|
| |
About
A weblog about stocks, technical analysis, the market and other things that pop into the mind of Manuel Backus, founder and head trader of Portfolio Crafter and First Hour Trading. Contact
Email: manuel [AT] manuelbackus.com
Links
Subscribe
Receive weekly trading tips by email.
|
|
« July 2006 |
Main
| September 2006 »
Stocks closed near flat on the day, but higher on the month with the market managing to overcome a long list of economic, energy price and political worries during August. Investors welcomed upbeat reports on the economy and inflation but played it cautious after the recent rally and ahead of tomorrow’s monthly employment report.
Today, the Dow Jones industrial average closed down 1.76 or 0.02% to 11,381.15, the broader Standard & Poor's 500 index closed down 0.45 or 0.03% to 1,303.82, and the Nasdaq composite index closed down 1.98 or 0.09% to 2,183.75. For the month, the Dow rose 1.7%, the S&P 500 advanced 2.1% and the Nasdaq Composite gained 4.4%. In comparison, your Model Portfolio gained 12.51% for the month – outperforming the market by nearly 200%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 19 to 13 on volume of 1.32 billion shares. On the Nasdaq, advancers topped decliners by 15 to 14 as 1.73 billion shares changed hands.
In an afternoon speech, the Fed Chief Ben Bernanke said that the strong increase in productivity seen over the past decade is likely to continue for some time. His speech was cautiously optimistic in that the longer-term rate of productivity growth could remain at roughly 2.5% per year. However, he did not address interest rate policy, and stocks showed little reaction.
Under economic news, July personal income rose 0.5%, while personal spending rose 0.8%. This shows that consumer spending is holding up, even amid a cooling in the housing market and still expensive oil and gas prices. As spending fuels two-thirds of economic growth, the report is encouraging for the economy. The PCE index rose 0.1% against the expected 0.2%. Core U.S. consumer prices rose a less-than-expected 0.1% against the expected 0.2%. Overall inflation, increased by 0.3%, reflecting higher energy prices.
The Chicago PMI fell to 57.1 in August from 57.9 in July, against the expected 57.0. A reading above 50 indicates expansion. The employment component of the index rose to 55.1 in August from 50.5 in July. Prices paid slipped to 75.2 in August from 86.8 in July. New orders edged down to 59.6 in August from 60.0 in July.
In July, factory orders fell 0.6%, against the expected drop of 0.8%. New orders at U.S. factories fell by a smaller-than-expected 0.6% against the expected 1% decline. Total unfilled orders for durable goods, rose 1.3& and durable goods inventories rose 1.0%.
A number of retailers reported August sales at stores open a year or more, and the results were mixed. Many U.S. chain store operators failed to get a hoped-for back-to-school sales boost. Among the laggards, Gap Inc (NYSE: GPS) posted a 7% decline in August same-store sales. Analysts had expected it to post a 3.4% decline for the month.
Wal-Mart Stores Inc. (NYSE: WMT) reported August same store sales at the high end of its own expectations, helped by solid back-to-school purchases, and forecast same-store sales would increase by 1% to 3% next month. This lead the stock to close up $0.12 or 2.7% to $44.74. Same store sales rose 2.7% against the expected 2.5%. Total sales reached $25.97 billion, up 12.5% from last year.
In merger news, Goldcorp (NYSE: GG) said it was buying rival Glamis Gold (NYSE: GLG) for $8.6 billion in stock. Shares of Goldcorp Inc closed down $2.84 or 8.6% to $27.63, after this announcement. On the other hand, stock of Glamis closed up $7.32 or 20% to $46.18. The fact that the offer was for a 33% premium was not welcomed by investors. This deal would create the world's third biggest gold miner by market capitalization, with 41.1 million ounces in provable and probable reserves and 11,000 employees. Goldcorp, which has operations in the Americas and Australia, would also gain about 26 million ounces of annual silver production.
Valassis Communications (NYSE: VCI) for, a marketing company, filed a lawsuit to end its $1.3 billion merger with Advo (NYSE: AD), a direct-mail marketer, owing to what it said was management's misinformation about the company's finances. This lead shares of Advo to close down $7.99 or 25% to $28.81, and that of Valassis to close down $1.22 or 95 to $19.79.
U.S. light crude oil for October delivery fell 23 cents to $70.26 a barrel on the New York Mercantile Exchange. News of an increase in natural gas supplies helped ease energy supply worries for the moment.
Wal-Mart Stores Inc. (NYSE: WMT) reported August same store sales at the high end of its own expectations, helped by solid back-to-school purchases, and forecast same-store sales would increase by 1% to 3% next month. This lead the stock to close up $0.12 or 2.7% to $44.74. Same store sales rose 2.7% against the expected 2.5%. Total sales reached $25.97 billion, up 12.5% from last year.
In merger news, Goldcorp (NYSE: GG) said it was buying rival Glamis Gold (NYSE: GLG) for $8.6 billion in stock. Shares of Goldcorp Inc closed down $2.84 or 8.6% to $27.63, after this announcement. On the other hand, stock of Glamis closed up $7.32 or 20% to $46.18. The fact that the offer was for a 33% premium was not welcomed by investors. This deal would create the world's third biggest gold miner by market capitalization, with 41.1 million ounces in provable and probable reserves and 11,000 employees. Goldcorp, which has operations in the Americas and Australia, would also gain about 26 million ounces of annual silver production.
Stocks finished higher with investors hoping that weaker Treasury yields may signal an end to Federal Reserve interest rate increases. The market also absorbed news of an upward revision to second quarter GDP data that, while higher than the original estimate, was below expectations. Tech stocks rallied for a fifth session in a row, while the broader market ended little changed.
Today, the Dow Jones industrial average closed up 12.97 or 0.11% to 11,382.91, the Standard & Poor's 500 index closed down 0.01 to 1,304.27, and the Nasdaq composite index closed up 13.43 or 0.62% to 2,185.73.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by 5 to 3 on volume of almost 1.28 billion shares. On the Nasdaq, advancers beat decliners 18 to 11 as roughly 1.67 billion shares changed hands.
Investors welcomed falling oil prices and a revised read on second-quarter GDP. However, they chose to tread cautiously and move forward slowly. Economic reports that are due soon shall give some direction to the markets. Of significance are the personal income and spending reports, in particular, the report's inflation component which is expected to have risen at a 2.5% against the Fed's target of 1-2%. The monthly employment report for August would also be closely watched. However, Federal Reserve official Jeffrey Lacker said that there is a risk of inflation becoming entrenched and that an unfolding economic slowdown might not be enough to bring inflation down quickly. He opines that the economic slowdown may not be enough to slow inflation.
The GDP growth for the second quarter was revised up to 2.9% and the key inflation component was revised a bit lower. This eased some recent worries about the economy slowing too fast and heading toward a recession. The revision is largely due to higher investments in nonresidential construction, more inventory building and higher exports, offset by lower investments in housing.
Shares of Apple Computer Inc. (Nasdaq: AAPL) finished up $0.48 or 0.8% to $66.96 after the CEO of Google Inc. (Nasdaq: GOOG) Eric Schmidt, was named to the Apple's board. Shares of Google closed up $1.80 to $380.75. Before joining Google, Schmidt served as CEO at Novell Inc. (Nasdaq: NOVL) and was also the CTO at Sun Microsystems Inc. (Nasdaq: SUNW).
Shares of Costco Wholesale Corp. (Nasdaq: COST) dropped $2.07 or 4.2% to close at $47.15, after warning that current-quarter earnings won't meet forecasts because of weaker gross margins. The management said that a higher return rate on electronics devices, as well as markdowns of those devices, other merchandise and furniture contributed to the shortfall. This was unsettling to market as participants worried about a slowdown in consumer spending, amid the cooling in the housing market and ongoing high gas prices.
Shares of General Motors Corp. (NYSE: GM) ended 0.7% lower at $29.25. The CEO Rick Wagoner said the automaker's North American turnaround strategy is "working just great," and that the company remains focused on cutting costs, investing in new products and improving its marketing strategies in the U.S.
On reports of earning warning, shares of Novell (Nasdaq: NOVL) closed down $0.14 or 2% to $6.64. The company announced that fourth-quarter sales and earnings won't meet estimates as a result of disappointing sales.
U.S. light crude oil for October delivery gained 32 cents to settle at $70.03 a barrel on the New York Mercantile Exchange. Supply concerns increased ahead of Thursday's deadline for Iran to meet a U.N. demand that it halt uranium enrichment. On the other hand, the Energy Department reported that crude supplies rose 2.4 million barrels to 332.8 million for the latest week.
Shares of Costco Wholesale Corp. (Nasdaq: COST) dropped $2.07 or 4.2% to close at $47.15, after warning that current-quarter earnings won't meet forecasts because of weaker gross margins. The management said that a higher return rate on electronics devices, as well as markdowns of those devices, other merchandise and furniture contributed to the shortfall. This was unsettling to market as participants worried about a slowdown in consumer spending, amid the cooling in the housing market and ongoing high gas prices.
Stocks finished higher as investors looked past Federal Reserve monetary policy meeting notes that provided few decisive clues about the central bank's next interest rate move. While the Fed cut its growth forecast and left open the option of further rate increases, investors decided to focus on a drop in crude prices.
Today, the Dow Jones industrial average closed up 17.93 or 0.16% to 11,369.94, the broader Standard & Poor's 500 index closed up 2.50 or 0.19% to 1,304.28, and the Nasdaq composite index closed up 11.60 or 0.54% to 2,172.30.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 11 to 5 on volume of 1.37 billion shares. On the Nasdaq, advancers topped decliners by 19 to 9 on volume of 1.62 billion shares.
Release of the Fed policy meeting minutes, brought to fore that the policy-makers, while worried about inflation, feel that keeping interest rates steady would enable them to gather more data before deciding on any future rate rises. A key factor in the central bank's decision was that the staff forecast below-trend growth over the next year and a half. Some officials were wary of over-tightening, and were comfortable with pausing for at least one meeting, so as to allow the effects of the previous rate hikes to be better felt by the economy. However, the Feds are keeping their options open.
In data news, the U.S. consumer confidence this month fell to 99.6 against the expected fall to 102.5. This reflects worries that the economy may be heading toward a recession. Worries about job growth and the economy have overshadowed a pause by the Federal Reserve in raising interest rates.
Shares of Apple Computer (Nasdaq: AAPL) closed down $0.50 or almost 1% to $66.48, on worries about its recently recalled laptop batteries. In addition, Vivendi's Universal is reportedly backing a service that will allow customers to download songs for free - in competition with Apple's iTunes. However, news of the CEO of Google (Nasdaq: GOOG) joining the board of Apple was welcomed.
Stock of Coca-Cola Co. (NYSE: KO) gained almost 1% to $45.13, after it announced that it had bought a controlling holding in Kerry Beverages Ltd., a bottling joint venture it formed in 1993 with Kerry Group, a Hong Kong conglomerate. However, financial terms of this deal weren't disclosed.
Stock of Schering-Plough Corp. (NYSE: SGP) rose 2.6% to $20.94, after the firm agreed to plead guilty to conspiracy and pay $435 million to settle an investigation into its sales and marketing practices by the Justice Department and the U.S. Attorney's Office of Massachusetts. This calls for the company to pay $180 million in criminal fines and an additional $255 million to resolve civil aspects of the investigation.
Shares of BP Plc (NYSE: BP) fell 60 cents or 0.9%, at $67.70 on announcement that the U.S. government has begun criminal and civil investigations into whether BP manipulated U.S. crude-oil and unleaded-gasoline markets. The CEO of BP is being forced to testify under oath about safety problems. Disclosure of the investigations comes as BP has been summoned before the House Energy and Commerce Committee to explain the recently discovered pipeline leak at its Prudhoe Bay, Alaska, operation that has indefinitely taken some 200,000 barrels a day of crude output off the market.
U.S. light crude oil for October delivery fell 90 cents to $69.71 a barrel on the New York Mercantile Exchange. Tropical Storm Ernesto has skirted Cuba and is headed toward the Florida Keys, away from key U.S. oil and natural-gas infrastructure in the Gulf of Mexico.
Shares of BP Plc (NYSE: BP) fell 60 cents or 0.9%, at $67.70 on announcement that the U.S. government has begun criminal and civil investigations into whether BP manipulated U.S. crude-oil and unleaded-gasoline markets. The CEO of BP is being forced to testify under oath about safety problems. Disclosure of the investigations comes as BP has been summoned before the House Energy and Commerce Committee to explain the recently discovered pipeline leak at its Prudhoe Bay, Alaska, operation that has indefinitely taken some 200,000 barrels a day of crude output off the market.
Stock of Schering-Plough Corp. (NYSE: SGP) rose 2.6% to $20.94, after the firm agreed to plead guilty to conspiracy and pay $435 million to settle an investigation into its sales and marketing practices by the Justice Department and the U.S. Attorney's Office of Massachusetts. This calls for the company to pay $180 million in criminal fines and an additional $255 million to resolve civil aspects of the investigation.
Stocks closed sharply after a weakening of Tropical Storm Ernesto relieved investors and sent crude prices lower. Positive momentum was reinforced by news upbeat corporate news energy transporter Kinder Morgan (NYSE: KMI) accepting a $22 billion buyout and by other bits of mergers and acquisition news.
Today, the Dow Jones industrial average closed up 67.96 or 0.6% to 11,352.01, the broader S&P 500 index closed up 6.69 or 0.52% to 1,301.78, and the Nasdaq composite index closed up 20.41 or 0.95% to 2,160.70.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by 23 to 9 on volume of 1.2 billion shares. On the Nasdaq, advancers beat decliners also by 9 to 5 as 1.4 billion shares changed hands.
The three major factors that regulated the market today were, the decline in crude prices, the strong sales news from Wal-Mart (NYSE: WMT), and the continued resiliency of mergers and acquisitions. The market will however, continue to wait for more information about the economy. Investors are looking forward to the employment report due Friday and it is expected that jobs will increase by 130,000 this month. The jobless rate is also expected to be down at 4.7%. The PCE index is expected to show an advance of 0.2%. Additionally, tomorrow investors will see the minutes from the Fed's August 8 meeting and the August report on Consumer Confidence.
Oil and gas pipeline operator Kinder Morgan, Inc. (NYSE: KMI), has agreed to be bought by an investor group that includes Chief Executive Richard Kinder for $107.50 a share, or $15 billion, in cash. This led the share to close up $2.57 or 2.5% to $104.27. The investor group that includes the company management, Goldman Sachs Capital Partners, American International Group, Inc., The Carlyle Group and Riverstone Holdings LLC., will also assume $7 billion of debt. This transaction is expected to be completed by early 2007, subject to stockholder and regulatory approvals.
Shares of eBay (Nasdaq: EBAY) closed up $0.49 to $25.79, and that of search engine Google (Nasdaq: GOOG) ramped up $7.69 to $380.95, on announcement of a mutual deal. Google Inc. has gained exclusive rights to display text advertisements on the auction sites of eBay Inc. outside the U.S., giving eBay access to the Internet's largest inventory of search-based ads and Google more Web pages on which to display them.
On buy back news, stock of Amazon.com (Nasdaq: AMZN) closed up 0.88 to $28.91, after its board of directors authorized the company to buy back up to $500 million in common stock. Shares of Intel gained $0.48 to $19.38, after Friedman Billings Ramsey's Chris Caso upgraded it to "Outperform" from "Market Perform."
Stock of Ford Motor Co. (Nasdaq: F) gained $0.05% or 0.6% to $8.05 on news that it is considering a sale of a stake in its financing arm. This is a part of a sweeping restructuring plan for the company.
Shares of Wal-Mart Stores Inc. (NYSE: WMT) closed up $0.55 or over 1% to $44.43, after the company estimated that August sales rose 2.7% at its U.S. stores open at least a year, near the high end of its forecast.
U.S. light crude fell $1.90 to $70.61 a barrel on the New York Mercantile Exchange. The news that Ernesto has weakened and veered away eased supply worries. Hurricane Ernesto has been downgraded to tropical storm status and forecasts suggest it will miss oil facilities in the Gulf of Mexico and hit South Florida instead.
Stocks closed mixed with all three major averages taking weekly losses due to concern over the outlook for interest rates and mounting fear of a sharper than expected slowdown in economic growth. Today, tech shares closed higher and blue chips closed lower, at the end of a choppy session that was driven mostly by fluctuating oil prices.
Today, the Dow Jones industrial average closed down 20.41 or 0.18% to 11,284.05, the broader Standard & Poor's 500 closed down 0.97 or 0.07% to 1,295.09, and the Nasdaq composite index closed up 3.18 or 0.15% to 2,140.29. For the week, the Dow ended down 0.9%, the S&P closed lower 0.05% and the Nasdaq lost 1.1%.
Market breadth was positive and trading volume was light. On the New York Stock Exchange, winners beat losers by 16 to 15 on volume of 1.06 billion shares. On the Nasdaq, advancers narrowly topped decliners 15 to 13 as 1.30 billion shares changed hands.
Federal Reserve chief Ben Bernanke confined his speech to the subject of global economic integration at the central bank's annual Jackson Hole retreat in Wyoming. He said that economic policymakers have to make sure that enough segments of society feel the benefits of globalization in order to guard against protectionism. Investors were disappointed as they had been expecting that he would also address the issues of inflation and economic growth.
Uncertain future is making investors nervous and the markets are behaving erratically. Investors have growing evidence showing the housing market is slowing down, but they could, at the same time, be putting too much weight on what that means for the economy. Adding to concerns, new orders for U.S. made durable goods tumbled 2.4% in July against the expected 0.7%. There is adequate evidence that the economy is slowing down, but it's not clear that it's slowing enough to stop inflation. At the same time, there is also the problem that the economy is slowing enough to hurt corporate earnings.
Stock of Ford Motor Co (Nasdaq: F) closed up 3.1% to $8, after Robert Rubin, a senior Citigroup Inc. (NYSE: C) executive, resigned from the automaker's board of directors, on which he had served since 2000. The resignation is to avoid any questions of a conflict of interest, since Ford is undergoing a strategic review and Citigroup has a broad relationship with the automaker. Ford is looking to sell its luxury brands, including Jaguar and Land Rover. Additionally, it may be thinking of joining a Renault-Nissan alliance and that the Ford family may be considering taking the company private. As a reaction, stock of Citigroup closed down $0.08 to $48.64.
Stock of Toyota Motor Co. (NYSE: TM) fell 2% to $106.12 after a Wall Street Journal reported that it may delay introducing some new models by as much as half a year in order to deal with quality problems that have arisen in the U.S. and Japan. This has dealt a blow to the Japanese car maker's reputation for reliability. The company is recalling more than 20,000 cars in China because of a windshield problem.
U.S. light crude oil for October delivery added 15 cents to settle at $72.51 a barrel on the New York Mercantile Exchange. Futures rallied as a tropical depression over the Atlantic has the potential to strengthen and reach the Gulf of Mexico, holding out the potential to disrupt production.
Stock of Toyota Motor Co. (NYSE: TM) fell 2% to $106.12 after a Wall Street Journal reported that it may delay introducing some new models by as much as half a year in order to deal with quality problems that have arisen in the U.S. and Japan. This has dealt a blow to the Japanese car maker's reputation for reliability. The company is recalling more than 20,000 cars in China because of a windshield problem.
Stock of Ford Motor Co (Nasdaq: F) closed up 3.1% to $8, after Robert Rubin, a senior Citigroup Inc. (NYSE: C) executive, resigned from the automaker's board of directors, on which he had served since 2000. The resignation is to avoid any questions of a conflict of interest, since Ford is undergoing a strategic review and Citigroup has a broad relationship with the automaker. Ford is looking to sell its luxury brands, including Jaguar and Land Rover. Additionally, it may be thinking of joining a Renault-Nissan alliance and that the Ford family may be considering taking the company private. As a reaction, stock of Citigroup closed down $0.08 to $48.64.
Stocks closed with slender gains as the latest reports on the economy eased concerns about higher interest rates but also raised questions about slowing growth. The weaker than expected new home sales report implies accelerating pace of the economic slowdown.
Today, the Dow Jones industrial average closed up 6.56 or 0.06% to 11,304.46, the Standard & Poor's 500 index closed up 3.07 or 0.24% to 1,296.06, and the Nasdaq composite index closed up 2.45 or 0.11% to 2,137.11.
Market breadth was positive, after alternating throughout the session. On the New York Stock Exchange, winners topped losers 6 to 5 on volume of 1.25 billion shares. On the Nasdaq, advancers narrowly edged decliners on volume of 1.42 billion shares.
Federal Reserve Chairman Ben Bernanke is due to speak tomorrow at the annual Fed symposium for global central bankers. His speech will likely set the tone for morning trading. Investors continue to worries about how the slowing housing market will hurt consumer spending. Overall, economic data point to a slowdown in economic growth, but there appear to be mixed opinion as to what the trend of growth will be heading into 2007.
New home sales fell to an annual pace of 1.07 million in July, against the expected 1.13 million. New home sales are down 21.6% in the past year, the biggest drop since late 1994. The housing data shows that the slump is getting worse, and it's raising questions for investors about what the Federal Reserve will do next. A separate report showed a bigger than expected dip in durable goods orders. New orders fell a 2.4% percent in July, much larger than the expected 0.7% decline. However, excluding the 9.6% drop in transportation goods, durable-goods orders rose 0.5%. This has actually boosted prospects for the economy and we are now looking at a 10%.
Shares of Rite Aid Corp. (NYSE: RAD) closed down $0.32 or 6.8% to $4.36, after announcing that it is buying the Eckerd and Brooks drugstore chains for $3.4 billion in cash and stock. The deal is to acquire 1,858 drugstores from Canada's Jean Coutu Group which will give it a 32% stake in Rite Aid. Rite Aid, will also assume $850 million of Jean Coutu long-term debt. This deal will raise Rite’s ownership to 5,000 stores and will significantly expand its presence on the East Coast with estimated sales of nearly $27 billion. Goldman Sachs feels that this will make Rite Aid an underperforming and highly leveraged company. Analysts opine that the increased financial risk and challenges of integrating the acquired stores could result in a lower credit rating.
Shares of Ford Motor Co. (Nasdaq: F) closed unchanged at $7.76, on reports that the founding family is considering taking the company private. The Ford family controls nearly 40% through a separate class of stock and the attempt is to pave the way for Bill Ford and his inner circle to retool the struggling automaker without further meddling by shareholders. This move would presumably cost about $13.7 billion and is being termed as ‘mere speculation’ by the company spokesman.
Stock of McDonald's Corp. (NYSE: MCD) closed up 29 cents at $35.88 after its president and CEO, Mike Roberts resigned after nearly three decades with the company. He's being replaced by Ralph Alvarez, head of its North American operations. This news comes in the wake of its slowest U.S. monthly sales gain, and amid persistent speculation that there was acrimony in the executive suite over succession plans.
Shares of Apple Computer Inc (Nasdaq: AAPL) rose less than 1% after it said that it is recalling 1.8 million laptop batteries made by Sony amid a risk of overheating. Stock of Sony (NYSE: SNE) closed down $1.16 or 2.6% to $43.26. These Sony lithium-ion battery packs were used in Book G4 and PowerBook G4 laptop computers. Apple, said an additional 700,000 of the battery packs were sold outside the U.S. and will also be recalled.
Stock of EBay Inc. (Nasdaq: EBAY) closed down $1.22 or 4.7% to $25.78, on a Piper Jaffray downgrade to underperform from market perform. The brokerage said it sees a worsening picture for the company, with costs likely to increase and with prospects for growth picking back up in the core eBay business seen as highly unlikely. Hundreds of eBay Inc. merchandisers have closed their online storefronts, and some took their listings elsewhere, in the wake of a controversial fee increase eBay began charging earlier in the week. eBay took this step since there is about four times the number of items listed for sale in stores than in auctions on eBay. The imbalance has hit eBay hard with profit dropping 14% from a year earlier.
U.S. light crude oil for October delivery added 60 cents to settle at $72.36 a barrel on the New York Mercantile Exchange. Crude futures found some support from strength in natural gas, and a news report that BP's output from its key oilfield in Alaska's Prudhoe Bay has been further reduced due to a problem with a compressor.
Shares of Rite Aid Corp. (NYSE: RAD) closed down $0.32 or 6.8% to $4.36, after announcing that it is buying the Eckerd and Brooks drugstore chains for $3.4 billion in cash and stock. The deal is to acquire 1,858 drugstores from Canada's Jean Coutu Group which will give it a 32% stake in Rite Aid. Rite Aid, will also assume $850 million of Jean Coutu long-term debt. This deal will raise Rite’s ownership to 5,000 stores and will significantly expand its presence on the East Coast with estimated sales of nearly $27 billion. Goldman Sachs feels that this will make Rite Aid an underperforming and highly leveraged company. Analysts opine that the increased financial risk and challenges of integrating the acquired stores could result in a lower credit rating.
Shares of Ford Motor Co. (Nasdaq: F) closed unchanged at $7.76, on reports that the founding family is considering taking the company private. The Ford family controls nearly 40% through a separate class of stock and the attempt is to pave the way for Bill Ford and his inner circle to retool the struggling automaker without further meddling by shareholders. This move would presumably cost about $13.7 billion and is being termed as ‘mere speculation’ by the company spokesman.
Stock of McDonald's Corp. (NYSE: MCD) closed up 29 cents at $35.88 after its president and CEO, Mike Roberts resigned after nearly three decades with the company. He's being replaced by Ralph Alvarez, head of its North American operations. This news comes in the wake of its slowest U.S. monthly sales gain, and amid persistent speculation that there was acrimony in the executive suite over succession plans.
Stock of EBay Inc. (Nasdaq: EBAY) closed down $1.22 or 4.7% to $25.78, on a Piper Jaffray downgrade to underperform from market perform. The brokerage said it sees a worsening picture for the company, with costs likely to increase and with prospects for growth picking back up in the core eBay business seen as highly unlikely. Hundreds of eBay Inc. merchandisers have closed their online storefronts, and some took their listings elsewhere, in the wake of a controversial fee increase eBay began charging earlier in the week. eBay took this step since there is about four times the number of items listed for sale in stores than in auctions on eBay. The imbalance has hit eBay hard with profit dropping 14% from a year earlier.
Stocks closed lower after the Bush administration said an offer by Iran to hold negotiations on its nuclear program falls short of U.N. demands to halt uranium enrichment. Investors are worried any worsening of the conflict with Iran could send crude prices higher. Additionally, a softer than expected report on the housing market revived economic worries on Wall Street.
Today, the Dow Jones industrial average closed down 41.94 or 0.37% to 11,297.90, the broader Standard & Poor's 500 index closed down 5.83 or 0.45% to 1,292.99, and the tech heavy Nasdaq composite index closed down 15.36 or 0.71% to 2,134.66.
Market breadth was negative. On the New York Stock Exchange, losers beat winners 11 to 5 on volume of 1.2 billion shares. On the Nasdaq, decliners beat advancers also by two to one as 1.5 billion shares changed hands.
Iran continues to 'Priority One.' The State Department acknowledged that the response falls short of the conditions set by the Security Council, which require the full and verifiable suspension of all enrichment-related and reprocessing activities.
In data news, the home sales number came out so weak that it upset investors. The weak report may reinforce fears that the Federal Reserve has lifted interest rates to a point that has choked off not only inflation, but also growth, raising the specter of a recession. Sales of existing homes plunged 4.1% to a seasonally adjusted annualized rate of 6.33 million, against the expected 0.9% decline to 6.56 million. The inventory of unsold homes rose 3.2% to a 3.856 million, the highest since April 1993. Investors will get another look when the Commerce Department reports new home sales.
The star of the day, stock of Gateway Inc. (NYSE: GTW) closed up $0.23 or 13% to $1.95, after the PC maker received a $450 million bid for its retail operations from Lap Shun (John) Hui, owner of Joui International and a former owner of e-Machines. In a separate statement, the investor said he would consider buying all shares of Gateway. Additionally, Harbert Management Corp. has acquired a 10.2% of Gateway's outstanding stock. All this has suddenly got investors interested in the company.
National Semiconductor (NYSE: NSM) closed up $0.79 or 3.5% to $23.37, after lowering its quarterly sales target due to reduced shipments of chips used in mobile phones. The company, however, maintained its gross profit margin target.
Shares in Ford Motor Co. (Nasdaq: F) closed up $0.34 or 4.6% to $7.76 on a Wall Street Journal report that the auto maker was interested in joining a Renault-Nissan alliance, if talks with General Motors Corp. (NYSE: GM) don't work out. The company as recently approached Nissan and Renault CEO Carlos Ghosn about a possible three-way tie-up.
Shares of International Business Machines (NYSE: IBM) closed down $0.28 to $78.67, after it announced that it is acquiring Internet Security Systems Inc. (Nasdaq: ISSX) for $1.3 billion. The companies expect the deal to close in the fourth quarter. This led the shares of Internet Security to close up $1.62 or 6.3% at $27.60.
U.S. light crude oil for October delivery fell $1.34 to settle at $71.76 a barrel on the New York Mercantile Exchange. Futures fell after the latest weekly government supply data showed a smaller than expected decline in crude stocks.
Stock of Gateway Inc. (NYSE: GTW) closed up $0.23 or 13% to $1.95, after the PC maker received a $450 million bid for its retail operations from Lap Shun (John) Hui, owner of Joui International and a former owner of e-Machines. In a separate statement, the investor said he would consider buying all shares of Gateway. Additionally, Harbert Management Corp. has acquired a 10.2% of Gateway's outstanding stock. All this has suddenly got investors interested in the company.
Stocks closed flat after a Federal Reserve official's warning that the central bank may need to raise interest rates again to combat inflation. This revived concerns about higher pressure on inflation and its impact on interest rate hikes. Advanced Micro Devices (NYSE: AMD) was the bright spot that rallied on an upbeat market share forecast and a broker upgrade.
Today, the Dow Jones industrial average closed down 5.21 or 0.05% to 11,339.84, the Standard & Poor's 500 closed up 1.30 or 0.10% to 1,298.82, and the Nasdaq composite index closed up 2.27 or 0.11% to 2,150.02.
Market breadth was positive. On the New York Stock Exchange, winners topped decliners by 19 to 13 on volume of 1.21 billion shares. On the Nasdaq, advancers beat decliners by 4 to 3 as 1.59 billion shares changed hands.
Comments from Chicago Fed Bank President Michael Moskow revived worries about the economy. He said 'this month's pause to the Federal Reserve's string of interest rate hikes was "constructive," but more rate increases could still be needed to cut inflation. The risk of inflation remaining too high is greater than the risk of growth being too low. Thus some additional firming of policy may yet be necessary to bring inflation back into the comfort zone within a reasonable period of time." All this statement indicates is that there is no guarantee that the Fed is finished raising rates. Additionally, Jack Guynn, the president of the Atlanta Federal Reserve Bank, warned not to forget the lessons of the 1970s that inflation is "poisonous" to an economy and what happens when you start down the slippery slope of trading inflation for growth.
The other main focus today was Iran. Its chief nuclear negotiator stated that his country is ready to begin "serious talks" with the U.S. and the five other Western powers that put together an incentive package designed to encourage it to end its nuclear activities. However, he did not make clear whether his country would abandon nuclear enrichment. The U.S. and other Western powers suspect Iran is enriching uranium with a view to building a nuclear bomb. Iran, however, claims its nuclear program is for peaceful purposes.
Shares of Advanced Micro Devices Inc. (NYSE: AMD) closed up $1.48 or 6.3% to $24.88, after Bear Stearns upgraded it to "outperform" from "peer perform." The chipmaker said it aims to capture a 30% share of the global market for computer processors by 2009, by selling more processors that would be used in desktop and laptop computers by businesses. The broker confirmed the company's upbeat outlook and expects AMD to extend its share gains for PC and server chips.
Toll Brothers Inc. shares (NYSE: TOL) closed up $0.43 or 1.7% to $25.20, after reporting lower third-quarter earnings which topped analyst expectations. The company also cut its full-year outlook, blaming it on a glut of homes on the market and a decline in buyer confidence. The company is scaling back its land position as demand for new homes continues to deteriorate. The net income for its fiscal third quarter fell 19% to $174.6 million, and the revenue was $1.53 billion. Analyst had forecast earnings of $169.7 million, on sales of $1.57 billion.
Stock of XM Satellite Radio (Nasdaq: XMSR) closed up $2.28 or 20% to $13.52, after Bear Stearns upgraded it to "outperform" from "under perform." They opine that the wave of negative catalysts that have plagued the company have subsided. In sympathy, stock of rival Sirius Satellite Radio Inc (Nasdaq: SIRI) rose 3.3% to $4.03.
Shares of Microsoft (Nasdaq: MSFT) closed down $0.50 to $25.62, after it announced that it is considering making discounts available during the holidays to compel consumers to update their PCs with the new Vista system, even though the system won't be available until Jan. 2007. This was not taken well by the market.
U.S. light crude oil for September delivery gained 18 cents to settle at $72.63 a barrel on the New York Mercantile Exchange.
Stock of XM Satellite Radio (Nasdaq: XMSR) closed up $2.28 or 20% to $13.52, after Bear Stearns upgraded it to "outperform" from "under perform." They opine that the wave of negative catalysts that have plagued the company have subsided. In sympathy, stock of rival Sirius Satellite Radio Inc (Nasdaq: SIRI) rose 3.3% to $4.03.
Toll Brothers Inc. shares (NYSE: TOL) closed up $0.43 or 1.7% to $25.20, after reporting lower third-quarter earnings which topped analyst expectations. The company also cut its full-year outlook, blaming it on a glut of homes on the market and a decline in buyer confidence. The company is scaling back its land position as demand for new homes continues to deteriorate. The net income for its fiscal third quarter fell 19% to $174.6 million, and the revenue was $1.53 billion. Analyst had forecast earnings of $169.7 million, on sales of $1.57 billion.
Shares of Advanced Micro Devices Inc. (NYSE: AMD) closed up $1.48 or 6.3% to $24.88, after Bear Stearns upgraded it to "outperform" from "peer perform." The chipmaker said it aims to capture a 30% share of the global market for computer processors by 2009, by selling more processors that would be used in desktop and laptop computers by businesses. The broker confirmed the company's upbeat outlook and expects AMD to extend its share gains for PC and server chips.
Stocks closed lower after weaker than expected results from home improvement retailer Lowe's (NYSE: LOW) triggered concern about economic growth. Additionally, Iran's defiant stance over its nuclear activities boosted oil prices. Nasdaq was hit the hardest as investors bailed out of some of last week's biggest winners.
Today, the Dow Jones industrial average closed down 36.42 or 0.32% to 11,345.05, the broader Standard & Poor's 500 index closed down 4.78 or 0.37% to 1,297.52, and the Nasdaq composite index closed down 16.20 or 0.75% to 2,147.75.
Market breadth was negative, and volume was moderate. On the New York Stock Exchange, losers topped winners by nearly 19 to 13 as 1.11 billion shares changed hands. On the Nasdaq, decliners topped advancers by almost 2 to 1 as 1.34 billion shares changed hands.
The fact that the major averages closed well off their intraday lows, indicates where the market is going the rest of the week. While some sort of consolidation is on the cards, there do not appear to be any significant problems for the market right now. The major worry right now is the belligerent attitude of Iran and the revived worries about its nuclear program. The answer to how much will growth slow, would be available in the slew of reports expected next week.
Shares of Lowe's Cos. (NYSE: LOW) closed down $1.17 or 4% to $28.35, after reporting quarterly earnings that rose from a year earlier but were just short of expectations. The company also issued a full year earnings growth forecast that is short of estimates. The company's disappointing results and outlook had investors worried about the outlook for the home improvement sector as a whole, in this period of slowing economic growth.
Shares of Gold Kist Inc. (Nasdaq: GKIS) soared 47% to $19.02 as the poultry producer said it would consider a $1 billion plus the assumption of $144 million debt offer from Pilgrim's Pride Corp. (NYSE: PPC) to acquire the company. Gold Kist said it has already rejected two offers from Pilgrim's Pride since February. Stock of Pilgrim's Pride closed up 5.6% at $24.97.This represents a premium of around 55% over Gold Kist's closing stock price. Pilgrim Pride opines that the acquisition of Gold Kist would add to its earnings.
Ford Motor Co.'s shares (Nasdaq: F) closed down $0.53 or 6.6% to $7.47, as brokerage Credit Suisse First Boston downgraded it to "under perform" from "neutral". This is a reaction to the auto maker slashing its fourth-quarter production plans by 21%, particularly in the pickup and SUV segments. This has prompted speculation regarding the state of Ford's "Way Forward" restructuring plans as well as the future of its earnings.
Shares of SanDisk Corp. (Nasdaq: SNDK) closed up $0.22 to $51.39, after introducing a new digital music player that stores twice as many songs as Apple's (Nasdaq: AAPL) iPod Nano for almost the same price. Additionally, it cut the cost for Sansa players with two, four and six gigabytes of storage by as much as 30% ahead of the holiday shopping season. This led stock of Apple to closed down $1.35 or 2% to $66.56.
U.S. light crude oil for September delivery rose $1.31 to settle at $72.45 a barrel on the New York Mercantile Exchange. Crude-oil futures rose on Iran's refusal to bow to international pressure over its nuclear activities. Iran's supreme leader Ayatollah Ali Khamenei said that Tehran will continue to pursue nuclear technology, despite a U.N. Security Council deadline to suspend uranium enrichment. It also turned away U.N. inspectors wanting to examine its underground nuclear site in an apparent violation of the Nuclear Nonproliferation Treaty.
Shares of Lowe's Cos. (NYSE: LOW) closed down $1.17 or 4% to $28.35, after reporting quarterly earnings that rose from a year earlier but were just short of expectations. The company also issued a full year earnings growth forecast that is short of estimates. The company's disappointing results and outlook had investors worried about the outlook for the home improvement sector as a whole, in this period of slowing economic growth.
Shares of Gold Kist Inc. (Nasdaq: GKIS) soared 47% to $19.02 as the poultry producer said it would consider a $1 billion plus the assumption of $144 million -debt offer from Pilgrim's Pride Corp. (NYSE: PPC) to acquire the company. Gold Kist said it has already rejected two offers from Pilgrim's Pride since February. Stock of Pilgrim's Pride closed up 5.6% at $24.97.This represents a premium of around 55% over Gold Kist's closing stock price. Pilgrim Pride opines that the acquisition of Gold Kist would add to its earnings.
Shares of SanDisk Corp. (Nasdaq: SNDK) closed up $0.22 to $51.39, after introducing a new digital music player that stores twice as many songs as Apple's (Nasdaq: AAPL) iPod Nano for almost the same price. Additionally, it cut the cost for Sansa players with two, four and six gigabytes of storage by as much as 30% ahead of the holiday shopping season. This led stock of Apple to closed down $1.35 or 2% to $66.56.
Some positive quarterlies, a cease-fire in the Mideast and hopes that the Fed will continue holding off on interest rate hikes contributed to a great week on Wall Street. The Dow gained a whopping 293.44 on the week, ending at 11,381.47. the Nasdaq had its biggest weekly gain in four years, ending at 2163.95, up 106.24 for the week, and the S&P500 also reported good news, gaining 35.56 for the week and crossing the $1300 mark to finish the week at 1302.30. Gold lost a little ground, dropping 22.30 for the week and ending at 621.70, and crude slipped 3.21, closing at 71.14.
Oil dropped as worries over Prudhoe Bay eased off and BP continued production during repairs on the major pipeline. Initial reports said that BP would have to cease production of the entire oil field; instead, they have been able to continue production from Prudhoe Bay's Western side. In addition, the good news in the Middle East also took the edge off of worries on oil supplies, contributing to crude's decline. Despite these circumstances, crude is not likely to go much lower, and that makes now a good time to buy at these prices.
The marketplace is giving us a few hints that inflation may be under control, at least enough for the Fed to stop raising interest rates. Quarterly gains in home values are smaller, with median prices for existing homes up only 3.7 percent year-over-year. Some areas are still seeing those double-digit increases, but not as many--only 37 metro areas had double-digit increases in the second quarter, compared to 66 in the first quarter. And for those thinking about putting all your money in real estate instead of stocks because you think real estate never goes down, here's a startling statistic: 26 cities showed actual price declines in housing prices in the second quarter, compared to 16 cities in the first quarter.
Demand for automobiles, at least for American ones, is sagging, and Ford (NYSE: F) announced it will cut the number of vehicles it builds in North America by 21 percent. Another belwether, Wal-Mart Stores (NYSE: WMT) reported some distress this week, as we note its first quarterly decline in income in ten years. The King of Retail's profit dropped a whopping 26 percent in the second quarter, being greatly affected by its departure from the German market. America may love Wal-Mart, but other countries aren't necessarily as fond of it. The retailer's efforts to dominate retail in foreign countries has not been nearly as successful as its domestic plan. Wal-Mart for example, has been knocking on India's door for years, but India's not answering.
Stocks rose for a fifth straight day with the Nasdaq logging its biggest weekly point gain in more than four years, extending a rally powered by tamer than expected inflation data that lifted hopes the Federal Reserve has stopped raising interest rates.
Today, the Dow Jones industrial average closed up 46.51 or 0.4% to 11,381.47, the broader Standard & Poor's 500 closed up 4.82 or 0.4% to 1,302.30, and the Nasdaq composite closed up 6.34 or 0.3% to 2,163.95. The Nasdaq ended the week 5.5%, it's best performance since the week ending May 30, 2003. The Dow finished the week 2.6%, while the S&P gained 2.8%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 18 to 13 on volume of 1.34 billion shares. On the Nasdaq, advancers edged out decliners 15 to 13 on volume of 1.72 billion shares.
The major gauges have rallied this week on upbeat earnings from Hewlett-Packard and others, falling oil prices following a cease-fire in the Israel-Hezbollah war, and relief about the Federal Reserve. Next week will be light on economic news, with a report on existing home sales, durable orders and new home sales. Investors also took in comments from President Bush, who said that the 2006 budget deficit would be less than expected.
U.S. consumer sentiment sank in early August with the UMich consumer sentiment index dropping to 78.7 from 84.7 in July. Economists were expecting it to slide to 83.6. Inflation fears spiked, with consumers expecting prices to rise 4.2% over the next 12 months. This could be a red flag for the Feds.
Shares of Microsoft Corp. (Nasdaq: MSFT) shot up 4.4% to $25.79 after it said it expects to spend about $3.8 billion buying back 155 million shares of its common stock at a price of $24.75 a share. The company also said the authorization for its ongoing share repurchase program has been boosted by $16.2 billion, to $36.2 billion and it will buy through 2011.
Stock of Dell (NYSE: DELL) fell 2.8% to $21.64 after the company reported a second-quarter profit that fell almost 50% from a year ago. The company also reported quarterly revenue that rose from a year earlier and modestly surpassed analysts' expectations. However, profits have been substantially lower than a year ago due to increased competition from rival Hewlett-Packard (NYSE: HPQ). It reported sales of $14.1 billion, and earnings of $502 million. Additionally, it also disclosed that it has been under an informal investigation by the SEC for the past year.
In comparison, stock of Hewlett-Packard Co. (NYSE: HPQ) rose 72 cents or 2% to $35.15 2%, after the company reported a fiscal third-quarter profit surge and issued an earning forecast for the current quarter that topped Wall Street expectations. The quarterly net income rose by nearly $1 billion from a year earlier, and sales rose just over 5%. It also said it plans to buy back $6 billion worth of H-P stock.
Ford Motor Co. (Nasdaq: F) saw its stock slide 2.1% or $0.17 to $8 after deciding to reduce its North American auto production in an effort to lower the supply of several models, ease pressure on sales incentives and lower dealer inventory costs. The fourth-quarter production is being cut by 21%, or 168,000 units, from year-earlier levels. The company said the new production plan will result in downtime at more than 10 assembly plants through the end of 2006.
Shares of Gap (NYSE: GPS) closed down 3.8% to $16.65 after the apparel giant pared its full-year profit view in the wake of a second-quarter profit that tumbled 53%. The company has expressed disappointment with consumers' first takes on new apparel lines and accessories at Gap, Old Navy and Banana Republic outlets.
U.S. light crude oil for September delivery added $1.08 to settle at $71.14 a barrel on the New York Mercantile Exchange.
Shares of Microsoft Corp. (Nasdaq: MSFT) shot up 4.4% to $25.79 after it said it expects to spend about $3.8 billion buying back 155 million shares of its common stock at a price of $24.75 a share. The company also said the authorization for its ongoing share repurchase program has been boosted by $16.2 billion, to $36.2 billion and it will buy through 2011.
Stock of Dell (NYSE: DELL) fell 2.8% to $21.64 after the company reported a second-quarter profit that fell almost 50% from a year ago. The company also reported quarterly revenue that rose from a year earlier and modestly surpassed analysts' expectations. However, profits have been substantially lower than a year ago due to increased competition from rival Hewlett-Packard (NYSE: HPQ). It reported sales of $14.1 billion, and earnings of $502 million. Additionally, it also disclosed that it has been under an informal investigation by the SEC for the past year.
Stock of Hewlett-Packard Co. (NYSE: HPQ) rose 72 cents or 2% to $35.15 2%, after the company reported a fiscal third-quarter profit surge and issued an earning forecast for the current quarter that topped Wall Street expectations. The quarterly net income rose by nearly $1 billion from a year earlier, and sales rose just over 5%. It also said it plans to buy back $6 billion worth of H-P stock.
Ford Motor Co. (Nasdaq: F) saw its stock slide 2.1% or $0.17 to $8 after deciding to reduce its North American auto production in an effort to lower the supply of several models, ease pressure on sales incentives and lower dealer inventory costs. The fourth-quarter production is being cut by 21%, or 168,000 units, from year-earlier levels. The company said the new production plan will result in downtime at more than 10 assembly plants through the end of 2006.
Stocks ended higher after Hewlett-Packard Co (NYSE: HPQ) declared strong quarterly results and as investors remained optimistic that economic growth has slowed enough for the Federal Reserve to hold interest rates steady. Falling oil prices added fuel to the fire
Today, the Dow Jones industrial average closed up 7.84 or 0.07% to 11,334.96, the broader Standard & Poor's 500 index closed up 2.05 or 0.16%to 1,297.48, and the Nasdaq composite closed up 8.07 or 0.38% to 2,157.61.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 17 to 15 as 1.57 billion shares changed hands. On the Nasdaq, advancers topped decliners by 17 to 12 on volume of almost 1.94 billion shares.
While concerns over an economic slowdown and downturn in the stock market down the road are alive, the markets may make a run at their recent highs over the next several weeks. The combination of the lower oil prices and the increased bets that the 2 year interest-rate hiking campaign is over have led a broad rally this week. The pair of inflation reports this week - on wholesale and consumer prices - seemed to support that scenario, providing comfort to investors.
While several economic reports having investors worried the economy is slowing too much, there was good news out of the Federal Reserve Bank of Philadelphia. The Philly Fed index on manufacturing activity rose from 6.0 in July to 18.5 in August, against the expected 7.8. This indicates that most manufacturing firms surveyed are growing. On the other hand, the composite index of leading economic indicators fell 0.1% in July after posting a 0.1% gain in June. The index is designed to forecast economic activity six to nine months ahead of time, and indicates that the economy is slowing down. On unemployment, fewer Americans filed for first-time benefits, although the number of workers continuing to collect unemployment benefits hit a six-month high. Initial jobless claims fell by 10,000 to 312,000 for the week ending Aug. 12, against the expected dip to 316,000.
Shares of Hewlett-Packard Co (NYSE: HPQ) closed up $0.72 or 2.1% to $35.15, after it reported quarterly earnings and revenue that rose from a year ago and topped Wall Street expectations. Additionally, the company also announced that it would buy back up to $6 billion in shares. The computing giant also said it plans to buy back $6 billion worth of H-P stock. The company said quarterly net income rose by nearly $1 billion from a year earlier, and the results were helped by cost cuts and stronger demand for printers and personal computers. Sales for the quarter rose just over 5%.
Shares of Merck & Co (NYSE: MRK) shares fell $2.53 or 5.7% to $38.83 after a federal jury in New Orleans found the drug maker negligent in the case of a man who alleged that he suffered a heart attack brought about by his use of the company's painkiller treatment Vioxx. The jury has found that the drug maker misrepresented the risks of the arthritis painkiller and awarded the plaintiff more than $50 million in damages. Additionally, a New Jersey court judge tossed out an earlier verdict that favored Merck in a separate trial, based on new evidence stemming from a correction in the New England Journal of Medicine. The company said it plans to appeal the verdict from the New Orleans case.
Shares of Sears Holdings Inc. (Nasdaq: SHLD) fell $8.71 or 5.8% to $141.29, after the No. 3 retailer reported higher quarterly earnings that beat estimates. However, investors took a 'sell the news' approach and sent the stock lower. The company posted an 83% increase in second-quarter profit, helped by reduced expenses and improved gross margins. But, investors are worried that a hike in inventories, at a time when consumers are reining in spending, could add more risk to the company. The company has a cash trove of about $3.7 billion. This could be invested in any number of acquisitions, joint ventures and partnerships that will offer attractive return opportunities.
U.S. light crude for September delivery retreated $1.83 to $70.06 a barrel on the New York Mercantile Exchange. The retreat in prices is owing to the cease-fire in the war between Israel and Hezbollah militants in Lebanon.
Shares of Hewlett-Packard Co (NYSE: HPQ) closed up $0.72 or 2.1% to $35.15, after it reported quarterly earnings and revenue that rose from a year ago and topped Wall Street expectations. Additionally, the company also announced that it would buy back up to $6 billion in shares. The computing giant also said it plans to buy back $6 billion worth of H-P stock. The company said quarterly net income rose by nearly $1 billion from a year earlier, and the results were helped by cost cuts and stronger demand for printers and personal computers. Sales for the quarter rose just over 5%.
Shares of Merck & Co (NYSE: MRK) shares fell $2.53 or 5.7% to $38.83 after a federal jury in New Orleans found the drug maker negligent in the case of a man who alleged that he suffered a heart attack brought about by his use of the company's painkiller treatment Vioxx. The jury has found that the drug maker misrepresented the risks of the arthritis painkiller and awarded the plaintiff more than $50 million in damages. Additionally, a New Jersey court judge tossed out an earlier verdict that favored Merck in a separate trial, based on new evidence stemming from a correction in the New England Journal of Medicine. The company said it plans to appeal the verdict from the New Orleans case.
Shares of Sears Holdings Inc. (Nasdaq: SHLD) fell $8.71 or 5.8% to $141.29, after the No. 3 retailer reported higher quarterly earnings that beat estimates. However, investors took a 'sell the news' approach and sent the stock lower. The company posted an 83% increase in second-quarter profit, helped by reduced expenses and improved gross margins. But, investors are worried that a hike in inventories, at a time when consumers are reining in spending, could add more risk to the company. The company has a cash trove of about $3.7 billion. This could be invested in any number of acquisitions, joint ventures and partnerships that will offer attractive return opportunities.
The latest consumer price data eased inflation fears and firmed expectations the Federal Reserve will continue to stay its hand on interest. This prompted stocks to end higher for a third straight day with the Dow Jones Industrial Average and the S&P 500 at their best levels in three months.
Today, the Dow Jones industrial average closed up 96.86 or 0.86% to 11,327.12, the broader Standard & Poor's 500 index closed up 9.85 or 0.77% to 1,294.45, and the Nasdaq composite index closed up 34.53 or 1.63% to 2,149.54. Since the start of the year, the tech-rich Nasdaq Composite index is down around 2.5%. In contrast, the Dow is up about 5.5% while the S&P 500 has gained nearly 4%. In the last two days, your Model Portfolio has gained almost 10% while in comparison the Nasdaq has risen by less than 4%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers almost three to one as nearly 1.6 billion shares changed hands. On the Nasdaq, advancers topped decliners three to two on volume of 2.1 billion shares.
Yesterdays report on wholesale prices and today's read on consumer prices show less inflationary pressure than had been expected. This has given cheer in that the Feds will not have to restart their recently-paused interest-rate hiking campaign next month. However, investors need to be cautious since just because the inflation picture is good for this month, doesn't mean it will be good for next month. In the months ahead, the market will have to deal with rising interest rates, inflation fears, a slowdown in economic growth, a tenuous housing market, exceptionally high energy costs, a threat of storms in the Gulf, unrest in the Middle East, and the uncertainty over the upcoming election.
In data news, core prices showed a smaller than expected rise by 0.2% against the projected 0.3%. Soaring energy costs pushed the total CPI up 0.4% in July, as expected by economists. Construction of new houses fell 2.5% in July, weaker than expected by economists. Industrial production rose by 0.4% in July, against the expected 0.5% rise. All these are news that are detrimental to any further rate increase.
Shares of Applied Materials Inc. (Nasdaq: AMAT) closed up $0.02 to $15.71, after the chip gear maker reported a stronger-than-forecast 39% profit rise, saying it benefited from a wave of factories coming online and the proliferation of consumer electronic devices. However, the company was more cautious on the current quarter, saying higher chip inventories would hurt demand. The world's largest chip-equipment maker reported fiscal third-quarter net income of $512 million, up from $369.6 million a year ago. Sales rose 56% to $2.54 billion and new orders jumped 82% to $2.67 billion.
Shares of Abercrombie & Fitch (NYSE: ANF) rallied $7.46 or 14% to $63.19, after reporting quarterly earnings and revenue that beat estimates. It also issued earnings guidance for fiscal 2007 that is higher than analysts' estimates. Its second-quarter net earnings were $65.7 million, against $57.4 million in the same period last year. Revenue rose to $658.7 million from $571.6 million. Its net sales, edged higher by 3% to $316.3 million. The company has forecast an EPS of $4.49 to $4.54 for the year against the expected $4.39.
U.S. light crude for September delivery retreated $1.16 to $71.89 a barrel on the New York Mercantile Exchange. The report on weekly oil inventories showed that crude supplies declined about what had been expected after BP shut down half of its Alaska oil field last week. However, the decline has been far lower than expected.
Shares of Abercrombie & Fitch (NYSE: ANF) rallied $7.46 or 14% to $63.19, after reporting quarterly earnings and revenue that beat estimates. It also issued earnings guidance for fiscal 2007 that is higher than analysts' estimates. Its second-quarter net earnings were $65.7 million, against $57.4 million in the same period last year. Revenue rose to $658.7 million from $571.6 million. Its net sales, edged higher by 3% to $316.3 million. The company has forecast an EPS of $4.49 to $4.54 for the year against the expected $4.39.
Shares of Applied Materials Inc. closed up $0.02 to $15.71, after the chip gear maker reported a stronger-than-forecast 39% profit rise, saying it benefited from a wave of factories coming online and the proliferation of consumer electronic devices. However, the company was more cautious on the current quarter, saying higher chip inventories would hurt demand. The world's largest chip-equipment maker reported fiscal third-quarter net income of $512 million, up from $369.6 million a year ago. Sales rose 56% to $2.54 billion and new orders jumped 82% to $2.67 billion.
A tame inflation report allayed fears of further interest rate hikes to come, and shifted the focus away from concerns over slowing economic growth. This led the stocks to end higher with the S&P 500 at its best level in 2 1/2 months. The Nasdaq Composite posted its best one day point gain in more than six weeks to end at a one-month high, while the Dow Jones Industrial Average rallied triple digits to put in its biggest one day point rise in more than three weeks.
Today, the Dow Jones industrial average closed up 132.39 or 1.19% to 11,230.26, the broader Standard & Poor's 500 index closed up 17.37 or 1.37% to 1,285.58, and the Nasdaq composite index closed up 45.97 or 2.22% to 2,115.01.
Market breadth was resoundingly positive. On the New York Stock Exchange, winners trounced losers by more than five to one on volume of 1.51 billion shares. On the Nasdaq, advancers beat decliners by three to one on volume of nearly 1.80 billion shares.
Stocks began the day on a positive note and kept going from there. The sustenance of the rally will be defined tomorrow by the read on consumer inflation (CPI) which is a more telling indicator of pricing pressure. This is expected to have risen 0.4% in the month. A number lower than this could really see the rally continue and vice-versa.
The PPI rose 0.1% in July, below the 0.3% gain expected, and the core PPI fell 0.3%, against the expected gain of 0.2%. This reinforces, for the moment, the notion that the Fed is not going to be a problem. In other data news, the manufacturing in the area this month expanded at the slowest rate in more than a year, further supporting the case for the Fed to end its rate increases. The Empire State Manufacturing index fell to 10.3 in August from a revised 16.6 in July, a decline that was larger than expected.
Star of the day Home Depot (NYSE: HD) closed up $1.18 or3.6% to $34.44, after reporting earnings that rose from a year earlier and topped forecasts by a penny a share. The home improvement giant had a better-than-forecast 5.3% profit rise on 17% second-quarter sales growth, but cautioned that full year EPS and sales will be at the "low end" of its previously forecast range as it is reinvesting heavily in labor and new-store models amid a tough economic environment. The company plans to invest $350 million into its store base in the second half, to address customer service and merchandising assortment. In the second quarter, the company earned $1.86 billion, up from $1.77 billion a year ago.
Shares of Wal-Mart (NYSE: WMT) closed down $0.55 or 1.2% to $44.55, on reporting quarterly earnings that rose from a year earlier and met estimates. The company also issued a third-quarter earnings forecast that sets the midpoint below analysts' expectations. It has reported a 26% decline in net profit for the second quarter along with a revenue growth of 11%.
Stock of Dell (NYSE: DELL) closed up $0.84 or 4% to $22.08, even after announcing that it will recall 4.1 million Sony-produced computer notebook batteries because they are a fire hazard. Government safety regulators said that this was the largest recall ever in the U.S. consumer electronics industry. The company said the recall would have no "material adverse effect" on its results of operations, financial position or cash flows. Generally the supplier of the defective component bears the financial burden of recalls. Despite this, shares of Sony Corp (NYSE: SNE) closed up 1.4% at $45.43.
U.S. light crude for September delivery eased 48 cents to settle at $73.05 a barrel on the New York Mercantile Exchange. While traders are expecting U.S. data this week to show a decline in crude inventories, the Israeli-Hezbollah cease fire in the oil-rich Middle East region is keeping a tight cap on gains.
Star of the day Home Depot (NYSE: HD) closed up $1.18 or3.6% to $34.44, after reporting earnings that rose from a year earlier and topped forecasts by a penny a share. The home improvement giant had a better-than-forecast 5.3% profit rise on 17% second-quarter sales growth, but cautioned that full year EPS and sales will be at the "low end" of its previously forecast range as it is reinvesting heavily in labor and new-store models amid a tough economic environment. The company plans to invest $350 million into its store base in the second half, to address customer service and merchandising assortment. In the second quarter, the company earned $1.86 billion, up from $1.77 billion a year ago.
Stock of Dell (NYSE: DELL) closed up $0.84 or 4% to $22.08, even after announcing that it will recall 4.1 million Sony-produced computer notebook batteries because they are a fire hazard. Government safety regulators said that this was the largest recall ever in the U.S. consumer electronics industry. The company said the recall would have no "material adverse effect" on its results of operations, financial position or cash flows. Generally the supplier of the defective component bears the financial burden of recalls. Despite this, shares of Sony Corp (NYSE: SNE) closed up 1.4% at $45.43.
Stocks ended slightly higher as oil prices eased after a cease-fire in the fighting between Israel and Hezbollah. However, concerns over the nation's economic outlook, inflation and interest rates nearly erased the early rally. Investors did not find enough reason to sustain an advance ahead of key inflation news expected in the next two day.
Today, the Dow Jones Industrial Average closed up 9.84 points to 11,097.87, the S&P 500 Index closed up 1.47 points to 1,268.21, and the Nasdaq Composite Index added 11.33 points to 2,069.04. For the year, the Nasdaq is down more than 5% compared to gains of 5% for the Dow and over 2% for the S&P 500.
Market breadth was still positive. On the New York Stock Exchange, winners beat losers nine to seven on volume of 1.39 billion shares. On the Nasdaq, advancers topped decliners by eight to seven on volume of 1.5 billion shares.
The market may not be able to sustain a rally unless it is confirmed that the current slowdown is a temporary phase, not indicative of an impending recession in six months. The U.N. negotiated cease-fire did help remove one of the elements that had been weighing on an otherwise healthy market. The underlying fundamentals of the market are excellent, and it is evident that we're going to get about a 14% earnings increase from the second quarter of last year.
In data news expected over the next two days, economist economists producer prices to show a 0.3% increase, with core PPI registering a 0.2% gain. Consumer prices are expected to show a 0.4% gain, and the core consumer price rate is expected to show a 0.3% advance. Investors are also hoping inflation will not rise more than expected. Should the economic news suggest that the Federal Reserve needs to start raising rates again, there will be a sell-off in the offing.
Stock of Apple Computer Inc. (Nasdaq: AAPL) rose 29 cents to $63.94. Investors discounted news that the maker of iPods and Macintosh computers has been notified by the Nasdaq that it was out of compliance with the exchange's listing rules. Shares of Cisco Systems (Nasdaq: CSCOT) closed up $0.55 or 1.5% to $20.09, on a bullish mention in Barron's. The weekly said Cisco should benefit from telecom companies needing to upgrade their networks to handle services such as video.
Bear Stearns has upgraded the automaker Ford Motor Co. (Nasdaq: F) to an outperform from an underperform rating. This led the shares of Ford to jump 6.2% to $7.83. At the same time they have lowered their rating on General Motors (NYSE: GM) to underperform from peer perform. Shares of GM were last down 2 cents to $30.09. They believe that all the good news from GM is now behind them.
Stock of Merck (NYSE: MRK) rose 0.7% to $40.88, after the drug company announced in a joint statement with Gilead Sciences Inc. (Nasdaq: GILD) an agreement for the distribution of once-daily HIV treatment Atripla to developing countries. Gilead will manufacture Atripla, while Merck will handle its distribution.
Shares of PepsiCo (NYSE: PEP) gained $0.65 or 0.62% to $63.95, after announcing that its Chairman and CEO Steve Reinemund, will retire in March and the Chief Financial Officer Indra Nooyi will assume the CEO job this October. Steve had led the company past Coca-Cola in terms of market capitalization for the first time. Indra becomes the first woman to hold the post and enters the list of leading women in corporate America.
U.S. light crude fell 82 cents to $72.53 a barrel on the New York Mercantile Exchange. Easing Middle East tensions and news that BP Plc (NYSE: BP) would maintain Alaska pipeline production at 200,000 barrels a day while it makes pipeline repairs weighed on prices. The cease-fire also downplayed worries that nearby oil-producing countries such as Syria and Iran would join the conflict, thereby driving up crude prices.
Stocks closed lower after a session where investors spent a lot of time trying to diagnose the uncertain health of the economy. Investors digested retail sales numbers pointing toward strength and a business inventories report suggesting sluggishness. The sell off today was led by technology amid a mix of disappointing earnings and questions about stock options practices.
Today, the Dow Jones industrial average closed down 36.34 or 0.33% to 11,088.03, the broader Standard & Poor's 500 closed down 5.07 or 0.4% to 1,266.74, and the tech fueled Nasdaq composite closed down 14.03 or 0.68% to 2,057.71. For the week, the Dow lost 1.4%, the S&P 500 fell 1% and the Nasdaq Composite dropped 1.3%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners 21 to 11 on volume of 1.31 billion shares. On the Nasdaq, decliners topped advancers by 19 to 9 on volume of 1.45 billion shares.
Investors focused on the pace of inflation and on whether the economic slowdown will result in a "hard landing," searching for clues in the new data reports. They are increasingly fearful that the economy is going to slow down from even what we saw in the second quarter.
Talk of further rate increase got fueled by retail sales that grew 1.4% last month, against the expected 0.8% growth. Retail sales represent the health of the consumer, and this has been a big economic question mark hanging over the financial markets. It is apparent that moderate income growth is offsetting gas price inflation, thereby keeping discretionary spending alive. While retailing is holding up quite well, a sustained slowing is expected over the next few months. Prices of goods imported into the U.S. rose 0.9% in July on the back of high oil prices, indicating inflationary pressures.
Shares of Apple Computer (Nasdaq: AAPL) closed down $0.42 or 0.7% at $63.58, after it stated that it would delay filing its most recent quarterly report and will make big changes for the period due to problems related to past stock-option grants. The company expects significant increases in revenue and expenses for the third quarter but could not provide estimates because of an expected restatement of prior periods to account for irregularities in past stock-based compensation. Apple is now among the most high profile companies caught up in a stock-options scandal that has swept through the technology industry.
Stock of Nvidia (Nasdaq: NVDA) closed down $0.75 or 2% to $23.41, after the company said that it is reviewing its stock option practices going back to 1999. Because of this, the company delayed reporting second-quarter earnings, although it did report higher quarterly revenue. Revenue was up 20% to $687.5 million, against the expected $677.1 million.
Brazilian miner Companhia Vale Do Rio Doce (NYSE: RIO) has entered the bidding fray for the Canadian nickel producer Inco (NYSE: N) which led the stock to close up 3.4% to $79.21. Vale do Rio Doce said it's going to launch a $15.1 billion bid for Inco. This bid iswithout the backing of Inco, whose board has come out in support of an offer from Phelps Dodge (NYSE: PD). Teck Cominco (NYSE: TCK), another Canadian miner, also has an offer on the table for Inco.
Stock of Bisys Group (NYSE: BSG) closed down $2.72 or 23% to $9.20, after it announced that its president and CEO was resigning to run another company. Additionally, it also stated that it won't report 2006 results on time, that 2007 results will miss forecasts and that it has hired an investment bank to look at its options.
General Motors (NYSE: GM), ended 1.6% lower at $30.11, after Rick Wagoner, the CEO said the company will slow the production pace of its new lineup of full-size sport utility vehicles during the second half in an effort to cope with rising inventories.
U.S. light crude for September delivery rose 35 cents to $74.35 a barrel on the New York Mercantile Exchange. Traders weighed demand concerns linked to heightened terrorism fears against an uncertain supply outlook.
Brazilian miner Companhia Vale Do Rio Doce (NYSE: RIO) has entered the bidding fray for the Canadian nickel producer Inco (NYSE: N) which led the stock to close up 3.4% to $79.21. Vale do Rio Doce said it's going to launch a $15.1 billion bid for Inco. This bid iswithout the backing of Inco, whose board has come out in support of an offer from Phelps Dodge (NYSE: PD). Teck Cominco (NYSE: TCK), another Canadian miner, also has an offer on the table for Inco.
Stock of Nvidia (Nasdaq: NVDA) closed down $0.75 or 2% to $23.41, after the company said that it is reviewing its stock option practices going back to 1999. Because of this, the company delayed reporting second-quarter earnings, although it did report higher quarterly revenue. Revenue was up 20% to $687.5 million, against the expected $677.1 million.
Shares of Apple Computer (Nasdaq: AAPL) closed down $0.42 or 0.7% at $63.58, after it stated that it would delay filing its most recent quarterly report and will make big changes for the period due to problems related to past stock-option grants. The company expects significant increases in revenue and expenses for the third quarter but could not provide estimates because of an expected restatement of prior periods to account for irregularities in past stock-based compensation. Apple is now among the most high profile companies caught up in a stock-options scandal that has swept through the technology industry.
Stocks closed higher as investors cheered the fact that U.K. authorities had apparently thwarted a terror plot to blow up U.S. bound flights, with an accompanying decline in oil prices underpinning gains. However, their concern about a possible slowing of the U.S. economy and corporate earnings continue to be an irritant.
Today, the Dow Jones industrial average closed up 48.19 or 0.44% to 11,124.37, the broader Standard & Poor's 500 closed up 5.86 or 0.56% to 1,271.81, and the tech-fueled Nasdaq composite index closed up 11.46 or 0.56% to 2,071.74.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than 18 to 13 on volume of 1.59 billion shares. On the Nasdaq, advancers topped decliners by more than 4 to 3 on volume of 1.7 billion shares.
The talk of the day was the statement by British authorities that they had foiled a plot to blow up commercial airplanes flying between the UK and the US. As many as 21 people were taken into custody in the plot to use liquid explosives carried on board in hand baggage to simultaneously blow up several planes. The U.S. raised its threat level to the highest possible for all U.S. bound commercial flights originating in the U.K. and increased the threat level for aviation in general. The feeling that we have averted a disaster was a psychological positive for investors.
The slowing economic growth and how that might hurt corporate profits is continuing to worry investors. Investors are probably going to be reluctant to make big bets since the next Federal Reserve meeting isn't until late September, and most earnings have already been reported. They are going to be attuned to the economic news as they look for clues as to whether the recent Fed move was a pause or a full stop. Strong news would make them worry about higher rates and weak news would indicate a slowing economy. Any-which-way you lose.
In data news, the nation's trade deficit narrowed by 0.3% in June to $64.8 billion, slightly above the forecast of $64.5 billion. Additionally, the initial jobless claims in the latest week rose by 7,000, reaching 319,000. This continues to point to a cooler labor market.
Positive earnings from American International Group Inc. (NYSE: AIG) saw the share close up $1.83 or 3.1% to $60.32. The company reported better than expected second quarter results, buoyed by record underwriting profit from its property and casualty businesses. While there are legitimate concerns about the foreign life operations in Taiwan and Japan, those were being fixed with new insurance and savings products. Second quarter net income came in at $3.19 billion, and the results included additional income of $374 million from a correction in how it accounts for certain interests in unit investment trusts. The company has an EPS of $1.44 against the expected $1.39.
Shares of IBM (NYSE: IBM) closed up $0.35 or 0.5% to $75.74, after the company said it would buy business software maker FileNet (Nasdaq: FILE) for $1.6 billion in cash. This is the latest in a string of software acquisitions that have helped boost the technology giant's bottom line. This values the company at $35 a share, against the market price of $34.65.
Stock of news and entertainment conglomerate Viacom Inc. (NTSE: VIA) jumped 9.7% to $37.03. While its first-quarter profit fell 9%, there was a 23% increment in second-quarter net profit. Revenue for the quarter rose to $2.37 billion, boosted by a 7% increase in the cable networks segment, and a 25% increase in the entertainment segment, including DreamWorks. This is against the expected revenue of $2.27 billion.
Shares of Target Corp. (NYSE: TGT) closed up $2.44 or 5.4% to $47.72. The retail giant reported second quarter earnings per share that beat expectations paired with revenue that fell short. It also announced a new $5 billion stock buyback authorization.
U.S. light crude for September delivery slumped $2.35 to $74 a barrel on the New York Mercantile Exchange.
Stock of news and entertainment conglomerate Viacom Inc. (NTSE: VIA) jumped 9.7% to $37.03. While its first-quarter profit fell 9%, there was a 23% increment in second-quarter net profit. Revenue for the quarter rose to $2.37 billion, boosted by a 7% increase in the cable networks segment, and a 25% increase in the entertainment segment, including DreamWorks. This is against the expected revenue of $2.27 billion.
Shares of IBM (NYSE: IBM) closed up $0.35 or 0.5% to $75.74, after the company said it would buy business software maker FileNet (Nasdaq: FILE) for $1.6 billion in cash. This is the latest in a string of software acquisitions that have helped boost the technology giant's bottom line. This values the company at $35 a share, against the market price of $34.65.
Positive earnings from American International Group Inc. (NYSE: AIG) saw the share close up $1.83 or 3.1% to $60.32. The company reported better than expected second quarter results, buoyed by record underwriting profit from its property and casualty businesses. While there are legitimate concerns about the foreign life operations in Taiwan and Japan, those are being fixed with new insurance and savings products. Second quarter net income came in at $3.19 billion, and the results included additional income of $374 million from a correction in how it accounts for certain interests in unit investment trusts. The company has an EPS of $1.44 against the expected $1.39.
Stocks closed lower after a rally sparked by strong earnings from Cisco Systems (Nasdaq: CSCOT) and Walt Disney (NYSE: DIS) was undone by worries about economic strength. Investors tried to come to terms with an unfolding monetary-policy outlook that could include renewed rate increases in the coming weeks. The worry now is, would the Federal Reserve will be able to contain inflation without sparking a recession.
Today, the Dow Jones Industrial Average closed down 97.41 points or 0.87% at 11,076.18, the S&P 500 closed down 5.53 points or 0.43% at 1,265.95, and the Nasdaq Composite lost 0.57 points or 0.03% at 2,060.28.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by a margin of nearly 19 to 13 on volume of 1.7 billion shares. On the Nasdaq, losers topped winners by a margin of almost 17 to 11 as 2.1 billion shares changed hands.
Investors are worried about the economy and earnings. The statement that the Fed is reserving the right to raise rates again, possibly as early as next month, disappointed investors who had hoped for a clearer signal that the tightening cycle had ended. The implication of the Fed standing aside is that the economy is slowing and they expect this to help prevent inflation from getting worse. Additionally, there does not appear to be much good news to look forward to.
In economic news, wholesale inventories rose 0.8% in June against the expected 0.9%, and sales increased 1.4%. The economy grew at a 2.5% rate in the second quarter, less than half of the first quarter's pace. This slow growth can put pressure on corporate profits.
Star of the day, Cisco Systems Inc. (Nasdaq: CSCOT) jumped 14.5% - its biggest one day gain in more than four years - to gain $2.51 and close at $19.80. The networking equipment maker announced a flat quarterly profit due to stock options and acquisition expenses related to its acquisition of Scientific-Atlanta. These were off-set by better-than-expected sales. Revenue rose 21% to $7.98 billion, against the expected $7.92 billion. Cisco also gave a bullish sales outlook for 2007, with a forecast revenue growth between 15% and 20%, against the expected 15%.
Shares of Toll Brothers (NYSE: TOL) closed down $1.69 or 6.4% to $24.89, after the homebuilder lowered its estimate of the number of homes that will be delivered in the fourth quarter and also stated that the value of signed contracts in the third quarter fell 45%. The value of backlog of homes awaiting construction slipped 13% to $5.59 billion. This is a direct indicator of a cooling housing market and rising mortgage rates. It also stated that it would take write downs for the value of land options on "deals that no longer work due to today's weaker market conditions and slower sales paces."
Despite reporting a higher quarterly profit and earnings that exceeded Wall Street expectations, shares of Walt Disney Co. (NYSE: DIS) closed down 15 cents at $28.83. The entertainment conglomerate reported profit that soared 39% in the latest quarter.
Shares of Federated Department Stores (NYSE: FD) closed up $0.73 or 3% to $34.52, after announcing that its quarterly profit rose. The company also raised its outlook for the second half of the year.
U.S. light crude for September delivery rose 4 cents to settle at $76.35 a barrel on the New York Mercantile Exchange. Oil prices jumped after a weekly inventory report showed a decline in fuel supplies.
Star of the day, Cisco Systems Inc. (Nasdaq: CSCOT) jumped 14.5% - its biggest one day gain in more than four years - to gain $2.51 and close at $19.80. The networking equipment maker announced a flat quarterly profit due to stock options and acquisition expenses related to its acquisition of Scientific-Atlanta. These were off-set by better-than-expected sales. Revenue rose 21% to $7.98 billion, against the expected $7.92 billion. Cisco also gave a bullish sales outlook for 2007, with a forecast revenue growth between 15% and 20%, against the expected 15%.
Shares of Toll Brothers (NYSE: TOL) closed down $1.69 or 6.4% to $24.89, after the homebuilder lowered its estimate of the number of homes that will be delivered in the fourth quarter and also stated that the value of signed contracts in the third quarter fell 45%. The value of backlog of homes awaiting construction slipped 13% to $5.59 billion. This is a direct indicator of a cooling housing market and rising mortgage rates. It also stated that it would take write downs for the value of land options on "deals that no longer work due to today's weaker market conditions and slower sales paces."
Stocks closed lower after the Federal Reserve, as expected, took a break from its steady stream of quarter point interest rate increases but left open the door open for another rate increase as early as next month. Investors were left unsettled by the fact that the decision was not unanimous, with one Federal Open Market Committee member voting for another hike.
Today, the Dow Jones industrial average closed down 45.79 or 0.41% to 11,173.89, the broader Standard & Poor's 500 closed down 4.29 or 0.34% to 1,271.48, and the tech-fueled Nasdaq composite closed down 11.65 or 0.56% to 2,060.85.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by 19 to 13on volume of 1.62 billion shares. On the Nasdaq, decliners beat advancers 2 to 1 on volume of 1.90 billion shares.
The Federal Reserve noted that economic growth had "moderated" and decided to pause their campaign of rate increase. The FOMC repeated that any further tightening would depend on the economic data. It recognized that "inflation risks remain," and the decision on the monetary policy would be monitored. It is apparent that the FOMC has not reached their neutral point on rates, but they are concerned about overshooting and forcing the economy into a recession. This pause could lead to additional selling pressures as market participants will be concerned with the overall slowdown in the US economy.
A recent study from Citigroup (NYSE: C) stated that when there is a rate pause, sectors such as pharmaceuticals, financials, utilities and consumer staples have gained twice as much as the S&P 500. That's because consumers continue buying medicine, drinking soda and paying their electric bill, regardless of the state of the economy. Analysts opine that the health care sector would continue to do well. Financial sector too could benefit from greater corporate loan demand and merger activity once rate hikes end.
In data news, preliminary read on second-quarter productivity shows a 1.1% growth, slowing considerably from the 4.3 % in the first quarter, though better than the expected 0.9%. Additionally, labor costs rose at a 4.2% annual pace against the expected 3.5%. These numbers could have persuaded the Fed to adopt anti-inflationary language that warns of possible hikes later in the year.
Amidst a spate of merger news, stock of Brocade Communications (Nasdaq: BRCD) closed down $1.13 or 20% to $5.01, while that of McData (Nasdaq: MCDTA) rose $0.18 or 12.5% to $3.29, after Brocade Communications announced that it would buy McData for $713 million in stock. This is nearly 50% premium on the company's Monday closing price. Additionally, Brocade also issued an earnings forecast above estimates.
Food service company Aramark (NYSE: RMK) rose has accepted a $6.3 billion buyout offer from a group led by its chairman and several investment funds. Though the offer was upwardly revised from an initial bid in May, it was short of what investors were hoping, and the shares of Aramark closed down down $0.44 or 1% to $32.61.
Texas Pacific Group Ventures is buying aluminum products maker Aleris International (NYSE: ARS) for $1.7 billion in cash plus the assumption of debt. Shares of Aleris closed up $11.23 or 28% to $52.62.
Cell phone maker Nokia (NYSE: NOK) is buying digital music distributor Loudeye (Nasdaq: LOUD) for $60 million in cash. Shares of Nokia closed down $0.10 to $19.46, while that of Loudeye closed up $2.56 or 145% to $4.33.
Stock of McDonald's Corp. (NYSE: MCD) fell 1.04% to $35.16, after the fast food empire reported a 3.8% increase in July same-store sales, but lighter U.S. results. International strength and the continued popularity of its breakfast menu and premium coffee has been offsetting slowing U.S. sales. Sales for its restaurants worldwide were up 6.7% for the month. In the United States, the growth was just 1.9% with softness matching up with the heat wave that swept across the country. To break the trend, the company has launched a new "snack wrap" in the U.S. last week. Bear Stearns rates McDonald's shares at outperform.
Stock of Google Inc. (Nasdaq: GOOG) closed down $3.05 or 0.81% at $381 on the news that News Corp (NYSE: NWS) had chosen Google to handle searches and advertisements on its MySpace social networking site. Shares of News Corp closed down $0.43 or 2.18% to $20.19. This is a four year deal that will give Fox Web sites at least $900 million in payments. The agreement, also calls for Google to provide search-advertising services for the majority of Fox Interactive Media Web sites, which are owned by News Corp. Therefore, Google will replace Yahoo Inc. (Nasdaq: YHOO) as the search provider now being used by MySpace. The payments are expected to be made from the first quarter of 2007 through the second quarter of 2010.
U.S. light crude oil for September delivery fell 67 cents to $76.31 a barrel on the New York Mercantile Exchange. Futures closed lower on a reduced forecast for global oil demand and reassurance from Energy Secretary Samuel Bodman that there is enough supply to offset the loss linked to the Alaskan pipeline shutdown.
Amidst a spate of merger news, stock of Brocade Communications (Nasdaq: BRCD) closed down $1.13 or 20% to $5.01, while that of McData (Nasdaq: MCDTA) rose $0.18 or 12.5% to $3.29, after Brocade Communications announced that it would buy McData for $713 million in stock. This is nearly 50% premium on the company's Monday closing price. Additionally, Brocade also issued an earnings forecast above estimates.
Stock of McDonald's Corp. (NYSE: MCD) fell 1.04% to $35.16, after the fast food empire reported a 3.8% increase in July same-store sales, but lighter U.S. results. International strength and the continued popularity of its breakfast menu and premium coffee has been offsetting slowing U.S. sales. Sales for its restaurants worldwide were up 6.7% for the month. In the United States, the growth was just 1.9% with softness matching up with the heat wave that swept across the country. To break the trend, the company has launched a new "snack wrap" in the U.S. last week. Bear Stearns rates McDonald's shares at outperform.
Stock of Google Inc. (Nasdaq: GOOG) closed down $3.05 or 0.81% at $381 on the news that News Corp (NYSE: NWS) had chosen Google to handle searches and advertisements on its MySpace social networking site. Shares of News Corp closed down $0.43 or 2.18% to $20.19. This is a four year deal that will give Fox Web sites at least $900 million in payments. The agreement, also calls for Google to provide search-advertising services for the majority of Fox Interactive Media Web sites, which are owned by News Corp. Therefore, Google will replace Yahoo Inc. (Nasdaq: YHOO) as the search provider now being used by MySpace. The payments are expected to be made from the first quarter of 2007 through the second quarter of 2010.
Stocks closed with moderate losses as investor were worried a day ahead of the Federal Reserve's monetary-policy decision and by a supply disruption at a BP Plc (NYSE: BP) run oil field in Alaska that touched off a rally in crude futures. The rising oil prices sparked worries about inflation and how that would affect the Federal Reserve's decision to put its rate hiking campaign on hold.
Today, the Dow Jones industrial average closed down 20.97 or 0.19% to 11,219.38, the broader Standard & Poor's 500 index closed down 3.59 or 0.28% to 1,275.77, and the tech fueled Nasdaq composite index closed down 12.55 or 0.60% to 2,072.50.
Market breadth was negative. On the New York Stock Exchange, losers topped winners five to three as 1.34 billion shares changed hands. On the Nasdaq, decliners beat advancers by 19 to 10 as 1.44 billion shares changed hands.
An interesting statement by Al Goldman, A.G. Edwards' chief market strategist "We're not in a bull market, and we're not in a bear market, we're in a turtle market. A turtle waddles around in the muck of all kinds of problems." While investors are hoping for a Fed pause, that would be a blessing in disguise as it would also suggest a slower economic growth. The weaker than expected read on July jobs growth pointed to a Fed pause, but also to a slowing economy. The Feds are not expected to give any clear indications for the future. Traders are now betting there's only a 22% chance that the central bank will boost rates another quarter point tomorrow. However, market is not likely to rally much if the central bank takes a break as a rate pause is already priced into stocks.
Investors are also worried about the escalating violence in the Middle East. Overnight, Israeli forces took on Hezbollah fighters near the Mediterranean coast, while air strikes continued. The market did not react to the news that consumers took on a bigger than expected $10.3 billion in new debt in June. This is nearly double what they'd taken on in May and is totally against the expected $3.4 billion in new credit.
Shares of Apple Computer (Nasdaq: AAPL) edged lower to close down $1.51 or 1.3% to $66.79, after the company introduced its latest desktop computer line at its annual software developer's conference. The Mac Pro will use the Intel dual Xeon chipset, and will cost about $2,500. While the new Mac is twice as fast as the one it replaces, there were no new gadgets that were announced; which disappointed investors.
Shares of Hansen Natural (Nasdaq: HANS) closed down $10.40 or 26% to $29.85, after the energy drink maker reported quarterly earnings that rose from a year ago, on sales that missed analysts' forecasts. On the other hand, stock of AES (NYSE: AES) closed up $1.82 or 10% to $20.07, after reporting quarterly sales and earnings that beat estimates. The company has also boosted its 2006 earnings forecast.
Shares of Mylan Laboratories (NYSE: MYL) declined $3.09 or 13% to $19.92, after the U.S. health regulators determined that in addition to Mylan, a second company could market a generic version of the pain patch Duragesic. The patent of this pain patch was with Johnson & Johnson (NYSE: JNJ) that closed down $0.26 to $63.27.
Stock of Andrew Corp (Nasdaq: ANDW) closed up $1.67 or 21% to $9.56, after telecom gear maker CommScope (NYSE: CTV) made a bid for the cable maker worth $1.5 billion in cash. Shares of CommScope closed down $2.16 or 7.2% to $28.00, after this announcement.
In a show of Unity is strength, shares of AmerisourceBergen Corp. (NYSE: ABC) closed 1% higher at $43.18, and that of Kindred Healthcare Inc. (NYSE: KND) moved up 6.7% to $30.94. The two companies have signed a letter of intent to combine their two institutional pharmacy businesses.
Shares of oil producer BP Plc (NYSE: BP) closed down $2.09 to $70.45 after it announced that it is shutting down its Prudhoe Bay oil field in Alaska, following the discovery of a corroded pipeline and a small leak. This will take about 400,000 barrels a day of crude oil off the world market. The company said data showed 16 anomalies in 12 locations on the pipeline. This represents nearly half the total daily production from the North Slope, and about 8% of daily U.S. output. The company had already announced plans to replace a three-mile segment of the pipeline following inspections conducted after a large spill discovered in early March of this year.
U.S. light crude oil for September delivery jumped $2.22 to $76.98 a barrel on the New York Mercantile Exchange, just short of the record close of $77.03 per barrel, hit in July. The increase is owing to BP PLC shutting down 8% of the country's oil output to fix a leaky pipeline. This comes when traders were already concerned about disruptions to Nigeria's oil output, and by fears that the Middle East conflict could spread, with countries such as oil-rich Iran becoming involved.
Shares of Apple Computer (Nasdaq: AAPL) edged lower to close down $1.51 or 1.3% to $66.79, after the company introduced its latest desktop computer line at its annual software developer's conference. The Mac Pro will use the Intel dual Xeon chipset, and will cost about $2,500. While the new Mac is twice as fast as the one it replaces, there were no new gadgets that were announced; which disappointed investors.
Shares of Mylan Laboratories (NYSE: MYL) declined $3.09 or 13% to $19.92, after the U.S. health regulators determined that in addition to Mylan, a second company could market a generic version of the pain patch Duragesic. The patent of this pain patch was with Johnson & Johnson (NYSE: JNJ) that closed down $0.26 to $63.27.
Shares of oil producer BP Plc (NYSE: BP) closed down $2.09 to $70.45 after it announced that it is shutting down its Prudhoe Bay oil field in Alaska, following the discovery of a corroded pipeline and a small leak. This will take about 400,000 barrels a day of crude oil off the world market. The company said data showed 16 anomalies in 12 locations on the pipeline. This represents nearly half the total daily production from the North Slope, and about 8% of daily U.S. output. The company had already announced plans to replace a three-mile segment of the pipeline following inspections conducted after a large spill discovered in early March of this year.
Stocks lost some steam and closed with slight losses. Investors were heartened by weak labor-market data that seemed to point to an imminent pause in the Federal Reserve's current series of rate hikes. However, concerns about slowing growth offset investor's initial enthusiasm about a possible pause in the Fed campaign of raising interest rates.
Today, the Dow Jones industrial average closed down 2.24 to 11,240.35, the broader Standard & Poor's 500 index closed down 0.91 to 1,279.36, and the tech-heavy Nasdaq composite index down 7.29 or 0.4% to 2,085.05. For the week, the Dow rose 0.2%, the S&P 500 gained 0.1% and the Nasdaq Composite gave up 0.4%. For the year, the Dow has gained 4.6%, the S&P is up 2.4% and the Nasdaq is down 5.5%.
Market breadth was negative. On the New York Stock Exchange, losers edged out winners by nine to seven as 1.71 billion shares changed hands. On the Nasdaq, decliners beat advancers four to three as 1.87 billion shares changed hands.
The market promises more volatility as investors tussle between expectations of a Fed pause and jitters about slower economic growth hurting corporate earnings. However, some economists opine that economic slowing is necessary to sooth the economy of inflation pressures. All data indications point towards a pause, and today, the federal funds futures priced in only a 16% chance of a Fed rate increase next week. Investors will also continue to monitor events in the Middle East, with little prospect of a cease-fire to cheer the market.
In data news, the Labor Department said that non-farm payrolls increased by 113,000 last month against the expected 143,000. The inflation in wages, rose 0.4% against the expected 0.3% gain - higher than expected. The unemployment rate rose to 4.8% in July from 4.6% in June - the expectation was that it would be steady. Therefore, all indicators are that the job market is slowing, and that the Fed probably will pause next week - if they disregard the inflation problem.
Shares of Apple Computer Inc. (Nasdaq: AAPL) closed down $1.29 or 1.9% lower at $68.32. The company revealed that it has discovered evidence of irregularities related to stock-option grants and that it may have to restate prior financial results to adjust irregularities between 1997 and 2001. It added that it had not yet determined the amount of the charges, and it said all earnings reports relating to periods beginning Sept. 29, 2002, should not be relied upon.
Shares of Goodyear Tire & Rubber Co. (NYSE: GT) rallied up $0.72 or 6.5% to $11.79. The company's quarterly profit topped expectations, due to price increases and higher sales of its more expensive products.
Stock of Bristol-Myers Squibb (NYSE: BMY) closed down $1.04 or 4% to $22.75, after the CEO of drug benefits firm Medco said he expects a generic form of pharmaceutical company's blockbuster anti-clotting drug Plavix to become available this year. The U.S. spend for Plavix is nearly $2.7 billion. A Canadian maker of generic medicines has already won final U.S. marketing approval for its generic Plavix but has delayed launching the product due to an ongoing patent battle.
Amidst a 39% jump in profit in the first quarter, shares of Toyota (NYSE: TM) closed up $1.17 or 1% to $108.14. In the U.S market, the company increased its sales by 16% against an overall 14% decline. Its net profit grew 39.2%, the revenue rose 13.2%, and the company reiterated that it expects its global vehicle sales for the 2006/07 business year to total 8.45 million units.
U.S. light crude oil for September delivery lost 70 cents to $74.76 a barrel on the New York Mercantile Exchange.
Shares of Apple Computer Inc. (Nasdaq: AAPL) closed down $1.29 or 1.9% lower at $68.32. The company revealed that it has discovered evidence of irregularities related to stock-option grants and that it may have to restate prior financial results to adjust irregularities between 1997 and 2001. It added that it had not yet determined the amount of the charges, and it said all earnings reports relating to periods beginning Sept. 29, 2002, should not be relied upon.
Stock of Bristol-Myers Squibb (NYSE: BMY) closed down $1.04 or 4% to $22.75, after the CEO of drug benefits firm Medco said he expects a generic form of pharmaceutical company's blockbuster anti-clotting drug Plavix to become available this year. The U.S. spend for Plavix is nearly $2.7 billion. A Canadian maker of generic medicines has already won final U.S. marketing approval for its generic Plavix but has delayed launching the product due to an ongoing patent battle.
Amidst a 39% jump in profit in the first quarter, shares of Toyota (NYSE: TM) closed up $1.17 or 1% to $108.14. In the U.S market, the company increased its sales by 16% against an overall 14% decline. Its net profit grew 39.2%, the revenue rose 13.2%, and the company reiterated that it expects its global vehicle sales for the 2006/07 business year to total 8.45 million units.
Stocks closed higher with the DOW reaching its highest close in a month. Investors sincerely hope that tomorrow's monthly employment report will help convince the Federal Reserve to soften its monetary policy. However, two interest rate hikes in Europe have given this story a new twist. The bounce back in technology stocks boosted the broader market higher.
Today, the Dow Jones industrial average closed up 42.66 or 0.38% to 11,242.59, the broader Standard & Poor's 500 index closed up 1.72 or 0.13% to 1,280.27, and the tech-heavy Nasdaq composite index closed up 13.53 or 0.65% to 2,092.34.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by 19 to 12 on volume of nearly 1.8 billion shares. On the Nasdaq, advancers topped decliners 17 to 11 as nearly 1.84 billion shares changed hands.
The Bank of England and the European Central Bank surprised observers by hiking their key rate by a quarter-percentage point. While the move was not widely expected, the banks said the pace of economic activity has quickened in the past few months, and that higher energy prices have led to greater inflationary pressures. This leaves U.S. investors less certain of what to hope for. This shows that growth outside the U.S. is also slowing down. However, stock market investors continue to hope for a pause in rate hikes next week, as U.S. rates would still remain well above those of the European Union and Japan for some time.
In data news, the jobless claims rose by 14,000 to 315,000, indicating that the labor market is weakening. Tomorrow's employment report is expected to show 145,000 jobs added to payrolls, and the unemployment rate is expected to hold steady at 4.6%. In June, factory orders shot up 1.2%, a bit weaker than the 1.7% increase expected by analysts. The Institute for Supply Management said that its survey of the services sector had a headline reading of 54.8% for July, against the expected 56.9%. Al this has led traders to bet there's a 43% chance that the central bank will boost rates another quarter point.
Shares of Sprint Nextel (NYSE: S) closed down $2.43 or 13% to $17.70, after reporting quarterly earnings that fell from a year earlier due to charges related to its merger with Nextel. The company also reported quarterly revenue and subscriber growth that missed analysts' estimates. Additionally, it also lowered its outlook for the full year.
On warnings of missing first-quarter sales and earnings, shares of Medtronic (NYSE: MDT) closed down $6.61 or 12% to $44.32. The fall is due to a slowdown in the market for implantable devices that regulate erratic heart beats. Shares of rival Boston Scientific (NYSE: BSX) also closed down $1.35 to $16.27, amid worries that the slowdown in sales will hurt their businesses as well.
Disappointing same store sales at Starbucks (Nasdaq: SBUX) led the share to close down $2.70 or 8% to $30.60. July sales missed expectations, overshadowing its otherwise upbeat earnings report. The company also projected an increase in capital expenditures for new-store openings. It stated that high demand for blended drinks, increased waiting times and caused the chain to lose some of its regular "espresso business" in the peak morning hours.
Shares of Gap Inc. (NYSE: GPS) fell 3% to $16.61. The company reported a 4% drop in July sales at stores open at least one year, and forecast second-quarter profit well below Wall Street's expectations as price cuts to move merchandise ate into profits. Gap forecast a second-quarter profit of 13 cents to 15 cents, against the expected 22 cents a share.
Retailers that closed higher included Wal-Mart Stores Inc. (NYSE: WMT) that closed 0.8% higher at $44.73. Its July same-store sales rose 2.4%, in line with its own prediction. Shares of Target Corp. (NYSE: TGT) ended 1.3% higher at $46.39, after forecasting that its August same-store sales will rise 2% to 4%.
U.S. light crude oil for September delivery fell 35 cents to $75.465 a barrel on the New York Mercantile Exchange. The decline in price can be because the threat posed by Topical Storm Chris has diminished.
Disappointing same store sales at Starbucks (Nasdaq: SBUX) led the share to close down $2.70 or 8% to $30.60. July sales missed expectations, overshadowing its otherwise upbeat earnings report. The company also projected an increase in capital expenditures for new-store openings. It stated that high demand for blended drinks, increased waiting times and caused the chain to lose some of its regular "espresso business" in the peak morning hours.
Shares of Gap Inc. (NYSE: GPS) fell 3% to $16.61. The company reported a 4% drop in July sales at stores open at least one year, and forecast second-quarter profit well below Wall Street's expectations as price cuts to move merchandise ate into profits. Gap forecast a second-quarter profit of 13 cents to 15 cents, against the expected 22 cents a share.
Stocks bounced back from two sessions of losses on a slew of positive corporate news stories, with Procter & Gamble (NYSE: PG) and Time Warner (Nasdaq: TWTC) zooming higher on stronger-than-expected earnings.
Today, the Dow Jones industrial average closed up 74.20 or 0.67% to 11,199.93, the broader Standard & Poor's 500 index closed up 7.63 or 0.6% to 1,278.55, and the tech-heavy Nasdaq composite index closed up 16.82 or 0.82% to 2,078.81.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by 11 to 5 on volume of nearly 1.75 billion shares. On the Nasdaq, advancers topped decliners 3 to 2 as nearly 1.79 billion shares changed hands.
While there have been some decent earnings, the investors continue to wait on the Fed meeting on Aug 8. The inflationary signs in the recent economic news could mean the Federal Reserve's interest-rate-hiking campaign isn't done. Until the meeting, the market is likely to bounce back and forth within its recent trading range. The catalyst could be the employment report on Friday and next Tuesday's Fed meeting. Traders are now betting there's a 38% chance that the central bank will boost rates another quarter point next week.
Continuing violence in the Middle East has added to the uncertain tone. Israel has expanded ground attacks and staged new helicopter attacks on Lebanon in a bid to immobilize Hezbollah before any cease-fire is reached. Hopefully, Condoleezza Rice can ask for a cease-fire by the end of this week and maybe get it by next Tuesday to give a double whammy.
Stellar performance by Procter & Gamble (NYSE: PG) led its shares to close up $2.36 or 4.2% to $58.29. The world's largest consumer products company, reported that fiscal fourth-quarter net income rose 36%, as new products drove better-than-expected sales growth and Gillette products helped fatten profit margins. It also forecast current-quarter earnings in a range that could miss expectations. However, investors focused on the actual reported earnings, as EPS grew to 55 cents against the expected 54 cents.
Shares of Time Warner (Nasdaq: TWTC) closed up $0.42 or 2.6% to $16.67, after reporting quarterly earnings that rose from a year ago and topped estimates. The company also announced that it would offer AOL's e-mail and Web services for free. The media conglomerate posted a profit of $1 billion in the second quarter after revenue climbed at its cable-television networks and cable systems. The rising revenue at the cable systems, offset declining revenue at AOL. Revenue rose 1% on a year-over-year basis, reaching a total of $10.71 billion, and operating income before depreciation and amortization rose 7% to $2.7 billion.
Stock of Cigna Corp. (NYSE: CI) closed up $9.44 or 11% to $102.10, on reporting quarterly sales and earnings that beat expectations. The U.S. health insurer also boosted its 2006 earnings forecast. The stock jumped 11 percent. It reported an EPS of $2.33 against the expected $1.94. However, revenue was flat at $4.1 billion.
According to The Wall Street Journal, Phelps Dodge (NYSE: PD) is considering lifting its offer for Canadian Nickel miner Inco (NYSE: N). The company appears to be reacting to a refreshed offer for Inco from Teck Cominco, which also increased its cash component. On this news, shares of Inco closed up 1.9% at $79.27.
General Motors Corp. (NYSE: GM) revised its second-quarter results to show a loss that was $200 million wider than its original figure, to reflect a change in the estimated tax provision relating to its pending sale of a majority interest in its GMAC financing unit. The share erased earlier losses to trade up 1% at $31.61.
Stock of Ford Motor Co (Nasdaq: F) jumped $0.38 or 5.8% to $6.96 after a report that it is bringing in a mergers & acquisitions expert to advise it on whether to pursue alliances or sell assets. The company is looking at a broad range of strategic alternatives, which could include alliances or even the selling off of assets such as Jaguar.
Shares of Pfizer (NYSE: PFE) closed down $0.38 or 1.5% to $25.61, on concerns about a court ruling that could affect the time line of its Lipitor patent protection. While its basic patent on Lipitor was upheld in federal court, a second, longer-running patent was ruled invalid, possibly eliminating billions of dollars in potential sales. This effectively chops 15 months off the Pfizer patent. This is important considering Lipitor sales totaled $12.2 billion in 2005. If it can't find a way to reverse the decision, the company could miss out on billions of dollars in potential sales.
U.S. light crude oil for September delivery jumped 90 cents to settle at $75.81 a barrel on the New York Mercantile Exchange. Crude continues to benefit from supply worries created by the Middle East violence and Tropical Storm Chris.
Stellar performance by Procter & Gamble (NYSE: PG) led its shares to close up $2.36 or 4.2% to $58.29. The world's largest consumer products company, reported that fiscal fourth-quarter net income rose 36%, as new products drove better-than-expected sales growth and Gillette products helped fatten profit margins. It also forecast current-quarter earnings in a range that could miss expectations. However, investors focused on the actual reported earnings, as EPS grew to 55 cents against the expected 54 cents.
Shares of Time Warner (Nasdaq: TWTC) closed up $0.42 or 2.6% to $16.67, after reporting quarterly earnings that rose from a year ago and topped estimates. The company also announced that it would offer AOL's e-mail and Web services for free. The media conglomerate posted a profit of $1 billion in the second quarter after revenue climbed at its cable-television networks and cable systems. The rising revenue at the cable systems, offset declining revenue at AOL. Revenue rose 1% on a year-over-year basis, reaching a total of $10.71 billion, and operating income before depreciation and amortization rose 7% to $2.7 billion
Shares of Pfizer (NYSE: PFE) closed down $0.38 or 1.5% to $25.61, on concerns about a court ruling that could affect the time line of its Lipitor patent protection. While its basic patent on Lipitor was upheld in federal court, a second, longer-running patent was ruled invalid, possibly eliminating billions of dollars in potential sales. This effectively chops 15 months off the Pfizer patent. This is important considering Lipitor sales totaled $12.2 billion in 2005. If it can't find a way to reverse the decision, the company could miss out on billions of dollars in potential sales.
Stocks closed sharply lower on worries that inflationary signs in the day's economic news could mean the Federal Reserve's interest-rate hiking campaign may not be done yet. The round of strong economic reports dealt a blow to last week's hopes for a speedy conclusion to the interest rate tightening campaign. Rising energy prices and weak monthly auto sales added fuel to the fire.
Today, the Dow Jones industrial average closed down 59.95 or 0.5% to 11,125.73, the broader Standard & Poor's 500 index closed down 5.74 or 0.5% to 1,270.92, and the tech-heavy Nasdaq composite index closed down 29.48 or 1.4% to 2,061.98.
Market breadth was negative. On the New York Stock Exchange, losers beat winners more than two to one as 1.7 billion shares changed hands. On the Nasdaq, decliners beat advancers by about three to one on volume of 1.7 billion shares.
The euphoria of last week amidst weaker than expected second quarter gross domestic product report, could not be sustained. Today with the oil significantly higher and higher-than expected data, the situation has reversed. The inflationary signs of economic reports do not mean well for interest rates. The balance may be tipped by the August job report. However, traders are now betting a 38% chance that the central bank will boost rates, up from a 32% yesterday.
In economic news, the core personal-consumption expenditure price index increased 0.2%, and has risen 2.4% in the past 12 months. The 2.4% year-over-year gain in core inflation exceeded the 2.3% pace most economists had been and sits above the Fed's 2% comfort zone. A sign of an expected rate increase. Additionally, personal income rose 0.6% in June, with nominal spending up 0.4%.
In July, factory activity increased with the manufacturing index rising to 54.7%, up from 53.8% and higher than the expected 53.6%. The PPI rose to 78.5% from 76.5% in June. Manufacturing growth showed strength even as prices paid jumped. This shows that manufacturers are dealing with "a very inflationary environment." Once again, not a great news for interest rates.
Construction spending rose a stronger than expected 0.3% to a record high in June on gains in nonresidential and public building. However, private residential construction fell, as the housing market cooled. This is against the expected gain of 0.1%. Once again a sign of continued growth.
Detroit carmakers reported sharp sales declines for July. Daimler Chrysler (NYSE: DCX) closed down $0.61 or 1.2% to $51.04, with sales down 34%, Ford Motors (Nasdaq: F) closed down $0.07 or 1.4% to $6.58, with sales down 34.2%, and General Motors Corp. (NYSE: GM) closed down $0.89 or 2.9% to $31.34, with July sales declining 22.5%.
Shares of Qwest Communications (NYSE: Q) closed up $0.60 or 7.8% to $8.40, after posting a quarterly profit versus a year ago loss. The company reported a second straight quarterly profit, as it reduced costs and added more high-speed Internet customers. The second-quarter net income rose to $117 million, a reversal from the loss of $164 million, registered in the year-ago period. The revenue edged 0.1% higher at $3.47 billion.
Stock of International Paper (NYSE: IP) was 3% lower at $33.29. The company's quarterly profit and sales improved, and its earnings before one time items exceeded expectations. However, the results would have been stronger without restructuring costs.
However, the hardest hit today were the tech stocks, with chips, computer hardware and networking stocks suffering the most. Intel (Nasdaq: INTC) closed down $0.34 to $17.66, Broadcom (Nasdaq: BRCM) lost $1.08 to $22.88, and National Semiconductor (NYSE: NSM) lost $0.72 to $22.54.
Shares of Verizon Communications (NYSE: VZ) closed down $0.48 or 2.5% to $33.34, after reporting quarterly earnings that fell from a year earlier and topped estimates. Power Technologies (OTC: PWTC) closed down $1.41 to $6.53, after reporting that second quarter numbers missed forecasts and warned on third-quarter earnings.
Stock of Eastman Kodak Co. (NYSE: EK) dropped 13.7% to $19.20. The company reported a second quarter loss that was wider than its year earlier loss, due to weakness in film and photo finishing. It also reaffirmed targets for 2006 cash flow and digital earnings.
U.S. light crude oil for September delivery gained 51 cents to $74.91 a barrel on the New York Mercantile Exchange.
Stock of Eastman Kodak Co. (NYSE: EK) dropped 13.7% to $19.20. The company reported a second quarter loss that was wider than its year earlier loss, due to weakness in film and photo finishing. It also reaffirmed targets for 2006 cash flow and digital earnings.
Shares of Qwest Communications (NYSE: Q) closed up $0.60 or 7.8% to $8.40, after posting a quarterly profit versus a year ago loss. The company reported a second straight quarterly profit, as it reduced costs and added more high-speed Internet customers. The second-quarter net income rose to $117 million, a reversal from the loss of $164 million, registered in the year-ago period. The revenue edged 0.1% higher at $3.47 billion.
|
|
|
|
| |
| |
| |
| |
| |
|
Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
|
|
