Spend & Rally

123jump.com Staff
01 Mar, 2006
New York City

Mild rise in inflation indicator, healthy consumer spending and stable construction spending in January all supported the rise in broader averages. Semiconductor stocks rose as several brokers indicated positive comments. Altera, National Semi and Texas Instruments gained. AutoDesk and American Eagle rose more than 10% on earnings. India based ADRs including Infosys, Satyam, Tata Motors and ICICI gained. Closed-end funds India Funds jumped more than 3%. GM and F January auto sales declined.

U.S. MARKET AVERAGES


Mixed batch of earnings and economic news and reports awaited market in the morning.

AutoDesk reported strong earnings and raised its guidance for the year 2006 lifting the stock up 11% and American Eagle Outfitters rose 13% on sales rise of 10%.

On the economic front January construction spending rose 0.2% less than expected rise of 1.2% and less than 1.0% rise in December 2005. A manufacturing industry survey showed a widening activity base supporting a several construction and manufacturing related stocks including Caterpillar ((CAT)), Manitowoc ((MTW)), United Tech ((UTX)) and others.

Personal income rose 0.7% in January according to the latest report from the Commerce Department but personal consumption also rose 0.9%. A key measure of inflation tracked by Federal Reserve showed that price index for Personal Consumption Expenditure, widely known as PCE, excluding food and energy – volatile portion – rose 0.2% in January after rising 0.1% in December.

Auto sales for the month January reflected a long-term trend in place where domestic auto makers continue to lose market shares to its Asian rivals. Unit sales at General Motors fell 2.4% in January compared to the previous month and sales at Ford dropped 1.4% however Chrysler registered gain of 2.5% in sales. Sales at Toyota rose 2.4% and at Honda gained 8.7%.

Index of semiconductor stocks Philadelphia Semiconductor Sector Index rose 4.4% as several of the 19 stocks in the index received positive comments. Semiconductor sector led the rally in tech stocks as several brokers raised price targets or upgraded ratings on stocks in the sector. Texas Instruments ((TXN)) gained 8% on the back of positive comments from Bernstein Research, National Semi ((NSM)) rose 5% after Morgan Stanley analyst hoped for an earnings surprise in the next earnings report and Altera ((ALTR)) rose 5.69% after Bear Stearns upgraded the stock to “outperform”.

Weekly Crude oil inventory data did not surprise the market sparking a mild rally in the commodity and in the energy stocks. Drillers, explorers and refiners gained during the day. Crude futures rose 56 cents to close at $61.97 per barrel. Rown Companies ((RDC)), Valero ((VLO)) and Schlumberger ((SLB)) were some of the leaders at close.



MOVERS AND SHAKERS

Joy Global ((JOYG)) said Q1 net profit surged to $60 million, or 48 cents a share, from $22 million, or 18 cents a share a year ago. Revenue jumped 48% to $553.3 million. It predicted revenue between $2.35 billion and $2.55 billion for the year. The company’s shares rose 11%.

Altera ((ALTR)), semiconductor maker, was upgraded at Bear Stearns to outperform from peer perform, citing the belief that the company will raise its revenue outlook during its mid-quarter update on March 6. The broker introduced a year-end 2006 stock price target of $25. The stock gained 4.2%.

HouseValues ((SOLD)) reported net income increase of 15 cents a share from 8 cents in the year-earlier period. Revenue rose to $25.2 million from $14.4 million. Analysts expected per-share earnings of 14 cents on revenue of $29 million. The stock slipped 26%.

Cogent Systems ((COGT)), provider of fingerprint biometric solutions, reported Q4 net income per share doubled from the year-earlier period to 22 cents, beating estimates of 20 cents. Revenue rose 46% to $46.2 million. The company’s shares fell 19.2%.

Hedrick & Struggles ((HSII)), human-resources consulting firm, reported Q4 net income drop of 36 cents a share against 44 cents in the year-earlier period, citing higher tax rate. Earnings for the quarter failed to meet estimate of 50 cents per share. Revenue rose 2.1% to $100.7 million. The stock dropped 11%.

ECONOMIC NEWS

Crude oil inventories advanced in the latest week, according to government statistics released Wednesday, adding to a recent string of gains. Meanwhile, stocks of gasoline recorded another rise as well.

The Department of Energy''s Energy Information Administration revealed that crude oil inventories climbed by 1.6 million barrels for the week ended February 24, rising to 328.3 million barrels from the prior week''s level of 326.7 million barrels. This followed an advance of 1.1 million barrels in the previous week. Oil inventories were 9.1% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week increase of 300,000 barrels, the government said. This added to a recent string of gains, including an advance of 100,000 barrels in the previous week. Gasoline stocks were 0.1% above their levels of last year. Inventories of distillate fuel oil ticked down by 1.5 million barrels in the most recent week.
Personal income and spending showed notable growth in the month of January, according to a report from the Department of Commerce. At the same time, the report also showed an acceleration in the pace of inflation.

The report said personal income rose 0.7 percent in January following an upwardly revised increase of 0.5 percent in December. Economists had expected income to increase by 0.6 percent compared to the 0.4 percent growth originally reported for December.

The Commerce Dept. noted that the increase in personal income reflected several special factors, including new Medicare prescription drug plan payments and cost-of-living adjustments to several federal transfer payment programs.

The report also showed that personal spending grew by 0.9 percent in January after a downwardly revised increase of 0.7 percent in December.

The growth in personal spending came in slightly below the expectations of economists, who had expected growth of 1.0 percent compared to the 0.9 percent growth originally reported for December.

With personal spending growth outpacing the increase in personal income, the personal savings rate came in at a negative 0.7 percent in January compared with a negative 0.4 percent savings rate in December.

As mentioned above, the report also showed that the price index for consumer spending rose 0.5 percent in January after coming in unchanged in December. Excluding food and energy prices, the index rose 0.2 percent following a 0.1 percent increase in the previous month.

Additionally, the price index showed an annual rate of growth of 3.1 percent in January compared to the 2.8 percent year-over-year growth seen in the two previous months. Core prices rose 1.8 percent year-over-year.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished mixed, reflecting positive fund flows and easing political tensions. The Nikkei slid 1.5% on disappointing U.S. economic data and a sharp drop of Google’s shares which hurt the auto and tech sectors. Across the region, Hong Kong’s Hang Seng fell 0.6% on profit taking, Australia’s All Ordinaries tumbled 1.3%, while India’s Stock Exchange Sensitive index surged 1.9% on gains in automobile shares.

European stocks posted solid gains Wednesday to close higher, supported by strong earnings from Xstrata and takeover speculations involving French media group Thomson The German DAX 30 surged 1.2%, the French CAC 40 rose 1.1%, and London’s FTSE 100 climbed 0.9%.

OIL, METALS, CURRENCIES

Crude oil prices hovered round $62 despite petroleum report showing another rise in U.S. oil inventories. Light sweet crude April delivery gained 54 cents to $61.95 a barrel. Gasoline gained nearly 3 cents to $1.616. Heating oil added 2 cents to $1.741. Natural gas rose 10 cents to $6.81 per 1,000 cubic feet. London Brent for April delivery added 68 cents to $62.44a barrel.

European gold prices extended gains. In London gold traded at the fixed price of $565.70 bid per troy ounce, up from $559.30. In Zurich the precious metal traded at $564.90, up from $558.40. In Hong Kong gold rose $7.40 to $562.70. Silver closed at $9.83, up from $9.75.

The U.S. dollar gained ground vs. other major currencies. The euro traded at $1.1910, down from $1.1921. The dollar bought 116.07, up from 115.73. The British pound stood at $1.7488, down from $1.7536.

EARNINGS NEWS

Saks Inc, ((SKS)), retailer, reported a Q4 net loss of 2 cents a share, compared to net income of 71 cents a share in the year-earlier period. The company also okayed a special cash dividend of $4 a share, immediately following the expected closing on March 13 of the sale of its Northern Department Store Group. Q4 results incorporated net after-tax charges of $56.3 million, or 42 cents a share related to goodwill and other asset impairments. Revenue declined to $1.77 billion from $2.1 billion, reflecting the sale of the Proffitt''s/McRae''s business. The company missed analysts’ forecasts for earnings of 58 cents a share and revenue of $1.78 billion.

The Houston Exploration Co, ((THX)), oil and gas company, reported Q4 earnings of 68 cents a share, down from a profit of $1.21 a share a year-ago due to revenue decline. The company stated that declines in production more than offset improvements in average realized prices for the quarter. Production for Q4 dropped to 26.3 billion cubic feet of natural gas equivalent, or bcfe, from 30.3 bcfe in last year''s period. The company missed analysts’ estimates by a penny.

William Lyon Homes, ((WLS)), single family home builder, reported that Q4 net income advanced to $10.11 a share, up from $8.58 a share last year. Net new home orders, a predictor of future activity, dropped 7% to 460 homes. The company announced that the softening of some of its markets it experienced in late 2005 is continuing into 2006 as orders are lower and cancellation rates are higher for the first eight weeks of 2006 relative to the year-ago period.

American Eagle Outfitters Inc, ((AEOS)), apparel company, reported Q4 income of 71 cents a share, up from 66 cents a share in the year-earlier period on 13.4% total sales and 7.8%. same-store sales growth. Operating income rose to $174.2 million from $171.7 million last year.

SciClone Pharmaceuticals, Inc, ((SCLN)), pharmaceutical company, reported a Q4 net loss of 4 cents a share, up from a loss of 5 cents a share in the year-ago period on revenue growth and a 22% jump in sales of Zadaxin, SciClone''s lead product. The company predicted Zadaxin sales will advance to about $32 million in 2006, driven by continued growth in China.

Aristotle Corp, ((ARTL)), manufacturer of products for the education, medical and agricultural markets, reported that Q4 net earnings advanced 54.7% to 9 cents a share on 5.9% net sales growth. Aristotle, announced that reductions in administrative and selling costs had more than offset higher energy prices and sluggish spending in the education market.

Fargo Electronics, Inc, ((FRGO)), provider of sercure identity-card technologies, reported that Q4 net income increased 12% to 19 cents a share from the year-ago period on 7% sales growth. Gross profit margins advanced to 44% from 39%. The company predicted it will earn 13 cents to 15 cents a share in Q1, including one cent for the expensing of stock options.

Walter Industries Inc, ((WLT)), diversified infrastructure company, posted a Q4 net loss of $1.88 a share, three times more than earned in the same period a year ago. Total revenue at the company advanced to $801.2 million from $391 million a year ago. Walter Industries beat analysts’ forecasts of $1.44 a share.