to a new low.

In midday trading, the Dow Jones industrial average fell 103.58, or 0.95%. The Standard & Poor's 500 index lost 10.83, or 0.84%, and the tech-dominated Nasdaq composite index dropped 27.37, or 1.18%.

Bonds edged higher, with the yield on the 10-year Treasury note falling to 4.55% from 4.56% late Wednesday.

MOVERS AND SHAKERS

NutriSystem Inc ((NTRI)), weight management services provider, projected Q4 earnings of 16 cents a share and 2005 of 58 cents a share, both views a penny shy of the analyst estimates. The company forecast Q4 revenue of $69 million to $70 million, above analysts'' forecast of $62 million and 2005 revenue outlook of $212 million to $213 million, also above analysts'' expectations for revenue of $206 million. The stock dropped 14.9%.

Research in Motion ((RIMM)), producer of the BlackBerry wireless e-mail system, said it won a round in a patent dispute with InPro, a Luxembourg patent-holding company. RIM said that InPro had asserted that certain BlackBerry products infringed a United Kingdom patent it held. The High Court of Justice, Chancery Division in London invalidated the claims. The stock fell 1.6%.

SiRF Technology Holdings Inc ((SIRF)), semiconductor company, reported Q4 net earnings of $9.6 million, or 17 cents a share, down 44% from $17.1 million, or 33 cents a share, last year on revenue rise of $54.4 million from $27.5 million. Excluding certain items, earnings came in at 21 cents a share compared with 10 cents a share last year. Analysts had forecast earnings of 19 cents a share on revenue of $52 million. The company’s shares climbed 9.6%.

ECONOMIC NEWS

The Department of Labor released its report on initial jobless claims in the week ended January 28 on Thursday, showing an unexpected decline. The 4-week moving average also fell, reaching its lowest level in over five years.

The report showed that jobless claims fell to 273,000 from the previous week''s revised figure of 284,000. Economists had expected jobless claims to increase to 295,000 compared to the 283,000 originally reported for the previous week.

The Labor Dept. added that the less volatile 4-week moving average fell to 284,250 from the previous week''s revised average of 289,000. This marks the fifth consecutive decline for the 4-week moving average, which fell to its lowest level since June of 2000.

The report also showed that continuing claims fell to 2.509 million in the week ended January 21 from the preceding week''s revised level of 2.573 million. With the decrease, continuing claims fell to their lowest level since February of 2001.

Thursday morning, the Department of Labor released its preliminary report on fourth quarter productivity. The report showed that productivity unexpectedly fell during the final three months of 2005.

The report showed that non-farm productivity fell 0.6 percent in the fourth quarter after rising 4.5 percent in the third quarter. The decrease came as a big surprise to economists, who had been expecting growth of about 1.7 percent.

This marked the first decrease in productivity since a 0.4 percent drop in the first quarter of 2001, and it was also the biggest drop since a 0.9 percent decrease in the third quarter of 2000.

The decrease in productivity came as an increase in hours outpaced an increase in output, with hours rising 1.5 percent in the quarter while output increased by only 0.9 percent. In the third quarter, output increased by 4.7 percent while hours edged up by 0.1 percent.

The report also showed that unit labor costs rose by 3.5 percent in the fourth quarter after falling 0.5 percent in the third quarter. Economists had been expecting a more modest increase in unit labor costs of about 2.8 percent.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed largely higher, supported by solid Wall Street gains and strengthening dollar after the interest rate rise which is favorable for the Asian exporter-related issues. The Nikkei soared 1.4% to 16,710.55. Among other regional markets Singapore Straits Times rose 0.45%, while Thailand SET dropped 2.1% and South Korea’s Kospi declined 0.1%. The dollar bought 118.24 yen.

European stocks closed in the negative as early gains on upbeat news from Alcatel and Rio Tinto were erased by losses in the oil sector and disappointing quarterly results from Royal Deutsch Shell. The German DAX 30 slipped 1.3%, the French CAC 40 dipped 1.4%, and London’s FTSE 100 dropped 0.9%.

OIL, METALS, CURRENCIES

Crude oil slipped below $65 a barrel after U.S. and European leaders played down the threat of UN sanction against Iran Light sweet crude for March delivery fell $1.01 to $65.55a barrel. London Brent lost $1.23 to $63.80.

European gold prices hit a 25-year high on oil rise and inflation worries. In London gold traded at $573.10 bid per troy ounce, up from $565.30. In Zurich the precious metal traded at $572.80, up from $566.20. In Hong Kong gold rose $4.95 to close at $572. Silver closed at $9.83, up from $9.70.

The U.S. dollar traded mixed against other major currencies. The euro was quoted at $1.2093, up from $1.2057. The dollar bought 118.33 yen, up from 117.94. The British pound stood at $1.7794, up from $1.7732.

EARNINGS NEWS

Starbucks reported a 20% rise in Q1 earnings, topping forecasts. It also raised its earnings outlook after reporting a 10 percent rise in January same-store sales.

Tyco International Ltd. ((TYC)) reported that Q1 net income fell 22% on 1.1% higher sales, missing estimates by a penny a share.

Whirlpool Corp. ((WHR)) announced better-than-expected Q4 profit of $1.83 a share on 9% sales growth, beating estimates of $1.70. The company raised 2006 earnings to $7-$7.25 a share.

Cable TV operator Comcast Corp. ((CMCSA)) posted a 69% drop in quarterly profit. The board of directors approved an additional $5 billion stock buyback program