Thursday, July 20, 2006, 4:15 PM EST (Thomson Financial Corporate
Services): The North American markets softened today after yesterday's
triple- digit rally, as markets absorbed the second half of Fed Chairman
Bernanke's testimony (which largely mirrored yesterday's) and mixed
earnings reports balanced each other. On the M&A front, Xstrata has checked
Phelps Dodge and Inco in their Falconbridge acquisition chess match.
* The S&P/TSX Stock Exchange Composite Index dropped 154.08 points, or 1.33%.
* Phelps Dodge decided to finally stop raising its stake in its battle
for Falconbridge, as the U.S. company withdrew any support for partner Inco
to increase its bid again. Xstrata CEO Mick Davis promptly claimed victory,
but Inco chief Michael Hand said that his cash-and-stock bid, worth fifteen
cents more than Xstrata's US$62.50 per share at Wednesday's close (and
Falconbridge is adding their own seventy-five cent dividend), was their
"best and final offer for Falconbridge." The next step would appear to be
up to Falconbridge's avidly-courted shareholders.
* A dramatic day for U.S. tech sector Goliaths began with a tumble of
57% in profits for Intel, its biggest in four years. In the second quarter,
Intel lost US$0.15 per share and posted revenues of US$885 million, down
from US$0.33 and US$2.04 billion last year. Demand for its PC chips has
weakened to the point it will have to lay off 1,000 managers and
restructure its business. However, Apple, which had been predicted by
analysts to lose money, posted a 48% jump in its second-quarter profit,
with earnings of US$472 million, or US$0.55 per share, compared to US$320
million, or US$0.37, last year. Finally, Motorola also posted a 48% profit
surge that also outstripped analyst forecasts, claiming net income of
US$1.38 billion, or US$0.55 per share, up from US$933 million, or US$0.37,
last year.
* Ford Motors reported a highly unsatisfactory second quarter as the
appetite for its SUVs and light trucks withered as energy prices
skyrocketed, and it shed or bought out employees in a massive
restructuring. It lost US$123 million, or US$0.03 per share; Wall Street
had anticipated a gain of US$0.12. Revenue fell from US$44.55 billion to
US$41.97 billion.
* Nova Chemicals' shares climbed as it reported second-quarter earnings
of C$108 million, up 22% and compared to a C$5 million loss last year. Tax
cuts in Alberta and a corporate reorganization were credited for the gain.
* The healthcare sector was buoyed by good news from Biomira about its
Phase II clinical trials for its new Stimuvax, a drug that may stabilize
the androgen levels in prostate cancer patients. Antigen levels stabilized
in half the patients tested. Biomira plans to try the drug with non-small
cell lung cancer patients in Phase III.
* No "AppleBerrys" on the horizon: Research In Motion announced that it
was developing a "next generation" lighter, thinner, expandable-memory
Blackberry that would incorporate multimedia features and a better radio.
It promises a "really big" marketing campaign for the rollout. However,
execs scotched the rumour that RIM was planning to partner with Apple for
the new product. Despite the long-anticipated news, RIM rose only slightly
as partner Intel foundered.
* Warnings from Iran that its nuclear power ambitions are not abated
and further fighting in the Middle East moderated the week-long drop in
oil, as crude closed today up US$0.42 at US$73.08.
* Gold went down 1.60% to US$632.50 as investors, fleeing from emerging
markets, took profits and bought dollars and U.S. treasury bonds.
* Statistics Canada released figures showing wholesale sales, after
dropping 0.3% in April, shooting up 0.9% in May. More than half of the
increase was in the automotive sector, with building materials also a large
factor. The loonie rose 0.08% on the news, closing at US$88.20.
* In the U.S., factory activity in the Philadelphia region slowed in
July, the Philadelphia Federal Reserve said. The Philly Fed index fell to
6.0 points in July from 13.1 in June. Economists expected the index to slip
to about 11.6. Also the index of leading economic indicators increased 0.1%
in June after two consecutive declines, the Conference Board reported.
-- 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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