US & World Daily Markets Financial Briefing 03-03-2006

U.S. stocks trim losses as market absorbs Intel warning

NEW YORK - U.S. stocks trimmed early losses to trade little changed Friday as a drop in crude-oil prices and some positive data helped the market absorb an Intel revenue warning that some investors said came as little surprise.
   
The Dow Jones Industrial Average was last down 5 points at 11,020, but off an early low of 10,984.61.
   
The Nasdaq Composite Index fell 2 points at 2,308, while the S&P 500 Index dropped 1.25 points to 1,287.93.
   
"The market may not be able to overlook Intel's warning, but the fact that it's able to absorb the negative news without a steep price decline is a positive signal," said Ken Tower, chief market strategist at CyberTrader.
   
Tower said the Intel news was hardly a surprise as the chipmaker has struggled since its shares tumbled over 11% on Jan. 18 when its first-quarter profit outlook fell short of expectations.
   
Intel shares briefly touched an 18-month low of $19.86 after the company said it expects revenue of $8.7 billion to $9.1 billion in the first quarter, below its previous forecast of $9.1 billion to $9.7 billion.
   
The chipmaker, a Dow component, cited weaker-than-expected demand and a slight loss of market segment for the lower projection. Intel also anticipates its gross margin for the first quarter will be hurt by its lower revenue outlook.
   
Intel was last off 2.3% at $20.02 in morning trading.
   
Rival chipmaker Advanced Micro Devices Inc. benefited from Intel's woes. Its stock was last up 45 cents at $41.77.
   
On the broader market for equities, decliners outpaced advancers by 4 to 3 on the New York Stock Exchange, and by 14 to 11 on the Nasdaq.
   
By sector, home builders , gold stocks and utilities were under pressure. Semiconductors were only modestly lower on Intel's warnings.
   
Brokers rose, helped in part by Merrill Lynch's decision to raise its earnings estimates on a number of the key players in the sector. Internet stocks also edged higher as Google gained on positive sentiment generated by its analyst meeting.
   
Mixed data
   
There was mixed news on the economic front.
   
Non-manufacturing sectors of the U.S. economy expanded at a faster pace during February, the Institute for Supply Management reported Friday. The ISM non-manufacturing index rose to 60.1% from 56.8% in January. The increase was above expectations. Economists were looking the index to rise to 58.2%. Inflation pressures also eased. The price index slipped to 64.8% from 67.2% in the previous month.
   
But U.S. consumer sentiment weakened slightly in late February, according to media reports of proprietary research at the University of Michigan.

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Starbucks Corp. tacked on 26 cents at $35.71 after the coffee chain reported an 8% rise in same-store sales in February, slower than the growth it posted in January but above consensus forecasts for an increase of 6.5%.
   
Wendy's International Inc. will also be in focus after the fast-food company said late Thursday it plans to explore strategic alternatives for its Baja Fresh Mexican Grill chain. The stock was last up 1.8% at $59.51.
   
Shares in Novell Inc. tumbled 16% to $8.03 after the network-software provider's profit forecast disappointed in the wake of quarterly results that largely met expectations.
   
Google Inc. shares gained 1.8% to $383.09 after the Internet company told analysts it expects to invest significantly in 2006 with an eye toward capturing a larger share of the more than half-a-trillion-dollar global advertising business.
   
The rebound in Google's shares comes after its share price tumbled on Tuesday following remarks by Chief Financial Officer George Reyes that "growth will slow" at the company.
   
The brokerage sector received a boost after Merrill Lynch analysts increased their first-quarter earnings estimates for big Wall Street brokers by an average of 5%. Merrill cited strength in underwriting volumes, mergers and acquisitions "firing on all cylinders" and robust market conditions.
   
Merrill lifted its profit outlook on Bear Stearns , Morgan Stanley , Goldman Sachs and Lehman Bros.

Forex

The U.S. dollar rose against the Japanese yen after falling to one-month lows earlier in the week. The yen, however, will continue to be supported by expectations the Bank of Japan is preparing to tighten its monetary stance. A larger-than-expected rise in Japan's retail inflation in January underpinned this sentiment.
   
The dollar was last up 0.8% at 116.66 yen. The euro was off 0.2% at $1.2009.

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The European Markets at 12.00 GMT

London - UK share prices were firmer midday, as BT and Cairn Energy rallied on bid hopes, and with oil and mining stocks lending support on the back of rising commodity prices, dealers said.
   
At 11.07 am, the FTSE 100 was up 23.2 points at 5,856.2 after reaching  intra-morning highs of 5,864.0; with the broader indices mixed.
       
Frankfurt - Shares were higher in midday trade, bouncing back from yesterday's slump, as Metro continued to gain on yesterday's better-than-expected German January retail sales and as Fresenius Medical Care and Adidas-Salomon sparkled on broker upgrades, dealers said.
   
At 12.01 pm, the DAX 30 index was 22.66 points or 0.39 pct higher at 5,806.15, having moved between 5,749.65-5,811.48 so far this session. The MDAX was at 8,356.32, up 8.26 points or 0.10 pct, while the TecDAX was at 738.00, up 0.78 point or 0.11 pct.

Paris - Share prices were slightly higher in midday trading, bouncing from early declines as investors were relieved that the CAC-40 index managed to remain above the key 5,000 support level, bolstering hopes of further upside potential for equities, dealers said.
   
At 12.14 pm, the CAC-40 index was up 18.83 points at 5,027.92, on volume of 1.6 bln euro.

Amsterdam - Share prices were higher in early afternoon trade, led up by Hagemeyer and Royal Dutch Shell, dealers said.
   
At 1.06 pm, the AEX was up 1.15 point or 0.25 pct at 458.41, after opening at 457.16, reaching a low of 455.81 and a high of 459.02.

Milan - Share prices were slightly higher at midday, lead by Saipem in the wake of higher oil prices, dealers said.
   
At 11.48 am, the Mibtel index was up 0.64 pct at 28,861 points and the S&P/Mib rose 0.66 pct to 37,575.

Madrid - Share prices were higher midday, in line with most other European bourses, led by gains in Repsol YPF on a fresh spike in crude prices and M&A talk, while Telecinco also outperformed, dealers said.
   
At 1.10 pm, the IBEX-35 index put on 17.9 to 11,827.5, after trading in a range of 11,765-11,834, on turnover of 1.1 bln eur.

Stockholm - Share prices remained in positive territory in midday trade, slightly extending the morning's gains, with clothing retailer Lindex showing a sharp rise in the wake of an upgrade from Handelsbanken, dealers said.
   
At 12.15 pm, the OMX Stockholm index was up 0.50 pct at 323.06, while the OMX Stockholm 30 index was up 0.53 pct at 1,011.12.

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Asian shares close mostly down, Tokyo slides amid interest rate fears

HONG KONG - Share prices across the Asia-Pacific region ended mostly down, with Japan's blue-chip Nikkei 225 index shedding more than 240 points as the latest inflation data raised concerns over a possible near-term interest rate hike, dealers said.
  
The Nikkei 225 Stock Average closed down 246.42 points or 1.55 pct at 15,663.34.
   
The broader TOPIX index of all first-section issues lost 19.28 points or 1.2 pct to 1,612.96.
   
For the week the Nikkei 225 index was down 2.7 pct and the TOPIX fell 2.1 pct.
   
Before the start of trade the government announced that nationwide core consumer prices rose 0.5 pct year-on-year in January, marking the biggest gain since March 1998.
   
It was the third month in a row prices have risen, and the size of the increase beat the market consensus for a 0.4 pct gain.
   
The inflation data fuelled expectations in the market that the Bank of Japan (BoJ) may move as soon as next week to end its more than five-year old super-loose monetary policy, paving the way for a hike in interest rates.
   
"I think the market is, in fact, reacting more to the possible interest hikes (than the CPI data itself), even though this will only come long after the BoJ lifts its quantitative-easing (super-loose monetary) policy," said Ryuta Otsuka, a strategist at Toyo Securities.
   
In Australia, share prices also finished lower after posting reasonable gains during the trading session, slipping into negative territory on end of the week profit-taking in the resource and banking sectors, dealers said.
   
They said the world's two largest miners, BHP Billiton and Rio Tinto, fell into the red despite the overnight rise in metal and oil prices.
   
Dealers said Australia's largest independent oil and gas producer Woodside defied the late sell-off as oil prices continued to trade above 60 usd on concerns that terrorist attacks may target the global oil industry.
   
The S&P/ASX 200 fell 5.3 points or 0.11 pct to close at 4,898.5.
   
The key indicator closed above the day's low of 4,897.6 and below the high of 4,939.5. Over the week the indicator added just 5.1 points or 0.1 pct.
   
Share prices in Hong Kong were little changed in afternoon trade as investors marked time ahead of 2005 results announcements from HSBC and its unit Hang Seng Bank, due on Monday, dealers said.
   
Standard Chartered Bank's strong annual results lent some support to the market but the overall mood was cautious, they said.
   
China's Nine Dragons Paper was in focus as it posted sharp gains on its trading debut.
   
At 3:23 pm, the Hang Seng Index was up 2.97 points or 0.02 pct at 15,885.42
   
In mainland China, A-shares in Shanghai and Shenzhen closed higher on some bargain-hunting interest after yesterday's plunges with airlines and metal companies buoyed in particular, dealers said.
   
The Shanghai A-share Index rose 7.91 points to 1,356.40 on turnover of 12.31 bln yuan and the Shenzhen A-share Index was up 0.56 point at 324.22 on turnover of 6.55 bln yuan.
   
In Seoul, share prices ended sharply lower as Samsung Electronics and Hynix tumbled on a report of a possible price-fixing probe by local regulators and growing concerns over their first-quarter results due to falling NAND flash chip prices, dealers said.
   
Wall Street's overnight downturn, the Seoul bourse's impending triple witching, and uncertainty over interest rate decisions at home and abroad also added to the market jitters, they added.
   
The KOSPI index closed down 38.75 points or 2.83 pct at 1,328.95.

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Gold futures fell in morning trading. The benchmark April contract was off $3.50 at $566.90 an ounce.
   
On the bond market, long-term Treasury prices were lower, sending yields higher, amid worries over rising interest rates not only in the U.S. but also in Japan and the euro zone. A key European rate was lifted Thursday.
   
The benchmark 10-year note was off 7/32 at 98 24/32, with its yield at 4.6%.
   
Crude-oil futures fell in New York trading even as talks between Iran and the European Union aimed at ending concerns over the former's nuclear-research program ended without agreement. The benchmark April contract was off 26 cents at $63.10 a barrel.

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