U.S. MARKET AVERAGES
U.S. stock markets have kept in a holding mode, trading below the flat line as investors have locked in recent gains, eagerly awaiting the FOMC meeting. Market sentiment has also been overweighed by weakness in tech stocks, pressured by disappointing preliminary third-quarter results from computer giant Dell, down by 8%. The company released lowered earnings forecast on sales decrease as well as revenue outlook far below expectations. It also announced it would take a third-quarter charge of $450 million to restructure its consumer unit and replace some faulty PC circuits.
Two economic reports were released today. The Commerce Department said that construction spending in September reached an all-time high, rising 0.5% to $1.120 trillion from a revised $1.115 trillion in August. In another economic news release, ISM reported that manufacturing sector grows at a slower pace with the manufacturing index up at 59.1% last month, down from September's 59.4%.
Bonds have been under pressure ever since the prices paid component in the Oct ISM Index rose to 84.0 - the highest since May 2004, raising inflation fears.
The utility sector has declined through most of the morning, though presently off its intraday low. The Dow Jones Utilities Index is down about 2.1%, erasing a significant share of gains from the previous two sessions. Bank, drug and housing stocks are posting modest losses.
Energy stocks traded lower at the start, but have turned to the upside and are now showing modest advances. The oil service space is leading the group, with an advance of 1%.
Google (
GOOG: chart) has continued extending its 52-week high, gaining on its quarterly earnings report.
Computer Sciences Corp. (
CSC: chart) has jumped to a fresh peak on reports that it could receive a $12 billion takeover bid.
EDS (
EDS: chart) has ticked to a new high ahead of earnings release.
Dell (
DELL: chart) is the most conspicuous mover to the downside, reflecting disappointing preliminary Q3 results.
Masco (
MAS: chart) has dropped to a fresh nadir as well, with quarterly results and guidance dragging it lower by about 4%.
On the earnings front, consumer goods retailer
Procter & Gamble (
PG: chart) reported Q3 income rise of 77 cents a share, vs. 70 cents a share a year ago on 8% revenue growth, beating estimates by a penny.
Colgate-Palmolive (
CL: chart), consumer products maker, released Q3 profit of 67 cents per share against 58 cents last year, in line with expectations.
CMS Energy (
CMS: chart), energy services company, posted Q3 loss of $1.21 a share, vs. a profit of 34 cents a year ago, despite a revenue growth.
In takeover news, defense contractor
Lockheed Martin Corp. (
LMT: chart) and three private equity firms are considering a bid for
Computer Sciences Corp. (
CSC: chart), a technical services provider, according to a report in the Wall Street Journal.
MOVERS AND SHAKERS
Computer maker
Dell Inc. (
DELL: chart) announced third-quarter earnings would come at the low end of the company’s estimates, while sales would be below analyst expectations. The company cited as a reason for this negative results the shortfall on weakness in its U.S. consumer and U.K. business operations. Dell''s revised forecast brought up downgrades from financial brokers Bear Stearns and UBS Investment. Rival
Apple Computer Inc. (
AAPL: chart) was also under pressure on Dell’s news. Dell stock lost 8%, while Apple stock was down 1%.
Consumer products company
Procter & Gamble (
PG: chart) presented profit results that came in slightly ahead of analyst estimates as unit volume rose 6% in the period. Rival household products maker
Colgate-Palmolive Co (
CL: chart) also reported strong results. Procter & Gamble stock added 1.2%, while Colgate-Palmolive stock gained 1.5%.
The Wall Street Journal reported that
Lockheed Martin Corp. (
LMT: chart) and three private-equity firms are focusing on an aquisition price of about $64-$65 a share for
Computer Sciences Corp. (
CSC: chart). Computer Sciences stock was up 15%.
ECONOMIC NEWS
Tuesday morning, the Department of Commerce released its report on construction spending in the month of September, with spending reaching a new all-time high.
The report showed that construction spending rose 0.5 percent to $1.120 trillion in September from a revised $1.115 trillion in August. Economists had been expecting spending to increase by 0.5 percent.
The increase in spending was largely due to a 0.6 percent increase in private construction spending, which came as a 1.0 percent increase in residential construction more than offset a 0.3 percent drop in non-residential construction.
At the same, public construction spending was roughly unchanged in September, as a 0.9 percent drop in highway construction offset a 1.3 percent increase in educational construction.
Activity in the manufacturing sector expanded for the 28th consecutive month in October, according to a report from the Institute for Supply Management, although the pace of growth slowed from September. The pace of growth was still stronger than expected.
Activity in the manufacturing sector expanded for the 28th consecutive month in October, according to a report from the Institute for Supply Management, although the pace of growth slowed from September. The pace of growth was still stronger than expected.
