U.S. MARKET AVERAGES
-Citigroup, Schwab, W.W. Graniger and Wachovia report better than forecasted earnings.
-General Motors, Saks, Mattel and Hasbro fall short of expectations.
-Tobacco stocks rallied on a Supreme Court ruling.
In a day of earnings, market had little distraction other than gyration in oil price. At the opening market’s negative sentiment was replaced by a glimmer of hope. It was not General Motor’s earnings but it was management’s release of agreement with UAW to reduce annual healthcare bill by $1 billion and shut additional plants and cut total of 25,000 employees. Management forecasted that annual savings could reach $5 billion beginning next year. For the record GM reported loss of $1.92 vs. profit of 56 cents a year ago and estimate of loss of 87 cents.
Afternoon trading was dominated by rise in oil price. As oil price rose close to 2.5% during the mid-session, stocks in consumer discretionary, casinos, retails, and transportation sectors lost ground.
Tech stocks IBM, Intel and 3M rose before the earnings release scheduled for this evening and tomorrow evening.
Tobacco stocks rallied on the Supreme Court ruling that industry is no liable to pay to federal government $280 billion in penalties related to civil racketeering lawsuit against tobacco industry. Shares of Altria (
MO: chart) were up 6% and Reynolds American (
RAI: chart) were up 6.4% and Loews Group (
LTR: chart) closed up 3.5%.
MOVERS AND SHAKERS
Dow component
Citigroup Inc (
C: chart) reported earnings this morning. According to the report, the banker’s earnings from continuing operations came below Wall Street predictions, because of expenses connected to Hurricane Katrina. Revenue was above analyst estimates, due to an increase in corporate and investment banking business and a gain of $2.12 billion on the sale of life insurance and annuities. Citigroup’s stock added 1%.
Wachovia Corp (
WB: chart) also posted quarterly results. Both adjusted earnings and revenue topped Wall Street estimates. Wachovia posted earnings of $1.67 billion, or $1.06 a share. The company’s earning results were $1.26 billion, or 96 cents a share, a year ago. Wachovia’s stock was up 1.3% on Friday.
General Motors Corp (
GM: chart) gained because of the news that it has made an agreement with the United Auto Workers' union to reduce health care costs. By this reduction the company will save $15 billion. The car maker also said it is planning to sale its financial unit GMAC. In another report the company announced a third-quarter loss that was more than expected.
Doughnut seller
Krispy Kreme Doughnuts’s (
KKD: chart) stock lost nearly 30% after the company said its unit Freedom Rings LLC has filed for Chapter 11 bankruptcy protection.
Brokerage Legg Mason upgraded
Anheuser-Bud (
BUD: chart) to “hold” from “sell”, primary due valuation. The beer giant’s stock is expected to gain today.
Home improvement retailer
Pier 1 Imports Inc. (
PIR: chart) was upgraded by Lehman Bros. to “equal-weight” from “underweight”. The financial broker citied as a reason limited downside potential to the company’s share price.
ECONOMIC NEWS
For the week market expects report on PPI on Tuesday. On Wednesday petroleum weekly statistics, housing starts and mortgage loan applications are released. Initial claims for the unemployment are released. Market is forecasting rise in PPI, for the month of September, of 1.2% followed by rise of 0.6% in August. Core PPI is expected to be flat.
INTERNATIONAL MARKET NEWS
Asian-Pacific benchmarks closed largely in the negative territory on a fourth-day decline in bank shares as Prime Minister Junichiro Koizumi’s controversial visit to a shrine, provoked criticism from neighboring countries, causing concerns over the successful completion of the economic reforms. The Nikkei lost 0.2%, South Korea’s Kospi shed 1.2%. Taiwan’s Taipei’s Weighted Index was the biggest loser, down 2.4%, on tech stocks, hurt by the disappointing fourth-quarter earnings.
