By Mark Cotton, MarketWatch
Jan. 17, 2006
U.S. stocks fell in early trading Tuesday, hurt by a surge in crude-oil
prices, with Guidant Corp once again in focus after Boston Scientific's
sweetened $27 billion offer for the medical-devices maker.
The Dow Jones Industrial Average came off an early low of 10,903.60, and
was last down 36 points at 10,924.
The Nasdaq Composite Index was down 13 points at 2,304 while the S&P 500
Index dropped 4 points to 1,283.
"The back-up in oil prices due to intensifying geopolitical problems is
obviously weighing and will overshadow any bullish sentiment that's linked to
earnings or economic data," said Peter Cardillo, chief market analyst at S.W.
Bach.
On the broader market for equities, decliners outpaced advancers by more
than 2 to 1 on the New York Stock Exchange and the Nasdaq.
By sector, semiconductor stocks, networkers, airlines, banks and brokers
were putting in some of the most significant declines.
The rise in crude prices sent energy and oil services stocks higher.
Oil futures surged ahead of the bell amid supply concerns as attacks
continued on Royal Dutch facilities in Nigeria threatening exports from that
country. Possible fallout from Iran's resumption of its nuclear program was
another factor boosting crude prices.
The benchmark February contract ended up $1.35 at $65.27 a barrel in
electronic trading. New York trading starts at 10 a.m. Eastern.
On the data front, manufacturing activity in the New York area expanded at
a slower pace in January, the New York Federal Reserve Bank said. The bank's
Empire State Manufacturing index fell to 20.1 in January from a revised 26.3
in December. The decline was roughly in line with expectations. The prices-
paid index, a measure of inflation, held steady.
U.S. industrial output, meanwhile, increased 0.6% in December while
capacity utilization soared to 80.7%, the highest since October 2000, the
Federal Reserve said. The increase in capacity utilization could raise red
flags at the Federal Open Market Committee, which warned in December that
decreasing slack in the economy could fuel inflationary pressures.
The dollar extended early gains against the euro and the Japanese yen on
fears the stronger-than-expected industrial output and capacity utilization
data could cause the Federal Reserve to extend its cycle of interest rate
hikes.
The euro was off 0.4% at $1.2063. Against the Japanese yen, the greenback
was up 0.3% at 115.42. Strength in the dollar weakened gold. The benchmark
February contract fell $2.60 to $554.40 an ounce.
On the bond market, long-term Treasurys traded slightly lower after the
data. The benchmark 10-year note was down 3/32 at 101 1/32, with its yield at
4.36%.
Boston Scientific lifts bid for Guidant
Shares in Guidant Corp. soared 7.4% to $76.12 after Boston Scientific
raised its offer for the medical devices maker to around $27 billion, or $80 a
share from $73 a share.
Boston Scientific noted its bid represents a premium of $3.3 billion, or
$9 per share, over the competing offer of Johnson & Johnson. Boston said its
amended offer expires at 5 p.m. Eastern on Tuesday unless its offer is
declared "superior" by Guidant's board, a condition that would move the
offer's expiration back to Jan. 25. Johnson & Johnson shares fell 24 cents to
$61.58. Boston Scientific shares dropped 4.6% to $24.05.
Dow stocks in focus
McDonald's Corp. was one of only a handful of Dow components moving
higher, up 1.8% at $35.10, after the fast-food giant said it expects fourth-
quarter earnings of 48 cents a share, a penny above current Thomson
First Call estimates. The company also reported a 5% jump in December sales
from restaurants open at least a year, known as same-store sales.
Shares in Caterpillar Inc. fell 33 cents to $62 as Lehman Bros. cuts its
rating on the industrial and farm equipment maker as part of a broader
downgrade of the machinery sector. The broker said the company is set to hit
its cyclical earnings peak in 2007.
Lehman Bros.' view appeared to outweigh a more positive take from
Citigroup, which upgraded the company to a buy, saying a survey of global
construction dealers indicates industry demand continues to outstrip supply.
After the close, Dow components Intel Corp. and International Business
Machines are set to report their quarterly results. Investors are hoping
strong earnings from these two companies will help erase last week's
disappointing results out of fellow Dow member Alcoa Inc. and a profit warning
from DuPont, another component of the blue-chip index.
Yahoo is also slated to report after the bell. The Internet company's
stock was off 30 cents at $59.60 in the early going.
Slew of banks report earnings
California-based Wells Fargo & Co led a number of banks, mostly regional,
reporting their earnings. Wells' fourth-quarter net-income rose 8% but a spike
in personal bankruptcies weighed on results, and its earnings per share came
up a penny shy of estimates. The stock was off 38 cents at
$62.86.
Fifth Third Bancorp, U.S. Bancorp, AmSouth Bancorporation, National City
and Texas Regional were some of the other banks posting their earnings.
Elsewhere, there was mixed news for homebuilders. M.D.C. Holdings Inc.
rose after the company posted fourth-quarter results that handily topped
analyst estimates. The stock was up 1.8% at $66.34.
But Toll Brothers Inc. was under pressure after Bank of America downgraded
the homebuilder to sell from neutral, citing slowing demand for more expensive
new houses. The stock was off 2% at $36.97.
This MarketWatch news update is provided to you courtesy of Thomson
Financial.
This MarketWatch news update is provided to you courtesy of Thomson
Financial. The information herein is believed to be true and accurate. We take
no responsibility for inaccurate information and reserve the right to update
our reports. If you have any questions please e-mail James Sang at
james.sang@thomson.com or call 646.822.6233. For more information about
Thomson Financial visit us at http://www.thomson.com/financial.
SOURCE Thomson Financial Corporate Group
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