Weaker New Home Sales

Elena
27 Feb, 2006
New York City

Stock averages opened higher as falling oil prices and better-than expected earnings from Lowe''s Cos eased concerns about corporate ptofits. The retailer posted Q4 profit rise of 87 cents a share on 7.8% same-store sales rise, beating estimates. A report saying that Apple Computers may acquire Walt Disney also provided support. SanDisk and M-Systems Flash Disk Pioneers were upgraded by Citigroup to buy from hold.

U.S. MARKET AVERAGES

Stocks advanced at opening, reflecting a decline in oil prices and stronger-than-expected earnings from Lowe's Cos which eased worries about corporate profits and consumer spending. A published report saying that Apple Computer is likely to acquire Walt Disney also contributed to the positive mood.

Crude-oil futures slipped Monday, following $2.37 surge Friday an explosion in Saudi Arabia. Front-month crude dipped 86 cents to $62.05 a barrel in electronic trade.

In overtake news, UK-based utility National Grid announced that it agreed to acquire KeySpan ((KSE)) at the total value of $7.3 billion, or $42 per share in cash. The company said the merger creates the third-largest energy delivery utility in the U.S. National Grid said it will honor all labor agreements with the KeySpan unions, but employee reductions will be made through attrition and voluntary programs. The transaction is expected to close by early 2007.

On the analyst front, Citigroup upgraded SanDisk Corp. and M-Systems Flash Disk Pioneers to buy from hold.

The retail sector stood out as one of the best performers lifted by Lowe's ((LOW)) which rose more than 4% on strong earnings and guidance. The sector gained about 1.4%. Utility stocks also showed strength owing to the National Grid's ((NGG)) $7.3 billion deal to acquire KeySpan ((KSE)).

Energy stocks posted modest losses as oil prices retreated after Friday's jump. The oil service sector was the worst performer in the group, down more than 1.5%. Housing stocks also posted modest weakness ahead of monthly new home sales data.

In midmorning trading, the Dow Jones industrial average rose 50.99, or 0.46%. The Standard & Poor's 500 index added 4.88, or 0.38%, and the Nasdaq composite index gained 14.13, or 0.62%.

Bonds edged higher, with the yield on the 10-year Treasury note falling to 4.56% from 4.58% late Friday.

MOVERS AND SHAKERS

Dana Corp. ((DCN)), auto-parts maker, said it was in discussions with banks to resolve its financing difficulties and would come to a resolution within two weeks. On Friday the stock tumbled as it obtained a waiver from its lenders over its required credit rating on its accounts-receivable-securitization program. On Monday the stock surged 30%.

Wilshire Enterprises ((WOC)) received an acquisition proposal from Mercury Real Estate Advisors LLC, an affiliate of real estate investment firm Mercury Partners LLC. The offer values Wilshire at $8.50 per share in cash, a slight premium to Wilshire's Friday closing price of $8.20. The company’s shares gained 3.8%.

Superior Essex ((SPSX)) ,wire and copper maker, posted Q4 earnings drop of 16.7% to $3 million, or 18 cents a share, hurt by non-cash equity compensation and a bad debt provision for customer insolvencies. Excluding special items, earnings per share surged 79% to 25 cents a share and revenue rose 37% to $523 million. Company’s shares dropped 9.3%.

Vodafone group ((VOD)), U.K. mobile operator, announced it will write off up to $49 billion of its assets, mostly relating to its German business. The stock fell 4%.

ECONOMIC NEWS

The Department of Commerce released its report on new home sales in the month of January on Monday, showing that sales fell compared to an upwardly revised reading for the month of December.

The report showed that new home sales fell 5 percent to a seasonally adjusted annual rate of 1.233 million units in January from a revised rate of 1.298 million units in December.

Economists had been expecting new home sales to come in at a 1.278 million unit rate compared to the 1.269 million unit rate originally reported for December.

The drop in new home sales reflected double-digit percentage declines in each of the four regions of the country. Sales in the Northeast showed a notable decline, falling 14.5 percent.

The report also showed that the seasonally adjusted estimate of new houses for sale at the end of January came in at 528,000, representing a supply of 5.2 months at the current sales rate.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks advanced across the region helped by strong fund flows with the yen extending recent rally on speculations that the Bank of Japan will end its easy monetary policy and increase interest rates. The Nikkei climbed 0.5%, supported by energy, steel and insurance stocks. Hong Kong’s Hang Seng rose 0.6%, South Korea’s Kospi gained 0.6%, and Shanghai Composite added 0.4%. The Bombay Stock Exchange Sensitive index surged 0.7%.

European stocks traded in the positive at mid-day, lifted by deal talk in the utility sector. However, telecoms weighed after mobile operator Vodafone Group announced it will write off up to $49 billion of its assets. The German DAX 30 gained 0.2%, the French CAC 40 added 0.1%, and London’s FTSE 100 rose 0.2%.

OIL, METALS, CURRENCIES

Crude oil prices eased back, following solid gains after the bomb attack in a huge oil refinery in Saudi Arabia. Light sweet crude April delivery slipped 91 cents to $61.99 a barrel. London Brent for April delivery declined 80 cents to $61.80 a barrel.

European gold prices declined on strengthening dollar. In London gold traded at the fixed price of $556.10 bid per troy ounce, down from $557.80. In Zurich the precious metal traded at $555.50, down from $557. In Hong Kong gold climbed $4.70 to $556.50. Silver opened at $9.70, up from $9.57.

The U.S. dollar traded mixed against other major currencies. The euro traded at $1.1854, down from $1.1873. The dollar bought 116.13, down from 116.82. The British pound stood at $1.7393, down from $1.7445.

EARNINGS NEWS

The Warnaco Group Inc, ((WRNC)), intimate apparel manufacturer, reported its Q4 net income dropped 42% to 20 cents a share, from 35 cents a share in the year-earlier period. Revenue fell 3.2%. The company stated that results dropped due to lower sales, an increase in selling, general and administrative expenses and a significant increase in pension expense. Analysts forecast earnings of 24 cents a share.

Gehl Co, ((GEHL)), equipment maker, reported Q4 net income of 50 cents a share, almost double from 29 cents a share, in the year-ago period. A one-time item related to a reversal of a warranty charge added 12 cents a share to Q4 net income. Revenue advanced 16% to $108.7 million from $93.9 million. The company topped analysts’ forecasts of 35 cents a share.

Top Tankers Inc, ((TOPT)), tanker operator, reported Q4 net income of $1 a share, up from 80 cents a share in the year-ago period. The results included a net charge of 13 cents a share, mostly for staff bonuses and compensation.. Revenue almost doubled.

Newmont Mining Corp, ((NEM)), precious metals company, reported Q4 earnings from continuing operations of 16 cents a share, down from 34 cents a share a year-ago. The company added that Q4 results include items, such as losses on the writedown of certain assets, that decreased earnings by a total of 19 cents a share. Revenue advanced to $1.31 billion from $1.2 billion in the same period a year earlier. The company missed analysts’ estimates for a profit of 36 cents a share. The company attributed the lower earnings to industry-wide cost pressures.

Hormel Foods Corp, ((HRL)), food products manufacturer, posted Q1 net income of 50 cents a share, up from 46 cents a share a year earlier on 11% higher sales but up just 1% excluding acquisitions, topping analysts’ estimate of 48 cents a share. For Q2, the company forecast earnings of 42 cents to 48 cents a share on a GAAP basis.

Laureate Education Inc, ((LAUR)), higher education services provider, reported Q4 earnings of 89 cents a share, up from a profit of 65 cents a share a year-ago on 32% revenue growth. On a continuing operations basis, the company reported 91 cents a share. Total student enrollment for campus-based institutions advanced 41% in Q4. The company missed analyst estimate for a profit of 92 cents a share.

Lowe''s Cos, ((LOW)), home improvement products retailer, reported Q4 earnings of 87 cents a share, up from a profit of 64 cents a share a year-ago on 26.4% sales and 7.8% same-store sales growth, beating analyst estimate of 80 cents a share.

NovaStar Financial Inc, ((NFI)), U.S. mortgage lender and real estate investment trust, reported Q4 advanced 16% to 84 cents a share on 30.4%. revenue growth The company had delayed its earnings statement from Feb. 10 in order to obtain legal opinion on certain tax positions. NovaStar added that its strong portfolio earnings more than compensated for weakness in its mortgage banking business, primarily because of better-than-expected credit performance driven by rising home prices.

American Financial Realty Trust, ((AFR)), real estate investment trust, reported that its Q4 net loss was down to $21 million, or 17 cents a share, from $6.3 million in the year-ago period despite 22.7% revenue growth. The company announced a loss of 20 cents a share from continuing operations and funds from operations at 17.5 cents a share in Q4, compared to 27.1 cents a share in the same period of 2004.

Harvest Natural Resources Inc, ((HNR)), oil and gas company, reported Q4 net earnings of 27 cents a share, down from 39 cents in the same time the prior year period on a decline quarterly, reflecting lower oil and natural-gas production, but in line with analyst predictions. The company also said it is expecting average oil deliveries of about 21,000 barrels a day for Q1, down from the pace of 22,000 barrels a day at the end of 2005.