Thursday, February 16, 2006

Stocks Climb on Profits, Housing News

News Article
February 16, 2006

Business Week Online

Stocks Climb on Profits, Housing News

Hewlett-Packard reported 30% higher first-quarter earnings. January housing starts beat expectations by a wide margin

Stocks pushed higher in the final hour Thursday, as investors digested solid high-tech earnings reports and a flurry of economic news. Fed Chairman Ben Bernanke's comments to the Senate, like his testimony before the House Wednesday, yielded no surprises, says Standard & Poor's MarketScope.

The Dow Jones industrial average rose 61.71 points, or less than 0.56%, to 11,120.68. The broader Standard & Poor's 500 index added 9.38 points, or 0.73%, to 1,289.38. The tech-heavy Nasdaq composite index climbed 18.2 points, or 0.8%, to 2,294.63.

The session's strong economic data may be deceptive, some analysts say. "In a very warm January, one cannot read anything into the underlying health of the housing market from the strength of housing starts," says John Ryding, chief U.S. economist for Bear Stearns. January housing starts rebounded 14.5% to a whopping 2.3 million units, handily exceeding expectations.

Upbeat quarterly results appeared to be boosting sentiment Thursday. Hewlett-Packard (HPQ) rose 7% after posting 30% higher first-quarter profits late Wednesday. Credit Suisse upgraded the computer maker from neutral to outperform. After the close, rival Dell (DELL ) posted higher fourth-quarter EPS of 43 cents, up from 26 cents and above targets.

Applied Materials(AMAT ), which makes chip equipment, ended more than 2% lower. The company said orders will rise as much as 20% this quarter from the period ended Jan. 29.

In retail, JC Penney (JCP ) posted 66% higher fourth-quarter earnings. Target (TGT ) said its fourth-quarter earnings rose 14 percent, modestly above expectations.

XM Satellite Radio (XMSR ) fell 5% after fourth-quarter earnings failed to meet Wall Street estimates. Competitor Sirius Satellite Radio (SIRI ), which reports Friday, declined 3%.

Heading into a long President's Day weekend, earnings are also due Friday from Campbell Soup (CPB ), PG&E (PCG ) and RadioShack (RSH ).

On the M&A front, General Motors (GM ) rose 1% after a report that a group led by Cerberus Capital Management is the head bidder for majority stake in the automaker's GMAC finance unit. Another Big Three member, DaimlerChrysler (DCX ), posted an 84% increase in fourth-quarter profit, on a 9.8% revenue rise.

Among other companies in the news, Dow component Honeywell (HON ) got a boost as CIBC World Markets upgraded the company from sector performer to sector outperformer. Cardiac device-maker Medtronic (MDT ) was 1% lower amid a California lawsuit alleging the company sold flawed cardiac defibrillators for two years after learning of a potential defect.

Economic action continued Thursday, a day after Bernanke's well-received initial testimony before Congress. In addition to housing starts, import prices jumped 1.3% in January, as export prices rose 0.7%, providing stronger data than markets had anticipated.

Initial jobless claims rose 19,000 to 297,000 for the week ended Feb. 11, a bigger increase than forecast. The Philadelphia Fed index also surged higher than expected, to 15.4 in February after slowing to 3.3 in January.

Also, the new Fed chief spoke again, this time before the Senate Banking Committee. He refused to limit his options regarding data-dependent rate hikes.

On the economic front Friday, the release of the January overall producer price index is expected to drop 0.1%, while the core index increases 0.3, says Action Economics. The University of Michigan's preliminary February reading for consumer sentiment is seen rising to 93.0 from 91.2 in January.

In the energy markets Thursday, March West Texas Intermediate crude oil futures settled higher $1.05 at $58.70.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 37.4 points, or 0.65%, to 5,803.1. Germany's DAX index gained 24.88 points, or 0.43%, to 5,789.25. In Paris, the CAC 40 index added 39 points, or 0.79%, to 4,973.09.

Asian markets ended higher. Japan's Nikkei 225 index rose 110.84 points, or 0.7%, to 16,043.67. In Hong Kong, the Hang Seng index edged higher 27.62 points, or 0.18%, to 15,450.88. Korea's Kospi index climbed 27.62 points, or 0.8%, to 1,314.32.

Treasury Market

Prices for 10-year Treasury notes edged higher to 99-10/32 with a yield of 4.59%, while 30-year bonds were also barely higher at 98-28/32 for a yield of 4.57%. Bernanke told Congress he was not "overly" worried by the inverted yield curve. Steady bond yields helped stocks avert inflation fears, says S&P MarketScope.

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