8:41 AM ET Jan 12, 2006
LONDON (MarketWatch) -- U.S. stock futures declined Thursday, with rising
oil prices and downgrades of Dow industrials components Coca-Cola and J.P.
Morgan Chase among the bearish signs for the session.
A narrower-than-expected merchandise trade deficit for November helped
lift the dollar, but failed to budge the stock market's outlook.
S&P 500 futures dipped 2.10 points at 1,297.60 and Nasdaq 100 futures were
off 3.5 points at 1,767.50. Dow industrials futures slid 25 points to 11,050.
On Wednesday, the Dow industrials rose 32 points at 11,043, the Nasdaq
Composite rose 11 points at 2,331 and the S&P 500 rose 4.5 points at 1,294, as
markets looked past a profit warning from DuPont and a sales disappointment at
Genentech to continue this year's upward trend.
Front-month crude recently was up 56 cents at $64.50 a barrel, as Iran's
resumption of nuclear research continued to unsettle markets.
The U.S. trade deficit narrowed by 5.8% in November to $64.2 billion from
a record $68.1 billion in October, the Commerce Department said. The consensus
forecast of Wall Street economists was for a deficit of $66.2 billion in
November. However, the deficit with China widened to $18.5 billion in November
compared with $16.7 billion in the same month last year.
The dollar rose 0.2% vs. the euro to $1.2116. Prior to the data, the
currency pair was flat.
Against the Japanese yen, the dollar was down 0.6% at a 3-month low of
113.58.
The British pound advanced slightly on the dollar, recently at $1.7698,
following the Bank of England holding its key interest rate at 4.5%. The euro
was steady after the European Central Bank also kept rates on hold.
Of companies drawing attention, Guidant Corp. eased 0.6% in the pre-open
after it said late Wednesday it will stay with Johnson & Johnson, which
offered a sweetened cash-and-stock deal worth $23.2 billion. But Boston
Scientific said it won't give up on its $25 billion bid for the company.
Dow member Coca-Cola Co. declined over 1.3% after Goldman Sachs downgraded
it to in-line from outperform and cut Anheuser-Busch to underperform from
in-line after shifting most of its beverage coverage to Judy Hong. Hong
believes 2006 won't be a break-through year for Coke, while Anheuser-Busch is
her least favorite stock as valuation looks full relative to the slow growth
she sees in U.S. beer.
"We would not put fresh money to work in Coca-Cola, PepsiCo or Anheuser-
Busch," she told clients. Pepsi Bottling Group was upgraded by the broker.
J.P. Morgan Chase, also a Dow component, was downgraded to market perform
from outperform by Piper Jaffray, as the broker believes healthy capital
markets and synergies from its merger with Bank One are fully figured into the
shares. "Further, the impact from net interest margin deterioration, a
moderating trading environment, and slowing consumer loan volumes may be more
severe than anticipated," the broker said.
Apple Computer was upgraded to outperform from peer perform at Bear
Stearns, which cited an improved revenue and earnings growth rate, reduced
risks for transition to Intel and an increased clarity into new product. The
stock was last up $1.28, or 1.5%, at $85.18 in Instinet pre-open trading,
after closing at an all-time high on Wednesday.
Google Inc. gained $1.13 to $472.76 after CIBC World Markets raised its
stock price target to $540 from $400, citing expectations for a "blow out"
fourth-quarter report. Analyst Paul Keung reiterated his sector outperform
rating, and raised his fourth-quarter earnings estimate to $1.98 a share from
$1.84.
AT&T, however, was upgraded by Prudential Equity Group to overweight from
neutral weight. Possible increased SBC and AT&T merger synergies, aggressive
share buybacks, a lowered cost structure and a high level of "negativity"
already in the company are reasons to be bullish on the telecom, the broker
said.
Investors weren't bullish on European telecoms, however, following the
second warning from France Telecom in four months, which weighed on European
stock markets. Advancing technology shares led stocks in Tokyo and South Korea
higher.
Elsewhere, RadioShack said earnings for 2005 won't reach the company's
previous established range of $2.14 to $2.24 a share. The consumer-electronics
retailer didn't specify an updated full-year earnings target. The company also
said it had total sales of $1.67 billion for the fourth quarter, 5% higher
than the $1.59 billion registered in the final three months of 2004, while
comparable-store sales grew by 4%. Analysts, on average, have been looking for
RadioShack to post sales of $1.65 billion for the latest quarter, according to
estimates compiled by Thomson First Call.
Steve Goldstein is MarketWatch's London bureau chief.
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