Markets Languish

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

Markets in the U.S. charted a lacklusted course despite several stock upgrades and deals of more than $24 billion. Mega deals continued to drive investors interest in the first quarter of this year. European markets raced ahead and emerging markets are on the recovery path after losing between 5% and 10% in two weeks. Russia, Turkey, Taiwan, Mexico recovered more than 1%. India closed at record high for the second day in a row.

4:15PM Emerging and European markets advance but the U.S. market languishes.

- DOW DOWN 0.32 to 11,076.02
- NASDAQ UP 0.49 to 2,267.03
- S&P UP 2.55 to 1,284.13

- Bond yields, 10-year 4.785% and 30-year yield 4.767%
- AMD down 7% and Apple Computer up 4%.
- Energy sector led advancers. Retailers, financials and select railroads led decliners.
- April crude up $1.81 to $61.77 per barrel and natural gas jumped 36 cents $7.01 mBTU.

- Emerging markets recover.
- Russia up 2.54%, Turkey up 1.65%, Taiwan up 0.83%, India up 0.36%
- Brazil down 0.48%, Mexico up 1.27%, Argentina up 0.48%

Asian markets closed higher led by a strong rally in Tokyo, Seoul and Sydney of 1.53%, 1.38% and 1.26% respectively. In Tokyo shares of automobiles and banking sectors rose on the revised government economic growth estimates for the fourth quarter to 5.4%. Nomura holdings rose 2.5% and Honda, Nissan and Toyota rose 1.4%, 1.3% and 0.8% respectively at the close. In Australia Patrick Corp rose 13% and acquirer Toll Corp, rail and road carrier rose 9% on possible merger between the two corporations. The regulators have laid out revised conditions for the merger to which Toll is likely to respond soon.

Emerging markets enjoyed another day of gain. Taiwan, Thailand, Hong Kong and India rose 0.83%, 0.65%, 0.63% and 0.36% respectively. India’s Sensex scaled a new high and reached 10,803 but traded down from the intra-day peak of 10,884. The liquidity driven rally is supported by inflow of funds of $3.27 billion in the first three months of the year. Retailer Pantaloon jumped 16% and NTPC rose 2% and Bajaj Auto rose 1.6% to Rs 139 and Rs 2,802 per share. On Delhi High Court ruling broadcaster Zee Telefilms rose 5%. Software exporters rose for the second day led by TCS and Wipro gain of 2.7% and 2.6% respectively.

Indexes in Russia and Turkey rebounded after a week of battering. Russian index closed up 2.54% and that of Istanbul Exchange in Turkey rose 1.65%. Markets in Latin America closed higher except in Brazil. Mexico and Argentina raced ahead with 1.27% and 0.48% gains at close. Brazilian market lost more than 6% in the last two weeks and traded higher at mid-day on revised economic growth forecast in the latest survey from the Central Bank. Brazil economy is expected to grow at 3.7% revised from the previous week read from 3.5%. Banks, oil and petroleum and telecom sector stocks were in favor. Petrobras and recently listed TAM and Gol airlines jumped in the trading. In Mexico Televisia and Grupo Modelo traded higher 0.5% and 1.2%. Cemex and Homex jumped up 1.5% and down 1% respectively.

Corning did not revise its financial projection for the current quarter during a presentation to investors. The company has guided 22 cents of earnings on revenue of $1.23 billion in revenue for the current quarter that ends in March. The company stated that it expects LCD flat panel TV to form 19% of its revenue up from 17% from previous forecast for the current. The company expects the glass volume to grow 45% from a year ago from the previous guidance of 40%. The stock has traded as low as $11 and as high as $27 in the last twelve months of trading and closed today at $25.33.


3:00PM Ratings revisions bring buyers to the market.
In the recent months investors have warmed up to stocks in the telecom and telecom equipment and component makers. Avanex and others have managed to sell stocks investors and today Broadwing Corp ((BWNG)) sold $7.4 million shares at $10 per share and raised $70.1 million. The stock rose 2.5% to $12.51. Domino’s Pizza ((DPZ)) stated that it has repurchased 5.6 million shares from Bain capital. Bain has reduced its stake from 34% to 28% after this sale. The stock is 2.5%. Duke Energy ((DUK)) is up 3% on positive comments from Merrill Lynch and upgrade to buy. Energizer Holding ((ENR)) rose 3% after it received an upgrade to neutral from underweight by J.P. Morgan. Recently priced Brazilian Airline TAM ((TAM)) on the second of trading is trading above $19. Less than a year ago another Brazilin air, GOL ((GOL)) was priced at $8 and is now trading near $27.


2:00PM Upgrades and mergers support market enthusiasm.
Ratings upgrades and target price revisions are taking some stocks higher in the early afternoon trading. Apple Computer received ‘buy’ recommendation from Citigroup and positive comments from Piper Jaffray and Bear Sterns. The stock after trading as high as $86.40 has corrected $63. The stock has rebounded $2.40. Nucor ((NUE)) and Citrix ((CTXS)) are two other companies enjoying positive comments from brokers. Citrix has jumped 50% in the last twelve months of trading. Mergers after mergers have put stocks in the positive lights this morning. Watson pharmaceuticals((WPI)) has agreed to buy Andrx for $1.9 billion in cash and Pinnacle Entertainment ((PNK)) will buy for $2.1 billion Aztar ((AZR)).


12:30PM European markets closed higher on mergers.
European markets closed in the positive on merger-and-acquisition deals and speculations. The German DAX 30 climbed 0.9%, boosted by drug maker Schering which rocketed 26% on a takeover bid by a rival company Merck. The French CAC 40 gained 0.8%, while London’s FTSE 100 rose 0.8%, supported by 31% gain in London Stock Exchange on speculations that U.S. exchanges may start a bidding war for it.

Crude oil prices advanced 1% on continuous concerns over Iran’s nuclear program. Light sweet crude April delivery gained 59 cents to $60.50 a barrel. Heating oil gained 3 cents to $1.716 a gallon, while gasoline rose 4 cents to $1.727. Natural gas surged 30 cents to $6.94 per 1,000 cubic feet. Gold prices gained advanced Monday. The precious metal rose $5.60 to $546.90 on the Nymex. In Hong Kong gold fell $2.60 to $543.50. Silver closed at $10.06, up from $9.92. The U.S. dollar traded mixed against other major currencies. The euro traded at $1.1934, up from $1.1911. The dollar bought 119.15 yen, up from 118.99. The British pound was quoted at $1.7306, up from $1.7263.


11:30AM Crude oil prices rise. Treasury yields under pressure.
Stock averages came off early gains, posting some weakness on rising crude oil prices and Treasury yields under pressure. Crude jumped 1% to $60.55 per barrel, and its advance tempered buying in some market areas. As a result the Energy sector rose 1.4%, helping the indices keep gains. The Dow Jones held on to the modest gains of early morning, up 18 points. The Nasdaq was flat at around 10 points. The biggest Dow Jones gainer was DuPont ((DD)), rising 1.2% to nearly a 3-week high. Exxon Mobil ((XOM)) sustained early gains, currently up 1%. Boeing ((BA)) was higher by 0.8%, climbing to a new 52-week high. More than a third of Dow components moved to the downside. The most notable decliner was American Express ((AXP)), which is down about 0.8%. Altria ((MO)) and Microsoft ((MSFT)) were both down around 0.6%.

Among other stocks, Andrx Corp. ((ADRX)) rose 11% on news that Watson Pharmaceutical ((WPI)) would buy the company for $1.9 billion, or $25 a share in cash. Apple Computer ((AAPL)) climbed 5% after it was upgraded to buy from hold at Citigroup on expectations that new product introductions will provide a strong start of Q2. The company is expected to introduce a new PowerMac and Intel chip-based iBooks, as well as a new video iPod product in April. Aztar ((AZR)) jumped 24% after casino operator Pinnacle Entertainment (((PNK)) agreed to buy the company for $2.1 billion cash, assuming debt. North Fork Bancorp ((NFB)) rose 17% on agreement to be acquired by Capital One ((COF)) for $14.6 billion in cash and stock. Capital One’s shares fell nearly 6%. Schering AG ((SHR)) soared 26% after rival German drug maker Merch KGaA made a hostile bid for the company for $17.4 billion.




10:30AM U.S. Stocks slightly off intraday highs. Tech sectors advanced.
In midmorning the averages ticked slightly off their highs for the day. All of the ten economic sectors advanced. The Nasdaq rose 17 points to 0.7%, owing to a number of strong tech sectors. The disk drive rebounded, rising by about 1.9% after a week-long decline and flat performance Friday. The networking and computer hardware sectors also posted strength. The Financials sector gained 0.4% on merger-driven strength in regional banks. Energy stocks moved to the upside as well, including a 1.4% gain in the oil service sector. The Dow was steady with an advance of about 22 points. Aztar Corp. ((AZR)), casino operator, was one of the best performers in the early going, climbing 24%, after it agreed to be acquired by Pinnacle Entertainment for $38 per share. NMT Medical ((NMTI)) stood out as the morning’s biggest decliner, falling 28%, after it revealed studies of a migraine treatment that missed its primary endpoint.
Bond prices extended last week's decline, with the yield on the 10-year Treasury note edging up to 4.78% from 4.76% late Friday.


9:45AM Stocks opened higher on deal news.
A string of merger-and-acquisition deals on both sides of the Atlantic boosted stocks early Monday. The biggest deal in value was in the banking sector as Capital One Financial ((COF)) agreed to acquire North Fork Bancorp ((NFB)) for $14.6 billion in cash and stock with about $5.2 billion of the amount to be paid in cash. Under the deal, each North Fork share is valued at $31.18, a 23% premium over North Fork's closing price on Friday. The addition of North Fork is expected to transform the credit card issuer into a banking company with deposits of more than $84 billion. Capital One expects the deal to close in the Q4 of 2006. In another deal, Knight Ridder ((KRI)) agreed to be acquired by McClatchy for $6.5 billion, or $67.25 a share, including the assumption of $2 billion in debt. The company put itself up for sale in November on pressure from shareholders to lift its stock price. The price valued the publishing chain at only a slight premium over its Friday close of $65.00. In Europe, Merck KGaA made a hostile $17.4-billion cash offer for the German Schering AG in a bid rejected by the drug maker. The London Stock Exchange rocketed 30% after the Nasdaq Stock Exchange bid $4.2 billion. The NYSE Group is reportedly considering an offer as well.



9:00AM Stock futures pointed to a higher start, supported by bid activity.
U.S. stock futures were sitting above the flat level, indicating a higher start. The upbeat pre-market sentiment was largely contributed by merger-and-acquisition activity, considered a bullish sign for stocks. Standard & Poor's 500 futures were up 2.4 points, above fair value. Dow Jones industrial average futures were 25 points, and Nasdaq 100 futures were up 6.5 points. As no major economic reports are due out today and only a few earnings releases are expected, bid activity will be in the spotlight. Credit card issuer Capital One Financial Corp. ((COF)) agreed to buy North Fork Bancorp Inc. ((NFB)) for $14.6 billion in cash and stock with about $5.2 billion of the amount to be paid in cash. North Fork shares rose 21%. McClatchy Co. ((MNI)) agreed to acquire its larger rival, newspaper publisher Knight-Ridder Inc. ((KRI)) in cash and stock for $4.5 billion before debt. In Europe, the Nasdaq bid $4.1 billion for London Stock Exchange.

Crude oil prices eased back on expectations of sufficient oil supplies. Light sweet crude April delivery lost 13 cents to $59.83 a barrel. London Brent for April delivery added 6 cents to $60.89 a barrel. European gold prices gained advanced Monday morning. In London gold rose to $545.25 bid per troy ounce, up from $535 late Friday. In Zurich the precious metal advanced to $544.80 from $539.30. In Hong Kong gold fell $2.60 to $543.50. Silver opened at $10, up from $9.92. The U.S. dollar traded lower against other major currencies. The euro traded at $1.1925, up from $1.1911. The dollar bought 118.88 yen, down from 118.99. The British pound was quoted at $1.7264, up from $1.7263.


8:30AM Vail, Stewart Enterprise and AM Castle reported rising profit.
Stewart Enterprises Inc, ((STEIE)), funeral services and cemetery operator, reported Q1 earnings of 8 cents a share, swinging from a loss of $1.33 a share a year-ago. Adjusted income for Q1 in 2006 and 2005 would have been 9 cents a share and 8 cents a share, respectively. In Q1 the company announced sales increased 3% to $126.6 million.

Vail Resorts ((MTN)) reported Q2 earnings of $1.12 a share, up from 89 cents a share in the year-earlier period. If not for certain one-time items, earnings would have increased to $1.15 a share from last year's 90 cents a share, beating analysts’ expectations for earnings of 94 cents a share. Revenue advanced 8.8%, as a 15% increase in mountain revenue and 23% growth in real estate revenue helped offset a 25% decline in lodging revenue. The company added it set a stock repurchase program of up to 3 million shares of common stock.

AM Castle & Co, ((CAS)), specialty metals and plastics distributor, reported that Q4 profit more than tripled to 39 cents a share, from 12 cents in the year-ago period. Sales for Q4 advanced to $227.3 million from $197.8 million in the same quarter last year.

Westar Energy Inc., ((WR)), electric utility, reported that Q4 profit totaled 8 cents per share, down 92% from $1.03 per basic share, a year ago, as the company recorded a large charge against year-ago results that benefited from a gain. Q4 incorporated a 49 cent per share charge to reverse gains connected with fuel supply contracts for its generating units. Q4 last year was lifted by a gain of 84 cents per share from discontinued operations. If not for some items, the company earned 3 cents per basic share. Sales rose 15%, helped by cooler weather and higher wholesale power prices.

Computer Horizons Corp, ((CHRZ)), computer services company, reported that Q4 net loss grew to $39.5 million, or $1.24 a share, from $24.3 million due to a 2.7% decline in. Q4 loss incorporated special charges of $36.6 million connected with restructuring and losses on the sale of investments. The company added that it is set to report modest profitability in Q1 of 2006 in the wake of its restructure.

8:00AM Asian markets gained across the region. New Zealand reached a record high.
Asian-Pacific benchmarks ended higher Monday, boosted by a strong Friday rally on Wall Street and stronger dollar with technology and industrial shares in focus. The Nikkei led gainers, rising 1.5% to 16,361.51 on improved confidence in the economic recovery, despite GDP data showing slightly disappointing figures. Nissan Motor, Toyota Motor and Nomura Holdings stood out among advancers. South Korean Kospi surged to 1.4%, supported by strong automobile and bank stocks. Shanghai Composite rose 1.1% on property stocks and gains in cement companies. Australian All Ordinaries soared 1.3%, lifted by corporate data and strength in overseas markets. Hong Kong’s Hang Seng rose 0.6%, although concerns over interest-rate hikes weighed. Stocks in New Zealand hit a record high of 0.8% to 3516.99.

European markets advanced at mid-day dealings as merger-and-acquisition news and speculations sent stocks higher. The German DAX 30 climbed 0.7%, boosted by drug maker Schering which rocketed 23% on a takeover bid by a rival company Merck. The French CAC 40 gained 0.4%, while London’s FTSE 100 rose 0.5%, supported by 22% gain in London Stock Exchange on speculations that U.S. exchanges may start a bidding war for it.