By Steve Goldstein, MarketWatch
Jan 11, 2006
U.S. stock market futures flattened Wednesday, erasing earlier gains, as
an earnings warning from DuPont, Genentech's report of below consensus sales
of a key drug and a downgrade of Yahoo Inc. offset an upgraded of
Hewlett-Packard and continued gains in Apple Computer.
U.S. stocks were coming off a mixed performance on Tuesday. The Dow
industrials held onto the 11,000 level but ended the session with a
fractional loss, while the Nasdaq Composite rose 1.6 points at 2,303,
behind stronger-than-forecast revenue at Apple Computer. The S&P 500 ended
0.5 point lower at 1,289.
"Given the strong performance over the previous session, yesterday's price
action only can be considered as constructive," said analysts from KBC
Securities.
The U.S. dollar was slightly weaker against the euro and the yen, but
advanced on the British pound after a wider-than-forecast U.K. trade gap.
The pound recently was down 0.34% at $1.7578.
Front-month crude oil futures recently were down 24 cents at $63.13 a
barrel in electronic trading, ahead of weekly U.S. energy data expected to
increase in gasoline and distillates inventories but a decline in crude oil
inventories.
Of companies in focus, DuPont fell $1.35, or 3.2%, to $41.20 in Instinet
pre-open trading after the Dow component warned that fourth-quarter earnings
would fall short of expectations due to operation disruptions from hurricanes
Katrina and Rita, as well as weaker-than-anticipated performances in its crop
protection chemical, performance coatings and surfaces businesses.
The chemical company now expects to earn 10 cents a share vs. the
company's prior forecast of 20 to 25 cents a share. The company said it
expects the tax rate for 2005 will be lower than previously estimated.
Meanwhile, fellow Dow member Hewlett-Packard tacked on 35 cents, or 1.1%,
to $31.13 in Instinet after Prudential Equity Group upgraded computer hardware
giant to overweight from neutral weight, citing the benefit of continued cost
reductions, improved tactical execution, consistency and credibility and
strong earnings growth momentum.
Genentech shed $3.36, or 3.6%, to $89.98 in Instinet after the biotech
overnight reported in-line earnings growth of 64% in the fourth quarter, but
reported sales of Avastin below consensus estimates. Merrill Lynch downgraded
the biotech to neutral from buy. "Avastin is a key driver for future growth
and needs to beat estimates at this point in its launch in order to justify
the current valuation," the broker said.
Merrill also cut Yahoo Inc. to neutral from buy, saying there's limited
upside ahead for the Internet portal. That knocked the stock down 87 cents,
or 2%, to $42.11 in Instinet.
Among other stocks seeing early activity, Apple Computer hiked up $2.08,
or 2.6%, to $82.94 after Prudential raised its price target to $100 from
$86 and kept a buy rating on the stock, citing Apple's revenue guidance.
Banc of America Sec. also raised its stock price, moving to $87 from $78.
The stock had run up 6.3% on Tuesday to close at an all-time high of
$80.86.
Elsewhere, supercomputer maker Cray Inc. surged 27% to $1.76 after raising
late-Tuesday 2005 revenue forecasts to $199 million from $195 million.
Elsewhere, Johnson & Johnson was considering whether to launch a new bid
for medical device maker Guidant, The New York Times reported Wednesday,
citing anonymous people involved in the talks. Guidant's board met to declare
Boston Scientific Corp.'s $25 billion offer superior to Johnson &
Johnson's original $21.4 billion bid, which would trigger a five-day deadline
for J&J to make a new offer, but J&J was considering a new bid to avert a
showdown, the report said.
AmerUs may see activity after U.K. insurer Aviva denied a newspaper report
it's bidding nearly $3 billion for the U.S. rival, though it said it's on the
lookout for international acquisitions.
Three private-equity firms have joined the bidding for newspaper publisher
Knight-Ridder, the Los Angeles Times reported, citing anonymous participants
in the auction.
Overseas, European markets bounced back after losses on Tuesday, and
Tokyo's Nikkei 225 and Hong Kong's Hang Seng also advanced.
Broker calls
Deutsche Bank downgraded the world's largest mobile phone maker, Nokia
Corp., to hold from buy. While the bank has upgraded its 2006 handset market
forecast to show a 10% volume rise from a previous view of 7%, it believes the
shares are fully valued. Deutsche raised Nokia's target price to 16 euros from
15 euros.
This MarketWatch news update is provided to you courtesy of Thomson
Financial.
This is Thomson Financial's Market Commentary, which is issued three times
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p.m.). The information herein is believed to be true and accurate. We
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SOURCE Thomson Financial Corporate Group
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