Tuesday, May 2, 2006

Stocks Rise amid Auto Sales, Earnings

News Article
May 2, 2006

Business Week Online

Stocks Rise amid Auto Sales, Earnings

The Dow closed at a six-year high after solid quarterly reports and largely disappointing April vehicle sales numbers

Stocks finished higher Tuesday, led by the blue-chips, as reports came in on April vehicle sales and energy stocks enjoyed rising oil prices. Gains reflected sentiment that the previous session's late sell-off on reported comments by Federal Reserve Chairman Ben Barnanke was overdone, says Standard & Poor's MarketScope.

The Dow Jones industrial average rose 73.16 points, or 0.64%, to 11,416.45, a six-year closing high, paced by Caterpillar (CAT ). The broader Standard & Poor's 500 index added 8.02 points, or 0.61%, to 1,313.21. The tech-heavy Nasdaq composite edged higher 5.05 points, or 0.22%, to 2,309.84, hampered by weakness in biotech.

Investors were assessing mostly disappointing April auto sales reports Tuesday. Ford (F ) was modestly higher after announcing a new marketing plan and reporting its U.S. vehicle sales fell 7% in April. General Motors (GM ) was higher after it said its sales fell 11%, a narrower decline than analysts expected. DaimlerChrysler (DCX ) dipped on an unexpected 6% sales decline.

In other economic readings, the National Association of Realtors said its pending home sales index fell 1.2% in March after slipping 0.8% in February.

On the docket Wednesday, the Institute for Supply Management's non-manufacturing index is expected to ease to 58.0 in April from 60.5 in March, says Action Economics.

Earnings reports continued to trickle in Tuesday. Telecom giant Verizon (VZ ) was modestly lower after posting a 7% decline in first-quarter profit, slightly stronger than expectations.

Meanwhile, Sirius Satellite Radio (SIRI) was higher after reporting a first-quarter loss that doubled but topped Street projections. The biggest factor contributing to the results was the cost of stock-based compensation, including $225 million to star shock jock Howard Stern.

Agriculture processor Archer-Daniels-Midland (ADM ) was sharply higher after reporting a 29% earnings increase for its fiscal third quarter, beating analyst estimates.

Homebuilder Hovnanian (HOV) fell after trimming its second-quarter and full-year earnings guidance, citing production delays and slower sales, among other factors.

Quarterly results are due Wednesday from CIGNA (CI ), Procter & Gamble (PG ) and Starbucks (SBUX ), among others.

Outside of earnings, computer maker Apple (AAPL) was up on a report the company has renewed contracts with four major record labels to offer songs through iTunes for 99 cents each.

J.P. Morgan said it projects the airline industry will resume growth in 2007. The brokerage downgraded JetBlue Airways (JBLU ) and Frontier Airlines Holdings (FRNT ), but boosted Southwest Airlines (LUV ) and Alaska Air Group (ALK ) from neutral to overweight.

In the energy markets Tuesday, June West Texas Intermediate crude oil futures closed up 91 cents at $74.61.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index gained 59 points, or 0.98%, to 6,082.1. Germany's DAX index advanced 41.4 points, or 0.69%, to 6,051.29. In Paris, the CAC 40 index climbed 52.79 points, or 1.02%, to 5,241.19.

Asian markets finished higher. Japan's Nikkei 225 index rose 228.06 points, or 1.35%, to 17,153.77. In Hong Kong, the Hang Seng index added 206.74 points, or 1.24%, to 16,868.04. Korea's Kospi index bounced 15.17 points, or 1.07%, to 1,434.9.

Treasury Market

Treasury yields pulled back on the lower pending home sales report, says S&P MarketScope. Prices for 10-year Treasury notes rose to 95-10/32 with a yield of 5.11%, while 30-year bonds climbed to 89-14/32 for a yield of 5.2%.

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