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« May 2006 |
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| July 2006 »
Stocks closed lower for today and mixed for the second quarter on a lackluster note. Markets were pressured by the latest Chicago purchasing managers' monthly report which suggested a worst-case scenario of economic slowing alongside higher prices. However, shares of General Motors (NYSE: GM) rose 8.5% on news that the investor Kirk Kerkorian is urging the auto maker to consider an alliance with foreign rivals Renault SA and Nissan Motor Co. Wild swings characterized the stock market in the second quarter, as investors worried about inflation, slowing economic growth and the interest rate outlook.
Today, the Dow Jones Industrial average closed down 40.58 or 0.36% to 11,150.22, the broader S&P 500 index closed down 2.67 or 0.21% to 1,270.20, and the Nasdaq composite closed down 2.29 or 0.11% to 2,172.09. During the second quarter, the Dow gained 0.5%, the S&P 500 lost 1.8% and the Nasdaq tumbled 7.1%.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by a margin of two to one on volume of 1.77 billion shares. On the Nasdaq, winners beat losers by a margin of three to two as 2.50 billion shares changed hands.
Investors have been worried that in an effort to ward off inflation, the Fed would raise rates too much and choke off economic growth and corporate profits. Their statement yesterday contained some softer language, saying future decisions will depend on the latest economic numbers. Many took the statement as a sign that an end to the central bank's two-year old rate-hiking campaign may be in sight.
In data news, the National Association of Purchasing Managers' Chicago group said its index of regional business activity slowed to 56.5% from 61.5% in May. This is below the expected 59.4%. However, the prices-paid component leapt to 89% from 76.9%, indicating sharply higher costs for manufacturers. Therefore, consumers both earned and spent more last month, but inflation canceled out most of the gains. Consumer prices increased 0.4% in May. Core prices increased 0.2% in May for a second month. These reports indicate that inflationary pressure is persisting even in a weakening economy.
Shares of General Motors Corp. (NYSE: GM) closed up 8.5% to $29.79, after Kirk Kerkorian, one of the company's largest investors, urged them to consider a three-way partnership with Japan's Nissan Motor Corp. and France's Renault SA. GM stated that the suggestion would be "taken under advisement by the board," but that it "has received no offer or proposal from Renault/Nissan" about a potential linkage."
Shares of computer maker Apple Computer Inc. (Nasdaq: AAPL) closed down $1.70 or 3% to $57.27. The company launched an internal probe of executive stock options granted over a 4-year period, including a grant to Chief Executive Steve Jobs that was later canceled.
Stock of Palm Inc. (Nasdaq: PALM) closed down 13.7% at $16.10, after the maker of the Treo phone issued a weaker-than-expected sales forecast for the current quarter. The company plans to stop European sales June 30 as the product doesn't meet new environmental requirements on lead content. Sales are expected to be in the range of $380 million to $385 million, against the forecast $413 million.
On news that storage-technology giant EMC (NYSE: EMC) would buy RSA for slightly less than $2.1 billion, shares of RSA Security Inc. (NYSE: RSA) vaulted 18.5% to $27.11, while that of EMC fell 2.5% to $10.97. The companies expect the acquisition to close late in the third quarter or early in the fourth quarter. In the last three years, EMC has bought 25 companies and feels that acquiring a security company like RSA is a necessity for continued growth.
U.S. light crude oil for August delivery rose 40 cents to settle at $73.92 a barrel on the New York Mercantile Exchange. Traders focused on gasoline supplies heading into the Fourth of July holiday, a time when many Americans take long driving trips. Crude rose 7% during the second quarter.
On news that storage-technology giant EMC (NYSE: EMC) would buy RSA for slightly less than $2.1 billion, shares of RSA Security Inc. (NYSE: RSA) vaulted 18.5% to $27.11, while that of EMC fell 2.5% to $10.97. The companies expect the acquisition to close late in the third quarter or early in the fourth quarter. In the last three years, EMC has bought 25 companies and feels that acquiring a security company like RSA is a necessity for continued growth.
Stock of Palm Inc. (Nasdaq: PALM) closed down 13.7% at $16.10, after the maker of the Treo phone issued a weaker-than-expected sales forecast for the current quarter. The company plans to stop European sales June 30 as the product doesn't meet new environmental requirements on lead content. Sales are expected to be in the range of $380 million to $385 million, against the forecast $413 million.
Shares of General Motors Corp. (NYSE: GM) closed up 8.5% to $29.79, after Kirk Kerkorian, one of the company's largest investors, urged them to consider a three-way partnership with Japan's Nissan Motor Corp. and France's Renault SA. GM stated that the suggestion would be "taken under advisement by the board," but that it "has received no offer or proposal from Renault/Nissan" about a potential linkage."
Stocks staged a major rally with the Dow Jones Industrial Average surging 217 points, after a Federal Reserve statement was seen as signaling that an end to the rate-tightening cycle is near. Blue chips scored their biggest gains in three years. The rally came despite the fact that the Federal Reserve raised the overnight bank lending rate to 5.25%. While the Feds have left the door open for future increases, investors see signs that the central bank may pause after its latest move.
Today, the Dow industrial average closed up 217.24 or 2% to 11,190.80, the broader Standard & Poor's 500 index closed up 26.87 or 2.2% to 1,272.87, and the tech-heavy Nasdaq composite closed up 62.54 or almost 3% to 2,174.38. This is the biggest point gain for the Dow since March 2003, and the best gain for the Nasdaq in over two years. For the year, the Dow has climbed 4.1% and the S&P is up 1.8%, but the Nasdaq is still down 1.7%.
Market breadth was positive. On the New York Stock Exchange, advancers topped decliners by a margin of 27 to 4 on volume of 1.9 billion shares. On the Nasdaq, winners beat losers by a margin of four to one as 2.2 billion shares changed hands.
Investors cheered as the committee removed the phrase that some further measured policy firming "may" be needed with "any additional firming that may be needed" will depend on the economic outlook. This does point to an end that is approaching. Feds too appear concerned that growth is moderating; and that cannot be great for the economy.
New data too pointed toward a healthy economy. First-quarter gross domestic product was revised for a final time to show a 5.6% increase, the fastest rate of growth in about three years and stronger than the 5.5% gain expected by economists. Core consumer-price inflation rose at a 2% annual rate during the quarter, down from 2.4% in the fourth quarter. Initial jobless claims in the latest week rose by 4,000 to 313,000, while the four-week average of new claims dropped by 6,000 to 305,500, the lowest since Feb. 25. This is against the expected a rise to 311,000 and suggests a healthy job market.
Shares of McDonald's Corp. (NYSE: MCD) closed up $1.59 or almost 5% to $33.56, after Merrill Lynch upgraded the burger chain to "buy" from "neutral". Merrill Lynch forecasts improved sales and margins, particularly in Europe.
Walt Disney Co. (NYSE: DIS) closed up $0.50 or 1.7% to $29.88, after naming ex-Procter & Gamble CEO and Disney director John Pepper as non-executive chairman, succeeding former Sen. George Mitchell.
Shares of Tenet Healthcare (NYSE: THC) closed down $0.13 or 2% to $7.10. The health-care provider has agreed to pay $725 million to settle U.S. Justice Department claims regarding its receipt of certain Medicare payments before 2003. The settlement also covers physician financial arrangements and Medicare-coding issues. Tenet also revealed a new plan to boost profitability. It will sell 11 hospitals and expand its capital investment program
Oil futures rose $1.33, or 1.8%, to $73.52 a barrel. In the past seven sessions, the price of crude has risen 6%.
Stock closed higher after adventurous investors shook up a complacent market late in the day by seeking out attractively priced shares. Warner Music Group (NYSE: WMG) managed a strong rise, after making a new offer to buy British recording company EMI. However, EMI has rejected the Warner Music offer, and has issued its own bid to buy Warner Music. Investors look forward to the Federal Reserve policy statement tomorrow.
Today, the Dow Jones Industrial average closed up 48.82 or 0.45% to 10,973.56, the broader Standard & Poor's 500 index closed up 6.80 or 0.55% to 1,246.00, and the Nasdaq composite index closed up 11.59 or 0.55% to 2,111.84.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by a margin of 19 to 12 on volume of 1.487 billion shares. On the Nasdaq, winners narrowly beat losers by 15 to 14as 1.637 billion shares changed hands.
Many investors looked for bargains in the hope that the anticipated 0.25% rate increase has already been factored in. It is evident that there is no movement in any direction - only individual stories and stocks. The market continues to struggle to understand policymakers' monetary leanings under the leadership of new Chairman Ben Bernanke. There have been rumblings that the Fed could be more aggressive and raise by half a percentage point this time. The consensus is that the market already has forward-priced to adjust to the expected events. Investors will be focusing more on the Fed's statement and looking for clues about what the central bank intends to do with interest rates in the months ahead.
On data news, there was slight reaction to news from the Mortgage Bankers Association that mortgage applications fell 6.7% last week. This counteracted the impression of a booming housing market suggested by a 4.6% surge in monthly new home sales earlier in the week, but investors suspected it would have little influence on the Fed decision. Investors also scrutinized news from the Energy Department that crude supplies fell a bigger-than-expected 3.4 million barrels in the latest week. There also was a drop in gasoline supplies.
Shares of Warner Music (NYSE: WMG) rose 3.2% to close at $28.11 after the company's $4.6 billion bid for British music company EMI Group was rejected. Earlier in London trading, shares of EMI shot up 10% as the unusual tug-of-war takeover battle unfolded. EMI has also raised its offer for Warner Music to $4.6 billion, or $31 a share, a nearly 14% premium from Tuesday's close.
Shares of General Motors (NYSE: GM) closed up nearly 3% as the world's largest automaker had tumbled 7% the previous session on concerns of lower industry wide sales. GM shares have put in the best performance of the 30 stocks in the Dow industrials this year, up 43% as of Monday's close. The gain is prominently owing to reasons such as buyout option, reduced dividend, heath care costs and raising of cost cutting targets.
Shares of retailer J. Crew Group (NYSE: JCG) soared 27.8% up $5.42 to $25.55 to $25.42, in their market debut on the New York Stock Exchange. The stock debut price for the clothing retailer and catalog marketer was initially set in the $15 to $17 range.
Shares of Nike Inc. (NYSE: NKE) down $3.91 or 4.7% to $79.72, after the sneaker maker said its quarterly net income declined and profit margins fell below expectations. Heavy spending on the World Cup and other costs forced the company to miss quarterly earnings estimates.
Wendy's International (NYSE: WEN) closed off 2.3%. at $56.41. The fast-food restaurant operator late Tuesday said that second-quarter earnings per share will fall due to charges from its early-retirement plan, job cuts and other cost-cutting moves.
In the tech sector, shares of Texas Instruments (NYSE: TXN) fell 2.3% to $28.96 as RF Micro Devices (Nasdaq: RFMD) slid 4.3% to $5.76, after J.P. Morgan said there was downside risk for the earnings of the suppliers of components to Nokia (NYSE: NOK). According to the brokerage, Nokia could push out orders for handset components to future quarters, which could pinch on current profits. Nokia's U.S.-traded stock fell 2.4% to $19.13.
Crude for August delivery closed higher after news of the drop in weekly supply. The front-month contract closed at $72.19 a barrel, up 27 cents on the session on the New York Mercantile Exchange.
Shares of retailer J. Crew Group (NYSE: JCG) soared 27.8% up $5.42 to $25.55 to $25.42, in their market debut on the New York Stock Exchange. The stock debut price for the clothing retailer and catalog marketer was initially set in the $15 to $17 range.
Shares of Warner Music (NYSE: WMG) rose 3.2% to close at $28.11 after the company's $4.6 billion bid for British music company EMI Group was rejected. Earlier in London trading, shares of EMI shot up 10% as the unusual tug-of-war takeover battle unfolded. EMI has also raised its offer for Warner Music to $4.6 billion, or $31 a share, a nearly 14% premium from Tuesday's close.
Stocks ended sharply ahead of the Federal Reserve's highly anticipated two-day policy meeting. The technology sector bore the brunt of investor jitters over interest rates. Additionally, a sharp sell-off in shares of General Motors Corp. (NYSE: GM) and DuPont (NYSE: DD) contributed to the biggest one-day point drop in three weeks for the Dow Jones Industrial Average.
Today, the Dow Jones Industrial average closed down 120.54 or 1.1% to 10,924.74, the broader Standard & Poor's 500 closed down 11.36 or 0.9% to 1,239.20, and the tech-heavy Nasdaq composite closed down 33.42 or 1.6% to 2,100.25.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by a margin of eight to three on volume of 1.55 billion shares. On the Nasdaq, decliners beat advancers by a margin of three to one as 1.82 billion shares changed hands.
Ongoing worries that the Federal Reserve is about to raise interest rates too high and make a very serious mistake, killing off the economy and earnings is something that’s bothering all investors. The Feds appear fixated on combating inflation by raising rates and are somewhat indifferent to indications of economic slowing. Some investors think that the increase may be as high as half percentage - however, this appears unlikely. While a quarter-percentage point increase is inevitable, investors will be scouring the central bank's policy statement for clues to how much further rates may rise.
On the data front, resale of U.S. homes fell 1.2% in May to a seasonally adjusted annual rate of 6.67 million, against a bigger decline, to 6.64 million. While sales didn't slow as much as expected, the report pointed to overall cooling in the housing sector. U.S. consumer confidence, meanwhile, rose to 105.7 in June from a revised 104.7 in May. This is against an expected dip to 103.1. These reports rattled investors already nervous the Fed will say there's reason to remain concerned about inflation and vigilant about interest rates.
General Motors (NYSE: GM) stock closed down $1.85 or 6.7% to $25.90, after stating that 35,000 union workers would take buyouts or early retirement, allowing the company to raise its cutting target by $1 billion annually to $8 billion. However, recent price actions by Daimler Chrysler (NYSE: DCX), sizable share loss at GM and significant excess capacity all highlight that GM fundamentals remain under severe pressure. GM's Group Vice President Mark LaNeve said the company is faced with brutal year-over-year sales comparisons this summer, after turning in record results last year on the back of its wildly successful employee discount program.
Shares of DuPont (NYSE: DD) closed down $1.16 or 2.8% to $40.88 after French conglomerate Vivendi (NYSE: V) sold its 16.4 million shares (1.8% of the company) of the chemicals giant for $671 million, or $40.82 a share. The sale was expected after Vivendi said earlier in the month that it had resolved a dispute with the U.S. Internal Revenue Service over a 1995 sale of DuPont shares.
Univision Communications Inc. (NYSE: UVN) closed up $1.97 or 6.2% at $34, after it agreed to be bought by a group of private equity firms and media mogul Haim Saban for $13.7 billion. The firms include Saban Capital Group, Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group and Thomas H. Lee Partners. Grupo Televisa S.A., which has been in the running for Univision has lost the race.
In another merger, Barr Pharmaceuticals Inc. (NYSE: BRL) agreed to buy Croatian drug manufacturer Pliva for $2.2 billion, edging out a competitive bid from Iceland's Actavis. Barr shares were off 1.7% at $47.93.
Stock of Intel (Nasdaq: INTC) closed down $0.23 to $18.05, after it stated that it would sell its phone chip unit to Marvell Technology Group. for $600 million in cash as it looks to focus on chips for personal computers and servers amid stiffer competition. Shares of Marvell closed down $7.76 or 15% to $44.14.
U.S. light crude oil for August delivery rose 12 cents to settle at $71.92 a barrel on the New York Mercantile Exchange. Traders have concerns linked to production setbacks in Louisiana and threats from Iran that it will use oil as a weapon in its battle with the United States and the European Union over its nuclear enrichment program.
Stock of Intel (Nasdaq: INTC) closed down $0.23 to $18.05, after it stated that it would sell its phone chip unit to Marvell Technology Group. for $600 million in cash as it looks to focus on chips for personal computers and servers amid stiffer competition. Shares of Marvell closed down $7.76 or 15% to $44.14.
Univision Communications Inc. (NYSE: UVN) closed up $1.97 or 6.2% at $34, after it agreed to be bought by a group of private equity firms and media mogul Haim Saban for $13.7 billion. The firms include Saban Capital Group, Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group and Thomas H. Lee Partners. Grupo Televisa S.A., which has been in the running for Univision has lost the race.
Shares of DuPont (NYSE: DD) closed down $1.16 or 2.8% to $40.88 after French conglomerate Vivendi (NYSE: V) sold its 16.4 million shares (1.8% of the company) of the chemicals giant for $671 million, or $40.82 a share. The sale was expected after Vivendi said earlier in the month that it had resolved a dispute with the U.S. Internal Revenue Service over a 1995 sale of DuPont shares.
General Motors (NYSE: GM) stock closed down $1.85 or 6.7% to $25.90, after stating that 35,000 union workers would take buyouts or early retirement, allowing the company to raise its cutting target by $1 billion annually to $8 billion. However, recent price actions by Daimler Chrysler (NYSE: DCX), sizable share loss at GM and significant excess capacity all highlight that GM fundamentals remain under severe pressure. GM's Group Vice President Mark LaNeve said the company is faced with brutal year-over-year sales comparisons this summer, after turning in record results last year on the back of its wildly successful employee discount program.
Merger Monday - Stocks ended higher as upbeat housing data and acquisition deals totaling around $90 billion pulled investors from the sidelines and distracted them from the Federal Reserve's upcoming two-day meeting.
Today, the Dow Jones Industrial average closed up 56.19 or 0.5% to 11,045.28, the broader Standard & Poor's 500 index closed up 6.06 or 0.5% to 1,250.56, and the Nasdaq composite index closed up 12.20 or 0.6% to 2,133.67.
Market breadth was positive. On the New York Stock Exchange, advancers topped decliners by a margin of five to three on volume of 1.34 billion shares. On the Nasdaq, winners beat losers by a margin of 18 to 11 as 1.41 billion shares changed hands.
Merger and acquisition deals combined with the growth in new home sales for the month May gave stocks a lift. For some time, investors were distracted from their focus and worry over the looming Federal Reserve FOMC meeting. Fed policy-makers are all but certain to raise interest rates another quarter-percentage point when they meet, but investors will be focusing on the central bank's statement for clues to how much further rates may rise. There is even some talk in the market about a possible half-point rise.
Investors cheered data showing an unexpected increase in sales of new homes for the month of May - against an expected decline. Sales rose 4.6% to annualized rate of 1.234 million from a revised 1.18 million. Sales were running at the fastest pace since December after three straight increases. Sales are down 5.9% in the past year.
Merger Monday started with Phelps Dodge (NYSE: PD) stating it would buy two major Canadian nickel miners, Inco (NYSE: N) and Falconbridge (NYSE: FAL), in a $40 million deal that would create the largest mining company in North America. Shares of Phelps Dodge closed down $6.72 or 8% to $76.23, while Inco closed up $5.95 or 10% to $64.21, and Falconbridge closed up $2.50 or 5% to $51.80.
Shares of Johnson & Johnson (NYSE: JNJ) closed down $1.11 or 1.8% to $60.21, after the company announced a $16.6 billion deal to buy the consumer products unit of Pfizer (NYSE: PFE). The unit includes such well-known brands as Listerine mouthwash, Nicorette anti-smoking treatments, Rolaids antacid, Benadryl allergy medicine, Rogaine baldness treatment and the antacid Zantac. Stock of Pfizer Inc. strengthened 1.6% to $23.01.
Arcelor bowed to a sweetened $32.2 billion takeover bid from Mittal Steel (NYSE: MT). This merger will create a world steel giant three times larger than its nearest rival. Shares of Mittal Steel dropped 2.4% to $31.40. The bid values each share at $50.77, a 7% improvement on Mittal's previous offer and a 43% premium on its original bid in January.
Shares of Warren Buffett's Berkshire Hathaway (NYSE: BRK/A) closed down $600.00 to $91,500.00, after the billionaire said he would give most of his $44 billion fortune to the Bill & Melinda Gates Foundation and other charities. This charitable giveaway shall start in Jul this year. Shares of Boston Scientific Corp. (NYSE: BSX) fell 6.6% to $17.06 after the company said it was recalling some pacemakers and defibrillators from its sales force and hospital inventories because of problems that could cause battery depletion or loss of operation.
Lennar Corp (NYSE: LEN) slashed its 2006 profit outlook as builders weather the deeper-than-expected pullback in the U.S. housing market. The company reported second-quarter earnings that topped analyst expectations, but it also lowered its fiscal-year forecast, saying activity in its markets is softening on "speculators exiting the market and changing homebuyer sentiment." The stock rose 2.6% at $45.68.
U.S. light crude oil for August delivery added 93 cents to settle at $71.80 a barrel on the New York Mercantile Exchange. Traders continued to eye developments in Iran and wait to see whether this year's hurricane season will be as devastating as last summer's.
Phelps Dodge (NYSE: PD) stating it would buy two major Canadian nickel miners, Inco (NYSE: N) and Falconbridge (NYSE: FAL), in a $40 million deal that would create the largest mining company in North America. Shares of Phelps Dodge closed down $6.72 or 8% to $76.23, while Inco closed up $5.95 or 10% to $64.21, and Falconbridge closed up $2.50 or 5% to $51.80.
Shares of Johnson & Johnson (NYSE: JNJ) closed down $1.11 or 1.8% to $60.21, after the company announced a $16.6 billion deal to buy the consumer products unit of Pfizer (NYSE: PFE). The unit includes such well-known brands as Listerine mouthwash, Nicorette anti-smoking treatments, Rolaids antacid, Benadryl allergy medicine, Rogaine baldness treatment and the antacid Zantac. Stock of Pfizer Inc. strengthened 1.6% to $23.01.
Arcelor bowed to a sweetened $32.2 billion takeover bid from Mittal Steel (NYSE: MT). This merger will create a world steel giant three times larger than its nearest rival. Shares of Mittal Steel dropped 2.4% to $31.40. The bid values each share at $50.77, a 7% improvement on Mittal's previous offer and a 43% premium on its original bid in January.
Wall Street is in a cautious holding pattern pending next week's meeting of the Fed on interest rates. All major indices took a small loss this week, but the fact that the drops were small indicates the market still has good overall strength. The Dow ended below 11,000 today, a big blow symbolically, but the index was down only 25.46 over last Friday's close which ended only a hair above the 11,000 milestone. The Nasdaq lost 8.48 on the week, finishing at 2121.47, and the S&P500 lost 7.04 this week, ending the week at 1244.50. Crude and gold held their own with small gains. Crude closed at 70.87, up 67 cents on the week, and gold gained 6.30 to end at 588.00.
In addition to concern over next week's probable rise in the interest rate, Wall Street also held back due to the Commerce Department's report issued today that orders for durable goods dropped by 0.3 percent last month, primarily driven by drops in orders for transportation equipment and automobiles.
In other big news, Six Flags (NYSE: SIX) said it might have some problems in meeting its obligations and will sell some of its properties. The stock dropped more than 25 percent, ending the day at $5.55 with its stock chart looking like one of the big drops on its roller coasters. In the tech business, Oracle (Nasdaq: ORCL) had good news this week with earnings coming in ahead of expectations, pushing the stock up to close today up 57 cents at 14.90.
Oil and gas stocks in general were up this week due in part to the $21 billion deal announced by Anadarko (NYSE: APC) to acquire Kerr-McGee and Western Gas Resources. Several oil and gas stocks not directly affected by the deal also gained in a coat-tail effect, causing the AMEX Natural Gas Index to close up today at 399.07, one of the few indexes that gained this week.
Stocks closed lower on the day and week with the S&P 500 logging a third straight week of declines, after a wary session spent marking time ahead of next week's Federal Reserve rates decision. However, the energy sector was a notable gainer after two major deals suggested a round of consolidation among oil and gas producers may be on the cards. Concerns about the economy, inflation and interest rates continue to unnerve investors.
Today, the Dow Jones Industrial average closed down 30.02 or 0.3% to 10,989.09, the broader Standard & Poor's 500 index closed down 1.10 or 0.1% to 1,244.50, and the tech-heavy Nasdaq composite index closed down 1.51 to 2,121.47. For the week, the Dow ended down 0.2%, the S&P lost 0.5% and the Nasdaq fell 0.4%.
Market breadth was negative and volume was light. On the New York Stock Exchange, decliners edged out advancers by 16 to 15 on volume of 1.4 billion shares. On the Nasdaq, losers narrowly beat winners by 15 to 14 as 1.6 billion shares changed hands.
There are new worries about just how hawkish the Fed is and whether it will over-tighten and whether investors will have a hard landing or a soft landing scenario for the economy. The market could instead focus on expectations that the second-quarter earnings season will prove solid. Investors are scared to buy and scared to sell - everyone is trapped in day-to-day volatility.
On the data front, orders for new U.S. made durable goods fell a more-than-expected 0.3% in May. It marked the second decline in a row, with orders now down 3.5% since a peak in December. The news heightened investors' nervousness before the Federal Reserve's policy meeting next week.
Additionally, the hedge-fund business came under scrutiny after the New York Times reported that Pequot, a $7 billion fund managed by Arthur Samberg, is being investigated by the SEC for possible insider trading. The probe has not resulted in any charges. Pequot, responding to the report, said all its trades have been proper and it has never received any insider information regarding impending mergers.
Blockbuster from the energy sector had news of a merger. Shares of Shares in Anadarko Petroleum Corp. (NYSE: APC) fell 7.2% down $3.49 to $44.90 after the company said it would spend $21.1 billion to acquire rivals Kerr-McGee Corp. (NYSE: KMG) that closed up $18.31 or 36% to $68.61: and Western Gas Resources Inc. (NYSE: WGR) that closed up $18.76 or 46% to $59.67. The merger would create one of the world's largest independent oil and gas producers. In another deal for the oil sector, Energy Partners Ltd. (NYSE: EPL) closed up $1.15 to $19.17and Stone Energy Corp. (NYSE: SGY) closed up $0.48 to $46.71, on a merge announcement in a $2.2 billion deal. The combined entity will create one of the most active drillers of operated oil and gas wells on the Gulf of Mexico.
Stock of Oracle Corp. (Nasdaq: ORCL) closed up $0.57 or 4% to $14.90, after the software maker posted a 27% jump in its quarterly profit and strong revenue growth, buoyed by strong sales of new software licenses, particularly in its applications segment. Safra Catz, the company's president and chief financial officer, predicted profit excluding acquisition and other one-time items for the current quarter that met analysts' average estimate. She forecast a stronger-than-expected rise in revenue for the current period.
Shares of Alcoa Inc. (NYSE: AA) closed up $0.19 to $30.18, on information that it has sealed a four-year labor contract with its United Steelworkers union. The company also expects to book a second-quarter charge of 4 cents a share on costs related to the ratification of the contract. The aluminum producer is also in talks to establish operations in other African countries besides Guinea and Ghana.
Shares of Six Flags Inc. (NYSE: SIX) closed down $1.90 or almost 26% to $5.55 after the theme-park company said that it was looking to shed six properties as part of its initiative to sell off non-core assets. The company also announced that reaching its prior outlook for adjusted earnings before interest, taxes, depreciation and amortization would be "extremely difficult," and Standard & Poor's downgraded its outlook to "negative" from "stable.
Stock of Qualcomm Inc. (Nasdaq: QCOM) fell 4.2% to $39.55 after J.P. Morgan cut the wireless-technology provider to neutral from overweight. The broker cited a likely stalemate in contract negotiations with Nokia Corp. (NYSE: NOK) over the Finnish handset maker's WCDMA license agreement.
Crude-oil futures maintained flat while traders continued to weigh a smaller-than-expected build in U.S. gasoline supplies, developments in Iran, and next week's Federal Reserve decision on interest rates. The August contract closed up 3 cents at $70.87 a barrel on the New York Mercantile Exchange.
Shares of Six Flags Inc. (NYSE: SIX) closed down $1.90 or almost 26% to $5.55 after the theme-park company said that it was looking to shed six properties as part of its initiative to sell off non-core assets. The company also announced that reaching its prior outlook for adjusted earnings before interest, taxes, depreciation and amortization would be "extremely difficult," and Standard & Poor's downgraded its outlook to "negative" from "stable.
Shares of Alcoa Inc. (NYSE: AA) closed up $0.19 to $30.18, on information that it has sealed a four-year labor contract with its United Steelworkers union. The company also expects to book a second-quarter charge of 4 cents a share on costs related to the ratification of the contract. The aluminum producer is also in talks to establish operations in other African countries besides Guinea and Ghana.
Shares of Shares in . (NYSE: APC) fell 7.2% down $3.49 to $44.90 after the company said it would spend $21.1 billion to acquire rivals Kerr-McGee Corp. (NYSE: KMG) that closed up $18.31 or 36% to $68.61: and Western Gas Resources Inc. (NYSE: WGR) that closed up $18.76 or 46% to $59.67. The merger would create one of the world's largest independent oil and gas producers.
Stock of Oracle Corp. (Nasdaq: ORCL) closed up $0.57 or 4% to $14.90, after the software maker posted a 27% jump in its quarterly profit and strong revenue growth, buoyed by strong sales of new software licenses, particularly in its applications segment. Safra Catz, the company's president and chief financial officer, predicted profit excluding acquisition and other one-time items for the current quarter that met analysts' average estimate. She forecast a stronger-than-expected rise in revenue for the current period.
Stocks closed lower after the yield on the benchmark 10-year note touched a more than four-year high and new data once again suggested that economic growth is slowing. Stocks erased nearly all of the previous session's gains, as inflation fears took hold of investors once again.
Today, the Dow Jones Industrial average closed down 60.35 or 0.5% to 11,019.11, the broader Standard & Poor's 500 index closed down 6.60 or 0.5% to 1,245.60, and the tech-heavy Nasdaq composite index closed down 18.22 or 0.9% to 2,122.98.
Market breadth was negative and volume was relatively light. On the New York Stock Exchange, decliners topped advancers by a margin of two to one on volume of 1.4 billion shares. On the Nasdaq, losers beat winners by a margin of 17 to 12 as 1.7 billion shares changed hands.
The market is likely to remain in a tight band till the Jun 28 meeting. Investors won't be surprised if the Fed lifts its key short-term interest rate to 5.25%. However, a very small number of companies have warned ahead of the second-quarter earnings season. Therefore, the tone for earnings looks very positive, and that's going to provide some support. The yield on the benchmark 10-year Treasury note ran up to 5.2%
The index of U.S. leading economic indicators fell 0.6% against the expected 0.4% drop. This suggests that the economy is likely to grow at a "slow to moderate" pace in the near term. The latest weekly jobless data brought out that first-time applications for state unemployment benefits rose by 11,000 to 308,000. Though the increase was bigger than expected, new claims near the 300,000 level are still a sign of a tight job market.
Shares of Johnson & Johnson (NYSE: JNJ) and Boston Scientific Corp. (NYSE: BSX) moved lower on a news report that several major cardiology centers are cutting back on their use of drug-coated coronary stents, using less expensive uncoated stents instead. Cardiologists at Los Angeles' Cedars-Sinai and Boston's Brigham and Women's report they are inserting fewer drug-coated stents into cardiac patients due to concerns that the devices can cause blood clots. J&J shares closed almost 1% lower at $61.18 while shares of Boston Scientific dropped 2.6%.
Investors today focused on the airline sector. Shares of British Airways PLC. (NYSE: BAB) tumbled 6% to $63.70 after the company disclosed U.K. regulatory authorities and the U.S. Department of Justice are probing the airline over ticket prices and fuel surcharges. United Airlines (Nasdaq: UAUA) confirmed that it's received an inquiry and is cooperating. American Airlines (NYSE: AMR) said it has been subpoenaed but is not a target. United Airlines' closed down 19 cents at $32.03 while AMR shares rose 1.4% to $25.97.
Shares of Bed, Bath & Beyond (Nasdaq: BBBY) fell $2.21 or 6% to $34.67 after the retailer's fiscal first-quarter profit edged up, roughly in line with expectations, but Bear Stearns downgraded the home goods retailer to "peer perform" from "outperform".
Shares in Novell Inc. (Nasdaq: NOVL) surged 8.7% to $6.52 after the computer-networking company ousted its chief executive and chief financial officer, saying new leadership may help lift its share price out of the doldrums. Yum Brands Inc. (NYSE: YUM), owner and operator of the KFC, Pizza Hut and Taco Bell fast-food chains, saw its shares fall more than 2.6% after investors expressed disappointment over its same-store sales performance in the U.S.
Brokerage action was behind a more than 10% drop in shares of RealNetworks Inc. (Nasdaq: RNWK) down $1.11 to $9.72. Goldman Sachs cut the provider of digital media services and software to under-perform from in-line, citing valuation. The broker also said revenue growth could be tempered by the lower-average revenue per user and profit generated by cable subscribers from the Comcast and Cox agreements as well as competition from well-funded players.
Cell phone maker Nokia (NYSE: NOK) has decided that it would stop making phones based on CDMA, which is a cell phone standard developed by the wireless technology company. This led to a drop in share price if Qualcomm that closed down $2.82 or over 6% to $41.38.
Crude-oil futures rose 51 cents to $70.84 a barrel on the New York Mercantile Exchange. Prices took their cue from data showing a smaller-than-expected increase in gasoline supplies in the latest week.
Brokerage action was behind a more than 10% drop in shares of RealNetworks Inc. (Nasdaq: RNWK) down $1.11 to $9.72. Goldman Sachs cut the provider of digital media services and software to under-perform from in-line, citing valuation. The broker also said revenue growth could be tempered by the lower-average revenue per user and profit generated by cable subscribers from the Comcast and Cox agreements as well as competition from well-funded players.
Cell phone maker Nokia (NYSE: NOK) has decided that it would stop making phones based on CDMA, which is a cell phone standard developed by the wireless technology company. This led to a drop in share price if Qualcomm that closed down $2.82 or over 6% to $41.38.
Shares of Bed, Bath & Beyond (Nasdaq: BBBY) fell $2.21 or 6% to $34.67 after the retailer's fiscal first-quarter profit edged up, roughly in line with expectations, but Bear Stearns downgraded the home goods retailer to "peer perform" from "outperform".
Shares of Johnson & Johnson (NYSE: JNJ) and Boston Scientific Corp. (NYSE: BSX) moved lower on a news report that several major cardiology centers are cutting back on their use of drug-coated coronary stents, using less expensive uncoated stents instead. Cardiologists at Los Angeles' Cedars-Sinai and Boston's Brigham and Women's report they are inserting fewer drug-coated stents into cardiac patients due to concerns that the devices can cause blood clots. J&J shares closed almost 1% lower at $61.18 while shares of Boston Scientific dropped 2.6%.
Stocks locked in strong gains after investors cheered Morgan Stanley (NYSE: MS) and FedEx Corp.'s (NYSE: FDX) strong earnings reports. They set aside recent worries about the Federal Reserve's interest-rate decision next week. News that crude-oil supplies hit an eight-year high last week also gave the market some relief. The Dow Jones industrial average rose over 100 points while the broader market posted solid gains.
Today, the Dow closed up 104.62 or 1% to 11,079.46, the broader Standard & Poor's 500 index closed up 12.08 or 1% to 1,252.20, while the tech-heavy Nasdaq composite closed up 34.14 or 1.6% to 2,141.20.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by a margin of three to one on volume of 1.7 billion shares. On the Nasdaq, winners topped losers by more than two to one as 1.9 billion shares changed hands.
Investors have been concerned over rates, inflation and the slowing economy. The volatility in the markets is likely to persist until the Federal Reserve's policy meeting June 28-29. Investors remain convinced that the Fed almost certainly will again lift rates by a quarter-percentage point, which would lift the overnight rate to 5.25%.
The star of the day was DuPont (NYSE: DD) that closed up $1.70 or 4% to $41.94, after news of a partnership with BP Plc to develop a gasoline additive meant to compete with corn-based ethanol.. Stock of BP closed up $1.31 to $67.01. Development of transportation bio-fuels could help cut overall greenhouse gas emissions and reduce reliance on petroleum. The companies plan to roll out their first product next year.
Stock of Morgan Stanley (NYSE: MS) closed up 4.3% at $59.48. The brokerage reported a second-quarter profit that was more than double the year-earlier level and easily topped market expectations. It also chalked up a 48% improvement in revenue.
FedEx (NYSE: FDX) closed up $5.54 or 5.1% to $113.86, after reporting a 27% increase in its fourth-quarter profit. This is far better than market expectations. The company also gave first-quarter guidance above current analysts' forecasts.
Among technology stocks, Hewlett-Packard Co. (NYSE: HPQ) rose 2.7% to $33.74. The company said that it would grant more autonomy to its three business groups. Analysts at Robert Baird reiterated an outperform rating on the company, citing the company's plan to restructure some activities.
Oil prices jumped 99 cents to $70.33 a barrel on the New York Mercantile Exchange after the Energy Information Administration said that crude supplies rose by 1.4 million barrels reaching a total of 347.1 million barrels. However, motor-gasoline inventories rose a modest 300,000 barrels to total 213.4 million barrels. Additionally, concerns about nuclear tensions between the west and Iran and North Korea added fuel to fire.
FedEx (NYSE: FDX) closed up $5.54 or 5.1% to $113.86, after reporting a 27% increase in its fourth-quarter profit. This is far better than market expectations. The company also gave first-quarter guidance above current analysts' forecasts.
Hewlett-Packard Co. (NYSE: HPQ) rose 2.7% to $33.74. The company said that it would grant more autonomy to its three business groups. Analysts at Robert Baird reiterated an outperform rating on the company, citing the company's plan to restructure some activities.
Stock of Morgan Stanley (NYSE: MS) closed up 4.3% at $59.48. The brokerage reported a second-quarter profit that was more than double the year-earlier level and easily topped market expectations. It also chalked up a 48% improvement in revenue.
The star of the day was DuPont (NYSE: DD) that closed up $1.70 or 4% to $41.94, after news of a partnership with BP Plc to develop a gasoline additive meant to compete with corn-based ethanol.. Stock of BP closed up $1.31 to $67.01. Development of transportation bio-fuels could help cut overall greenhouse gas emissions and reduce reliance on petroleum. The companies plan to roll out their first product next year.
Blue-chip stocks closed slightly higher as upbeat reports on the housing industry and strong sales from Caterpillar (NYSE: CAT) helped overshadow inflation jitters on Wall Street. However, investors continue to be worried about next week's Federal Reserve policy meeting and as a result, the broader market couldn't hold early gains.
Today, the Dow Jones industrial average closed up 32.73 or 0.3% to 10,974.84, the broader Standard & Poor's 500 index closed down 0.02 to 1,240.12, and the Nasdaq composite index closed down 3.36 or 0.2% to 2,107.06.
Market breadth was negative. On the New York Stock Exchange, decliners edged out advancers 9 to 7 on volume of 1.5 billion shares. On the Nasdaq, losers narrowly beat winners by 16 to 13 as 1.6 billion shares changed hands.
The Commerce Department data showed a stronger-than-expected 5% rise in the construction of new homes in May. Despite this slight relief from the housing numbers, the path of least resistance appears to be a downside. The investors are continuing to drift and will do so till the Fed meet on June 28 and 29 to review the economy and monetary policy. The Fed is widely expected to raise its short-term rate target to 5.25%, and some investors say that they could push that to near 6%. The overriding issue for investors is how to reconcile what appears to be slowing growth with the Fed's concern about inflation and the need to raise interest rates.
Caterpillar (NYSE: CAT) was the star of the day. The share closed up $1.04 or 1.5% to $70.99, after the heavy equipment maker reported strong dealer retail sales. The company stated that the sale of engines to dealers rose in the March-through-May period, with demand especially noteworthy in the marine and oil and gas industries.
Kroger Co. (NYSE: KR) posted a 4% rise in first-quarter profit, although the supermarket operator said charges related to legal proceedings at its Ralph's unit cut earnings by 3 cents a share in the 2006 first quarter. The stock closed up $1.01 or 5% to $20.47. Shares of Target Corp. (NYSE: TGT) closed down $0.06 to $49.04, after the retailer said same-store sales for the five weeks to July 1 were on pace to hit the upper range of its forecast 3% to 5%.
J.M. Smucker Co. (NYSE: SJM) posted higher fourth-quarter profit and sales, helped by improved profitability in its frozen-sandwich business and lower restructuring, and merger and integration costs. The stock surged about 7.2% to $43.30.
J.P. Morgan (NYSE: JPM) has upgraded discount retailer Costco Wholesale Corp. (NYSE: COST) to "overweight" from "neutral." This sent the stock up $1.33 or 2.5% to $54.88. J.P. Morgan Chase expects the company's same-store sales in the second half of the year to outpace its competitors.
Shares of Applied Materials (Nasdaq: AMAT) closed up $0.14 or almost 1% to $16.45, after Prudential Equity Group raised its rating to "overweight" from "neutral." It expects the semiconductor industry to increase capacity by more than 10% in the second half of 2006. It also expects Applied Materials improved product portfolio to stabilize market-share losses.
Morgan Stanley initiated JetBlue Airways (Nasdaq: JBLU) with an overweight rating. The stock climbed 6.3% to $12.25. Morgan Stanley said JetBlue's revenue will surprise on the upside this summer, while a new focus on efficiency is leading a push to reduce costs in 2006.
Crude-oil futures for July delivery gained 36 cents to settle at $69.34 a barrel on New York Mercantile Exchange.
Stocks closed lower with the S&P 500 turning negative for the year, after a Federal Reserve official's remarks reinforced market expectations that the Fed will keep lifting interest rates. Adding fuel to fire was the weak housing-sentiment data, while a pullback in energy and metals prices sparked a sell-off in commodity-related shares.
Today, the Dow Jones industrial average closed down 72.44 or 0.7% to 10,942.11, the broader Standard & Poor's 500 index closed down 11.40 or 0.9% to 1,240.14, and the tech-heavy Nasdaq composite closed down 19.53 or 0.9% to 2,110.42.
Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by three to one on volume of 1.5 billion shares. On the Nasdaq, losers also beat winners by a margin of more than two to one as 1.7 billion shares changed hands.
Atlanta Federal Reserve President Jack Guynn, who is one of the voting members of the Federal Open Market Committee that sets Fed rates, said that core inflation has moved beyond the upper end of its comfort range. This is an indication of a coming increase in rate. Therefore, investors are likely to behave pessimistically ahead of the Fed's June 29 monetary policy meeting. Additionally, the National Association of Home Builders' June index dropped four points to 42, which indicates that business conditions are far from good. A housing market that continues to pull back at this pace means we run a greater risk of recession.
Shares of Circuit City shares (NYSE: CC) closed down $0.85 or 2.9% at $28.63. This is despite reporting a quarterly profit compared to a loss a year earlier. The home-electronics retailer is forecasting fiscal-year net sales growth of 7% to 11% and domestic same-store sales growth of 5% to 7%. The forecast is based on continued sales of items such as flat-panel-television sets, notebook computers, portable music players and related accessories.
UBS has upgraded Intel (Nasdaq: INTC) to "buy" from "neutral" on expectations of positive trends for gross and operating margin and Lehman Brothers upgraded Procter and Gamble (NYSE: PG) to "overweight" from "equal-weight. Shares of Intel Corp. closed down 8 cents lower at $18.21. Shares of P&G closed down $0.15 to $54.87.
Shares of Nokia Corp. (NYSE: NOK) rose 12 cents to $20.09 after the Finnish mobile-phone giant and Germany's Siemens AG (NYSE: SI) agreed to merge their phone-equipment arms into a 50-50 joint venture. U.S. listed shares of Siemens shot up more than 5.1% to $83.90. The tie-up of the two units will create a company roughly equal in size to rival Ericsson (Nasdaq: ERICY) of Sweden, and to the firm that will emerge when the Lucent Technologies (NYSE: LU) merger with Alcatel (NYSE: ALA) is completed.
Shares of Alberto-Culver Co. (NYSE: ACV) rallied nearly 2.4% to $47.61 after it said that it planned to spin off its beauty-supply-distribution business, Sally Beauty Co. As part of the plan, the company would pay out a special one-time cash dividend of $25 a share once the deal is completed. Additionally, Swiss-food Nestle SA (OTC: NSRGY) said that it will buy weight-loss company Jenny Craig for $600 million.
Oil prices closed $1.23 lower at $68.65 a barrel on the New York Mercantile Exchange after major oil exporter Iran said there was a positive atmosphere in the dispute over its atomic work. This raised hopes for a breakthrough in its nuclear standoff with the West.
Shares of Nokia Corp. (NYSE: NOK) rose 12 cents to $20.09 after the Finnish mobile-phone giant and Germany's Siemens AG (NYSE: SI) agreed to merge their phone-equipment arms into a 50-50 joint venture. U.S. listed shares of Siemens shot up more than 5.1% to $83.90. The tie-up of the two units will create a company roughly equal in size to rival Ericsson (Nasdaq: ERICY) of Sweden, and to the firm that will emerge when the Lucent Technologies (NYSE: LU) merger with Alcatel (NYSE: ALA) is completed.
Shares of Circuit City shares (NYSE: CC) closed down $0.85 or 2.9% at $28.63. This is despite reporting a quarterly profit compared to a loss a year earlier. The home-electronics retailer is forecasting fiscal-year net sales growth of 7% to 11% and domestic same-store sales growth of 5% to 7%. The forecast is based on continued sales of items such as flat-panel-television sets, notebook computers, portable music players and related accessories.
It was another bearish week on Wall Street, with the Dow just barely finishing above 11,000 after a precipitous drop last week. The Dow closed at 11,014.55, up 122.63 over last Friday. When the Dow rises above a 1,000 point milestone, Wall Street likes to keep it there, and gets nervous when it drops back behind that level--so today's finish was reassuring. Not very reassuring, but still enough to give us an indication that the storm is going to be short-lived and the bulls will once again return.
The Nasdaq and S&P500 were both relatively flat on the week. The Nasdaq closed at 2129.95, down 5.11 from last Friday, and the S&P500 finished at 1251.54, down 0.76 on the week. With the Dow earning a solid, if not spectacular gain this week and the other indexes remaining flat, it looks as though investors are still putting their money into the market, but they are doing so cautiously. Speculative stocks are being avoided now in favor of more secure, "blue chip" issues. To take a contrary philosophy however, the current dips in the market would indicate a good time to be looking for bargains outside of the Dow, in anticipation of a return of a stronger market. Although Wall Street has a decidedly herd-like mentality, it's not always the most profitable thing to do to follow the crowd.
Gold futures suffered another setback, closing today at 581.70, down 31.10 on the week, but up 11.40 on the day. Crude held its ground, closing at 70.20, down 1.43 on the week. Despite ongoing concerns over inflation, the outlook for crude remains positive and is likely to continue on an upward path. Inflation concerns will be outweighed by geopolitical issues, including concerns over Iran's position on uranium enrichment and a possible disruption in the oil supply from the region.
After much speculation on the possibility of a break in the steady stream of interest rate hikes, the sentiment on Wall Street among economists and traders seems to have shifted. The consensus among most economists now is that the Fed will indeed raise the interest rate later this month by another quarter percent. The raise in rates would put the interest rate at 5.25 percent, and mark 17 consecutive rate hikes. Many economists and analysts had made statements to the effect that a pause in the stream of rate hikes would be a prudent thing to do, while the Fed takes time out to analyze the facts around an economic slowdown. The rate hike becomes more likely especially after May's inflation data came out. Core inflation increased 0.3 percent in May, and the CPI increased 0.4 percent, primarily on higher energy and housing costs.
Stocks ended lower today and mixed on the week after a two-day run of gains helped put a brake on a month and a half of heavy selling that was sparked by inflation and interest-rate fears. It is evident that investors have remained cautious, preferring the safety of blue-chip stocks over riskier shares.
Today, the Dow closed down 0.64 to 11,014.55, the broader Standard & Poor's 500 index closed down 4.62 or 0.4% to 1,251.54, and the Nasdaq composite index closed down 14.20 or 0.7% to 2,129.95. For the week, the Dow gained 1.1%, the S&P was flat, and the Nasdaq fell 0.2%.
Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of two to one on volume of 2 billion shares. On the Nasdaq, losers also beat winners by a margin of two to one as 2.5 billion shares changed hands.
The market needs to get a better feel on the course the Federal Reserve is going to take on interest rates, and that is unlikely to come until the central bank meets at the end of June. The inflation is picking up, and that means further rate increases beyond June. It is likely that the market will be stuck in a trading range for the summer, with some further upside probing over the next few weeks.
Gasoline and oil prices may be adding to inflation pressures in a way the current data haven't detected. However, statistical studies to detect pass-through from recent energy-price increases have failed to show significant effects in U.S. price data, but stories about widespread pass-through are becoming increasingly common. On the other hand, the Fed chairman had said that high energy and commodity prices may account for a recent pickup in core inflation, but he also said the rate of pass-through of these higher prices to core consumer-price inflation appears to have remained low in the current episode. This has been confusing to say the least.
In data news that supports the first assessment, U.S. consumer sentiment improved in early June, with the UMich consumer sentiment index rising to 82.4 points. Also, the U.S. balance-of-payments deficit narrowed in the first quarter to $208.7 billion from $223.1 billion in the fourth quarter, against the expected reduction to about $221 billion.
Microsoft Corp. shares (Nasdaq: MSFT) ticked up 3 cents to $22.10. Its Chairman Bill Gates made a surprise announcement that he would be leaving day-to-day responsibilities at the company in two years to concentrate on his charitable foundation the Bill and Melinda Gates Foundation. He is immediately handing over his role as chief software architect to Chief Technology Officer Ray Ozzie.
Shares of Oracle Corp. (Nasdaq: ORCL) gained 3.6% to $14.19 after the company said sales for the quarter ended in May rose 25% from a year earlier, to $4.85 billion. Oracle had previously forecast a rise of 13% to 17%. The software giant attributed the performance to better-than-expected sales of new software licenses.
Shares of Adobe Systems Inc. (Nasdaq: ADBE) rose 16 cents to $29.12. Although the design-software company posted an 18% fall in quarterly profit and cuts its earnings outlook, two brokers upgraded the company. RBC Capital Markets said any downside to current earnings estimates is reduced, with the broker also excited about revenue opportunities ahead of the company's first large product upgrade cycle.
Home builder KB Home (NYSE: KBH) closed up $0.37 to $45.47, after reporting better than expected second quarter earnings. However, it lowered its guidance for 2006 due to the slowing new-home demand and a rise in new and existing-home supplies. It reported a 14% profit improvement for the May 31-ending quarter, above consensus analyst forecasts.
Oil prices made modest gains. U.S. crude for July delivery rose 38 cents to settle at $69.88 a barrel on the New York Mercantile Exchange. Traders weighed the conflicting views on inflation from Fed officials and the latest developments regarding Iran's nuclear research.
Shares of Adobe Systems Inc. (Nasdaq: ADBE) rose 16 cents to $29.12. Although the design-software company posted an 18% fall in quarterly profit and cuts its earnings outlook, two brokers upgraded the company. RBC Capital Markets said any downside to current earnings estimates is reduced, with the broker also excited about revenue opportunities ahead of the company's first large product upgrade cycle.
Shares of Oracle Corp. (Nasdaq: ORCL) gained 3.6% to $14.19 after the company said sales for the quarter ended in May rose 25% from a year earlier, to $4.85 billion. Oracle had previously forecast a rise of 13% to 17%. The software giant attributed the performance to better-than-expected sales of new software licenses.
Microsoft Corp. shares (Nasdaq: MSFT) ticked up 3 cents to $22.10. Its Chairman Bill Gates made a surprise announcement that he would be leaving day-to-day responsibilities at the company in two years to concentrate on his charitable foundation the Bill and Melinda Gates Foundation. He is immediately handing over his role as chief software architect to Chief Technology Officer Ray Ozzie.
Stock gains accelerated after Federal Reserve Chairman Ben Bernanke made soothing comments on the inflationary impact of higher energy prices at the retail level. Stocks posted one of the best days of the year with the Dow Jones industrial average settling above 11,000, extending a morning rally sparked by tame economic reports. A rally in shares of Caterpillar Inc. (NYSE: CAT), Boeing Co. (NYSE: BA) and others provided a further boost.
The Dow Jones Industrial Average closed up 198.27 or 1.83% to 11,015.19, while the broader Standard & Poor's 500 index closed up 26.12 or 2.12% to 1,256.16, and the Nasdaq composite closed up 58.15 or 2.79% to 2,144.83.
Market breadth was positive. On the New York Stock Exchange, advancers topped decliners by a margin of four to one on volume of 1.46 billion shares. On the Nasdaq, winners also beat losers by a margin of five to one as 1.71 billion shares changed hands
Stocks got a boost after Federal Reserve Chairman Ben Bernanke said the rate of pass-through of higher energy and commodity prices to the retail inflation level appears to have remained low. This got a favorable reaction from investors. But markets continue to struggle for the year to date, with only the Dow posting a moderate gain. The Nasdaq remains nearly 4% lower since Dec. 30.
In data news, manufacturing activity in the Philadelphia region grew at a slower pace in June, with the Philly Fed index falling to 13.1 in June from 14.4 in May. Reflecting the weakness in the manufacturing sector in May, the Federal Reserve said that output at the nation's factories, mines and utilities fell during the month for the first time since January. U.S. industrial production slipped 0.1%. However, the New York Federal Reserve Bank's Empire State Manufacturing index jumped to 29 in June, above the average economist forecast of 12.5. Inflation in the sector also gathered momentum: The prices-paid component rose to 52.9 points from 43.1 in May. Also, first-time applications for state unemployment benefits dropped by 8,000 to 295,000 in the week ending June 10.
Shares of heavy equipment maker Caterpillar (NYSE: CAT) rallied 4.6% to $70.60. Chairman and Chief Executive James W. Owens told shareholders at the annual meeting that 2006 is shaping up to be the company's third year in a row of record earnings. He affirmed the company's 2006 profit outlook of earnings ranging $4.85 to $5.20 a share and said that he expects earnings to increase by as much as 20% by 2010.
Shares of Bear Stearns (NYSE: BSC) closed up $7.62 or almost 5% to $131.82, after the investment bank said quarterly profit surged, easily beating estimates, on brisk business in its fixed income unit. The second-quarter earnings rose 81% from year-earlier levels. The figure topped Wall Street forecasts.
Aircraft maker Boeing (NYSE: BA) closed up $2.97 or nearly 3% to $84.98, after gaining roughly 5% Wednesday on problems rival Airbus is having completing its giant A380 plane, which Airbus' co-chairman described Thursday as a "major crisis."
Morgan Stanley downgraded the home-building sector to cautious from attractive, as order declines and increasing inventories are expected to lead to further negative earnings revisions. Many analyst expects the group as a whole to trade down another 15% to 25%. The view is based on the current supply/demand imbalance, the increasing odds of further rate increases and the prospect that operating fundamentals could continue to get worse.
Oil prices rose after a Wednesday report on U.S. fuel inventories report that showed crude inventories smaller than expected. U.S. light crude for July delivery gained 36 cents to settle at $69.50 a barrel on the New York Mercantile Exchange.
Aircraft maker Boeing (NYSE: BA) closed up $2.97 or nearly 3% to $84.98, after gaining roughly 5% Wednesday on problems rival Airbus is having completing its giant A380 plane, which Airbus' co-chairman described Thursday as a "major crisis."
Shares of Bear Stearns (NYSE: BSC) closed up $7.62 or almost 5% to $131.82, after the investment bank said quarterly profit surged, easily beating estimates, on brisk business in its fixed income unit. The second-quarter earnings rose 81% from year-earlier levels. The figure topped Wall Street forecasts.
Shares of heavy equipment maker Caterpillar (NYSE: CAT) rallied 4.6% to $70.60. Chairman and Chief Executive James W. Owens told shareholders at the annual meeting that 2006 is shaping up to be the company's third year in a row of record earnings. He affirmed the company's 2006 profit outlook of earnings ranging $4.85 to $5.20 a share and said that he expects earnings to increase by as much as 20% by 2010.
At last, the Dow Jones Industrial Average ended with a triple-digit gain, and the Nasdaq Composite snapped an eight-session losing streak. The market weathered a Federal Reserve report and consumer-price data pointing to a pickup in inflation. Amongst the positive factors was a broker upgrade for the semiconductor sector and its key player, Intel Corp. (Nasdaq: INTC) and a rally in shares of Boeing Co. (NYSE: BA) that gave the Dow industrials a further boost.
Today, the Dow Jones Industrial Average closed up 110.78 or 1% to 10,816.92, the broader Standard & Poor's 500 index closed up 6.35 or 0.5% to 1,230.04, and the Nasdaq composite index closed up 13.53 or 0.7% to 2,086.00. This snapped an eight-session losing streak.
Market breadth was positive. On the New York Stock Exchange, advancers narrowly topped decliners by 17 to 15 on volume of 1.97 billion shares. On the Nasdaq, winners also edged out losers by 8 to 7 as 2.14 billion shares changed hands.
While the market gained, most investment was in large-cap highly liquid stocks - this shows the investors have little confidence in the market. The market is definitely oversold, under-loved, and definitely due for a bounce. It appears that the market has factored in an economic slowdown and investors have also catered to the almost assured interest rate hike. The market is reaching a bottom, however, there is no major catalyst in the near future to provide that much needed bounce.
The data on CPI is enough to keep the Fed concerned and vigilant against a potential further rise in inflation. After the report that released yesterday, the federal-funds-futures market priced in a 100% chance that the Federal Reserve will raise its target for overnight rates in Jun. The Federal Reserve, in its Beige Book report on economic conditions, said price pressures were rising in most regions and the economy is showing signs of slowing. What worries investors is that the Fed will raise rates too far, cutting off cheap money for businesses and hurting corporate profits.
Boeing (NYSE: BA) made big news with the share closing up $5.03 or over 6.5% to $82.01, after its main rival Airbus warned of new delays of at least six months in deliveries of its A380 super-jumbo. Goldman upgraded Boeing to in line from under-perform, citing an increased outlook for aircraft deliveries. The broker also lifted its earnings estimates on the aerospace giant. As an after effect, the shares of EADS, the European defense company that's the majority parent of Airbus also slumped 26.3% at $18.73. Only nine of the Airbus aircraft are likely to be delivered in 2007, which will seriously affect the financial results. BAE Systems, which owns the rest of Airbus, saw its shares fall 1.1% in London. The group warned that operating profit would be cut by "about 500 million euros" ($625 million) a year between 2007 and 2010. In another positive development for Boeing, Singapore Airlines said in a statement that it's signed a letter of intent to order 20 Boeing 787-9s at a list price of $4.52 billion. It's also agreed on purchase rights to 20 more planes.
Ethanol producer VeraSun Energy priced its initial public offering at $23 per share, above its previous forecast range of $21 to $22. Stock of VeraSun closed up $7.00 or 30% to $30.00, in their first day of trade.
Goldman Sachs has upgraded the semi-conductor sector to neutral from cautious. It has recommended buying the stock of Intel (Nasdaq: INTC) as its market share is expected to gain and valuation is attractive. The stock rallied 3.6%. It also upgraded Advanced Micro Devices (NYSE: AMD) to in line from under-perform. The stock closed up 3%. Additionaly, Applied Materials (Nasdaq: AMAT) was upgraded to in line from under-perform on the belief that earnings will grow through expense controls and lower share counts. The stock climbed 1.9%. SanDisk Corp. (Nasdaq: SNDK) was upgraded by Covello to in line from under-perform on valuation and the belief that the worst is behind the company. The stock rose 3.2%.
U.S. crude for July delivery gained 58 cents to settle at $69.14 a barrel on the New York Mercantile Exchange.. A rise in natural gas futures due to hot weather across much of the U.S. and the possibility of hurricane disruptions to the country's energy output lent further support. Oil prices moved higher despite a report showing a larger-than-expected rise in U.S. gasoline stocks.
Boeing (NYSE: BA) made big news with the share closing up $5.03 or over 6.5% to $82.01, after its main rival Airbus warned of new delays of at least six months in deliveries of its A380 super-jumbo. Goldman upgraded Boeing to in line from under-perform, citing an increased outlook for aircraft deliveries. The broker also lifted its earnings estimates on the aerospace giant. As an after effect, the shares of EADS, the European defense company that's the majority parent of Airbus also slumped 26.3% at $18.73. Only nine of the Airbus aircraft are likely to be delivered in 2007, which will seriously affect the financial results. BAE Systems, which owns the rest of Airbus, saw its shares fall 1.1% in London. The group warned that operating profit would be cut by "about 500 million euros" ($625 million) a year between 2007 and 2010. In another positive development for Boeing, Singapore Airlines said in a statement that it's signed a letter of intent to order 20 Boeing 787-9s at a list price of $4.52 billion. It's also agreed on purchase rights to 20 more planes.
The Dow Jones industrial average sank into the red for the year as concerns about rising inflation, higher interest rates and slowing economic growth overshadowed tumbling commodity prices and some rosy corporate news. The Nasdaq Composite fell for an eighth session in a row, the second time in a month that it has logged an eight-session losing streak.
Today, the Dow closed down 86.44 or 0.8% to 10,706.14. This left the stock market gauge off 936 points, or 8% from its May high, and down 0.1% for the year. The broader Standard & Poor's 500 index closed down 12.71 or over 1% to 1,223.69, leaving it down 2% in 2006. The Nasdaq composite index closed down 18.85 or 0.9% to 2,072.47, putting it down 6% year-to-date and 12.6% below its April high.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by a margin of just three to one on volume of 2.3 billion shares. On the Nasdaq, losers topped winners by a margin of two to one as 2.54 billion shares changed hands.
While a rally is overdue, investors have every reason to be worried, especially in light of the heavy sell-off in overseas markets. Additionally, inflation is increasing while economic growth is slowing and interest rates are rising. Merrill Lynch said that its survey of global fund managers suggests that central banks worldwide may impose a period of below-trend growth to address the inflation threat. That represents a negative growth which is consistent with the action we are seeing in the marketplace. Traders will now focus on the Consumer Price Index due tomorrow. Most hope that this would come in tame, easing fears that rising prices and interest rates will hurt economic growth, and corporate profits.
U.S. producer prices rose 0.2% in May, which was close to economists' expectations. However, core prices rose 0.3%, on signs that inflationary pressures were growing. Intermediate goods prices increased 1.1%, the biggest gain since October. U.S. retail sales, meanwhile, rose 0.1% in May, once again in line with forecasts. Excluding auto sales, retail sales rose 0.5%. U.S. business sales and shipments outpaced growth in inventories in April, according to the government. Investors were hoping for a weak PPI report might signal an end to the Fed's interest rate hiking campaign, although today's PPI number probably won't push the Fed in that direction.
Goldman Sachs Group (NYSE: GS) reported second-quarter earnings more than doubled, boosted by strong results in fixed-income and equities trading. However, its chief financial officer warned that if the market weakness drags on, it could take a toll on the company's results. The stock closed down $5.75 or 4% to $139.254%.
Best Buy (NYSE: BBY) beat earning projections for the first quarter and its shares closed up $2.66 or over 5% to $51.69. The company reported first-quarter earnings and revenue rose from year-earlier levels and exceeded analysts' forecasts. The consumer-electronics retailer also backed its earnings forecast for the year. The company had hot sales of flat-screen TVs, coupled with tight controls on spending for everything from advertising to corporate travel. This triggered the 38% surge in first-quarter profit. The results surprised investors because they far outpaced expectations by Wall Street and were much better than Best Buy's forecast for "modest" year-over-year growth.
Qualcomm Inc. (Nasdaq: QCOM) closed up $0.65 or 1.6% to $41.84 after the chipmaker raised its earnings outlook on strong demand and higher prices for mobile phones that use its products. In the third quarter ending June 25, Qualcomm expects to earn 41 cents to 42 cents a share, on revenue of $1.91 billion to $1.96 billion. Wall Street, had been forecasting a profit of 40 cents a share.
Shares of Maverick Tube Corp. (NYSE: MVK) staged a huge rally after the maker of oil and gas line products agreed to be acquired by Luxembourg-based Tenaris (NYSE: TS) for about $3.19 billion, including debt assumption. Stock of Tenaris closed up $1.03 to $32.53, while that of Maverick Tube closed up $16.99 or 37% to $62.65. The deal represents a 42% premium for Maverick. Maverick's shares were up almost 38 percent in early afternoon trade. Tenaris said it plans to finance the deal with a combination of cash on hand and debt.
Shares of Merck & Co. (NYSE: MRK) rose 0.9% at $33.66 after the company said that its drug Januvia was as effective as the popular diabetes drug glipizide, also known as Glucotrol, in reducing blood-sugar levels in patients with type 2 diabetes. Patients taking Januvia also lost weight on the drug, the study showed.
U.S. light crude for July delivery settled down $1.80 at $68.56 on the New York Mercantile Exchange. This is the lowest level since April 4, pressured by relief that Tropical Storm Alberto will likely miss oil assets in the Gulf of Mexico, as well as a lower demand estimate.
Shares of Maverick Tube Corp. (NYSE: MVK) staged a huge rally after the maker of oil and gas line products agreed to be acquired by Luxembourg-based Tenaris (NYSE: TS) for about $3.19 billion, including debt assumption. Stock of Tenaris closed up $1.03 to $32.53, while that of Maverick Tube closed up $16.99 or 37% to $62.65. The deal represents a 42% premium for Maverick. Maverick's shares were up almost 38 percent in early afternoon trade. Tenaris said it plans to finance the deal with a combination of cash on hand and debt.
Qualcomm Inc. (Nasdaq: QCOM) closed up $0.65 or 1.6% to $41.84 after the chipmaker raised its earnings outlook on strong demand and higher prices for mobile phones that use its products. In the third quarter ending June 25, Qualcomm expects to earn 41 cents to 42 cents a share, on revenue of $1.91 billion to $1.96 billion. Wall Street, had been forecasting a profit of 40 cents a share.
Best Buy (NYSE: BBY) beat earning projections for the first quarter and its shares closed up $2.66 or over 5% to $51.69. The company reported first-quarter earnings and revenue rose from year-earlier levels and exceeded analysts' forecasts. The consumer-electronics retailer also backed its earnings forecast for the year. The company had hot sales of flat-screen TVs, coupled with tight controls on spending for everything from advertising to corporate travel. This triggered the 38% surge in first-quarter profit. The results surprised investors because they far outpaced expectations by Wall Street and were much better than Best Buy's forecast for "modest" year-over-year growth.
Markets closed lower with the Dow Jones Industrial Average falling almost 100 points and the Nasdaq declining for a seventh day. Investors await the first of two key inflation reports and a speech by Federal Reserve Chairman Ben Bernanke, both of which will be poured over for clues to the direction of interest rates.
Today, the Dow Jones industrial average closed down 99.34 or almost 1% to 10,792.58, the broader Standard & Poor's 500 index closed down 15.90 or 1.3% to 1,236.40, and the tech-laden Nasdaq composite index closed down 43.74 or almost 2% to 2,091.32.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by a margin of almost 4 to 1 on volume of 1.62 billion shares. On the Nasdaq, winners topped losers by a margin of four to one as 1.97 billion shares changed hands.
The three factors that are affecting the market are energy prices, a possible economic slowdown and the interest rates. Analyst are predicting that the May CPI core rate would be above the Fed's 2% comfort zone - which could lead to a further slide. Any further cause of inflation worries will take the markets south. This week investors will also get the snapshot on the health of consumer spending when retail sales for May are released tomorrow. The Fed Chairman is slated to discuss consumer issues in a conference at the Library of Congress. His speech to the Economic Club of Chicago on Thursday will get the most attention, where he will discuss energy and take previously submitted questions from the audience. Investors continue to worry that the Fed may raise rates too much and end up putting the kibosh on economic expansion. Traditionally, investors don't like higher interest rates because they slow the flow of money through the economy and put the brakes on corporate profit growth, thus making stocks less appealing.
Shares of Lehman Bros. (NYSE: LEH) fell 5.5% to $62.01. The nation's fourth-largest investment bank reported that underwriting and merger activity along with rising capital-markets revenue boosted second-quarter profit 47% from a year earlier. This beat all expectations. However, the numbers showed a cooling in some businesses from the first quarter's blistering pace.
Stock of General Motors Corp. (NYSE: GM) closed up $0.43 or 1.7% at $25.78 after Delphi Corp. (OTC: DPHIQ.PK) announced a broad employee buyout program that reduces the risk of a strike that could cripple the automaker. The program also takes Delphi a step closer to emerging from Chapter 11 bankruptcy. GM said the costs of the program, which are being split 50-50 with Delphi, are already factored into financial forecasts.
Shares of Walt Disney Co. (NYSE: DIS) fell $0.43 or 1.5% at $28.90 after Citigroup downgraded the media and entertainment giant to hold from buy, saying it believes the shares are less attractive at their current level following a strong run. Some disappointment over ticket sales for the movie "Cars" in its opening weekend also weighed on the stock. The movie racked up an estimated $62.8 million in ticket sales over the weekend, putting it in fifth place on the list of the most-lucrative opening weekends for animated films.
Luxembourg-based Arcelor rejected a $31 billion offer from Mittal Steel (NYSE: MT) in favor of its own plan to merge with Russia's Serverstal. However, the company left room for Mittal to improve its offer, saying the company is "free" to recommend a superior proposal. Arcelor has long resisted Mittal's overtures, and stated that the current offer "is inadequate as it continues to undervalue Arcelor."
French insurer Axa SA (NYSE: AXA) is in talks to acquire the Winterthur insurance business of Credit Suisse Group (NYSE: CSR) in what is expected to be an $8 billion deal. Axa last week earned exclusive negotiating rights to buy Winterthur. Under the deal, Axa would purchase the Winterthur's operations, with Credit Suisse likely retaining some parts of the business.
U.S. crude for July delivery lost $1.27 to settle at $70.36 a barrel on the New York Mercantile Exchange.
Stock of General Motors Corp. (NYSE: GM) closed up $0.43 or 1.7% at $25.78 after Delphi Corp. (OTC: DPHIQ.PK) announced a broad employee buyout program that reduces the risk of a strike that could cripple the automaker. The program also takes Delphi a step closer to emerging from Chapter 11 bankruptcy. GM said the costs of the program, which are being split 50-50 with Delphi, are already factored into financial forecasts.
Shares of Walt Disney Co. (NYSE: DIS) fell $0.43 or 1.5% at $28.90 after Citigroup downgraded the media and entertainment giant to hold from buy, saying it believes the shares are less attractive at their current level following a strong run. Some disappointment over ticket sales for the movie "Cars" in its opening weekend also weighed on the stock. The movie racked up an estimated $62.8 million in ticket sales over the weekend, putting it in fifth place on the list of the most-lucrative opening weekends for animated films.
Luxembourg-based Arcelor rejected a $31 billion offer from Mittal Steel (NYSE: MT) in favor of its own plan to merge with Russia's Serverstal. However, the company left room for Mittal to improve its offer, saying the company is "free" to recommend a superior proposal. Arcelor has long resisted Mittal's overtures, and stated that the current offer "is inadequate as it continues to undervalue Arcelor."
Ouch! Wall Street took a beating this week with the Dow closing below 11,000 at 10,891.92, losing 355.95 over last Friday's close. The Nasdaq was down 84.35 on the week, finishing today at 2135.06, and the S&P500 lost 35.92 to end the week at 1252.30. Crude stayed steady during the week, losing just 0.70 to finish at 71.63. Even gold futures lost value this week, a surprising turn in times when people are worried about inflation. Gold lost 28.20 over the week, closing at 612.80, a two-month low.
The story is not a new one; investors are worried about rising interest rates and inflation. The market is going to remain volatile until the next meeting of the Fed, and there may still be additional losses until that time. Many of the Dow components, as well as other equities with very strong fundamentals and profitable balance sheets, are trading at very low prices today. It remains a time for bargain-hunting, not a time for panic selling.
Oil and gas shares also suffered, losing value in the wake of across-the-board losses, although energy continues to be a good investment. Oil stocks and indexes are likely to show good increases later this summer as seasonal demand increases, and foreign oil supplies continue to be on shaky ground. Former Fed chief Alan Greenspan spoke about oil to the Senate this week, indicating that rising oil prices may have a slowing impact on the nation's economy. Greenspan said oil prices aren't likely to decline, and that speculators are betting that oil prices will rise.
Last week we noted Vonage's disastrous IPO (NYSE: VG), in which shares sunk from $17 to $11.98 at the end of last week. Vonage has not recovered, and closed today at $11.88. The drop can be attributed to bad timing and a lack of confidence in the company's success in the fledging VoIP industry, but there is also an investigation going on as to whether short-sellers may have hastened the issue's rapid decline. Either way, we wouldn't bet the farm on this one.
The Dow Jones Industrial Average ended at a four-month low in a week where the market succumbed to heavy losses on concerns over inflation, rising global interest rates and slowing economic growth. The Nasdaq Composite Index fell for a sixth straight session to end at a more than seven-month low. Despite attempting, investors couldn't pull together a recovery and awaited key inflation readings expected next week.
Today, the Dow Industrial average closed down 46.90 or 0.4% to 10,891.92, the broader Standard & Poor's 500 index closed down 5.63 to 1,252.30, and the Nasdaq composite index closed down 10.26 or 0.5% to 2,135.06. For the week, the Dow was down 3.2%, the S&P 500 lost 2.8% and the Nasdaq shed 3.8%.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by a margin of 17 to 14 on volume of 1.59 billion shares. On the Nasdaq, winners topped losers by a margin of 17 to 12 as 1.78 billion shares changed hands.
It appears that the markets are searching for the bottom. The volatility is not allowing investors to see whether the end is in sight. However, they are adjusting to the idea that economic growth is slowing and are trying to work out what sectors will lead in this new environment. Trading volume remains light, which suggests the market hasn't seen the end of the pullback.
Stocks have been on a downward trend since the Federal Reserve raised interest rates at its May 10 meeting, and left the door open for further rate hikes should data show inflationary pressures picking up. The odds that they will raise interest rates at its monetary policy meeting starting June 29 rose sharply when Fed Chief Ben Bernanke said he was concerned about rising inflation. He also said U.S. economic growth was slowing. His comments sparked another round of selling, which accelerated as investors watched as a number of central banks around the world started lifting their interest rates, which sparked fear of a global economic slowdown.
Prices of goods imported into the U.S. rose 1.6% in May as the price of imported petroleum climbed for a third month. Excluding the rise in petroleum prices, import prices rose 0.6%, which is the biggest increase since October 2005. Excluding all fuels, import prices rose 0.7%. However, there was better news on the trade gap. The U.S. trade deficit widened by a narrower than expected 2.5% in April to $63.4 billion, against the expected $64.8 billion. Al this offered a worrying inflation sign, but investors are looking to key reports set to be released next week for more direction on the inflation outlook.
Shares of General Motors (NYSE: GM) closed up $0.52 or 2% to $25.35, after its former parts unit Delphi Corp. (OTC: DPHIQ.PK) said it reached an agreement with the United Auto Workers to offer buyouts to workers and expand its attrition plan to less senior workers. Shares of machinery supplier Caterpillar (NYSE: CAT) closed up $0.63 or almost 1% to $67.52, after U.S. officials gave the company the green light to acquire Progress Rail Services, a provider of railway products and services. Shares of Apple Computer (Nasdaq: AAPL) closed down $1.52 or 2.5% to $59.24, as the company is facing opposition in Europe over the inability of consumers to play music downloaded from iTunes on devices made by companies other than Apple.
Texas Instruments Inc. (NYSE: TXN) lifted its financial targets for the second quarter, with sales helped by increased demand for cell phone chips and its bottom line boosted by a tax benefit and a legal settlement. However, its shares closed down $1.04 or 3.4% to $29.68. This happened after an analyst voiced concerns about slowing down of sales in the second half of the year.
Stock of Mittal Steel (NYSE: MT) were up 0.7% at $30.60, as the steel manufacturer said it wasn't planning to raise its offer for Arcelor as talks between the world's top two steelmakers started. The reiteration that Mittal intends to stick with its current offer came after the Financial Times published an article suggesting the steel giant may raise its existing bid of about 37.74 euros a share to 44 euros a share.
U.S. light crude oil for July delivery gained $1.28 to settle at $71.63 a barrel on the New York Mercantile Exchange. Tensions with Iran were heightened once more following a report that it has accelerated its uranium enrichment program.
Texas Instruments Inc. (NYSE: TXN) lifted its financial targets for the second quarter, with sales helped by increased demand for cell phone chips and its bottom line boosted by a tax benefit and a legal settlement. However, its shares closed down $1.04 or 3.4% to $29.68. This happened after an analyst voiced concerns about slowing down of sales in the second half of the year.
Stock of Mittal Steel (NYSE: MT) were up 0.7% at $30.60, as the steel manufacturer said it wasn't planning to raise its offer for Arcelor as talks between the world's top two steelmakers started. The reiteration that Mittal intends to stick with its current offer came after the Financial Times published an article suggesting the steel giant may raise its existing bid of about 37.74 euros a share to 44 euros a share.
The Dow Jones industrials snapped the losing streak and just kept its nose above water. Investors remained skittish about rising interest rates, since the European Central Bank, South Korea, Turkey, India and South Africa raised rates, prompting concern that more expensive borrowing will slow world growth and hurt corporate profits. This follows remarks by the Federal Reserve Chairman Ben Bernanke and other bank officials that inflation is an increasing source of worry.
Today, the Dow Jones industrial average closed up 7.92 to 10,938.82, the broader Standard & Poor's 500 index closed up 1.41 to 1,257.56, and the Nasdaq composite index closed down 6.64 or 0.3% to 2,145.16. The Dow is off 6% since May 10.
Market breadth was negative. On the New York Stock Exchange, decliners topped advancers 19 to 13 on volume of 2.54 billion shares. On the Nasdaq, losers beat winners also by a margin of 2 to 1 as 2.98 billion shares changed hands.
Stocks got a boost when the White House raised its forecast for economic growth this year to 3.6% from 3.4% forecast in December. The administration also bumped up its outlook for a closely watched inflation gauge and said it expects the Consumer Price Index to rise 3% this year, from an earlier forecast of 2.4%. However, investors worried that rising rates would hurt global economic growth and watched stock markets tumble around the world.
One major reason behind the bounce today was the fact that the S&P 500 managed to hold a key support level, and continued an uptrend line going back to the summer of 2004, the reference point being 1,235. Its bounce up today at that level would have been a negative on the current bull market that has been in place since spring 2003. However, there is real concern that this tightening may lead to slowing of global economic growth. Fed governor Donald Kohn, whose nomination to be vice chairman of the central bank is being considered by the Senate Banking Committee said that rapid economic changes worldwide posed a big challenge to the Fed in its efforts to keep inflation under wraps and employment strong.
On the data front, initial claims for unemployment benefits fell last week to 302,000, well below what economists were expecting. First-time claims fell by 35,000 from the previous week's revised figure of 337,000. Economists were expecting claims to come in at 326,000 for the week ending June 3. Also, inventories at U.S. wholesalers tightened in April and matched the lowest level on record, as sales jumped 1.3% while inventories climbed 0.9%. The rise in sales is the largest increase since September 2005.
Procter & Gamble Co. (NYSE: PG) was the biggest percentage gainer on the Dow, rising 2.8% to $54.74. The consumer-products behemoth backed its fiscal fourth-quarter sales and earnings forecast amid industry concerns about the pace of sales growth.
Shares of Intel Corp. (Nasdaq: INTC) fell 1.6% to $17.11 after Citigroup cut its earnings estimates for the chip giant and its rival Advanced Micro Devices Inc. (NYSE: AMD), citing pricing concerns. The broker also slashed AMD's price target by $9 to $33, but left Intel's price target unchanged at $21. AMD shares closed down 3.5% at $27.03.
General Motors Corp. (NYSE: GM) closed down 0.6% at $24.83. The Wall Street Journal reported that the automaker, Delphi Corp. (OTC: DPHIQ.PK) and their unions have made substantial progress in restructuring Delphi's workforce. The newspaper said that a deal soon could be reached to offer thousands of Delphi workers lump-sum payments of $70,000 to $140,000 to leave their jobs and health-care benefits behind.
McDonald's Corp. (NYSE: MCD) said global system-wide sales rose 6.2% in May, while total worldwide comparable sales were up 4.5%. Same-store sales at its U.S. locations increased 3.4% for the month, driven by longer hours, new products like its Asian salad and premium-chicken sandwich line and the success of its breakfast menu following the launch of a premium-coffee blend. Europe saw same-store sales climb 4.9% for the month, with positive performances in France, Germany and the United Kingdom. The stock closed up 1.1% at $33.69.
Shares in Cisco Systems Inc. (Nasdaq: CSCO) fell 2 cents to $19.89. The company said that its board approved the repurchase of up to $5 billion worth of its common stock. Cisco also said that John Chambers, its current chief executive, will succeed John Morgridge as chairman, effective at the company's annual meeting on Nov. 15.
The news that Abu Musab al-Zarqawi, the head of al-Qaida in Iraq and the man said to be the instigator behind much of the violence in that country, including suicide bombings, kidnappings and beheadings, was killed in a U.S. air strike had little impact on trading. This sent crude futures below $70 a barrel for much of the session.
Procter & Gamble Co. (NYSE: PG) was the biggest percentage gainer on the Dow, rising 2.8% to $54.74. The consumer-products behemoth backed its fiscal fourth-quarter sales and earnings forecast amid industry concerns about the pace of sales growth.
McDonald's Corp. (NYSE: MCD) said global system-wide sales rose 6.2% in May, while total worldwide comparable sales were up 4.5%. Same-store sales at its U.S. locations increased 3.4% for the month, driven by longer hours, new products like its Asian salad and premium-chicken sandwich line and the success of its breakfast menu following the launch of a premium-coffee blend. Europe saw same-store sales climb 4.9% for the month, with positive performances in France, Germany and the United Kingdom. The stock closed up 1.1% at $33.69.
Fed Chief Ben Bernanke's remarks earlier in the week on inflation and slowing economic growth continued to rattle the markets. Uncertainty about interest rates continued to hound investors as the markets closed lower for the fourth straight session. The Dow Jones Industrial Average closed below 11,000 for the first time since March.
Today, the Dow Jones industrial average closed down 71.24 or 0.65% to 10,930.90, the Standard & Poor's 500 index closed down 7.70 or 0.61% to 1,256.15, and the Nasdaq composite index closed down 10.98 or 0.51% to 2,151.80.
Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of 16 to 15 on volume of 1.83 billion shares. On the Nasdaq, losers beat winners by a margin of 15 to 13 as 1.94 billion shares changed hands.
Investors continue to be concerned about higher inflation and a slowing economy all in the same breath. The Feds too don't know the direction to take and need to be data dependent. Equities have been under pressure since the Fed chief made it clear that he was worried about inflation. He also signaled that there were clear signs that the nation's economy has been slowing. Separately, former Fed Chairman Alan Greenspan stated that the U.S. economy has been able to absorb the impact of rising oil prices with little consequence to date because it has become far more flexible over the past three decades, owing to deregulation and globalization. He also warned that "growing protectionism" could undermine flexibility and make the U.S. more vulnerable to swings in the oil market. While he no longer makes Fed policy, his words are still closely watched as policy-makers and investors seek clues about the outlook for inflation and interest rates.
Atlanta Fed President Jack Guynn said that core inflation has exceeded the level he considers to be acceptable, joining the latest chorus of Fed officials to take a hawkish tone on inflation. On the data front, U.S. consumers took on an extra $10.6 billion in debt in April, the most in 10 months. Total outstanding consumer credit in April rose by 5.9% to $2.170 trillion.
Shares of Intel Corp. (Nasdaq: INTC) shares fell to a three-year low of $17.33 before closing down 2.25% at $17.39. The company is reportedly in talks with many private investment firms and rival chipmakers to sell all or part of its struggling communication-chip businesses in a single sale or series of deals that could fetch as much as $1 billion. Some analysts are concerned that exiting this business would leave the chip giant more dependent than ever on the mature PC market, where growth is slowing.
Stock of Target (NYSE: TGT) closed up $1.23 or 2.8% to $48.83, after Lazard Capital upgraded the retailer to "buy" from "hold." The company expects consolidated gross-margin rate to be "slightly greater" this year than its 2005 record of 31.9%.
The pharmaceutical sector made news today with Novartis (NYSE: NVS) agreeing to buy a U.K. maker of anti-infectives for more than $500 million, and European pharmaceutical rival GlaxoSmithKline plc (NYSE: GSK) agreeing to a licensing deal for arthritis drugs. Stock of Pfizer (NYSE: PFE) closed up $0.12 to $23.96, after a news report said it received bids of more than $14 billion for its consumer products division, which includes Listerine, Rolaids, Sudafed and other well known brands. Bidders include British drug maker GlaxoSmithKline plc that closed up $0.48 to $55.97, U.S. drug and consumer product maker Johnson & Johnson (NYSE: JNJ) that closed up $0.42 to $61.36, and Reckitt Benckiser.
U.S. light crude oil for July delivery sank $1.68 to settle at $70.82 a barrel on the New York Mercantile Exchange. Crude-oil futures fell more than 2% after weekly supply data showed higher U.S. stockpiles of crude, gasoline and distillates last week. Iran's cautious welcome to a package of incentives from the U.S and Europe designed to encourage the country to give up its uranium enrichment program, also took some of the strength out of crude prices.
Shares of Intel Corp. (Nasdaq: INTC) shares fell to a three-year low of $17.33 before closing down 2.25% at $17.39. The company is reportedly in talks with many private investment firms and rival chipmakers to sell all or part of its struggling communication-chip businesses in a single sale or series of deals that could fetch as much as $1 billion. Some analysts are concerned that exiting this business would leave the chip giant more dependent than ever on the mature PC market, where growth is slowing.
The pharmaceutical sector made news today with Novartis (NYSE: NVS) agreeing to buy a U.K. maker of anti-infectives for more than $500 million, and European pharmaceutical rival GlaxoSmithKline plc (NYSE: GSK) agreeing to a licensing deal for arthritis drugs. Stock of Pfizer (NYSE: PFE) closed up $0.12 to $23.96, after a news report said it received bids of more than $14 billion for its consumer products division, which includes Listerine, Rolaids, Sudafed and other well known brands. Bidders include British drug maker GlaxoSmithKline plc that closed up $0.48 to $55.97, U.S. drug and consumer product maker Johnson & Johnson (NYSE: JNJ) that closed up $0.42 to $61.36, and Reckitt Benckiser.
Stocks closed lower as inflation jitters and nervousness over interest rates dragged blue chips lower for the third straight session. The Dow Jones industrial average was battered and barely above 11,000. Additionally, Ben Bernanke's remarks on slowing growth spurred a gloomy outlook for corporate profits.
Today, the 30-share Dow index closed down 46.58 to 11,002.14, the Standard & Poor's 500 index closed down 1.44 to 1,263.85, and the Nasdaq composite index closed down 6.84 to 2,162.78. Concerns about inflation, the outlook for rates, and the stewardship of new Fed Chairman Ben Bernanke have all made financial markets nervous. This has reflected in a slide of over 650 points for the Dow.
Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of 21 to 11 on volume of 1.88 billion shares. On the Nasdaq, losers beat winners by a margin of 18 to 11 as 2.11 billion shares changed hands.
Investors are losing confidence in the Fed, since they have not been able to communicate their plans for interest rates. While they have stated that the interest rate hike shall be data dependent, most of the recent economic data has been very non-inflationary. Despite this, Bernanke's comments caught people by surprise. They appear to be more concerned about inflation, and that puts the rate hike back on the table. Fed Governor Susan Bies said that given the recent high readings on inflation and expectations for slower economic growth ahead, the central bank can't say when it will be finished raising rates. Rate futures on the Chicago Board of Trade show an 80% chance of a June rate hike.
Shares of Hewlett-Packard Co (NYSE: HPQ) closed down $0.69 to $30.90, after it revised its second-quarter profit higher and bumped up its earnings outlook for the full fiscal year. HP announced that its upbeat second-quarter earnings turned out even better than expected due to settling an IRS related audit of the company's tax returns for 1996 through 1998. The settlement will add $443 million to the company's second-quarter profit, bringing its earnings to $1.9 billion. HP also said it expects its net profit for all of fiscal 2006 to be between $2.02 and $2.06 a share.
Shares of General Motors Corp. (NYSE: GM) closed down $0.80 or 3% to $25.25, after CEO Rick Wagoner told shareholders that the company would have difficulty in hitting its target to cut costs by $1 billion this year. He stated that while the company had turned a corner, the road to recovery remains long and arduous. High gas prices were carving deeply into its sales of the SUVs and pick-up trucks that have for years been the company's biggest profit-makers. Additionally, the situation surrounding parts maker Delphi could halt North American production if it's not defused.
BAA, the world's leading airport operator, has agreed to be bought by a consortium led by Spain's Grupo Ferrovial in a deal valuing the operator of London's Heathrow and Gatwick airports at 10.3 billion pounds ($19.3 billion). The accepted offer is less than the 955.25 pence offer put on the table by a consortium led by Goldman Sachs. Terms of the deal require BAA to pay a 115 million-pound fee if Goldman or another bidder ends up winning the airports operator. BAA shares closed up 2.2% to 948 pence in London trading, while Ferrovial slipped 4.7% in Madrid.
U.S. light crude oil for July delivery fell 10 cents to settle at $72.50 a barrel on the New York Mercantile Exchange. In their initial response, Iran said that proposals made by world powers to end a standoff over its nuclear program had positive points. Traders now await Iran's full response to the package of incentives.
BAA, the world's leading airport operator, has agreed to be bought by a consortium led by Spain's Grupo Ferrovial in a deal valuing the operator of London's Heathrow and Gatwick airports at 10.3 billion pounds ($19.3 billion). The accepted offer is less than the 955.25 pence offer put on the table by a consortium led by Goldman Sachs. Terms of the deal require BAA to pay a 115 million-pound fee if Goldman or another bidder ends up winning the airports operator. BAA shares closed up 2.2% to 948 pence in London trading, while Ferrovial slipped 4.7% in Madrid.
Shares of General Motors Corp. (NYSE: GM) closed down $0.80 or 3% to $25.25, after CEO Rick Wagoner told shareholders that the company would have difficulty in hitting its target to cut costs by $1 billion this year. He stated that while the company had turned a corner, the road to recovery remains long and arduous. High gas prices were carving deeply into its sales of the SUVs and pick-up trucks that have for years been the company's biggest profit-makers. Additionally, the situation surrounding parts maker Delphi could halt North American production if it's not defused.
Shares of Hewlett-Packard Co (NYSE: HPQ) closed down $0.69 to $30.90, after it revised its second-quarter profit higher and bumped up its earnings outlook for the full fiscal year. HP announced that its upbeat second-quarter earnings turned out even better than expected due to settling an IRS related audit of the company's tax returns for 1996 through 1998. The settlement will add $443 million to the company's second-quarter profit, bringing its earnings to $1.9 billion. HP also said it expects its net profit for all of fiscal 2006 to be between $2.02 and $2.06 a share.
Federal Reserve Chairman Ben Bernanke placed wheels on skids after stating that the growth in the inflation rate could be worse than expected. This made the Dow Jones Industrial Average fall almost 200 points and the Nasdaq closing down more than 2%. Rising oil prices also contributed to the drop which is one of the worst on Wall Street so far this year.
Today, the Dow closed down 199.15 or 1.8% to 11,048.72, which is the third-biggest percentage and point loss for the blue-chip index this year. The broader Standard & Poor's 500 index closed down 22.93 or 1.8% to 1,265.29, and the Nasdaq composite closed down 49.79 or 2.2% to 2,169.62. Both the S&P 500 and Nasdaq posted their second-biggest percentage and point declines for the year. Since the Fed's last meeting on May 10, the Dow has lost nearly 600 points. Despite this, the Dow is still up 3.1% for the year, the S&P 500 is up 1.4%, and the Nasdaq is down 1.6%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by a margin of four to one as 1.62 billion shares changed hands. On the Nasdaq, decliners topped advancers also by a margin of four to one on volume of 1.75 billion shares.
Bernanke's hawkish talk on inflation accelerated the downward movement in stocks. He stated that there is a strong consensus among FOMC members to keep inflation low. The Feds are evidently in a predicament. While there is inflation, the economy is also starting to stall. This tough talk on inflation does not bode well for an end to interest-rate hikes. Investors worry that the Fed might raise interest rates too high and choke off economic growth. For the brave, the full comments of the Fed chairman can be accessed.
In data news, the report on the services sector has been weak. Non-manufacturing sectors of the U.S. economy expanded at a slower pace last month, with the index falling to 60.1% from 63.0% in April. The price index, a gauge of inflation, surged to 77.5% from 70.5% in the previous month. This has reinforced concerns about slowing economic growth.
On the Dow, all shares fell except Disney (NYSE: DIS) that closed up $0.12 to $30.74. The biggest loser was Alcoa (NYSE: AA) that closed down $1.19 or 3.7% to $31.38.
Pharmaceuticals garnered attention as a number of companies are presenting data at the American Society of Clinical Oncology annual meeting. The anti-cancer drug, Sutent, from Pfizer (NYSE: PFE) is reported to shrink tumors and stop them from spreading in the lungs and kidneys of patients. The shares of Pfizer closed down $0.25 to $23.94. Additionally, Pfizer has reportedly won a drawn-out battle in China for patent protection of Viagra.
Bear Stearns has upgraded the chip maker SanDisk Corp. (Nasdaq: SNDK) to outperform from peer perform. The broker has said that near-term oversupply concerns are now largely behind SanDisk. Prudential Equity Group upgraded the discount carrier Jetblue Airways Corp. (Nasdaq: JBLU) to overweight from neutral weight. The broker says the company has addressed most of the short- and longer-term issues it was facing. The stock closed up 5 cents at $10.80.
In corporate news, the Wall Street Journal has reported that the New York Mercantile Exchange (NYMEX) is in serious discussions with TSX Group Inc., owner of the Toronto Stock Exchange, about forming an alliance and possibly acquiring TSX's Natural Gas Exchange.
U.S. light crude oil for July delivery rose 27 cents to settle at $72.60 a barrel on the New York Mercantile Exchange. Oil prices surged after Iran's supreme leader, Ayatollah Ali Khamenei, warned the United States on Sunday that any "misbehavior" directed at Iran would serve to disrupt Gulf energy shipments.
It was a week of big swings and strong emotions on Wall Street, but today it ended just about where it left off last Friday, with the Dow down 30.74 ending the week at 11,247.87. The Nasdaq rose just 9.04 ending today at 2219.41, and the S&P500 rose 8.06, finishing at 1288.22. Crude was relatively inactive, closing up 96 cents over last Friday at 72.33, and gold futures dropped ten dollars, finishing out at 641.00.
There's still a lot of wild speculation and second-guessing as to whether the Fed will raise interest rates when it meets again at the end of this month, and in reality, it's too close to call, but if I were obligated to place a bet, I'd wager that they will take a month off. It's likely the Fed will choose to not raise the interest rate because the economy is already showing signs of slowing down on its own, and another hike may just put it over the edge. May payrolls rose less than expected, and other indicators, including housing, retail sales, and consumer confidence, are also losing steam.
Constant worries over the scenario of a possible extra quarter percent in the interest rate is what's pushing the market on its recent roller coaster, but once the meeting has been held on June 29 and we know for sure, the market should settle down. Take the opportunity now while the rates are swinging to do two things: engage in some short-term day trading or swing trading to take advantage of the fact that nobody knows what's going to happen, and look for oversold equities that have strong fundamentals that are temporarily selling at under their real value. There will be a lot of them this month.
The telecommunications sector is hot both in the US and abroad, but we take note here that Vonage definitely picked a bad time for their IPO. Vonage (NYSE: VG) closed today at just 11.98, down from its initial May 24 offer of $17 a share. In the dotcom business, Google (GOOG) is still holding its own, closing down 3.18 today at 379.44, despite having trouble transferring its wildly successful online business model to the offline world. The company's experiments in offline print media haven't fared well, and we think the company should stick to what it knows best.
Stocks turned mixed as weaker than expected jobs growth in May sparked concern that on one hand eased inflationary pressure yet on the other raised concerns over the nation's economic health. However, it also stirred hopes that the Federal Reserve may stop raising interest rates sooner rather than later.
Today, the Dow Jones industrial average closed down 12.41 or 0.11% to 11,247.87, the broader Standard & Poor's 500 index closed up 2.51 or 0.2% to 1288.22, and the Nasdaq composite closed down 0.45 or 0.02% to 2,219.41.
Market breadth was mixed. On the New York Stock Exchange, advancers beat decliners by a margin of 21 to 11 on volume of 1.21 billion shares. On the Nasdaq market losers held a 15 to 13 advantage over winners as 1.55 billion shares changed hands.
The awaited job report said that employers added only 75,000 new workers to their payrolls in May, compared with the 175,000 that were expected. The report showed that the unemployment rate ticked lower to 4.6% from 4.7%. Average hourly wages also rose less than expected, gaining only 0.1% against the expected 0.3%. This is a tell tale sign that the economy is slowing down and people have fewer dollars in their pocket. Weakening economy is evident through the weaker commodities, weaker housing market, lower demand for raw materials, weaker dollar and higher oil prices that add fuel to fire. New orders for U.S. made factory goods fell 1.8% against the expected decline of about 1.9%. This all provides the Fed with the unambiguous signal needed for a pause. The fed funds futures market is now pricing in a 44% chance that the central bank will pause at its meeting in June.
Revlon Inc. shares (NYSE: REV) plunged 40% to an all-time low after the cosmetics maker controlled by billionaire Ron Perelman said it would miss its revenue growth forecasts for the year. The stock closed at $1.91 a share, down $1.13, or 37%. The company said that its revised revenue outlook reflects less robust growth from Vital Radiance and Almay due to stepped up competitive activity. The company also said that it expects adjusted earnings before interest, taxes, depreciation and amortization to be at or below 2005 levels, "with a significant impact on the second quarter of this year."
Talks between Microsoft (Nasdaq: MSFT) and Adobe (Nasdaq: ADBE) have broken down about a Microsoft plan to use the Adobe-developed electronic document software, called PDF, in Microsoft's Office software package. Shares of Microsoft closed down $0.13 to $22.69, and that of Adobe closed up $0.27 to $28.99. Microsoft now expects an anti-trust lawsuit from Adobe.
Shares of Goldman Sachs (NYSE: GS) rose 54 cents or 0.35% to $154.09 after the bank's board named Lloyd Blankfein to succeed Henry Paulson as both chairman and CEO, ending speculation the post would be split in two. The appointment is contingent on the confirmation by the Senate of current Chairman and CEO Henry Paulson Jr. as U.S. Secretary of the Treasury.
NYSE Group Inc. shares (NYSE: NYX) rose $2.06 or 3.3% to $64.51 after the exchange and Euronext NV agreed to merge in a deal that would create a transatlantic exchange behemoth. NYSE reached an agreement to buy Paris-based Euronext, for about just under $10 billion, putting it ahead in the race to create the first trans-Atlantic stock exchange. However, German rival Deutsche Boerse, said it would continue its own attempts to partner with the pan-European exchange.
There is news that U.K. pharmaceutical giant GlaxoSmithKline (NYSE: GSK) is close to offering around $15 billion for the over-the-counter drugs business of Pfizer. Shares of Pfizer Inc. (NYSE: PFE) rose 29 cents +1.21% to $24.19, while that of Glaxo rose 1 cent to $55.99, after this news. If Glaxo seals the acquisition, it will become the world's top seller of non-prescription drugs.
The July light crude futures contract settled down $1.99 to $72.33 a barrel on the New York Mercantile Exchange. Futures got higher as an Iranian official made clear it would continue enriching uranium even as a delegation of European countries prepares to present a package of incentives to encourage Iran to give up its enrichment plan. Additionally, disruptions also happened at two Texas refineries.
There is news that U.K. pharmaceutical giant GlaxoSmithKline (NYSE: GSK) is close to offering around $15 billion for the over-the-counter drugs business of Pfizer. Shares of Pfizer Inc. (NYSE: PFE) rose 29 cents +1.21% to $24.19, while that of Glaxo rose 1 cent to $55.99, after this news. If Glaxo seals the acquisition, it will become the world's top seller of non-prescription drugs.
NYSE Group Inc. shares (NYSE: NYX) rose $2.06 or 3.3% to $64.51 after the exchange and Euronext NV agreed to merge in a deal that would create a transatlantic exchange behemoth. NYSE reached an agreement to buy Paris-based Euronext, for about just under $10 billion, putting it ahead in the race to create the first trans-Atlantic stock exchange. However, German rival Deutsche Boerse, said it would continue its own attempts to partner with the pan-European exchange.
Revlon Inc. shares (NYSE: REV) plunged 40% to an all-time low after the cosmetics maker controlled by billionaire Ron Perelman said it would miss its revenue growth forecasts for the year. The stock closed at $1.91 a share, down $1.13, or 37%. The company said that its revised revenue outlook reflects less robust growth from Vital Radiance and Almay due to stepped up competitive activity. The company also said that it expects adjusted earnings before interest, taxes, depreciation and amortization to be at or below 2005 levels, "with a significant impact on the second quarter of this year."
The first trading day of June started with strong gains led by technology stocks as the Nasdaq turned positive for 2006. Retailers also advanced after sales figures showed robust consumer spending in May. Investors feel that a series of weak economic reports could lead the Federal Reserve to hold off from another interest rate hike when its policy-makers meet later this month.
Today, the Dow Jones industrial average closed up 91.97 or 0.8% to 11,260.28, the broader Standard & Poor's 500 index closed up about 1.2 percent, and the Nasdaq composite index closed up 40.98 or 1.9% to 2,219.86.
Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by a margin of 25 to 7 on volume of 1.7 billion shares. On the Nasdaq, winners also beat losers by a margin of 22 to 7 as 2.1 billion shares changed hands.
Traditionally, the beginning of June has seen rallies. While the markets were oversold, the strong retail sales were a decent impetus for the market. This goes to show that the consumer is still pretty active. However, the investors are unsure and continue to guess on a daily basis what the latest data mean in terms of rate hikes. The rising concern over inflation expressed by Federal Reserve officials in the summary of their May meeting suggests a June rate increase is very likely.
In data news, productivity in the U.S. non-farm business sector rose at an annual rate of 3.7% in the first quarter. However, unit labor costs were revised lower to a 1.6% annualized gain from 2.5% reported earlier. This shows a much more benign inflation climate. The ISM index fell to 54.4% in May from 57.3% in April, a decline that was slightly larger than expected. The price index rose to 77% from 71.5%. Three reports pointed to a slowing housing market. Additionally, U.S. home prices rose at the slowest pace in two years. Lastly, initial jobless claims rose to a seven-month high in the latest week. This could alleviate some inflation fears. All economic reports have become important to investors as the Fed has yet to issue a clear signal about its next interest rate move.
Shares of General Motors Corp. (NYSE: GM) closed down $0.03 to $26.90 as vehicle sales in May fell a whopping 16%. U.S. vehicle sales in May tumbled 12.2%, to 345,157 units. Car sales dropped 16%, while truck sales dropped 9.7%. The stock was last off 5 cents at $26.88. Shares of Ford (Nasdaq: F) closed up $0.07 to $7.23, after reporting that its vehicle sales fell just 1.9% while Daimler Chrysler (NYSE: DCX) closed down $0.03 to $52.58 on posting an 8.4% drop.
Shares of Alcoa (NYSE: AA) closed up $0.85 or 2.7% to $32.57. The maker of aluminum products said it reached a tentative agreement with the United Steelworkers on a four-year labor contract covering approximately 9,000 workers at 15 locations.
Stock of H.J. Heinz Co. (NYSE: HNZ) closed up 3 cents at $42.38 after the company said it will cut 8% of its work force and reported a drop in fourth-quarter net income over year-ago levels. Still, its results came in above Wall Street estimates.
Retailers, have posted better-than-expected sales in May as consumers defied expectations to keep up a shopping spree that began in April. Some retailers that have performed will in May include Target Corp. (NYSE: TGT) with same-store sales rising 5.7%, J.C. Penney (NYSE: JCP), BJ's Wholesale Club (NYSE: BJ), Limited Brands (NYSE: LTD) and Federated Department Stores (NYSE: FD) where sales topped analyst expectations. However, Wal-Mart Stores Inc (NYSE: WMT) closed down $0.06 to $48.39, on reporting a 2.3% gain against the expected 2.9%.
Crude-oil futures closed lower as OPEC began its meeting in Caracas. Reports said the cartel will leave its production quota unchanged. The benchmark July contract closed 95 cents lower at $71.90 a barrel. Additionally, nervousness about Iran subsided after reports that the U.S. and other nations are close to a deal on economic incentives for Iran, in exchange for a halt to its nuclear activities.
Retailers, have posted better-than-expected sales in May as consumers defied expectations to keep up a shopping spree that began in April. Some retailers that have performed will in May include Target Corp. (NYSE: TGT) with same-store sales rising 5.7%, J.C. Penney (NYSE: JCP), BJ's Wholesale Club (NYSE: BJ), Limited Brands (NYSE: LTD) and Federated Department Stores (NYSE: FD) where sales topped analyst expectations. However, Wal-Mart Stores Inc (NYSE: WMT) closed down $0.06 to $48.39, on reporting a 2.3% gain against the expected 2.9%.
Shares of General Motors Corp. (NYSE: GM) closed down $0.03 to $26.90as vehicle sales in May fell a whopping 16%. U.S. vehicle sales in May tumbled 12.2%, to 345,157 units. Car sales dropped 16%, while truck sales dropped 9.7%. The stock was last off 5 cents at $26.88. Shares of Ford (Nasdaq: F) closed up $0.07 to $7.23, after reporting that its vehicle sales fell just 1.9% while Daimler Chrysler (NYSE: DCX) closed down $0.03 to $52.58 on posting an 8.4% drop.
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Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
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