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« June 2006 |
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| August 2006 »
Stocks closed lower to cap a mixed month for the markets as a largely solid second-quarter earnings season and rising hopes of an end to interest rate increases were offset by concerns over slowing economic growth and the conflict in the Middle East. Investors are stepping back amid concerns about rising oil prices and how much longer the Federal Reserve will keep raising interest rates.
Today, the Dow Jones industrial average closed down 34.02 or 0.3% to 11,185.68, the broader Standard & Poor's 500 index closed down 1.89 or 0.1% to 1,276.66, and the tech heavy Nasdaq composite closed down 2.68 or 0.1% to 2,091.46. For July, the DOW rose about 0.3%, the S&P gained around 0.5%, and the Nasdaq fell 3.7%. This is the fourth straight month of loss for the Nasdaq.
Market breadth was negative. On the New York Stock Exchange, losers beat winners nearly 17 to 14 on volume of 900 million shares. On the Nasdaq, decliners topped advancers by 15 to 13 on volume of 970 million shares.
Rising oil prices and comments by two Fed officials that suggested an end to interest-rate hikes may not happen as soon as had been hoped led to the slide today. I nvestors now await the next week's Federal Reserve policy-setting meeting to wait and see what the Fed does. St. Louis Fed president William Poole, said there is still a 50-50 chance of a rate hike at the central bank's policy meeting. Janet Yellen, president of the San Francisco Federal Reserve Bank, forecast that the economy will grow at a slower pace in coming quarters, which should ease inflation pressures. She also cautioned that it was important that the central bank be careful not to raise borrowing costs so much so that it hurts the economy. Fed funds futures on the Chicago Board of Trade are now pricing in a 32% probability of a hike.
On the data front, factory activity in the Chicago region accelerated in July, with the Chicago purchasing managers index rising to 57.9% from 56.5% in June. Economists had been expecting the index to fall to 55.8%. This stronger than expected read added to concerns that the Fed's two-year old rate hiking campaign is not yet done.
Shares of Apple Computer Inc. (Nasdaq: AAPL) closed up $2.37 or 3.5% to $67.96, after it was upgraded to "buy" from "neutral" at Bank of America. It also raised its price target to $79 from $68, citing strong demand for MacBooks and iPod digital music players. The broker stated that it sees upside potential to earnings from iPods of 8 cents to 12 cents a share.
J.P. Morgan Chase upgraded oil giant Exxon Mobil Corp. (NYSE: XOM) to overweight from neutral, citing an improved outlook for production growth and the stock's defensive characteristics in the face of downside risks surrounding crude prices. This lead to the shares of Exxon Mobil closing up $0.74 or 1% to $67.74. At the same time, J.P. Morgan downgraded Chevron Corp. (NYSE: CVX) to neutral from overweight due to concerns over relative valuation, "disappointing" earnings over the last few quarters and continued production decline. Shares of Chevron dipped 0.1% to $65.78.
Shares of Scottish RE (NYSE: SCT) closed down $12.01 or 75% to $3.99, after the re-insurer said its CEO quit and it expects a loss in the second quarter. It also forecast sluggish results for the second half. Additionally, the company also said it was suspending its dividend and has hired Goldman Sachs and Bear Stearns to help it look at "strategic alternatives."
Stock of Bristol-Myers Squibb (NYSE: BMY) closed down $0.50 or 2% to $23.97, after being dealt a regulatory setback in its efforts to block a generic version of its biggest drug. A group of state attorneys general rejected a deal that the drug maker had made with generic drug maker Apotex that would have seen the competitor holding off on selling a cheaper version of Bristol's anti-clotting drug Plavix in exchange for a payment.
Shares of SanDisk (Nasdaq: SNDK) closed down $0.48 to $46.66, after announcing that it is buying Israeli competitor M-Systems (Nasdaq: FLSH) Flash Disk Pioneers for around $1.35 billion in stock. Shares of M-Systems closed up $4.21 or 13% to $36.00. This is the bid by SanDisk to accelerate its push in the market for NAND flash, a fast-growing memory-chip technology used in portable electronics. The deal values the company at $36 a share and is a 26% premium over the average close for M-Systems shares over the last 30 days. The CFO Judy Bruner said the deal will also boost SanDisk's earnings by the end of next year.
U.S. light crude oil for September delivery gained $1.21 to $74.45 a barrel on the New York Mercantile Exchange after Israel's prime minister said that a cease-fire was not going to happen in the next few days between the nation and Hezbollah militants in Lebanon. Additionally, a leak on Russia's largest oil pipeline to Europe and ongoing concerns about Iran and Syria's nuclear capability also had an adverse effect. The natural-gas contract closed up $1.03 at $8.211 BTU. On the month, crude dipped 0.5% but natural gas futures chalked up a 35% gain.
Shares of Apple Computer Inc. (Nasdaq: AAPL) closed up $2.37 or 3.5% to $67.96, after it was upgraded to "buy" from "neutral" at Bank of America. It also raised its price target to $79 from $68, citing strong demand for MacBooks and iPod digital music players. The broker stated that it sees upside potential to earnings from iPods of 8 cents to 12 cents a share.
Stock of Bristol-Myers Squibb (NYSE: BMY) closed down $0.50 or 2% to $23.97, after being dealt a regulatory setback in its efforts to block a generic version of its biggest drug. A group of state attorneys general rejected a deal that the drug maker had made with generic drug maker Apotex that would have seen the competitor holding off on selling a cheaper version of Bristol's anti-clotting drug Plavix in exchange for a payment.
Shares of SanDisk (Nasdaq: SNDK) closed down $0.48 to $46.66, after announcing that it is buying Israeli competitor M-Systems (Nasdaq: FLSH) Flash Disk Pioneers for around $1.35 billion in stock. Shares of M-Systems closed up $4.21 or 13% to $36.00. This is the bid by SanDisk to accelerate its push in the market for NAND flash, a fast-growing memory-chip technology used in portable electronics. The deal values the company at $36 a share and is a 26% premium over the average close for M-Systems shares over the last 30 days. The CFO Judy Bruner said the deal will also boost SanDisk's earnings by the end of next year.
The Dow is back up to happier levels, gaining a whopping 351.32 this week to close the day at 11219.70. Wall Street breathed a sigh of relief after last week's sub-11000 levels soured investors' moods. The Nasdaq also climbed 73.75 this week, ending at 2094.14, despite mixed results on the tech front; and the S&P500 closed at 1278.55, up 38.26 for the week.
Gold was also up, closing the week at 647.80, up 27.60 for the week; but crude lost a little ground, closing at 73.24, down 1.19 on the week.
Texas Instruments (NYSE: TXN) reported that earnings for the quarter increased nearly fourfold over the year-ago quarter, with higher sales attributed to demand for the company's cell phone chips. Sun Microsystems (Nasdaq: SUNW) didn't have such good news, posting a quarter's loss of $301 million compared to a $50 million profit in the year-ago quarter, despite rising sales. Also, Internet giant Amazon (Nasdaq: AMZN) was hurt during the quarter with profits dropping by more than half. Like Sun, sales are up at the giant dotcom retailer, but profitability sunk due to increased operating expenses and its shipping promotions. Like many of the smaller dotcoms that fell during the boom, Amazon is being hurt by a simple and inescapable fact of online retailing: It costs money to put things in boxes and send them to customers.
Nobody expects American auto companies to turn a profit any more, so the Street was surprised when General Motors (NYSE: GM) reported a non-GAAP profit (excluding restructuring costs) for the quarter for the first time since 2004. The company didn't divulge any details in it quarterly report on the possibility of an alliance with Nissan and Renault, although speculation has investors giddy with anticipation.
It should come as no surprise that Exxon (NYSE: XOM) pulled in a profit of over 10 billion on revenue of $99 billion during the quarter. The oil giant had its best ever second quarter, well exceeding expectations and shooting share prices to new highs. Chevron (NYSE: CVX), on the other hand, missed expectations, despite seeing an 18 percent rise in profit. We wish all of our stocks would have such disappointing results.
Stocks ended sharply higher, with the S&P 500 Index posting its best weekly point gain in over three years, on hopes the Federal Reserve will stop raising interest rates after economic growth slowed more than expected in the second quarter. This strong finish comes after a week of volatile trading due to a mixed set of quarterly reports.
Today, the Dow industrial average closed up 119.27 or 1.07% to 11,219.70, the broader Standard & Poor's 500 index closed up 15.35 or 1.22% to 1,278.55, and the tech-heavy Nasdaq composite index closed up 39.67 or 1.93% to 2,094.14. For the week, the Dow gained 3.2%, the S&P rose 3.1% and the Nasdaq soared 3.7%.
Market breadth was positive. On the New York Stock Exchange, winners topped losers four to one on volume of 1.3 billion shares. On the Nasdaq, advancers topped decliners two to one on volume of 1.4 billion shares.
Before the opening bell, a report on the GDP confirmed a slower economy and raised the possibility of a pause from the Fed. In the second quarter, the GDP grew at a 2.5% annual rate, down from the 5.6% in the first quarter. Economist had expected a growth of 3%. This increases the chances that the Federal Reserve will pause in their long string of interest-rate increases when they meet next in August. At the same time, core inflation rose 2.9%, which could pressure the Federal Reserve to keep lifting rates. The employment cost index rose 0.9%, outstripping analysts' expectations.
Shares of Wal-Mart (NYSE: WMT) rose $0.90 or 2.1% to $44.46, as it announced it is pulling out of Germany and taking a $1 billion charge related to the move. Investors welcomed its decision to pull out of Germany, with the sale of all its 85 hypermarkets to Metro AG. Wal-Mart lost as much as $250 million a year from the German operations. It acknowledged that it misunderstood German regulations, shopping habits and tastes, and that the unit remained unprofitable.
Shares of Chevron (NYSE: CVX) closed down $1.60 or 2.5% to $66.13, after the oil company reported that quarterly profit rose 18%, driven by a surge in crude oil prices. However, results fell short of expectations. Net income in the second quarter increased to $4.35 billion, from $3.68 billion in the year earlier quarter. The EPS was $2.10, against the expected $2.17; while revenue jumped 10.7% to $53.53 billion.
Shares of auto parts supplier Lear (NYSE: LEA) closed down $1.29 or 5% to $22.78, despite reporting a narrower quarterly net loss. The net loss for the second quarter narrowed to $6.4 million, from $44.4 million. For the second half of 2006, it expects North American production to be down 7%.
Shares of McAfee (NYSE: MFE) closed down $1.88 or 8% to $22.14, after the antivirus software maker reported a lower quarterly net profit and said it would likely restate past financial results. The company was also downgraded by WR Hambrecht to "hold" from "buy." Likewise, shares of Coventry Health Care (NYSE: CVH) closed down $2.10 to $51.81, on poor second quarter profit. Shares of Office Depot (NYSE: ODP) closed down $2.54 or 8% to $34.61, despite 18% rise in second-quarter earnings. However, sales at its stores opened more than a year softened.
Light, sweet crude oil for September delivery fell $1.30 to $73.24 a barrel on the New York Mercantile Exchange. Traders took some profits ahead of the weekend as the weaker than expected GDP report prompted them to review their outlook for U.S. demand for energy products.
Shares of auto parts supplier Lear (NYSE: LEA) closed down $1.29 or 5% to $22.78, despite reporting a narrower quarterly net loss. The net loss for the second quarter narrowed to $6.4 million, from $44.4 million. For the second half of 2006, it expects North American production to be down 7%.
Shares of Chevron (NYSE: CVX) closed down $1.60 or 2.5% to $66.13, after the oil company reported that quarterly profit rose 18%, driven by a surge in crude oil prices. However, results fell short of expectations. Net income in the second quarter increased to $4.35 billion, from $3.68 billion in the year earlier quarter. The EPS was $2.10, against the expected $2.17; while revenue jumped 10.7% to $53.53 billion.
Shares of Wal-Mart (NYSE: WMT) rose $0.90 or 2.1% to $44.46, as it announced it is pulling out of Germany and taking a $1 billion charge related to the move. Investors welcomed its decision to pull out of Germany, with the sale of all its 85 hypermarkets to Metro AG. Wal-Mart lost as much as $250 million a year from the German operations. It acknowledged that it misunderstood German regulations, shopping habits and tastes, and that the unit remained unprofitable.
Stocks closed lower in a market hemmed in by concerns over the economy and tensions in the Middle East. However, Exxon Mobil Corp.'s strong earnings results brightened a day in which technology shares tumbled. Investors took a step back near the end of an otherwise strong week on Wall Street.
Today, the Dow Jones industrial average closed down 2.08 to 11,100.43, the broader Standard & Poor's 500 index closed down 5.20 or 0.4% to 1,263.20, and the tech-heavy Nasdaq composite index closed down 15.99 or 0.8% to 2,054.47.
Market breadth was negative. On the New York Stock Exchange, losers topped winners 9 to 7 on volume of nearly 1.82 billion shares. On the Nasdaq, decliners topped advancers 18 to 11 on volume of almost 2.16 billion shares.
While stocks attempt to crawl out of the hole, the many economic and geopolitical worries make it difficult for investors to get excited about financial markets right now. The slowing economic growth at a time when the Federal Reserve has yet to clearly signal that its cycle of interest-rate hikes is at an end - has been frustrating. Investors fear that further rate increase could slow the economy to a point where it would fall into recession. Additionally, the low trading volume and increased volatility has been a cause for concern. In general, blue-chip, defensive and multinational stocks are doing better than the rest of the market right now.
Amongst economic news, sales of new home sales fell by 3% - more than expected in June, reflecting the ongoing slowdown in the housing market. Additionally, the inventory of unsold homes on the market rose by 0.7% to a record 566,000. Orders of durable goods jumped 3.1% in June, against the expected 2%. Excluding transportation, orders rose a larger than expected 1%. There was a surprise drop in weekly jobless claims as they fell to their lowest level in more than a month in the week ended July 22. Therefore, the signals on the data front are very mixed.
Shares of Microsoft Corp. (Nasdaq: MSFT) closed down $0.50 or 2.1% to $23.87. CEO Steve Ballmer told shareholders at its annual meeting that the company needs to embrace an industry-wide shift toward software delivered over the Internet as a service, while continuing to drive advances in technology. The decline gave investors an incentive to back out of other tech stocks as well.
Stock of Exxon Mobil (NYSE: XOM) closed down $0.13 to $66.47, despite reporting quarterly earnings that surged 36% to more than $10 billion. The rise is fueled by historically high oil prices and strong refining margins. Exxon earned $10.36 billion, up from a year-ago profit of $7.64 billion. Revenue for the quarter came in at $99.03 billion, up from $88.57 billion a year earlier.
Stock of Bristol-Myers Squibb (NYSE: BMY) closed down $1.95 or 7.5% to $24.04, as the company stated that it is the target of a criminal antitrust probe by the federal government regarding a patent settlement with a generic competitor. The drug maker also reported quarterly earnings that fell from a year ago yet edged estimates.
Comcast Corp. (Nasdaq: CMCSK) saw its shares rally more than 4% as the cable-TV giant posted 7 % growth in second-quarter profit and as revenue increased on greater demand for broadband, phone and digital video services.
Shares of Aetna Inc. (NYSE: AET) closed down $6.71 or 17% to $33.25 - an 18-month low. The health insurer's second-quarter profit slipped, hurt by increased competition and higher than expected claims, and the company cut its membership forecast for the year
U.S. light crude oil for September delivery gained 60 cents to settle at $74.54 a barrel on the New York Mercantile Exchange. Concerns over production outages in Nigeria and a sizable decline in U.S. gasoline supplies have taken some of the spotlight off the Israel-Hezbollah conflict.
Disappointing results from Amazon.com Inc. (Nasdaq: AMZN) and a weak profit outlook from Boeing Co. (NYSE: BA) prompted the stocks to end lower. However, a Federal Reserve survey on the economy kept investor hopes alive that the central bank may stop raising interest rates soon.
Today, the Dow Jones industrial average closed down 1.2 or 0.01% to 11,106.20, the broader Standard & Poor's 500 index closed down 0.48 or 0.04% to 1,268.43, and the Nasdaq composite index closed down 3.44 or 0.17% to 2,070.46.
Market breadth turned positive after being negative through the morning. On the New York Stock Exchange, winners beat losers by a margin of 9 to 7 on volume of 1.4 billion shares. On the Nasdaq, advancers edged out decliners 16 to 13 as 1.7 billion shares changed hands.
This daily volatility is a trend that is likely to continue over the next couple of months until the Federal Reserve offers a clearer outlook on the economy and interest rates. The Federal Reserve, in its Beige Book read on the economy, said it saw signs of a slowdown in some regional markets but that the overall economy grew in the June through mid-July period. It is evident that upward pressure from energy and other inputs is persisting, despite reports that the pace of growth in the U.S. economy has slowed. Monetary policy makers are worried that the stubbornly high energy prices will spill over into a more general increase in prices unless interest rates are raised further.
Shares in Black & Decker (NYSE: BDK) fell $5.22 or 6.8% at $71.15 after the power tool manufacturer missed Wall Street profit targets for the second quarter and forecast lower earnings for the third amid rising commodity costs and disappointing orders. It reported that the net profit rose 0.9% to $152.2 million, while sales slipped 0.1% to almost $1.7 billion.
Stock of General Motors (NYSE: GM) closed up $1.39 or 5.5% to $32.05, as it reported a large operating profit and made money from its core auto operations for the first time since 2004. The company reported a net loss of $3.2 billion, due to charges it took to trim staff using buyouts and early retirement bonuses, as well as loss related to the pending sale of 51% of GMAC. It also reported income excluding special items of $1.2 billion, compared to the loss of $231 million in the year earlier period. Its global automotive operations earned $362 million on an adjusted basis, excluding special items, compared to a $899 million loss on that basis a year earlier.
Shares of Amazon (Nasdaq: AMZN) closed down 21.8% to a low of $26.26 after the online retail pioneer posted sharply lower second quarter profit. The company has been hurt by the cost of employee stock options and higher operating expenses. Additionally, broker Piper Jaffray has downgraded Amazon to under perform from market perform, citing concerns about gross-profit margins.
Boeing (NYSE: BA) tumbled $3.77 or 4.6% to $79.90, after reporting a quarterly loss versus a year ago that was nonetheless in line with estimates. The aerospace giant also lowered its 2006 EPS forecast, although it increased its outlook for 2007. It reported a second quarter loss of $160 million, compared with a year-ago profit of $566 million.
Shares of Corning (NYSE: GLW) closed down $3.10 or 12% to $18.55, after reporting quarterly earnings that rose and beat estimates. While revenue rose from a year ago, it missed analysts' estimates. Additionally, the company has also forecast third quarter earnings and sales that are shy of current expectations.
Shares of GlaxoSmithKline (NYSE: GSK) slipped 1.5% to $56.04. The company reported a 14% profit improvement to $2.45 billion, with revenue up 11% to 5.81 billion pounds. The rise was helped by sales of diabetes and asthma drugs. Sales of its Avandia family for diabetes rose 32% to 477 million pounds, and Seretide/Advair asthma drug sales rose 12% to 822 million pounds. Sales of drugs to treat HIV edged up 1% to 393 million pounds. Sales of vaccines, rose 17% to 387 million pounds.
Stock of Hewlett Packard (NYSE: HPQ) closed up $0.43 or 2% to $31.76, after it announced that it would buy Mercury Interactive, a software and business services firm in a bid to expand the computer maker's business software operations. The deal is for about $4.5 billion in stock, or $52 per share. This purchase also puts HP in closer competition with other major systems management software providers.
U.S. light crude oil for September delivery rose 19 cents to settle at $73.94 a barrel on the New York Mercantile Exchange after the government's weekly oil inventory report showed a bigger than expected decline in U.S. gasoline inventories.
Stock of Hewlett Packard (NYSE: HPQ) closed up $0.43 or 2% to $31.76, after it announced that it would buy Mercury Interactive, a software and business services firm in a bid to expand the computer maker's business software operations. The deal is for about $4.5 billion in stock, or $52 per share. This purchase also puts HP in closer competition with other major systems management software providers.
Boeing (NYSE: BA) tumbled $3.77 or 4.6% to $79.90, after reporting a quarterly loss versus a year ago that was nonetheless in line with estimates. The aerospace giant also lowered its 2006 EPS forecast, although it increased its outlook for 2007. It reported a second quarter loss of $160 million, compared with a year-ago profit of $566 million.
Shares of Amazon (Nasdaq: AMZN) closed down 21.8% to a low of $26.26 after the online retail pioneer posted sharply lower second quarter profit. The company has been hurt by the cost of employee stock options and higher operating expenses. Additionally, broker Piper Jaffray has downgraded Amazon to under perform from market perform, citing concerns about gross-profit margins.
Stock of General Motors (NYSE: GM) closed up $1.39 or 5.5% to $32.05, as it reported a large operating profit and made money from its core auto operations for the first time since 2004. The company reported a net loss of $3.2 billion, due to charges it took to trim staff using buyouts and early retirement bonuses, as well as loss related to the pending sale of 51% of GMAC. It also reported income excluding special items of $1.2 billion, compared to the loss of $231 million in the year earlier period. Its global automotive operations earned $362 million on an adjusted basis, excluding special items, compared to a $899 million loss on that basis a year earlier.
Shares in Black & Decker (NYSE: BDK) fell $5.22 or 6.8% at $71.15 after the power tool manufacturer missed Wall Street profit targets for the second quarter and forecast lower earnings for the third amid rising commodity costs and disappointing orders. It reported that the net profit rose 0.9% to $152.2 million, while sales slipped 0.1% to almost $1.7 billion.
Stocks closed higher on the back of better than expected consumer confidence data and lower oil prices. However, investors voiced fresh worries about the strength of corporate profits. Stocks staged a comeback at the end of a volatile session in which investors struggled with uncertainties.
Today, the Dow Jones industrial average closed up 52.66 or 0.5% to 11,103.71, the broader Standard & Poor's 500 index closed up 7.97 or 0.6% to 1,268.88, and the tech-fueled Nasdaq composite index closed up 12.06 or 0.6% to 2,073.90.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by two to one as 1.74 billion shares changed hands. On the Nasdaq, advancers beat decliners 18 to 11 on volume of 1.96 billion shares.
It is apparent that investors feel that the market is undervalued and is not headed toward a hard landing for the economy. Also, the Feds will not make a mistake of raising interest rates too high. However, corporate profits remain a concern. While investors are trying to keep their toes in the water, we are really at this crossroads on a technical level and that's been stalling the markets. The market is likely to continue see-sawing in the short term, amid the typically mild summer trading volume.
A strong read on consumer confidence led the data news. U.S. consumer confidence strengthened a bit with the index rising to 106.5 in July from a revised 105.4 in June. This was an unexpected gain since economists were expecting it to slip to 103.9. Sales of existing U.S. homes fell by a smaller-than-expected 1.3% in June, and the inventory of unsold homes rose to a record 3.725 million. However, the slowing of existing home sales was not as much as economists had expecting.
Stock of AT&T (NYSE: T) closed up $1.17 or 4.2% to $28.95, after reporting a bigger-than-forecast rise in quarterly profit, thanks in part to its Cingular Wireless joint venture. The net income climbed 80% in the second quarter and the profit was driven by wireless gains, cost reductions and the acquisition of old Ma Bell, and AT&T Corp.
Shares of McDonald's (NYSE: MCD) fell 8 cents to $34.76. The company reported a nearly 60% increase in quarterly profit, due to across the board growth in the U.S. and the best European results in more than a decade. The earnings climbed to $834.1 million from $530.4 million last year. Revenue jumped 9% to $5.6 billion, and global same store sales rose 5.5%.
Chemical maker DuPont (NYSE: DD) closed up $0.10 to $40.67, after reporting quarterly earnings and revenue that were short of estimates, due to higher energy and ingredient costs. In addition to rising raw material costs, it also faced a weaker market for its agricultural products. However, the company affirmed its full-year outlook and said it expects a significantly better second half.
Stock of Altria Group Inc. (NYSE: MO) rose 56 cents to $80.05, on reporting a higher second-quarter profit, helped by an increase in domestic tobacco market share and strength in its food business. It also raised its annual profit projection. The company is the parent of cigarette maker Philip Morris and majority shareholder of Kraft Foods Inc (NYSE: KFT). Revenue rose 4% to $25.77 billion, the earning to $2.71 billion, and the EPS came to $1.41 against the expected $1.37.
Conglomerate 3M Co. (NYSE: MMM) closed down $3.58 or 5% to $68.11, after posting quarterly earnings that rose from the prior year, but missed forecasts. The manufacturer has affirmed its yearly outlook but expressed concern about margins in some of its divisions.
Stock of United Parcel Service Inc. (NYSE: UPS) tumbled down $8.20 or 10.3% to $71.80, after reporting quarterly earnings that rose from a year earlier, but were short of analysts' forecasts. The company also issued a current quarter forecast that was shy of estimates.
U.S. light crude oil for September delivery fell $1.30 to settle at $73.75 a barrel on the New York Mercantile Exchange on hopes for progress in the conflict between Israel and Hezbollah militants in Lebanon. Traders are also focusing on a potential build in inventories and the slowing down of the economy which will lead to less consumption.
Stock of AT&T (NYSE: T) closed up $1.17 or 4.2% to $28.95, after reporting a bigger-than-forecast rise in quarterly profit, thanks in part to its Cingular Wireless joint venture. The net income climbed 80% in the second quarter and the profit was driven by wireless gains, cost reductions and the acquisition of old Ma Bell, and AT&T Corp.
Stock of United Parcel Service Inc. (NYSE: UPS) tumbled down $8.20 or 10.3% to $71.80, after reporting quarterly earnings that rose from a year earlier, but were short of analysts' forecasts. The company also issued a current quarter forecast that was shy of estimates.
Stock of Altria Group Inc. (NYSE: MO) rose 56 cents to $80.05, on reporting a higher second-quarter profit, helped by an increase in domestic tobacco market share and strength in its food business. It also raised its annual profit projection. The company is the parent of cigarette maker Philip Morris and majority shareholder of Kraft Foods Inc (NYSE: KFT). Revenue rose 4% to $25.77 billion, the earning to $2.71 billion, and the EPS came to $1.41 against the expected $1.37.
Shares of McDonald's (NYSE: MCD) fell 8 cents to $34.76. The company reported a nearly 60% increase in quarterly profit, due to across the board growth in the U.S. and the best European results in more than a decade. The earnings climbed to $834.1 million from $530.4 million last year. Revenue jumped 9% to $5.6 billion, and global same store sales rose 5.5%.
Stocks ended higher with the Dow Jones Industrial Average posting a triple-digit gain and the Nasdaq Composite up over 2%, after a diplomatic push in the Middle East, a flurry of merger-and- acquisition activity and strong results from Merck (NYSE: MRK) and Schering-Plough (NYSE: SGP) boosted sentiment. Investors eyed the big deals, upbeat earnings and decided to scoop up recently battered shares.
Today, the Dow industrials average closed up 182.67 or 1.68% to 11,051.05, the broader Standard & Poor's 500 index closed up 20.62 or 1.66% to 1,260.91, and the Nasdaq composite index closed up 41.45 or 2.05% to 2,061.84.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 5 to 1 on volume of almost 1.29 billion shares. On the Nasdaq, advancers beat decliners nearly 3 to 1 on volume of 1.63 billion shares.
The market sentiment received a boost as U.S. Secretary of State Condoleezza Rice arrived in the Middle East. Her diplomatic offensive raised hopes that a cease-fire between Israel and the Lebanon could be brokered. The brokering for peace, the announcement of mergers and better quarterly results will continue to be key for the market to recover. Inherently, the market continues to be volatile and shall remain so for some time. Since there is paucity of investor confidence, it doesn't take much to trigger a big move one way or the other. In addition to good results, there are also technical factors that support gains, and that could help bring in more buyers over the short term.
American Express (NYSE: AXP earnings that declined, but topped expectations. It stated that its second-quarter net income fell 7% from a year earlier, but it expanded its customer base and increased revenue. The net income dropped to $945 million, from $1 billion in the year-ago period. Income from continuing operations rose 13% to $972 million, from $860 million and revenue climbed to $6.88 billion from $6 billion. Analysts had forecast revenue of $6.64 billion.
Shares of hospital operator HCA Inc. (NYSE: HCA $21 billion leveraged buyout by a private equity group and members of the company's founding family and current management. The deal is valued at $51 a share, or $33 billion, including the assumption of about $11.7 billion in debt. However, HCA may solicit superior proposals from third parties during the next 50 days. The company also reported second-quarter earnings of $295 million, down from $405 million, in the year-earlier period. Revenue rose to $6.36 billion form $6.07 billion.
Shares in Merck & Co. (NYSE: MRK) closed up $1.49 to $38.95, after the company reported higher quarterly earnings that beat estimates and also boosted its outlook for the full year. Fellow drug maker Schering-Plough Corp. (NYSE: SGP) also closed up $1.22 or 5.7% to $20.67, after reporting higher quarterly earnings that topped forecasts. The company swung to a second-quarter profit, helped by sales of its rheumatoid drug Remicade and Nasonex.
Advanced Micro Devices Inc. (NYSE: AMD) closed down $0.87 to $17.39, after it announced a deal to buy Canada's ATI Technologies Inc. (Nasdaq: ATYT) for $5.4 billion. This move would open a new front in its rivalry with Intel Corp. Shares of ATI shot up $3.02 or 18.8% to $19.67.
On being upgraded, shares of Dell Computers (NYSE: DELL) closed up $0.89 or 3% to $20.80. Citigroup upgraded it to "buy" from "hold," and this follows Dell's profit warning Friday, with Citigroup saying that any slowdown is already fully reflected in analysts' earnings estimates on Dell.
U.S. light crude oil for September delivery rose 72 cents to $75.15 a barrel on the New York Mercantile Exchange. Oil prices rose on concerns about a hurricane heading toward the Gulf Coast and comments from U.S. officials casting doubt on the enforceability of any cease-fire in the Middle East.
On being upgraded, shares of Dell Computers (NYSE: DELL) closed up $0.89 or 3% to $20.80. Citigroup upgraded it to "buy" from "hold," and this follows Dell's profit warning Friday, with Citigroup saying that any slowdown is already fully reflected in analysts' earnings estimates on Dell.
Advanced Micro Devices Inc. (NYSE: AMD) closed down $0.87 to $17.39, after it announced a deal to buy Canada's ATI Technologies Inc. (Nasdaq: ATYT) for $5.4 billion. This move would open a new front in its rivalry with Intel Corp. Shares of ATI shot up $3.02 or 18.8% to $19.67.
Shares of hospital operator HCA Inc. (NYSE: HCA) closed up $1.61 or 3% to $49.48, after it agreed to a $21 billion leveraged buyout by a private equity group and members of the company's founding family and current management. The deal is valued at $51 a share, or $33 billion, including the assumption of about $11.7 billion in debt. However, HCA may solicit superior proposals from third parties during the next 50 days. The company also reported second-quarter earnings of $295 million, down from $405 million, in the year-earlier period. Revenue rose to $6.36 billion form $6.07 billion.
American Express (NYSE: AXP) rose 4 cents to close $50.66 after reporting earnings that declined, but topped expectations. It stated that its second-quarter net income fell 7% from a year earlier, but it expanded its customer base and increased revenue. The net income dropped to $945 million, from $1 billion in the year ago period. Income from continuing operations rose 13% to $972 million, from $860 million and revenue climbed to $6.88 billion from $6 billion. Analysts had forecast revenue of $6.64 billion.
This week, Fed chief Bernanke told Congress that the economy is slowing down to an acceptable level, and inflationary pressures will ease off as a result. Most investors took this to mean that the regular interest rate hikes have come to an end. The market rallied on the news and the Dow gained 122 points on Wednesday, ending the week up 129.03 over last Friday, closing at 10868.38. Still short of the 11,000 level that makes everybody happy, but a few good earnings reports next week will push the Dow back over that threshold.
The S&P500 gained 4.09 for the week to close at 1240.29. Gold was down 47.60, finishing at 620.20, and crude lost 4.28, closing out today at 74.43.
The Nasdaq, after initially gaining on Wednesday on the news from the Fed, gave up those gains and closed at 2020.39, down 16.96 for the week, a shocking 14 month low. Tech earnings reports this week were fairly tepid. Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL) both did well for themselves, with Apple reporting a nearly 50 percent rise in third quarter income and exceeding expectations. Microsoft's fourth quarter revenues, also released this week, were record-breaking, marking a 16 percent year-on-year increase. Google (Nasdaq: GOOG) reported that it second quarter profit more than doubled. But despite this trio of good news, the week was also marked by bad news in the tech field, with Yahoo! (Nasdaq: YHOO) reporting a steep drop in year-on-year profits, moving from last year's quarterly EPS of 51 cents to an 11 cent level this quarter. Dell (Nasdaq: DELL) also took a nosedive this week when it issued a profit and sales forecast that did not meet expectations, triggering the stock to drop to a five-year low.
Crude hasn't reached $80 yet, but that level is still a distinct short-term possibility, as tensions in the Mideast continue to rise and Israel continues a massive offensive against Lebanon. The spectre of a disruption in the Mideast oil flow is partially offset by the fact that U.S. crude supplies are growing. Nonetheless, growing demand overall, and continued hostilities point to a volatile crude market, and it's not likely we'll see those sub-$70 levels again any time soon.
Stocks closed lower once again with the Nasdaq Composite skidding to its lowest finish in 14 months and taking its third straight weekly loss. Profit warning from Dell (NYSE: DELL) and nervousness about slowing economic growth added fuel to the simmering fire. The worries about the economy overshadowed growing optimism that the Federal Reserve will stop raising interest rates soon.
Today, the Dow Jones Industrial average closed down 55.31 or 0.6% to 10,872.79, the broader Standard & Poor's 500 index closed down 8.55 or 0.7% to 1,240.58, and the tech-heavy Nasdaq composite closed down 18.84 or 0.9% to 2,020.58. For the week, the Dow gained 1.2%, the S&P rose 0.3% and the Nasdaq lost 1%.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by more than 2 to 1 as 1.5 billion shares changed hands. On the Nasdaq, decliners beat advancers 3 to 1 as 1.9 billion shares changed hands.
In the wake of Bernanke's congressional testimony and release of the minutes of the last Federal Reserve meeting on interest rates, the federal-funds-futures market now sees an August increase in interest rates as unlikely.
The day belonged to Dell (NYSE: DELL) that led the downslide. Shares of Dell closed down $2.99 or 12% to $19.11, after warning that quarterly results will miss forecasts owing to its aggressive pricing in a slowing commercial market worldwide. The company announced that EPS would be 21-23 cents, on sales of about $14 billion. This is against the expected EPS forecast of 32 cents, and a revenue of $14.2 billion. Its weak outlook prompted three brokers to lower their recommendation on the company.
It was a torrid day for chip makers. Stock of Advanced Micro Devices (NYSE: AMD) closed down $3.42 or 13% to $18.23, after it reported higher quarterly earnings that were short of analysts' estimates. Its quarterly sales slipped from a year ago and missed forecasts, due to slower demand and its ongoing price war with Intel. Shares of Intel (Nasdaq: INTC) closed up $0.05 to $17.15. Shares of Broadcom (Nasdaq: BRCM) closed down $3.24 or 12% to $23.11, after warning that third- and fourth-quarter revenue will miss analysts' estimates because of slowing sales and rising inventories. Chipmaker PMC Sierra (Nasdaq: PMCS) also closed down $1.84 or 25% to $5.14, after warning that current-quarter revenue will miss expectations.
Stock of Google Inc. (Nasdaq: GOOG) closed up $3.01 or 0.7% to $390.13, on reporting that second-quarter profit more than doubled as it expanded its leading share of the market for online-search advertising. Google stock has been under pressure in 2006 after surging 115 percent in 2005.
Shares of Caterpillar Inc. (NYSE: CAT) saw choppy trading and finished down 1% at $68.35. The heavy-equipment maker, however, lifted its profit forecast for the year after reporting a 38% jump in second-quarter earnings. The company attributed the strong quarter to better prices for its products and higher sales volume.
Shares of Microsoft Corp. (Nasdaq: MSFT) closed up $1.00 or 4.9% to $23.85, after posting results that topped expectations. Additionally, the company unveiled plans to buy back up to $40 billion of its own stock via a $20 billion tender offer and a five-year share-repurchase program. It reported a net income of $2.83 billion, or 28 cents a share, well ahead of Wall Street expectations. It reported sales of $11.8 billion, a 16% increase, against the expected $11.6 billion. In the plan to buy back, the company shall buy $20 billion worth of shares by Aug. 17 and $20 billion more through June 2011.
U.S. light crude oil for September delivery rose 23 cents to $74.50 a barrel on the New York Mercantile Exchange. Crude-oil futures rose amid signs that Israel is preparing for a ground invasion of southern Lebanon.
Shares of Dell (NYSE: DELL) closed down $2.99 or 12% to $19.11, after warning that quarterly results will miss forecasts owing to its aggressive pricing in a slowing commercial market worldwide. The company announced that EPS would be 21-23 cents, on sales of about $14 billion. This is against the expected EPS forecast of 32 cents, and a revenue of $14.2 billion. Its weak outlook prompted three brokers to lower their recommendation on the company.
Stock of Google Inc. (Nasdaq: GOOG) closed up $3.01 or 0.7% to $390.13, on reporting that second-quarter profit more than doubled as it expanded its leading share of the market for online-search advertising. Google stock has been under pressure in 2006 after surging 115 percent in 2005.
Shares of Caterpillar Inc. (NYSE: CAT) saw choppy trading and finished down 1% at $68.35. The heavy-equipment maker, however, lifted its profit forecast for the year after reporting a 38% jump in second-quarter earnings. The company attributed the strong quarter to better prices for its products and higher sales volume.
Shares of Microsoft Corp. (Nasdaq: MSFT) closed up $1.00 or 4.9% to $23.85, after posting results that topped expectations. Additionally, the company unveiled plans to buy back up to $40 billion of its own stock via a $20 billion tender offer and a five-year share-repurchase program. It reported a net income of $2.83 billion, or 28 cents a share, well ahead of Wall Street expectations. It reported sales of $11.8 billion, a 16% increase, against the expected $11.6 billion. In the plan to buy back, the company shall buy $20 billion worth of shares by Aug. 17 and $20 billion more through June 2011.
Stocks closed lower amid fresh news of manufacturing weakness, uncertain outlook for interest rates, and disappointing sales forecast from Intel (Nasdaq: INTC). The bad news from Intel dragged the technical down and seemed to overshadow a raft of upbeat earnings from Apple Computer Inc. (Nasdaq: AAPL), Motorola Inc. (NYSE: MOT) and others.
Today, the Dow Jones Industrial average closed down 83.32 or 0.8% to 10,928.10, the broader Standard & Poor's 500 index closed down 10.68 or 0.85 to 1,249.13, and the Nasdaq composite index closed down 41.29 or 25 to 2,039.42.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by a margin of 2 to 1 on volume of 1.67 billion shares. On the Nasdaq, decliners topped advancers by a margin of 3 to 1 as 2.07 billion shares changed hands.
Investors appear to be focused on the fact that inflation seems to be abating at a time when the economy may be slowing. Minutes from the Fed's June meeting echoed that view, saying that slowing economic growth should help inflation ease next year. However, the minutes also showed members saw "significant uncertainty" surrounding the rate outlook, and that the decision to raise the target federal funds rate at this meeting was a close call. Investors have been hoping for signs that the Fed may be ready to wind down its rate-hiking campaign, and right now it's just the battle of how much growth is going to slow and when the Fed is going to stop. A labor economist has suggested that the economy could cool even more in the third and fourth quarters of the year.
On the economic front, two reports offered further signs that economic growth is cooling. The Conference Board's Index of Leading Economic Indicators rose just 0.1%, below the expected 0.2%. The report is used to gauge future economic activity. The Philadelphia Federal Reserve Bank reported that mid-Atlantic factory activity slowed in July. The business activity index declined to 6 from 13.1 in June against the expected 12. While anything above Zero shows growth – this is an indicator of slowing down.
Shares of Pfizer (NYSE: PFE) closed up $0.41 or 1.8% to $23.71, after reporting earnings that beat Wall Street's estimates. It declared a net income of $2.42 billion, or 33 cents a share, compared with $3.46 billion, or 47 cents, earned in the second quarter last year. Total revenue for the quarter rose 3% to $11.74 billion from $11.45 billion last year.
Stock of Intel (Nasdaq: INTC) closed down $1.39 or 7% to $17.10. The world's largest chipmaker offered a weaker-than-expected sales forecast as current quarter profit tumbled 57% from a year ago on lower sales. Dow component Honeywell International Inc. (NYSE: HON) closed down $1.62 or 4.3% to $36.62, with upbeat quarterly results but reported weakness at its aerospace unit.
Shares of Ford Motor Co. (Nasdaq: F) closed down $0.14 or 2% to $6.19, after the company posted a surprise second-quarter loss. It stated that its business in North America was slammed by declining car sales.
Shares of Apple Computer Inc (Nasdaq: AAPL) surged 12% to $60.54 after quarterly profits surged nearly 48% on higher sales of its iPod digital-media players and flagship Macintosh players. Its forecast-beating earnings overshadowed a fourth-quarter profit outlook that lagged Wall Street estimates.
Motorola Inc. (NYSE: MOT) saw its stock shoot up 7% to $20.60. The world's second-biggest maker of mobile phones posted a 46% jump in profit, boosted by strong sales of its wireless products.
Shares of Ebay (Nasdaq: EBAY) slipped 4.4% to $24.78. The company's quarterly profit met analyst expectations, with sales surging 30%. It also said it will buy back $2 billion worth of its own shares during the next two years and will raise fees for eBay users who operate online stores.
Crude-oil futures for August closed up 42 cents at $73.08 a barrel, marking their first higher close in four sessions.
Shares of eBay (Nasdaq: EBAY) slipped 4.4% to $24.78. The company's quarterly profit met analyst expectations, with sales surging 30%. It also said it will buy back $2 billion worth of its own shares during the next two years and will raise fees for eBay users who operate online stores.
Shares of Apple Computer Inc (Nasdaq: AAPL) surged 12% to $60.54 after quarterly profits surged nearly 48% on higher sales of its iPod digital-media players and flagship Macintosh players. Its forecast-beating earnings overshadowed a fourth-quarter profit outlook that lagged Wall Street estimates.
Shares of Ford Motor Co. (Nasdaq: F) closed down $0.14 or 2% to $6.19, after the company posted a surprise second-quarter loss. It stated that its business in North America was slammed by declining car sales.
Shares of Pfizer (NYSE: PFE) closed up $0.41 or 1.8% to $23.71, after reporting earnings that beat Wall Street's estimates. It declared a net income of $2.42 billion, or 33 cents a share, compared with $3.46 billion, or 47 cents, earned in the second quarter last year. Total revenue for the quarter rose 3% to $11.74 billion from $11.45 billion last year.
Soothing comments on inflation from Federal Reserve Chairman Ben Bernanke sparked hopes the central bank may stop raising interest rates soon. Stocks reacted positively and rallied with the Dow Jones Industrial Average adding more than 200 points. Additionally, strong earnings reports from J.P. Morgan Chase (NYSE: JP) and International Business Machines (NYSE: IBM) also lent cheer.
Today, the Dow Jones Industrial average closed up 212.19 or 2% to 11,011.42, the broader Standard & Poor's 500 index closed up 22.95 or 1.8% to 1,259.81, and the tech-heavy Nasdaq composite index closed up 37.49 or 1.8% to 2,080.71.
Market breadth was resoundingly positive. On the New York Stock Exchange, winners trounced losers by nearly 9 to 2 as 1.86 billion shares changed hands. On the Nasdaq, advancers topped decliners by more than 4 to 1 on volume of 2.37 billion shares.
Fed chief's Ben Bernanke's prepared testimony to Congress was more dovish than he has ever been and appeared that he would be less aggressive about raising interest rates in the future. He stated that inflation risks remain and the central bank is concerned about rising prices. But he said the economy is likely to slow and this should ease inflation pressures. He stated that the full impact of past rate hikes has yet to hit the economy. His testimony fits with the consensus that the Fed's would either continue to raise rates or pause in August, depending on the central bank's interpretation of the latest economic data.
However, the latest data reveals higher inflation and a cooling housing market, stoking concern the U.S. economy may be slowing down. U.S. consumer prices increased a moderate 0.2% in June, but core inflation rose 0.3% for the fourth straight month. The core rate is now a bit higher than the Federal Reserve is thought to be comfortable with. In further confirmation that the housing market is cooling off, builders began new housing construction at a slower rate in June, and the number of building permits issued also continued to decline.
Shares of IBM (NYSE: IBM) closed up $1.81 or 2.4% to $76.07, after reporting quarterly earnings that rose and topped estimates. The company reported a 10% profit rise from a year ago helped by lower administrative costs. But revenue from its key global services and hardware divisions fell.
Shares of Yahoo (Nasdaq: YHOO) closed down $7.04 or 22% to $25.20, after reporting quarterly sales that rose from a year ago, but missed estimates. The quarterly earnings and sales fell shy of analysts' expectations. The company also forecast third-quarter revenue that disappointed investors.
Stock of J.P. Morgan Chase & Co. (NYSE: JP) rose 5.7% to $43.05 after its net income more than tripled on a boost from its investment-banking business. This saw the company gain record fees and "solid" market results.
U.S. light crude oil for August delivery fell 88 cents to settle at $72.66 a barrel on the New York Mercantile Exchange. Oil prices fell after a government report showed a surprise rise in weekly crude and gasoline supplies, and an unexpected increase in motor gasoline inventories.
Shares of IBM (NYSE: IBM) closed up $1.81 or 2.4% to $76.07, after reporting quarterly earnings that rose and topped estimates. The company reported a 10% profit rise from a year ago helped by lower administrative costs. But revenue from its key global services and hardware divisions fell.
Shares of Yahoo (Nasdaq: YHOO) closed down $7.04 or 22% to $25.20, after reporting quarterly sales that rose from a year ago, but missed estimates. The quarterly earnings and sales fell shy of analysts' expectations. The company also forecast third-quarter revenue that disappointed investors.
Stock of J.P. Morgan Chase & Co. (NYSE: JP) rose 5.7% to $43.05 after its net income more than tripled on a boost from its investment-banking business. This saw the company gain record fees and "solid" market results.
Stocks ended higher after some help from a retreat in crude-oil prices and some solid earnings reports from United Technologies (NYSE: UTX) and Coca-Cola (NYSE: KO). However, the volatile situation in the Middle East coupled with unsettling inflation and housing data left investors in an uncertain frame of mind.
Today, the Dow Jones Industrial average closed up 51.87 or 0.5% to 10,799.23, the broader Standard & Poor's 500 index closed up 2.37 or 0.2% to 1,236.86, and the tech-heavy Nasdaq composite index closed up 5.50 or to 2,043.22.
Market breadth was negative. On the New York Stock Exchange, losers beat winners nearly two to one on volume of 1.38 billion shares. On the Nasdaq, advancers topped decliners two to one, on volume of 1.66 billion shares.
The market reflected indecisiveness with no definite news and a persistent dark cloud in the Middle East. It's hard for investors to make a commitment either on the buy side or the sell side. Fed Chairman Ben Bernanke will begin the first day of his two-day semi annual Congressional testimony on the economy, and investors will be hoping that he has something new to say about the direction of interest rates.
In data news, capital flows into the U.S. bounced back in May to nearly $70 billion as private overseas investors scooped up large amounts of Treasury bonds and government agency bonds. Prices at the wholesale level rose more than expected in June. Producer prices rose by a larger-than-expected 0.5%, but core inflation increased 0.2% as expected. This caused some concern on the headline figure but was reassuring on the core number.
Shares of Coca-Cola Co. (NYSE: KO) closed up $0.85 or 2% to $43.55, after the beverage giant posted forecast-beating earnings, buoyed by strength in its Brazil, China and Russia markets, and strong sales of its non-carbonated Dasani water and Powerade. Likewise, stock of United Technologies Corp. (NYSE: UTX) rose 1.6% to $58.88 after the company raised its full-year outlook after posting a 15% rise in second-quarter profit. The company stated that strong aerospace demand and margins offset weakness in its Carrier heating and air conditioning equipment unit.
Shares of Johnson & Johnson (NYSE: JNJ) shares closed down $0.31 or 0.5% to $60.60. This is despite the fact that company's earnings beat analyst estimates, buoyed by strong sales of medical devices, pharmaceuticals and consumer products. It appeared that investors took a 'sell-the-news' approach.
Stock of Merrill Lynch (NYSE: MER) closed down $0.77 to $67.50, after reporting quarterly earnings that rose from a year earlier and beat estimates. However, worries that the recent difficult market conditions will hurt the performance in the current quarter, got the stock down.
In the retail sector, shares of Target (NYSE: TGT) closed down $2.02 or 4.3% to $45.53, after lowering its July sales forecast late Monday. At the same time, the company said it expects second-quarter profit to meet or exceed Wall Street analyst estimates.
Brokerage A.G. Edwards has cut Target (NYSE: TGT) and a number of other retailers, saying the warning could suggest consumer spending is starting to slow in response to rising energy prices and a slower housing market. This led Best Buy (NYSE: BBY) to close down $1.73 to $44.10, J.C. Penny (NYSE: JCP) to slide $2.29 to $63.37, and Abercrombie (NYSE: ANF) to lose $2.56 to $50.95.
U.S. light crude oil for August delivery fell $1.76 to settle at $73.54 a barrel on the New York Mercantile Exchange. Some traders deemed the potential spread of the violence between Israel and Lebanon into other areas of the Middle East as unlikely. However, many feel that Iran's involvement remains a real possibility.
Investors continued to decline to rally in the face of escalating Middle East violence. Markets closed mixed after some help from a more than 2% drop in crude-oil prices and a strong upbeat sales report from McDonald's Corp (NYSE: MCD). However, these were inadequate to spark a buying spree.
Today, the Dow Jones Industrial average closed up 8.01 or 0.07% to 10,747.36, the broader Standard & Poor's 500 closed down 1.71 or 0.14% to 1,234.49, and the tech-heavy Nasdaq composite index closed up 0.37 or 0.02% to 2,037.72.
Market breadth was negative. On the New York Stock Exchange, losers beat winners ten to seven on volume of 1.4 billion shares. On the Nasdaq, decliners topped advancers three to two as 1.5 billion shares changed hands.
The markets continue to struggle owing to the Middle East crisis. Investors are ignoring the few good earnings and the drop in crude prices. The drop in oil shows that there is little risk of oil-induced inflation pressures. Israel has stated that its attacks in Lebanon would continue until Hezbollah returns its Israeli captives. Leaders of the Group of Eight industrialized nations limited their diplomatic efforts to a statement calling for Israeli restraint as well as criticism of unnamed "extremist elements," thought to be a reference to Hezbollah.
In data news, output at U.S. factories, mines and utilities rose by a bigger than anticipated 0.8 percent in June. However, the NY Empire State index fell to 15.6 in July from a prior reading of 29. This weaker regional-manufacturing report kicked off a heavy week for economic data. The report is likely to raise concern that the economy is slowing, and also raises hopes that the Fed will not have to lift rates anymore to cool economic growth. Investors also will be looking for clues to the course of U.S. interest rates when Federal Reserve Chairman Ben Bernanke addresses Congress on the economy and Fed policy Wednesday and Thursday.
Shares in Citigroup Inc. (NYSE: C) closed down $1.07 or 2.5% to $46.51, after the bank's second-quarter earnings failed to match analysts' expectations, and were generally weaker than its first-quarter numbers. The bank posted a 4% rise in profit, helped by continuing strength in its securities-underwriting business and fees earned from advising companies on mergers and acquisitions.
Shares of McDonald's, (NYSE: MCD) closed up $1.80 or 5% to $34.84, after second quarter earnings beat estimates. Same-store sales rose 5.9% in June, helped by breakfast contributions and a Happy Meal promotion in the United States, along with premium sandwiches and salads in Europe. The company forecast a second-quarter profit of 67 cents a share, against the expected 56 cents a share.
Stock of General Motors Corp. (NYSE: GM) gained 0.7% to $27.68. The board of directors convened a meeting to discuss the potential three-way linkage with Renault and Nissan after the automakers last week agreed to review the benefits of such a partnership over the course of the next three months.
Shares of Apple Computer Inc. (Nasdaq: AAPL) climbed 3.6% to $52.35 after Piper Jaffray analyst Gene Munster said that he expects the company to top Wall Street expectations for its fiscal third quarter, following his checks with Apple specialist stores and data from research group NPD. Shares of Boeing Co. (NYSE: BA) closed up 2.2% at $78.95, after the announcing that Indonesia's Lion Air has exercised its rights to buy an additional 30 737-900 extended range aircraft in a deal valued at more than $2.2 billion.
Crude futures were volatile as traders tried to make sense of the conflicting reports coming out of the Middle East. Light crude oil for August delivery slumped $1.73 to $75.30 a barrel on the New York Mercantile Exchange. Additionally, the OPEC said, in its monthly report, that oil-demand growth should slow in 2007 due to lower economic growth and continued refinery bottlenecks.
Shares in Citigroup Inc. (NYSE: C) closed down $1.07 or 2.5% to $46.51, after the bank's second-quarter earnings failed to match analysts' expectations, and were generally weaker than its first-quarter numbers. The bank posted a 4% rise in profit, helped by continuing strength in its securities-underwriting business and fees earned from advising companies on mergers and acquisitions.
Shares of McDonald's, (NYSE: MCD) closed up $1.80 or 5% to $34.84, after second quarter earnings beat estimates. Same-store sales rose 5.9% in June, helped by breakfast contributions and a Happy Meal promotion in the United States, along with premium sandwiches and salads in Europe. The company forecast a second-quarter profit of 67 cents a share, against the expected 56 cents a share.
Stocks tumbled for the third straight session with the Dow Jones Industrial Average falling more than 100 points, after the escalating conflict in the Middle East unsettled investors and drove crude-oil prices to record highs. Weak retail sales and consumer-sentiment data and disappointment with General Electric Co.'s (NYSE: GE) results added to gloom.
Today, the Dow Jones Industrial average closed down 106.94 or 1% to 10,739.35, the broader Standard & Poor's 500 index closed down 6.09 or 0.5% to 1,236.20, and the Nasdaq composite index closed down 16.76 or 0.8% to 2,037.35. For the year, the Dow is up 0.2%, the S&P 500 is down nearly 1%, and the Nasdaq has tumbled 7.6%. For the week the Dow lost 3.2%, the S&P 500 lost 2.3%, and the Nasdaq gave up 4.3%.
Market breadth was negative. On the New York Stock Exchange, losers topped winners 11 to 5 as 1.71 billion shares changed hands. On the Nasdaq, decliners beat advancers by 2 to 1 on volume of 1.81 billion shares.
The geo-political situation from North Korea right through to the Middle East, has been a market depressant. Israel pressed its incursion into Lebanon mounting new strikes on the Beirut airport and other key infrastructure after the Lebanese Hezbollah group captured two Israeli soldiers. Lebanese Prime Minister Fuad Saniora said President Bush has pledged to pressure Israel to halt the attacks. The threat of a widening conflict in the Middle East will likely dominate this weekend's Group of Eight summit in St. Petersburg, Russia.
Retail sales in June fell 0.1%, due to weak auto sales. Excluding auto sales, retail sales rose 0.3%. Economists, however, had been forecasting total sales and sales excluding autos to rise 0.4%. Lower sales are a doubled-edged sword, as they confirm slowing growth but also raise hopes that the Federal Reserve would stop raising interest rates. Import prices rose 0.1% in June, the smallest increase since March. Separately, the University of Michigan's July consumer sentiment index fell to 83 versus expectations of a rise to 85.5.
Investors are also worried about the double impact of slowing economic growth and rising oil prices. In addition, higher oil prices make it more difficult for the Federal Reserve to stop raising interest rates, as it attempts to prevent these higher energy costs from boosting inflationary pressures in the economy. At the same time, investors are worried about second-quarter corporate profits, with the first big batch of companies due next week. Solid earnings growth is expected for the quarter, and if we get some positive developments, the stock selling can probably wash out.
Shares of General Electric (NYSE: GE) closed down $0.56 or 1.7% to $32.11, despite reporting higher quarterly earnings that met expectations. However, the company said it expects third-quarter results at or below the current consensus expectation. The conglomerate earned $4.9 billion, up from $4.4 billion a year earlier. But the company expects third-quarter EPS of 48 to 50 cents a share.
Stock of book chain Borders Group Inc. (NYSE: BGP) closed down $0.72 or 4% to $17.56 after the book, music and stationery retailer widened its second-quarter loss forecast, citing lower than expected sales. It now expects to report a loss for its second quarter, that could be more than three times as wide as had been forecast previously. Analysts were looking for a loss of 17 cents a share. The company also withdrew both its full-year sales view and its forecast for a per-share profit of $1.42 to $1.60 in fiscal 2006
Shares in Forest Laboratories Inc. (NYSE: FRX) closed up $6.00 or 6% to $44.40 after a favorable patent ruling for Lexapro, its treatment for depression. A federal judge has found that the patent covering the active ingredient in its depression treatment Lexapro is valid. The patent, which expires in March 2012, would be infringed by a proposed generic version from Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA) and its Ivax Corp. (AMEX: IVD) unit. Shares of Teva Pharmaceutical Industries closed down $0.01 to $30.50. Sales of Lexapro in the fourth quarter gained 16% to hit $464 million.
Shares of Petco Animal Supplies (Nasdaq: PETC) closed up $8.44 or over 43% to $27.89, after the retailer agreed to be bought by two private equity companies for around $1.7 billion in cash.
Light crude oil for August delivery hit $78.40, and then backed off to close 33 cents higher at $77.03 a barrel on the New York Mercantile Exchange. Oil prices have been propelled by Israel's continuing offensive in Lebanon.
Shares of General Electric (NYSE: GE) closed down $0.56 or 1.7% to $32.11, despite reporting higher quarterly earnings that met expectations. However, the company said it expects third-quarter results at or below the current consensus expectation. The conglomerate earned $4.9 billion, up from $4.4 billion a year earlier. But the company expects third-quarter EPS of 48 to 50 cents a share.
Stock of book chain Borders Group Inc. (NYSE: BGP) closed down $0.72 or 4% to $17.56 after the book, music and stationery retailer widened its second-quarter loss forecast, citing lower than expected sales. It now expects to report a loss for its second quarter, that could be more than three times as wide as had been forecast previously. Analysts were looking for a loss of 17 cents a share. The company also withdrew both its full-year sales view and its forecast for a per-share profit of $1.42 to $1.60 in fiscal 2006
Shares in Forest Laboratories Inc. (NYSE: FRX) closed up $6.00 or 6% to $44.40 after a favorable patent ruling for Lexapro, its treatment for depression. A federal judge has found that the patent covering the active ingredient in its depression treatment Lexapro is valid. The patent, which expires in March 2012, would be infringed by a proposed generic version from Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA) and its Ivax Corp. (AMEX: IVD) unit. Shares of Teva Pharmaceutical Industries closed down $0.01 to $30.50. Sales of Lexapro in the fourth quarter gained 16% to hit $464 million.
Shares of Petco Animal Supplies (Nasdaq: PETC) closed up $8.44 or over 43% to $27.89, after the retailer agreed to be bought by two private equity companies for around $1.7 billion in cash.
Stocks ended sharply lower and the Nasdaq Composite hit a nine-month low. The Dow Jones Industrial Average closed down more than 100 points for a second straight session, after oil prices hit a record high following a fresh escalation in Middle East tensions. Revenue warning from German software giant SAP AG (NYSE: SAP) added to investor concerns that second-quarter earnings may not live up to expectations. Additionally, broker downgrades for Wal-Mart Stores Inc. (NYSE: WMT) and Walt Disney Co. (NYSE: DIS) further undermined sentiment.
Today, the Dow Jones Industrial average closed down 166.89 or 1.5% to 10,846.29, the broader Standard & Poor's 500 index closed down 16.31 1.3% to 1,242.29, and the Nasdaq composite index closed down 36.13 or 1.7% to 2,054.11.
Market breadth was negative. On the New York Stock Exchange, losers topped winners nearly 13 to 4 as 1.77 billion shares changed hands. On the Nasdaq, decliners beat advancers 4 to 1 on volume of 2.07 billion shares.
The fresh weakness in stocks can be attributed to the reports of the Haifa rocket attacks and the jump in oil prices. It appears that all the world's problems have turned the markets into a vortex of losses across the board. Investors are seeking safe-haven investments. Israel expanded its offensive deep into Lebanon after two of its soldiers were kidnapped. Israel imposed a blockade on Lebanon and bombed Beirut's international airport, forcing it to shut down. A report that Iran will be referred to the U.N. Security Council for sanctions over its nuclear- enrichment program also undermined investor confidence as many worried Tehran might retaliate by cutting its oil exports.
Investors are worried since we are in the earnings period in which companies start lowering forecasts for the year, in tune with second-quarter results. Worries about slowing economic growth and rising interest rates has intensified the pressure on investors. It is hard to see in the short term what could turn the market around and lead to a new bull market. In data news, the U.S. Labor Department reported that jobless claims rose 19,000 to 332,000 in the latest week, the highest level since May 27.
Shares of SAP (NYSE: SAP) closed down $3.51 or 7% to $46.83, after warning that second-quarter software license sales and overall revenue will miss forecasts. This sent another chill through the vulnerable technology sector, continuing a recent string of warnings. The company reported that it would reach a quarterly license revenue of 621 million euros, equating to 8% growth. This is against the estimated growth of 675 million euros.
Shares of Walt Disney (NYSE: DIS) fell 4.1% to $28.70 after brokerage CIBC World Markets downgraded the media and entertainment group to sector underperformer from sector performer, on concern over a lackluster 2007. This is based on numerous reports that the company is about to make massive cuts in its operations.
Shares of Dell Inc. (NYSE: DELL) ended lower for a seventh straight session as the computer maker announced it plans to implement a series of pricing changes over the next 12 to 18 months that will result in fewer promotions and rebates for its consumer and small business products. The stock closed down $0.68 or 3% to $21.70. It plans to cut back on mail-in rebates that will simplify its pricing structure.
U.S. light crude oil for August rose $1.75 to settle at $76.70 a barrel on the New York Mercantile Exchange. Oil has been climbing of late amid the rising violence in the Mid-East, the bombings in India and blasts to a Nigerian pipeline. A fire in a Venezuelan refinery and a large drop in weekly U.S. crude oil inventories added to worries about oil supplies.
The woes of the tech sector spread to the broader market and the stocks slumped, amid concerns about corporate profit growth, geopolitical tensions and the mix of higher inflation and slower economic growth. The worsening political tensions in the Middle East weighed heavily on a market already unsettled by a poor start to the second-quarter earnings season.
Today, the Dow Jones Industrial average closed down 121.59 or 1.09% to 11,013.18, the broader Standard & Poor's 500 index closed down 13.92 1.09% to 1,258.60, and the Nasdaq composite index closed down 38.63 or 1.81% to 2,090.23.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers eleven to five on volume of 1.47 billion shares. On the Nasdaq, losers topped winners three to one as nearly 1.8 billion shares changed hands.
The tension from Mumbai bombings and from the fighting in Israel and Lebanon has percolated down to the stock markets. The few companies that have reported earnings have not been encouraging and the confessionals do not really heat up until later in the month. The investors are really nervous about that.
In data news, the trade deficit in May grew from the previous month but was nonetheless narrower than expected. This is despite soaring oil imports, and as U.S. exports made gains in global markets. The value of imports exceeded exports by $63.8 billion in the month, against the forecast a $65 billion trade deficit.
On a slap by European regulators, shares of Microsoft (Nasdaq: MSFT) closed down $0.42 or 1.6% to $22.68. The company has been fined $357.3 million for failing to abide by a previous antitrust ruling pertaining to its Windows operating system. They also warned the company to comply or face bigger fines next month. The Commission required Microsoft to provide technical information to rival server software makers after it found the company abused the dominance of its Windows operating system and squeezed out competitors. The fine covers the period from Dec. 16 to June 20 at €1.5 million daily. It fell short of a possible daily maximum of €2 million. Microsoft faces a further fine of up to €3 million a day if it still does not comply by July 31.
The FDA has approved the first once-daily pill for fighting AIDS. Atripla, which treats HIV, has been made by Bristol-Myers Squibb (NYSE: BMY) and Gilead Sciences (Nasdaq: GILD). Shares of Bristol-Myers closed down $0.41 to $25.07, and Gilead Sciences closed down $0.16 to $61.60.
Shares of Genetech (NYSE: DNA) closed down $3.07 to $80.99, despite reporting quarterly results that rose from a year ago and beat estimates, thanks to strong sales of its colon cancer treatment Avastin. However, analysts were expecting even stronger sales of the drug, and hence the dip.
Stock of Secure Computing (Nasdaq: SCUR) closed down $3.06 or 36% to $5.01, after warning that second-quarter earnings will miss forecasts. The company sees second-quarter revenue of $38.5 million to $39 million, compared with its prior view of $43 million to $45 million. The computer network security software provider also said it will buy smaller security firm CipherTrust for about $274 million.
U.S. light crude oil for August delivery rose 84 cents to settle at $75 a barrel on the New York Mercantile Exchange. The government's weekly inventory report showed a surprisingly large decline in crude oil stockpiles last week.
Stock of Secure Computing (Nasdaq: SCUR) closed down $3.06 or 36% to $5.01, after warning that second-quarter earnings will miss forecasts. The company sees second-quarter revenue of $38.5 million to $39 million, compared with its prior view of $43 million to $45 million. The computer network security software provider also said it will buy smaller security firm CipherTrust for about $274 million.
The FDA has approved the first once-daily pill for fighting AIDS. Atripla, which treats HIV, has been made by Bristol-Myers Squibb (NYSE: BMY) and Gilead Sciences (Nasdaq: GILD). Shares of Bristol-Myers closed down $0.41 to $25.07, and Gilead Sciences closed down $0.16 to $61.60.
On a slap by European regulators, shares of Microsoft (Nasdaq: MSFT) closed down $0.42 or 1.6% to $22.68. The company has been fined $357.3 million for failing to abide by a previous antitrust ruling pertaining to its Windows operating system. They also warned the company to comply or face bigger fines next month. The Commission required Microsoft to provide technical information to rival server software makers after it found the company abused the dominance of its Windows operating system and squeezed out competitors. The fine covers the period from Dec. 16 to June 20 at €1.5 million daily. It fell short of a possible daily maximum of €2 million. Microsoft faces a further fine of up to €3 million a day if it still does not comply by July 31.
Despite the revenue miss from Alcoa Inc. (NYSE: AA) and a profit warning from Lucent Technologies (NYSE: LU), stocks ended higher as some investors said it was still too early to write off the second-quarter earnings season. Upbeat news in the chip sector and strength in oil and gold stocks were among the factors leading the comeback.
Today, the Dow Jones Industrial Average closed up 31.22 points or 0.3% to 11,134.77, the S&P 500 Index closed up 5.18 points or 0.4% to 1,272.52, and the Nasdaq Composite Index closed up 11.93 points or 0.6% to 2,128.86.
Market breadth turned positive by the close. On the New York Stock Exchange, winners beat losers five to three as 1.57 billion shares changed hands. On the Nasdaq, advancers topped decliners by 17 to 13 on volume of around 2 billion shares.
Earnings warnings in tech, inflation concerns and geopolitical issues led the markets southwards. However, some improved profit guidance from chipmaker KLA Tencor (Nasdaq: KLAC) got the ball rolling in the right direction. Bond prices rose, lowering the corresponding yields, oil, gas and gold prices rose, and gave a lift to the underlying stocks. Despite the turnaround, concerns about the earnings remain in place and are not likely to ease until more companies have reported results. Second-quarter earnings are expected to grow about 12% and would mark the 12th straight quarter of earnings growth of at least 10%.
Some good news on the economy came from the White House. President Bush said surging tax receipts have trimmed the size of the federal deficit in the current year. The federal deficit would likely shrink to $296 billion, or 2.3% of gross domestic product, in fiscal 2006. That's an improvement from the $318 billion shortfall seen in fiscal 2005.
Alcoa (NYSE: AA) closed down $1.63 or almost 5% to $31.78, after kicking off the earnings reporting period on a down note. The aluminum maker reported higher quarterly earnings on revenue that missed expectations. Likewise, Lucent Technologies (NYSE: LU) closed down $0.15 to $2.19, after warning that quarterly revenue will miss estimates.
Upbeat news from chip gear maker KLA Tencor (Nasdaq: KLAC) assisted the stock to close up $3.23 to $42.56. This assisted the semiconductors a lot and helped the rest of the tech sector. The CEO of KLA Tencor said that the company will beat the top end of its second-quarter forecast of bookings growth of between 9-11%.
Shares of Pfizer (NYSE: PFE) slipped down $0.38 or over 2% to $23.49, after an article in Business Week questioned whether the company's diabetes treatment Exubera is turning out to be as big a blockbuster as some had expected.
U.S. light crude oil for August delivery rose 55 cents to $74.16 a barrel on the New York Mercantile Exchange.
Alcoa (NYSE: AA) closed down $1.63 or almost 5% to $31.78, after kicking off the earnings reporting period on a down note. The aluminum maker reported higher quarterly earnings on revenue that missed expectations. Likewise, Lucent Technologies (NYSE: LU) closed down $0.15 to $2.19, after warning that quarterly revenue will miss estimates.
Upbeat news from chip gear maker KLA Tencor (Nasdaq: KLAC) assisted the stock to close up $3.23 to $42.56. This assisted the semiconductors a lot and helped the rest of the tech sector. The CEO of KLA Tencor said that the company will beat the top end of its second-quarter forecast of bookings growth of between 9-11%.
Stocks ended mixed in a cautious market. Investors hope that second-quarter earnings season will provide a catalyst for a summer rally. Weakness in the semiconductor sector weighed heavily on the Nasdaq Composite and made Tech shares slip.
Today, the Dow Jones Industrial average closed up 12.88 or 0.12% to 11,103.55, the broader Standard & Poor's 500 index closed up 1.86 or 0.15% to 1,267.34, and the Nasdaq composite index closed down 13.13 or 0.62% to 2,116.93.
Market breadth showed mixed results. On the New York Stock Exchange, advancers topped decliners by 5 to 3 on volume of 1.01 billion shares. On the Nasdaq, losers beat winners 16 to 13 as 1.29 billion shares changed hands.
It is evident that investors are waiting for second-quarter earnings, before moving in any direction. The market is likely to be choppy for at least the first few weeks of the earnings period, as investors hold back until they get a stronger sense of the corporate results. Some of the optimism was undermined by a profit warning from computer data storage maker EMC.
In economic news, the Commerce Department said wholesale inventories rose 0.8% in May against the expectations for a 0.5% increase. Sales increased 1.6% in May. Additionally, consumers took on a bigger-than-expected $4.4 billion more in debt in May. U.S. borrowers pushed up overall outstanding consumer credit by 2.4%, or $4.4 billion, to $2.173 trillion.
EMC Corp. (NYSE: EMC), the biggest maker of corporate data storage equipment, closed down $0.77 to $10.41. The company reported that its earnings are short of forecasts, owing to inadequate inventories of a new product and other sales setbacks. This is the second quarter in a row that EMC has missed its own targets. It expects to report a net income of 12 cents a share on revenue of about $2.575 billion, against the expected 13 cents and at least $2.66 billion.
Shares of AMD (NYSE: AMD) closed down $1.05 to $22.51, as the stock continued to tumble. The computer processor maker had warned that second-quarter sales would fall short of expectations due to competition from Intel, which has cut its prices to spur sales. AMD estimated sales in the quarter of about $1.22 billion, but below analysts' average forecast of $1.31 billion.
Stock of Walt Disney (NYSE: DIS) closed up $0.09 to $29.92, after its "Pirates of the Caribbean: Dead Man's Chest" raked in a record setting $132 million at the box office over the weekend. The previous three-day record of $114.8 million was set by "Spider-Man" in 2002.
Stock of Kraft (NYSE: KFT) closed up $0.01 to $30.21, after Kraft Foods has agreed to increase its stake in United Biscuits of the United Kingdom. The British company makes Kraft products such as Ritz crackers and Oreo cookies under license in Europe.
U.S. light crude oil for August delivery sank 48 cents to $73.61 a barrel on the New York Mercantile Exchange. Crude prices fell after a report that stated that Saudi Arabia is testing a new technique that could unlock its hard-to-tap supplies of heavy crude.
Stock of Walt Disney (NYSE: DIS) closed up $0.09 to $29.92, after its "Pirates of the Caribbean: Dead Man's Chest" raked in a record setting $132 million at the box office over the weekend. The previous three-day record of $114.8 million was set by "Spider-Man" in 2002.
Shares of AMD (NYSE: AMD) closed down $1.05 to $22.51, as the stock continued to tumble. The computer processor maker had warned that second-quarter sales would fall short of expectations due to competition from Intel, which has cut its prices to spur sales. AMD estimated sales in the quarter of about $1.22 billion, but below analysts' average forecast of $1.31 billion.
EMC Corp. (NYSE: EMC), the biggest maker of corporate data storage equipment, closed down $0.77 to $10.41. The company reported that its earnings are short of forecasts, owing to inadequate inventories of a new product and other sales setbacks. This is the second quarter in a row that EMC has missed its own targets. It expects to report a net income of 12 cents a share on revenue of about $2.575 billion, against the expected 13 cents and at least $2.66 billion.
The Dow, Nasdaq and S&P500 were all down this week but not too dramatically. The Dow is still maintaining a symbolic edge, still over the 11,000 mark, closing today at 11,090.67, down 59.55 on the week. The Nasdaq closed at 2130.06, down 42.03 over last week, and the S&P500 lost 4.72 on the week, finishing up at 1265.48. Gold continued its rise, gaining 18.80 for the week and closing at 634.80, and crude also inched up a bit to finish at 74.09, up sixteen cents on the week.
Crude oil futures reached a high this week of 75.78 for August delivery, and prices at the pump are up and will probably stay up for the rest of the summer, averaging about $3 a gallon. Crude prices are likely to continue rising for the rest of summer while demand is higher, and $80 a barrel would not be unreasonable to see by the end of summer.
Internationally, Mexico declared Felipe Calderon the winner of the presidential election, a favorite of investors, but the victory was very slim--reminiscent of the last U.S. presidential election. Calderon's left-wing rival will naturally challenge the count. As a result, all major Latin indexes closed low this week, including the Indice de Precios y Cotizaciones index, which lost 0.7 percent to close today at 19,917. The Mexican market won't regain its strength until after the issue is settled, and the Federal Electoral Tribunal has issued a final decision on the recount.
In the tech market, a good old-fashioned price war on microchips has had a negative impact on share prices for rivals American Microdevices (NYSE: AMD) and Intel (Nasdaq: INTC), both of which closed down today. AMD cut its second quarter sales forecast as a result of the price war, an action which triggered the decline. Intel has been aggressively pricing it own chips, particularly those for low-end desktops.
Does anybody still drive American cars? Last week, we noted that there had been some noise about General Motors (NYSE: GM) entering into an alliance with the French Renault, and Japanese Nissan motor car companies. Apparently it's more than just noise, and GM's Board today endorsed the recommendation to enter into discussions regarding just such an alliance. The ailing GM closed today at 29.48, up one percent for the day.
A sour ending to this week saw stocks tumble with the Dow and Nasdaq closing down over 1% after disappointing corporate news and the monthly jobs report pointed to slowing growth and rising inflationary pressure. However, oil fell more than a dollar after setting another record high. With second quarter earnings kicking off on Monday, stocks will take the cue from earnings. The expected slowing down in the economy is likely to become more evident in the second half of the year. Therefore, investors will be keeping close watch on accompanying financial forecasts from companies.
Today, the Dow Jones industrial average closed down 134.63 or 1.2% to 11,090.67, the broader Standard & Poor's 500 index closed down 8.60 or 0.7% to 1,265.48, and the Nasdaq closed down 25.03 or 1.2% to 2,130.06. For the week, the Dow lost 0.5%, the S&P lost 0.4% and the Nasdaq dropped 1.9%.
Market breadth was lower. On the New York Stock Exchange, losers beat advancers by a margin of two to one on volume of 1.42 billion shares. On the Nasdaq, decliners beat advancers by a margin of five to two as 1.78 billion shares changed hands.
The Labor Department reported that employers added 121,000 new workers to their payroll, against the expected 160,000. These numbers fell way short and may persuade the Feds to stop hiking the rate. However, it still is bad news for the economy. The rising interest continues to cut off cheap capital and cripple economic growth. The fact that wages have shown a 3.9% year-over-year increase may make Feds take a good second look. The unexpected 0.5% rise in average hourly earnings is also a sign of inflationary pressure.
Shares of 3M (NYSE: MMM) closed down $7.29 or over 9% to $74.10, after the company lowered its second quarter earnings guidance. The maker of Post-it notes, Scotch tape and a host of other industrial products, is renowned for innovative products. The company said that higher costs for the startup of its optical-films business and lower sales will hurt its second-quarter results.
In the tech sector, stock of AMD (NYSE: AMD) fell over 1% after the chipmaker cut its second-quarter sales forecast. The company stated that quarterly revenue would miss its earlier forecast because of weak demand for chips used in personal computers.
On a good note, shares of GM (NYSE: GM) closed up $0.28 or 1% to $29.48, after the company said it would hold "exploratory discussions" with Renault and Nissan (Nasdaq: NSANY) regarding a possible alliance among the three automakers. This has been making news for the past few days.
Stock of Starbucks (Nasdaq: SBUX) closed down $1.84 or 5% to $36.04, after the coffee purveyor said that sales at stores open at least a year rose 6%, which was at the low end of Wall Street's estimates.
Light, sweet crude oil slid $1.05 to settle at $74.09 a barrel on the New York Mercantile Exchange after hitting a new trading record of $75.55 earlier in the session.
Stocks closed higher with the Dow Jones Industrial Average registering the sharpest rise among the major averages due to a ruling favorable to Altria Group (NYSE: MO). However, the initial enthusiasm over weak economic reports gave way to anxiety over Friday's big jobs report.
Today, the Dow Jones Industrial average closed up 73.48 or 0.66% to 11,225.30, the broader Standard & Poor's 500 closed up 3.17 or 0.25% to 1,274.08, and the Nasdaq closed up 1.75 or 0.08% to 2,155.09.
Market breadth was mixed. On the New York Stock Exchange, winners beat losers by a margin of 5 to 3 on volume of 1.4 billion shares. On the Nasdaq, advancers edged out decliners by 15 to 14 as 1.63 billion shares changed hands.
In international news about North Korea, the U.N. Security Council at an emergency meeting proposed a draft resolution condemning North Korea and calling on Pyongyang to "immediately cease the development, testing, deployment and proliferation of ballistic missiles and reconfirm its moratorium on missile launching.
Despite a raft of new retail sales reports, weekly crude and gas inventories levels, a weak non-manufacturing sectors survey and the decision in favor of Altria (NYSE: MO); investors continue to be hesitant ahead of the June unemployment report. They are looking for the economy to have added 160,000 jobs in the report expected tomorrow. The number will be closely watched as the Federal Reserve has said any future interest rate hikes will depend on the most recent economic data. A number too much over 160,000 will cause inflation and rate hike jitters, while one too soft could spark fears of a an economic slowdown. However, in a sign of economic strength, jobless claims for the latest week dropped 2,000 to 313,000, contrasting with economists' expectations for an increase of 2,000
The ISM stated that its headline services sector figure fell to 57% in June from 60.1% in May. Economists had expected a reading of 59.6%. This index measures economic conditions in the non-manufacturing sector, and a reading above 50 indicates growth. The prices paid component of the survey, which fell, is an important figure because it's a forward-looking indicator. That's the kind of stuff that will make the Feds pause. Retail sales in June came in on the sluggish side as high gas prices and lousy weather kept consumers away from the shopping center.
After a favorable decision, shares of Altira (NYSE: MO) closed up $4.43 or 6% to $77.76. The Florida Supreme Court upheld a lower court decision to throw out a $145 billion punitive damage award against Big Tobacco and decertified a class-action case. However, this has left open the door for damage claims by individuals. This decision may help speed up Altria Group's spin-off of Kraft. Other defendants in the case included various units of Reynolds American Inc. (NYSE: RAI) which ended up $4.59 or4% to $118.95 and Loews Corp (NYSE: LOW) that closed up $0.51 or 1% to $36.01.
Shares of retail giant Wal-Mart Stores Inc. (NYSE: WMT) closed 0.7% lower at $46.70, after reporting that June sales at stores rose 1.2%. This is against the expected gain of 2%. Results remain anemic despite price cuts as consumers focused their spending on the necessities. While being in line with expectations, the results touched the low end of the initial projection of a 1%-to-3%. Wal-Mart also said it expects to report second-quarter earnings within its prior forecast range of 70 cents to 74 cents a share.
Amongst other results, wholesale club operator Costco (Nasdaq: COST) closed down $1.00 or 2% to $55.79, after reporting June same-store sales rose 6%, U.S. same-store sales up 4% and international same-store sales jumping 14%. However, the overall figure was shy of analysts' expectations of a 6.9% gain.
Light sweet crude slipped 5 cents to settle at $75.14 a barrel on the New York Mercantile Exchange after a government report showed an unexpected buildup in weekly gasoline supplies. Additionally, gas supplies increased by 700,000 barrels diminishing supply worries.
Stocks closed with heavy losses after global exchanges were unnerved by North Korean missile tests and the domestic market remained undermined by fears that strong data will force the Federal Reserve to lift interest rates further. The red in stocks sparked a rally in commodities which caused a jump in gold and sent oil prices to fresh record highs.
Today, the Dow Jones Industrial average closed down 76.20 or 0.68% to 11,151.82, the broader Standard & Poor's 500 index closed down 9.28 or 0.72% to 1,270.91, and the Nasdaq closed down 37.09 or 1.69% to 2,153.34.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by a margin of 24 to 9 on volume of 1.509 billion shares. On the Nasdaq, decliners topped advancers by a margin of 20 to 9 as 1.597 billion shares changed hands.
The geopolitical events are causing tensions. North Korea fired seven missiles on Wednesday. One of the weapons launched was a Taepodong-2 long-range ballistic missile that's thought capable of delivering a warhead as far as Alaska or Hawaii. The continuing spat with Iran over its nuclear program.
The ADP national employment index, showed that private-sector jobs increased by 368,000 last month. This indicates economic strength, and possibly an up-tick in inflation, conditions that could pressure the Federal Reserve to keep lifting interest rates. This is contrary to the indication last week that the Feds may cease further increase. Additionally, U.S. economic strength was reinforced by news that factory orders rose 0.7% in May. This is against the expected 0.1% increase.
Stocks associated with Atlantic City's casinos faced rough weather. Casinos have been ordered closed by the state's Casino Control Commission due to New Jersey's budget crisis. Shares that were affected included Trump Entertainment Resorts (Nasdaq: TRMP) down $0.82 to $19.46, Hurrah's Entertainment (NYSE: HET) down $0.75 to $69.75, Hilton Hotels (NYSE: HLT) down $0.59 to $27.76, MGM Mirage (NYSE: MGM) down $0.59 to $40.24, and Boyd Gaming (NYSE: BYD) closed down $0.53 to $39.36.
Shares of General Motors Corp. (NYSE: GM) closed up 1% at $29.42. Their CEO, Rick Wagoner and Carlos Ghosn, the CEO of Nissan Motor (Nasdaq: NSANY) and Renault, are set to meet in Detroit later this month. It is reported that Renault and Nissan could buy 20% of GM. This could inject cash but would fall short of a full merger. Shares of Nissan closed down $0.86 or over 3% to $21.33.
Shares of AT&T Inc. (NYSE: T) closed down 3 cents at $27.90. Banc of America upgraded the stock to a buy rating, predicting stronger earnings estimates at the completion of its merger with BellSouth.
Shares of Duquesne Light Holdings (NYSE: DQE) rallied 17.9% to $19.39. after the company agreed to be acquired by a consortium led by Macquarie Infrastructure Partners and Diversified Utility and Energy Trusts at a price of $20 each in cash. This is a premium of roughly 22% over their closing price on Monday. The total enterprise value of the transaction is $3.15 billion. This reflects a cash consideration of about $1.59 billion, assumption of an estimated $1.26 billion in long-term debt and $148 million in Duquesne preferred and preference shares on issue. In addition, the consortium agreed to invest about $141 million in newly issued Duquesne Light Holdings' equity under a private placement priced at $16 per share prior to the closing of the deal.
Oil futures pushed through the key $75 a barrel level, after Iran pushed back a meeting about its nuclear activities with EU representatives. U.S. crude for August delivery gained $1.26 to settle $75.19 a barrel on the New York Mercantile Exchange.
Shares of General Motors Corp. (NYSE: GM) closed up 1% at $29.42. Their CEO, Rick Wagoner and Carlos Ghosn, the CEO of Nissan Motor (Nasdaq: NSANY) and Renault, are set to meet in Detroit later this month. It is reported that Renault and Nissan could buy 20% of GM. This could inject cash but would fall short of a full merger. Shares of Nissan closed down $0.86 or over 3% to $21.33.
Shares of Duquesne Light Holdings (NYSE: DQE) rallied 17.9% to $19.39. after the company agreed to be acquired by a consortium led by Macquarie Infrastructure Partners and Diversified Utility and Energy Trusts at a price of $20 each in cash. This is a premium of roughly 22% over their closing price on Monday. The total enterprise value of the transaction is $3.15 billion. This reflects a cash consideration of about $1.59 billion, assumption of an estimated $1.26 billion in long-term debt and $148 million in Duquesne preferred and preference shares on issue. In addition, the consortium agreed to invest about $141 million in newly issued Duquesne Light Holdings' equity under a private placement priced at $16 per share prior to the closing of the deal.
Stocks started the first shortened trading day of the third quarter on a positive note. Stocks rallied to a higher close after fund managers made portfolio additions. Additionally, unexpected economic weak data was seen as advancing an argument that U.S. interest-rate increases are nearing an end.
Today, the Dow Jones Industrial Average closed up 77.80 points or 0.70% at 11,228.02, the S&P 500 closed up 9.99 points or 0.79% at 1,280.19, and the Nasdaq Composite moved up 18.34 points or 0.84% at 2,190.43.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by a margin of three to one on volume of 763 million shares. On the Nasdaq, advancers topped decliners by a margin of 17 to 11 as 754 million shares changed hands.
Despite the low volume, it is evident that people are putting some money to work in stocks that have been knocked lower in recent times. In data news, the Institute for Supply Management said its index of manufacturing activity fell to 53.8 in June from 54.4 in May. Any reading above 50 shows a growth. Construction spending fell 0.4 percent in May, against the expected increase by 0.2%. These softer numbers indicate a slowing of economy and that could lead the Feds to stop the rate increase. Investors that were worried about rising inflation have cheered signs of cooling economic growth.
Shares of Alcoa Inc. (NYSE: AA) closed up 2.3% at $33.09. J.P. Morgan in a note last week said it believes that foreign rivals Rio Tinto (NYSE: RTP) and BHP Billiton (NYSE: BHP) both have the deep pockets to make it possible to mull a takeover of Alcoa and its 60%-owned Australian unit, Alumina Ltd.
Stock of Wal-Mart Stores Inc. (NYSE: WMT) closed 1.3% lower at $47.57. The retailer over the weekend said comparable-store sales for June would be up about 1.2%, which is at the low end of its predicted 1-3% increment.
It is believed that the U.K. music group EMI is mulling whether to raise its bid for Warner Music Group (NYSE: WMG) to $33 a share, valuing the company at about 2.6 billion pounds ($4.8 billion). Warner last week offered 2.5 billion pounds ($4.6 billion) for EMI. Shares of Warner Music closed down 20 cents to close at $29.28.
Jefferies & Co. upgraded Nortel Networks Corp. (NYSE: NT) to buy from hold, citing attractive valuation and confidence in Nortel's new management team. The stock closed up 3.1% higher at $2.31. The company has also raised his stock price target to $3 from $2.60.
Shares of General Motors (NYSE: GM) closed down 1.3% at $29.41. Banc of America upgraded the stock to neutral from sell, citing the value of a potential three-way transaction with Renault and Nissan (Nasdaq: NSANY). Investor Kirk Kerkorian is pressing the No. 1 automaker to consider a three-way partnership with Nissan Motor Corp. and Renault SA. Analyst Ron Tadross has also raised his stock price target on GM to $30 from $15. It is reported that Nissan's board has approved exploratory talks about the alliance, Reuters reported.
The Oil market remained closed today.
Weeks of wondering is at an end and the Fed issued their quarter-point increase in the interest rate. What's even more important, they signaled that this may have been the last one for a while. Wall Street wasn't all champagne corks and confetti today, but the mood was upbeat and the week ended with a small rally as a result. The Dow gained 161.13 for the week ending at 11150.22, after shooting up above 11200 on Thursday just after the news.
The Nasdaq ended the week up 50.62 to close at 2172.09 today, and the S&P500 was up 25.70, ending at 1270.20. Crude was also up by 3.06 on the week, closing at 73.93, and gold futures are once again above 600 today, ending the day at 616.00, up 28.00 over last week. Crude's increase can be attributed to news from the Energy Department that supplies fell by 3.4 million barrels for the week, more than expected. Motor gasoline inventory also fell by a million barrels.
Consumer confidence rose a bit in June, with the Index moving to 105.7 from May's 104.7.
A nice IPO this week was the new issue of J. Crew (NYSE: JCG), which opened at $25.05, well above its opening price of $20. It closed today at 27.45, up $1.07 for the day. The clothing maker is healthy financially, having doubled its first quarter net income year-over-year.
In the tech business, Google (GOOG) has taken a step closer to becoming the King of the Internet, with the release of its Google Checkout, a "shopping cart"-type utility for making online purchases. General Motors (NYSE: GM) stock also got a boost this week when billionaire Kirk Kerkorian suggested that GM ally itself with Renault and Nissan. GM has made no announcements other than that they will "take it under advisement," but the move may be just what the ailing American auto industry needs.
The mini-rally of the last couple days comes just in time, next month's earnings releases will start coming in soon, and nothing drags share prices down like mediocre earnings in a bear market. July's atmosphere on Wall Street will be decidedly better than June's, and this will help shore up share prices as the good news and bad news gets announced.
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