Markets on the Decline

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

Three large merger deals, rising bond market yields and falling crude oil prices take the broader averages lower in the afternoon trading. General Motors rose 1.7% and Caterpillar lost 1.9%, the best and worst peformers in the DOW. On light trading volume on NYSE markets are on the delcine. Casino stocks traded higher on the news that Wynn Resorts sold developments rights for $900 million to an Australian company.

1:30 PM ET – U.S. Mid-day Market Update

Falling oil price and three large deals dominated morning trading for the day so far. Heating oil and gasoline prices have dropped 4% and crude oil has declined 1.5% at this time. The mega deal between BellSouth and AT&T of $67 billion has lifted telecom stocks in the U.S. and in Europe. Telecom equipment providers are trading higher but will eventually come under pressure as providers will have to deal with even larger AT&T at lower prices.

General Motors ((GM)) is trading higher 1.6% on the news that the company is to sell 21% remaining stake in Japanese automaker, the best gainer in all of DOW 30 components. Caterpillar ((CAT)) is down 1.9%, the worst performer in DOW.



12:30 PM ET – European Markets Close

European stocks advanced Monday, lifted by telecom-consolidation news and a deal involving Linde and BOC Group. However, averages finished off intraday highs, reflecting weakness on Wall Street. The German DAX 30 rose 0.6%, the French CAC 40 climbed 0.4%, and London’s FTSE 100 closed up 0.7% after hitting a fresh four-year high. Merger driven stocks rose in the day. France Telecom, Vodafon and BT Group rose. Italian insurance company Assicurazoni Generali SpA rose 7% on stock buyback and company’s plan to spend $5 billion to acquire companies.

World’s third largest bank HSBC Plc reported 25% rise in earnings in the second half of the year 2005. Net income for the second half rose to $7.49 billion from $5.98 billion and for the full year earnings rose to $15.08 billion. The company stock rose 1.5% at close. The third largest bank’s return on equity was 16.8% lower than that for Citigroup’s 22.3% and Bank of America’s 17%. The bank recently expanded its presence in China, U.S. and Brazil.


11:30 AM ET - Market and Earnings

AT&T was the biggest decliner within the Dow Jones. AT&T fell about 1.3%.

3M ((MMM)) was another notable loser. The stock dropped 1%, reaching a one-month low. Honeywell International (HON: chart) also traded lower by about 1%.

General Motors ((GM)) was the leading gainer among the Dow components Monday morning. The stock climbed by about 3.2%. Another notable upside mover was Johnson & Johnson ((JNJ)), up about 0.9%.

In late morning trading, the Dow Jones industrial average gained 6.48, or 0.06%. The Standard & Poor''s 500 index was up 0.07, or 0.01%, and the Nasdaq composite index rose 4.79, or 0.21%.

10:30 AM ET - Market Movers

Research In Motion ((RIMM)) stood out among gainers in the early going after it announced a deal to settle its patent dispute with NTP. The gains came despite lowered guidance from the company. Shares of the maker of the popular BlackBerry wireless device rose 13%.

Redback Networks ((RBAK)) was a notable mover to the downside in early morning with a slide of 13%. The stock fell on an analyst downgrade and concerns that consolidation in the telecom space could lead to fewer customers.

9:45 AM ET - Market Tone

AT&T''''s agreement to buy BellSouth for $67 billion, with General Motors'''' stake-sale plans and a brokerage upgrade on Intel Corp boosted stocks to open higher.

Energy stocks moved lower in the early going on retreating oil prices. The transportation group was also weak. Technology stocks showed weakness as well, including a decline in the networking and disk drive sectors.

Telcom stocks stood out among movers to the upside, rallying on AT&T deal to buy BellSouth. The sector climbed nearly 2%, while BellSouth posted an advance of more than 10%.

9:00 AM ET - Premarket Opening

U.S stocks futures pointed to a higher opening, supported by a series of merger deals including AT&T Inc.''''s announcement of a $67 billion purchase of BellSouth Corp. which helped lift market sentiment after the lackluster trading of late last week.

Over the weekend, AT&T ((T)), long-distance telephone company, agreed to acquire BellSouth ((BLS)), the No. 3 U.S. regional phone company, for $67 billion. Under the agreement, each common share of BellSouth will be exchanged for 1.325 shares of AT&T common stock. Once the acquisition of BellSouth is completed, AT&T will gain total control of Cingular Wireless, the largest mobile phone company in the U.S. Currently, AT&T holds a 60% stake in Cingular, while BellSouth has the remaining 40% stake.

Economic News

The Department of Commerce released its report on new orders for manufactured goods in the month of January on Monday. The report showed a notable decrease in orders, although the drop was still smaller than economist had expected.

The report said that factory orders fell 4.5 percent in January after an upwardly revised increase of 1.6 percent in December. Economists had expected orders to fall 5.4 percent compared to the 1.1 percent increase originally reported for December.

The decrease was largely due to a notable drop in orders for transportation equipment, which fell 31 percent due in part to a steep drop in orders for commercial aircraft. Excluding the transportation sector, factory orders increased by 1.6 percent in January.

The Commerce Department also said that the decrease in new orders for manufactured durable goods was revised to 9.9 percent compared to the previously reported 10.2 percent decrease. New orders for manufactured non-durable goods rose 2.2 percent in January.

8:30 AM ET - International Markets News

Asian-Pacific benchmarks closed mostly higher. The Nikkei surged 1.5% to 15901.16, boosted by upbeat data showing 9.5% rise in capital spending. Across the region, South Korea’s Kospi climbed 1.2%, Singapore Straits Times rose 0.8% to reach a new six-year high, while Shanghai Composite lost 0.4%. Hong Kong’s Hang Seng traded flat ahead of global bank HSBC earnings release.

European stocks advanced significantly at mid-day, lifted by telecom-consolidation news. The Linde-BOC Group deal also provided support. The German DAX 30 rose 0.7%, the French CAC 40 climbed 00.9%, and London’s FTSE 100 hit a fresh four-year high rising 0.9% to 5910.

Oil, Metals, Currencies

Crude oil prices slipped over 2% on indications that OPEC would not cut output levels. Light sweet crude April delivery declined $1.47 to $62.20 a barrel.

European gold prices extended losses. In London gold declined to $565.10 bid per troy ounce, down from $568.60. In Zurich the precious metal fell to $565 from $568.30. In Hong Kong gold fell $1 to $567.80. Silver closed unchanged at $10.20.

The U.S. dollar traded mixed against other major currencies. The euro traded at $1.2021, down from $1.2037. The dollar bought 117.46 yen, up from 116.34. The British pound was quoted at $1.7513, up from $1.7500.

8:00 AM ET - Earnings News

Lexar Media Inc., ((LEXR)), electronic memory card manufacturer, expects to report a Q4 net loss in the range of 25 cents to 28 cents a share. Lexar added that it expects revenue for Q4 to be in the range of $237 million to $240 million. The company announced it has pushed its results back to March 14 to complete its accounting analysis of inventory and other reserves.

Bedford Property Investors Inc, ((BED)), real estate investment trust, reported Q4 net income of $1.23 share, down from $4.31 a share in the year-earlier period. The company added that funds from operations were 40 cents a share, up from 33 cents a share, beating analysts’ forecast of 38 cents a share in funds from operations.

Bayer AG, ((BAY)), drugmaker, reported that its Q4 profit dropped 33% after it set aside 275 million euros ($330.5 million) to settle claims that it colluded on prices of rubber and plastic in the U.S. The company earned 46 million euros ($55.3 million) in Q4 down from 68 million euros a year ago. Revenue advanced 16 % to 7.1 billion euros ($8.5 billion) from 6.11 billion euros.

Corporate News

General Electric''s ((GE)) entertainment division, NBC Universal, agreed to acquire iVillage, an online destination aimed at women for $8.50 per share in cash. The purchase price equates to about $600 million. The deal is expected to close in the second quarter, pending shareholder and regulatory approvals.
General Motors ((GM)) announced plans to sell a 17.4% equity stake in Japan''s Suzuki Motor Corp., or about 92.36 million shares, for an estimated $2 billion.
Education Management Corp. ((EDMC)) agreed to be acquired for $3.4 billion by Providence Equity Partners and the investment arm of Goldman Sachs.