Global Markets Decline on Rate concerns

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

Investors brace rising rates and markets from Asia, Europe, South Africa and in North and South America report sell-offs. South Africa lose 3.8%, Brazil down 2.83%, Mexico 2.3%, Argentina 2.2%, Korea 2.1%, Norway 0.96%. U.S. average Nasdaq led the delciners and tech stocks sell-off induced by earnings guidance from Texas Instuments. Commodities including crude oil, gold and copper suffer losses.

After Market – Dress Barn earnings surprise but Pixar report lower earnings.
Dress Barn report revenue jump of 55% and earnings of $14.1 million or 42 cents vs. 5 cents a year ago. Excluding stock options and other conversions related to debt earnings would have been 47 cents beating the estimates of 40 cents by analysts. Pixar Animation reported Q4 profit of 25 cents vs. 55 cents a year ago on flat revenue. Disney has agreed to acquire Pixar for $7.4 billion.


4:15PM-Market recovered barely despite 10-year yield closed at 4.742%.

Dow-10,980.69 + 22.10 Nasdaq- 2268.38 - (17.65) S&P- 1,275.88 – (2.38)

Markets gyrated with the bond market yield swings. Markets managed to make a small comeback in the last twenty minutes of trading and tech stocks heavy Nasdaq recovered for the day’s worst level of 1% decline. Brokerage stocks, home builders, railroads, miners and select tech stocks traded lower. In a day of negative bias on trading most tech stocks declined for the most part of the trading session. Citigroup decision to sell 8 million of Legg Mason shares received in a transaction for asset management unit led brokerage stocks to decline. Emerging markets ADRs trading in New York declined as markets in Brazil, Mexico, Korea, Argentina and Russia declined.

Crude oil, gold, copper closed lower but natural gas closed higher. Gold lost $2.30 per ounce to close at $554.50 and silver gained 8 cents to close above $10 to $10.107 but copper lost 1.95 cents to close at $2.1770. Natural gas gained 13 cents to close at $6.678 mBTU and crude oil lost 83 cents to close at $61.58 after trading as low as $61.10.


3:30PM-Markets in Europe and Americas decline on mining and tech stocks.
Markets in Europe and South Africa closed lower led by South Africa index loss of 3.84% and Norway index loss of 0.96%. U.K. and Switzerland lost more than 0.5%. Markets in Brazil led decliners in South America with a decline of 2.82% followed by a decline of 2.3% in Mexico and 2.2% in Argentina. Petrobras and CVRD lost 4% and 4.5% respectively in Brazil. American Movil and Cemex lost 4.2% and 4.1% respectively. Rising interest rates were blamed for the steepest decline in indexes in the last ten months across the region.

Telecom Italia SpA reported fourth quarter profit of euro 591 million from euro 138 million a year ago on revenue rise of 6.1% to euro 7.96 billion. The telecom company acquired 44% of the wireless unit it did not own in the last year. The company proposed buyback of shares worth one billion euros and dividend rise to 0.14 euro and 0.151 savings shares. For the full year revenue rose 5.8% and earnings rose 77%.


3:00PM-Earnings Roundup including Kroger and Qualcomm.
Kroger ((KR)) reported same store sales rise of 6.2% and earnings of 39 cents vs. loss of 89 cents in the fourth quarter a year ago. The year ago earnings included goodwill impairment charge of $1.17 per share. The company earnings beat the estimate of 36 cents and initiated cash dividend of 6.5 cents. Qualcomm ((QCOM)), mobile chipset manufacturer reported rising chip unit and dollar sales and revised earnings guidance. The company revised earnings for the second-quarter to 40 cents and 41 cents from 35 cents and 37 cents on revenue rise to $1.75 billion to $1.82 billion from $1.63 billion to $1.73 billion. It revised the unit chip guidance to 47 million to 48 million from 44 million to 46 million.


2:00PM- Markets remain under pressure on 10-year bond rising to 4.76%.
Broader averages and tech stocks remained in the negative territory in the early afternoon in rising rates, oil declining by $1 and telecom stocks sell-off. AutoNation ((AN)) is up 7% on the news that the company plans to buyback $50 million shares at $23 and $323.5 million of its 9% secured debt using $900 million unsecured debt. Public Storage confirmed the acquisition of Shurgard Storage for $5 billion, now the largest self-storage company with the market cap of $18 billion.

Penn National Gaming ((PENN)) rallied 11% on an upgrade from J.P. Morgan to overweight from neutral. The broker cited that recent ruling from Illinois Gaming Board to let the company run the riverboat casino and extend a dead-line to sell another casino.


12:30AM-European markets close in the negative.
European stocks closed lower, reflecting mixed U.S. averages and sharp losses in resource stocks including BHP Billiton, down 3.1% and Rio Tinto, down 2.2%. Automaker Volkswagen AG which bucked the lower trend in early trading finished down 0.6%. The company expects profit rise in 2006 on 15% sales growth in the first two months of the year. The German DAX 30 lost 0.3%, the French CAC 40 dropped 0.4%, and London FTSE 100 slipped 0.6%.

Crude oil prices declined ahead of OPEC meeting. Light sweet crude April delivery fell 16 cents to $62.25 a barrel on the Nymex. Gasoline lost 1 cent to $1.6450, while heating oil was marginally down to $1.7447. Natural gas rose 6 cents to $6.608 per 1,000 cubic feet. London Brent lost 7 cents to $62.27. European gold prices extended losses. In London gold fell to $549.80 bid per troy ounce, down from $565.10. In Zurich the precious metal traded at $565. In Hong Kong gold dropped $13.20 to $554.60. Silver closed at $9.98 per troy ounce, down from $10.20. The U.S. dollar advanced against other major currencies. The euro traded at $1.1880, down from $1.2017. The dollar bought 117.65 yen, up from 117.54. The British pound was quoted at $1.7346, down from $1.7491.


11:30AM-Large caps supported the Dow Jones Industrial index.
The Dow Jones sustained earlier gains, trying to reach the session highs. The Dow rose 29 points, boosted by General Motors ((GM)) which was the leading gainer with an advance of 1.75, as well as Honeywell International ((HON)), up 1.5% and Procter & Gamble ((PG)), up about 1.2%. General Motors released details of its revised pension plan. Employees hired after Jan 1, 2001 will be now on defined contribution plan, this move will help company to lower its pension liability in 2006 by $1.6 billion and pension cost in 2007 by $420 million. Analysts said the move is too little to have impact on the future cash flows.

The Nasdaq moved down around 12 points. Only about a third of the Dow 30 moved to the downside in the morning. The sharpest drop came from AT&T ((T)), which was down 1.7% on a deal to acquire BellSouth. Alcoa was another notable decliner, down about 1.6%.


10:30AM-Declining stocks led advancers by more than 3 to 1 on the Nymex.
Stocks slightly recovered from the initial drop. The Dow moved into the positive territory, rising 23 points, supported by some of its components, such as Honeywell International and Procter & Gamble Co. The Nasdaq posted a loss of about 10 points, or 0.4%.

Sunrise Senior Living ((SRZ)) was the most conspicuous gainer after posting Q4 earnings increase and raised its 2006 earnings guidance. Shares of the provider of senior living services jumped 10%. Myogen ((MYOG)) was one of the most notable losers, falling 10% after it revealed a licensing deal with GlaxoSmithKline, but it also announced a loss for 2005. Krispy Krème Doughnuts ((KKD)) climbed 17.4% after it said it hired Daryl G. Brewster as the new president and chief executive


9:45AM-Stocks started lower mostly on rising bond yields.
Stocks opened lower on continuous worries about interest-rate hikes and further rise in bond yields. The yield on the 10-year Treasury note rose to 4.77% from 4.74% late Monday. The worst performers in early going were tech stocks hurt by the disappointing guidance from Texas Instruments. The stock led decliners, falling 4.5%. The semiconductor sector fell 1.9%. The gold sector and biotech group also showed weakness. The HMO sector rose nearly 1% to stand out among gainers. Chemical and airline stocks also moved to the upside. In the first hour of trading, the Dow Jones industrial average fell 21.21, or 0.19%. The Standard & Poor''s 500 index fell 4.25, or 0.33%, and the Nasdaq composite index fell 13.03, or 0.57%.

Productivity fell 0.5% in the fourth quarter.
Tuesday morning, the Department of Labor released its revised report on productivity in the fourth quarter. The report showed that the drop in fourth quarter productivity was slightly smaller than previously reported. The report said productivity fell 0.5 percent in the fourth quarter, slightly less than the 0.6 percent decline reported previously. Economists had expected a more significant revision to a decline of 0.1 percent. The drop in productivity in the fourth quarter marked the first decline since the first quarter of 2001, when productivity fell 0.6 percent. In the third quarter of 2005, productivity increased by 4.5 percent. The Labor Dept. noted that the decline in productivity in the fourth quarter came as output increased by 1.5 percent while hours rose by 2.0 percent. The report also showed that the growth in unit labor costs in the fourth quarter was revised down to 3.3 percent from the previously reported 3.5 percent growth. Economists had expected the growth in unit labor costs to be revised down to 3.0 percent.


9:00AM – TI Earnings guidance indicates lower tech stocks opening.
U.S. stocks futures pointed to a negative opening, hurt by weakness in tech stocks. A number of technology firms released guidance late Monday including technology bellwether Texas Instruments Inc which posted a disappointing forecast and raised concerns about the outlook for corporate growth. Texas Instruments ((TXN)), top supplier of mobile phone chips, lifted the lower end of its profit forecast range but failed to deliver the strong outlook analysts had expected. The stock dropped 3% in shares after hours on Monday.

Fairchild Semiconductor ((FCS)) raised its guidance for Q1. The company expects to increase its revenue by about 9% from previously predicted 5%-7% growth on strong order rates. The company also reported that it has enough demand scheduled to ship within the quarter to achieve its new, higher sales guidance.


8:00AM-Asian Markets close reflected weakness led by a 2.1% decline in Korea.
Asian-Pacific benchmarks finished in the red, reflecting weak close on Wall Street and cautiousness ahead of Bank of Japan’s meeting on Wednesday. The Nikkei slipped 1.1% on speculations the BOJ could tighten its ultra-easy monetary policy. Semiconductor-linked stocks declined on disappointing earnings from U.S. technology company Texas Instruments. Chip maker Elpida Memory fell 6%. Softbank slid 8.5% on reports that the Internet service company is in deal talks with British mobile-phone operator Vodafone. South Korea’s Kospi tumbled 2.1%, China Shanghai Composite plunged 2.3% on profit taking by institutional investors, Hong Kong’s Hang Seng fell 1.3%, and Taiwan Weighted index dropped 1.2% on weakness in banking and tech stocks.

European stocks traded lower at mid-day dealings, hurt by sharp U.S. markets losses and weak resource stocks including BHP Billiton, down 3.7% and Rio Tinto, down 3%. However, automaker Volkswagen AG bucked the lower trend, rising 1.1%. The German DAX 30 lost 0.8%, the French CAC 40 dropped 0.7%, and London FTSE 100 slipped 0.9%.

Crude oil prices advanced ahead of OPEC meeting to discuss output levels. Light sweet crude April delivery gained 24 cents to $62.65 a barrel in electronic trading on the Nymex. Gasoline lost 1 cent to $1.6505, while heating oil was marginally up to $1.7598. Natural gas rose 3 cents to $6.575 per 1,000 cubic feet. London Brent added 43 cents to $62.77. European gold prices further declined. In London gold fell to $555.25 bid per troy ounce, down from $565.10. In Zurich the precious metal fell to $555.40 from $565. In Hong Kong gold dropped $13.20 to $554.60. Silver opened at $10 per troy ounce, down from $10.20. The U.S. dollar advanced against other major currencies. The euro traded at $1.1909, down from $1.2017. The dollar bought 117.84 yen, up from 117.54. The British pound was quoted at $1.7363, down from $1.7491.

Earnings from several small retailers generally met analyst’s expectations.
Per-Se Technologies, ((PSTI)), provider of healthcare technology products, reported Q4 earnings of 34 cents a share, down from a profit of $1.11 a share a year-ago. On an adjusted basis, the company reported earnings from continuing operations of 27 cents a share in Q4. The adjusted results exclude expenses related to the NDCHealth acquisition and a tax benefit. The analysts estimate was for a profit of 29 cents a share.

Finlay Enterprises ((FNLY)), retailer of fine jewelry products, reported Q4 net income of $3.11 a share, up 2% from $3.02 a share from a year ago. If not for charges, net income advanced to $3.25 a share from $2.94 a share. Revenue grew 10.7% to $421.4 million. The Sports Authority Inc, ((TSA)), sporting goods retailer, reported Q4 earnings of $1.10 a share, up from a year-earlier profit of 96 cents a share. Sales advanced in Q4 to $741.1 million from $713.8 million in the same period a year ago and same-store sales advanced 2.4%. The analysts’ estimate was for a profit of $1.08 a share. The company attributed the improved earnings to strong sales of active and outdoor apparel, fitness and team sports products, as well as improved gross margins and continued expense controls.

Dick''s Sporting Goods Inc, ((DKS)), sporting-goods retailer, reported that Q4 net income advanced 28% to $1 a share, up from 79 cents a year earlier, topping analysts’ estimate of 98 cents a share. Sales for Q4 rose 8% to $849.5 million, while same-store sales advanced 4.1%. Sunrise Senior Living, ((SRZ)), assisted living company, reported Q4 earnings of $1.01 a share, up from 28 cents a share in the year-ago period. Revenue advanced to $554.7 million from last year''s $379.1 million. Same-community portfolio revenue rose 6.7%, with the average daily rate rising 3.6% and occupancy increasing 3.4%. The company expects earnings of 28 to 34 cents a share in the first quarter and $1.16 to $1.20 a share for 2006.