Wednesday, July 19, 2006, 4:15 PM EST (Thomson Financial Corporate
Services): After a sluggish start to the week, Bay Street shook off the
doldrums and, along with Wall Street, rallied in all sectors after Inco
released impressive earnings results, the Fed Chairman and stats provided
reassuring American inflation news, and the price of oil dropped again.
U.S. earnings news were also in focus.
* The S&P/TSX Stock Exchange Composite Index jumped 147.89 points, or
1.29%.
* Federal Reserve Chairman Benjamin Bernanke testified today before the
Senate Banking Committee in a closely watched twice-yearly report that
sparked a major rally on Wall Street, as analysts interpreted his remarks
as pointing towards a slowdown in the Fed's interest rate hikes. Bernanke
said that, while inflation was a growing concern, he did not think it
affected all sectors equally, nor that a recession was imminent. He
stressed the importance of the Fed acting as an inflation fighter and said
it seemed to be working: "We're in a much more normal range of interest
rates." Finally, he observed that recent rapid growth appeared to be
moderating, which would reduce pricing pressures.
* Meanwhile, U.S. Commerce Dept. released figures for June showing that
inflation slowed, with a drop in oil prices accounting for much of the 0.2%
rise in consumer prices, half the May rise of 0.4%. Meanwhile, core prices
rose 0.3%. Separately, housing starts dropped by 5.3%.
* Another chapter was written in the biggest-ever Canadian merger story
as Inco trumpeted record profits in its second-quarter report, citing the
highest earnings in 104 years. Analysts had estimated US$1.68 per share and
revenue of US$1.68 billion; Inco delivered US$2.11 per share and sales of
US$1.81 billion. The company cited high prices for nickel and copper,
income tax rate reductions, and derivatives growing from anticipation of
the Falconbridge acquisition. Not to be outdone, Xstrata sweetened its own
deal for Falconbridge yet again, raising its all-cash offer. Hostile bidder
Teck Cominco is also mulling raising its own bid for Inco. However, Inco
feels that its news, which buoyed the metal and mines sector today, will
boost its own chances to buy Falconbridge.
* Fording Canadian Coal Trust also released its earnings, seeing a
second- quarter profit jump of 13.8% to C$140 million up from C$123 million
a year ago. Its shares dropped, however, as higher prices for coal were
offset by the fact that it earned C$1.03 per unit, before unusual items and
future income taxes, when analysts had been expecting C$1.12.
* A surprise increase in U.S. gasoline stocks and hopes of peace talks
in the Middle East made crude oil drop more than a US dollar, closing at
US$72.66. Gas stockpiles had been predicted to drop by 0.7 million barrels,
but instead rose by 1.5 million barrels, as demand slackened and refiners
increased production. OPEC released a statement claiming they were "very
uncomfortable" with current prices.
* The financial sector of the TSX was boosted as J.P. Morgan Chase and
Bank of America both posted earnings that beat forecasts. J.P. Morgan
reported that its earnings more than tripled in second-quarter as its
investment banking business took off, for a US$0.99 per share figure, up
from US$0.28 per share a year ago; analysts had predicted US$0.87 per
share. Meanwhile, Bank of America also topped expectations.
* Mixed news emerged from the U.S. tech sector, as Yahoo! and IBM
released earnings. Big Blue barely beat forecasts, posting US$2.02 billion
in earnings and US$1.30 per share with US$21.9 billion in revenue. Analysts
had been forecasting the same revenue but US$1.29 per share in earnings.
While the 1% second-quarter revenue increase was disappointing, shares went
up, buoying the Dow, as investors mulled the effects of cost-cutting and
stock buybacks. However, Yahoo! did not fare as well; while the company met
expectations, posting a second-quarter profit of US$164 million or US$0.11
per share, it revealed that a major innovation in the way it displays ad
links will be delayed another three months. Investors had been hoping the
new method would help in the fight against rival Google, which is now
outstripping it in growth.
* Centerra Gold fell on reports that the miner was forced to lower
production estimates on its Kumtor Mine in Kyrgyzstan, after a rockslide
cut its 2006 projections and increased its operating costs from US$375 per
ounce to US$530. However, this piece of bad news did not drag down the gold
sector in general, which rose as the yellow metal recovered some of its
recent price drops as the U.S. dollar weakened, closing up 2.11% at
US$642.80.
-- Carolyn.Crapo@contractor.Thomson.com; Thomson Financial Corporate
Services
This is Thomson Financial Corporate Services Canadian Commentary, which
is updated twice daily. The information herein is believed to be true and
accurate, we take no responsibility for inaccurate information and reserve
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SOURCE Thomson Financial Corporate Group
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