Inflation Concerns Relieved

Elena
22 Feb, 2006
New York City

U.S. stocks advanced at opening after a report on consumer prices brought relief to the market, easing concerns about higher interest rates. In earnings news, Sprint Nextel, Harrah''s Entertainment and Big Lots reported Q4 profit drop below estimates. Taser profit dropped 98% in Q4 on lower sales and higher expenses. The Chinese Internet search system Baidu com.Inc. reported quadrupled profit that beat expectations.

U.S. MARKET AVERAGES

Stocks slightly advanced at opening after the Labor Department reported core inflation rose only moderately in January.

The core rate of inflation, excluding energy and food, rose 0.2% in January, in line with economists' forecasts. The broader Consumer Price Index climbed 0.7% on higher prices for gasoline and electricity, a greater increase than economists expected and the largest rise in prices in four months.

Bank stocks were notable gainers in the early going, though the sector rose only 1%. HMO, chemical, airline and insurance stocks posted modest strength as well.

Energy stocks moved to the downside, reversing part of Tuesday's climb. The oil service sector showed a decline of 1.6%.

Axcan Pharma ((AXCA)) was one of the morning's sharpest movers to the downside after it revealed disappointing results in a late-stage trial of its Functional Dyspepsia drug. The stock dropped 30%.

In the first hour of trading, the Dow Jones industrial average rose 33.77, or 0.31%. The Standard & Poor's 500 index rose 3.51, or 0.27%, and the Nasdaq composite index rose 2.57, or 0.11%.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.56% from 4.57% late Tuesday.

MOVERS AND SHAKERS

Baidu com. Inc. ((BIDU)) reported Q4 net earnings of $3 million, or 9 cents a share. The Chinese Internet search engine posted total revenue jump of 29.2%, or $14.2 million compared with last-year same period. Baidu.com forecast Q1 revenue of $15.1 million to $16.1 million. The stock rose 12%.

AmSurg Corp. ((AMSG)), ambulatory-surgery center operator, reported Q4 net earnings of 28 cents a share, compared with 29 cents last year on revenue increase of $102.9 million from $87.3 million. For Q1 the company expects adjusted earnings of 32 cents to 33 cents a share. The stock gained 8.3%.

InPhonic ((INPC)), online wireless services provider, reported its Q4 net loss widened to $24.6 million, or 69 cents a share, from $7.9 million, or 37 cents, in the year-earlier period. Revenue rose to $85.2 million from $48.7 million. The adjusted loss for the quarter was $14.6 million, or 41 cents a share vs. earnings of $1.9 million, or 5 cents a share last year. InPhonic projected Q1 adjusted earnings of 5 cents to 6 cents a share on revenue of $83 million to $85 million. The company’s shares dropped 24%.

Herbalife ((HLF)) reported Q4 net income rise of $30 million, or 41 cents a share, compared with a net loss of $37.4 million, or 68 cents a year ago. Revenue rose to $409 million from $341.6 million. Herbalife expects Q1 sales growth of 16% to 18% and per-share profit of 37 cents to 41 cents. The stock fell 12%.

Intel ((INTC)) was downgraded at Think Equity Partners to sell from accumulate. The firm also lowered its price target on the stock to $16 from $26. Intel’s shares fell 2.4%.

ECONOMIC NEWS

The Department of Labor released its report on consumer prices in the month of January on Wednesday, showing that prices rose more than economists had expected due largely to a rebound by energy prices.

The Labor Dept. said that its consumer prices index rose 0.7 percent in January after an unrevised 0.1 percent decrease in December. Economists had been expecting a somewhat more modest increase of about 0.5 percent.

As mentioned above, the price growth in January reflected a rebound in energy prices, which rose 5.0 percent in January after falling 2.1 percent in December and 8.1 percent in November. Prices for transportation also showed a notable increase, rising 1.8 percent.

The report also showed that core prices, which exclude food and energy prices, rose 0.2 percent in January after a downwardly revised increase of 0.1 percent in December. The growth in core prices came in line with economist estimates.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks lost ground Wednesday to close broadly down, hurt by weakness on Wall Street and climbing oil prices. The Nikkei reversed from yesterday’s sharp rise of 3% to finish lower 0.7%. Across the region, Taiwan’s Weighted index tumbled 1.5%, South Korea’s Kospi lost 0.4%, while Australia’s All Ordinaries and the Bombay Stock Exchange’s Sensitive index slightly advanced.

European stocks retreated at mid-day dealings, reflecting a weak close of U.S. markets hit by rising crude oil and disappointing outlook from Wal-Mart. Well-received corporate data from brewers like Heineken and miners like Anglo American failed to lift sentiment. The German DAX 30 lost 0.1%, the French CAC 40 traded lower at 4,990, and London’s FTSE 100 edged down 0.1%.

OIL, METALS, CURRENCIES

Crude oil prices eased back after recent sharp gains, following the violent militant act against oil pipelines in the Niger Delta. Light sweet crude April delivery declined 51 cents to $62.23 a barrel. London Brent for April delivery dropped 37 cents to $61.23 a barrel.

European gold further weakened. In London gold traded at the fixed price of $551.75 bid per troy ounce, down from $554.40. In Zurich the precious metal traded at $551.60, down from $554.60. In Hong Kong gold gained 60 cents to close at $553.70. Silver rose to $9.59 from $9.51.

The U.S. dollar advanced against other major currencies. The euro traded at $1.1873 down from $1.1977. The dollar bought 118.77, up from 118.70. The British pound stood at $1.7400, down from $1.7460.

EARNINGS NEWS

Orbital Sciences Corp, ((ORB)), manufacturer of rockets for military and civil space projects, reported Q4 net income of $7.6 million, or 12 cents a share, down from $166.1 million in the year-ago period. The company attributed the sharp drop to a change in income tax expense and. Revenue for Q4 advanced 13.9%.

Big Lots, ((BLI)), retailer, reported Q4 net earnings 13 cents share, down from 51 cents in the year-ago period despite 6% sales growth. On a continuing operations basis, the company reported 33 cents a share, down from 50 cents, missing on that basis analyst estimate of 43 cents a share. Revenue reached $1.39 billion and same-store sales were up 2.5%.

Sprint Nextel Corp, ((S)), communication products and solutions provider, reported Q4 earnings of 7 cents a share, down from a profit of 29 cents a share a year-ago. On an adjusted basis, before amortization and certain non-recurring items, the company reported earnings of 33 cents a share in Q4. Revenue advanced 63%, compared the prior year period, missing analyst estimate by a penny.

IHOP Corp, ((IHP)), restaurant operator, reported a Q4 profit to 53 cents a share, from 52 cents a year earlier, beating analysts’ forecasts of 51 cents a share. Earnings per share rose despite the decline in profit because there were fewer shares outstanding in the most recent period.

Landry''s Seafood Restaurants, ((LNY)), restaurant operator, reported Q4 earnings of 18 cents a share, down from a profit of 49 cents a share a year-ago, topping analyst view of earnings of 14 cents a share. If not for items, such as costs related to a refinancing and an income tax benefit, the company reported adjusted earnings of 22 cents a share in Q4. Revenue advanced in Q4 to $328.8 million from $259.8 million in the year-ago period.

Jack In The Box, ((JBX)), fast-food restaurant chain, reported that Q1 earnings dropped 0.8% to $25.2 million. Earnings per share advanced, though, to 70 cents from 68 cents a share on stock buybacks. Q1 included 5 cents a share in stock options expensing and 4 cents in charges from a legal settlement. Revenue advanced 11.1% or up 5.5% on a same-store basis. The company beat analysts’ forecasts for earnings of 68 cents.

QLT Inc, ((QLTI)), provider of healthcare products, reported a Q4 loss of $4.04 a share, down from a loss of $2.64 a share a year-ago. The results include a charge of $410.5 million related to goodwill impairment stemming from its acquisition of Atrix Laboratories. On an adjusted basis, the company reported 11 cents a share for Q4. Sales fell in Q4, compared with the year-ago period.

Taser International Inc, stun gun maker, reported Q4 earnings, break even on a per share basis, down from a profit of 7 cents a share a year-ago. Sales dropped in Q4 to $12.6 million from $19.2 million in the same period a year ago.

American Woodmark Corp, ((AMWD)), kitchen cabinet maker, reported Q3 earnings of 37 cents a share, down from a profit of 42 cents a share year-ago, topping analyst estimate of 26 cents a share. Sales advanced 4% in Q3, compared with the prior year period.

Ritchie Bros, ((RBA)), auctioneer, reported Q4 earnings of 41 cents a share, up from a profit of 33 cents a share a year-ago, beating analysts’ views for a profit of 36 cents a share. Gross auction sales advanced in Q4 to $589.9 million from $549.8 million in the same period a year ago.