Stocks finish mixed, as afternoon rally fades in last hour - USA Today Stocks finish mixed, as afternoon rally fades in last hour - USA Today

Thursday, July 26, 2012

Stocks finish mixed, as afternoon rally fades in last hour - USA Today

Stocks finish mixed, as afternoon rally fades in last hour - USA Today

The major indexes finished mixed, with the Dow Jones industrial average ended up 58.73 points, , or 0.47% to 12,676.05; the Nasdaq composite index closed down 8.75 points, or 0.3%, to 2,854.24; the broader Standard & Poor's stock index was barely lower, losing 0.42 points or 0.03%, to 1,337.89.

The Nasdaq and S&P were lower for a fourth day in a row.

Investors briefly overlooked a bevy of ugly quarterly earnings on the growing belief that the Federal Reserve will step in to revitalize the economy.

Apple shares fell almost 4% Wednesday after the company revealed in its earnings report that consumers, leery of the course of the economy, are buying lower-end versions of iPads and iPhones.

It was Apple's slowest growth in two years, and a rare miss as it fell short of Wall Street expectations.

Boeing surprised Wall Street, with a 3% improvement in second-quarter net income.

Caterpillar, which makes mining and construction equipment, rose $1.67, or 2%, to $83.10. The company blew away analysts' estimates with a 67% surge in profits for the second quarter. Caterpillar credited strong sales of mining equipment overseas and a strengthening housing market.

Shortly after the market opened, a report on new-home sales punctured optimism about a recovery in the housing sector. The Commerce Department said sales of new homes plunged 8% last month to the slowest pace in five months.

The stock market weakened after the report came out at 10 a.m. ET. Home builders were hit. Beazer Homes fell 10 cents to $2.38 and KB Home lost 26 cents to $9.38.

In other corporate news, Netflix dropped $17.60, or 22%, to $62.77. The movie streaming company and DVD-by-mail company reported late Tuesday that its net plunged 91%. Netflix's licensing fees rose and the company is facing stiff competition from other video providers.

Ford reported a 57% decline in net income, pushing its stock down 8 cents to $8.98. WellPoint, the second largest U.S. insurer, lowered its outlook because of falling profits. It fell $6.68, or 11%, $54.74.

Globally, financial markets mostly recovered Wednesday; but a run of disappointing economic data in Europe and the worse-than-expected earnings from Apple kept the recovery in check.

Markets have been recently rattled by fears that Spain, the eurozone's fourth-largest economy, will need a bailout along the lines of Greece, Ireland and Portugal.

Following three days of market losses, investors bought some beaten-up stocks.

Helping sentiment were comments from European Central Bank policymaker Ewald Nowotny, who raised the prospect that the European Stability Mechanism, the eurozone's planned permanent bailout fund, could be given a banking license. That would give it the ability to borrow money from the ECB, increasing its financial resources.

"These comments are unlikely to lead to anything in the near term but the fact it is being considered has lifted the markets,"said Craig Erlam, market analyst at Alpari.

The main advance was seen in Spain, where the main IBEX 35 index was trading 0.89% higher. The country's borrowing rates also eased after hefty increases of the past few days. The 10-year yield was around 7.5%, still way above the 7% rate considered to be unsustainable in the long-run.

Elsewhere in Europe, Germany's DAX rose 0.36% while the CAC-40 in France was 0.3% higher. Britain's FTSE 100 index of leading British shares was down a bit even though official figures showed the country's economy shrank by a greater-than-anticipated quarterly rate of 0.7% in the second quarter.

The euro was faring better than in recent days, trading 0.8% higher at $1.2161. On Tuesday, it fell to a two-year low of $1.2052.

The main focus remains on Europe's debt crisis and in particular Spain and Greece.

The cost of bailing out Spain would potentially be twice the size of aid for Greece, Portugal and Ireland combined. This factor has raised questions over how long Europe's stronger economies will continue rescuing the weaker ones.

Germany's Ifo survey of business sentiment fell for a third consecutive month in July, adding to concerns over the state of Europe's largest economy. This follows Moody's announcement earlier this week that the country's credit rating was under pressure by the crisis enveloping Europe.

Some officials in Berlin have called for allowing Greece to leave the euro to keep it from hurting Germany. Investors think such an exit could happen soon if Greece's international debt inspectors conclude that little progress has been made in reforming the country's economy.

"It does appear though that we're approaching the endgame for Greece and that European officials will soon have no alternative but to make some very tough decisions regarding whether or not they provide more money and time or whether they restructure now and also whether Greece should stay in the eurozone," said Gary Jenkins, managing director of Swordfish Research.

Another worry in the markets heading into August, when liquidity levels are low, is that price movements could be exaggerated, in much the same way as they were last year. That could make matters worse in Europe crisis resolution effort.

"If liquidity dries up moving into August, prices are open to being driven by much less than in normal conditions, compounding fears of volatility," said David White, a trader at Spreadex.

Earlier in Asia, Japan's Nikkei 225 stock average closed down 1.4% at 8,365.90 and Hong Kong's Hang Seng dropped 0.1% to 18,877.33. The Shanghai Composite slipped 0.5% to 2,136.15.

Oil prices were steady with benchmark crude for September delivery up 24 cents at $88.74 a barrel in electronic trading on the New York Mercantile Exchange.

Japan Stocks Rise First Time in Five Days on Earnings - Bloomberg

Japanese stocks rose for the first time in five days on earnings optimism as Fanuc (6954) Corp. reported higher profit. Gains were limited after the International Monetary Fund said China may refrain from additional easing.

Fanuc, the world’s largest maker of factory robotics, advanced 4.7 percent after reporting an increase in first- quarter net profit. Sharp Corp., an electronics maker that gets 20 percent of its sales in China, fell 3.1 percent. Olympus Corp. (7733) led gains on the Nikkei 225 (NKY) Stock Average as Terumo Corp. moved to merge with the optics maker, aiming to scupper a tie-up with Sony Corp.

The Nikkei 225 advanced 0.4 percent to 8,399.24 at 12:45 p.m. in Tokyo. The broader Topix Index (TPX) rose 0.6 percent to 710.76, with more than two shares rising for each that declined.

“We’re probably going to see this first quarter for fiscal 2012 posting the first positive sequential rise in profitability for corporate Japan,” Kathy Matsui, the chief Japan strategist at Goldman Sachs Group Inc. in Tokyo, said in a Bloomberg TV interview. “On the one hand you’re going to see a lot of weakness from global cyclical export companies. On the other hand you’re going to see surprisingly resilient results coming from domestic demand-oriented companies.”

The Topix fell 19 percent from this year’s high on March 27 amid concern the U.S. and China economies are slowing and that Europe’s debt crisis will worsen. The decline has left shares on the Topix valued at 0.8 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.4 for the Stoxx Europe 600 Index. A number below one means investors can buy companies for less than the value of their assets.

Futures on the S&P 500 were little changed today. The gauge lost less than 0.1 percent in New York yesterday, erasing gains in the final hour of trading, after a report showed demand for new U.S. homes unexpectedly dropped in June from a two-year high.

Fanuc Rises

Fanuc advanced 4.7 percent to 12,600 yen. Net income rose 1.5 percent to 35.2 billion yen ($450 million) in the three months ended June 30 while sales rose 4.9 percent to 137.8 billion yen, the company reported yesterday.

Hitachi Construction Machinery Co. (6305) climbed 5.1 percent to 1,327 yen as operating profit in the first quarter beat analyst estimates. Machinery stocks also rose after bellwether Caterpillar Inc. raised its earnings outlook.

Gains were limited after Il Houng Lee, the IMF’s senior representative in China, yesterday said the government will probably maintain the “status quo” after already shifting monetary stance to a “more neutral or accommodating one” and may forgo expanding this year’s budget. Sharp slid 3.1 percent to 252 yen.

Olympus Merger

Olympus soared 9.3 percent to 1,396 yen. Terumo, Asia’s biggest maker of medical devices, proposed investing 50 billion yen in the endoscope manufacturer, Terumo spokesman Tetsuya Kumei said by telephone today. Olympus is also in discussions with Sony and Fujifilm Holdings Corp. about possible tie-ups, Olympus Chairman Yasuyuki Kimoto said in a July 23 interview.

Nomura Holdings Inc. (8604) advanced 4.9 percent to 257 yen. Chief Executive Officer Kenichi Watanabe and Chief Operating Officer Takumi Shibata are preparing to step down amid an insider- trading scandal, according to two people with knowledge of the matter. Keiko Sugai, a Tokyo-based spokeswoman for the company, declined to comment.

To contact the reporter on this story: Adam Haigh in Sydney at

To contact the editor responsible for this story: Nick Gentle at

Technology stocks dragged down by Apple - Financial Times

Last updated: July 25, 2012 9:57 pm

Big media stocks' big run faces test this quarter - Reuters

LOS ANGELES | Wed Jul 25, 2012 8:22pm EDT

LOS ANGELES (Reuters) - Big media companies' stocks have their swagger back.

A boom in political ad spending and bigger checks from cable and digital providers have driven up the stocks of Comcast Corp, Walt Disney Co, News Corp and CBS Corp, with their gains so far outpacing the broader market this year.

Those names have jumped between 15 percent and 32 percent, with Time Warner slightly trailing them, but still up a healthy 7 percent.

In comparison, so far this year, the Dow Jones industrial average is up 3.8 percent and the Standard & Poor's 500 is up 6.4 percent.

Only Viacom, which has suffered from ratings declines at some of its cable networks and a bruising battle with DirecTV over distribution fees, lags its peers. Its stock has been about flat since January.

"We call them our sleep-well-at-night cyclicals," RBC Capital Markets analyst David Bank said of the media giants.

A stable ad environment and stock buybacks have bolstered big media companies' stock prices this year, he said.

The big media conglomerates start reporting results next week. Analysts on average expect earnings-per-share gains of between 2 percent and 26 percent, according to Thomson Reuters I/B/E/S. CBS is at the low end of that range while Disney, Comcast and News Corp occupy the high end.

The rally in big media stocks marks a sharp turnaround from 2008 and 2009, when the advertising market and media companies' shares took a beating after corporations cut ad budgets during the recession. Media shares started to rise in late 2009 and early 2010 as ad spending rebounded.

The ad market has remained resilient despite the gloomy global economy. This is one reason why big media's stock prices are on a tear. While the ad marketplace has shown some signs of softening, both broadcast and cable television advertising "remain generally solid on the national level," Cowen & Co. analyst Doug Creutz said in a note to clients.


As is typical in an election year, the explosion of political ads is likely giving a lift to media shares, said Bill Carroll, vice president of programming for Katz Television Group, which advises stations on programming choices.

Political ad spending is even bigger than usual this year. For the first time, political action committees known as SuperPACs can spend unlimited funds to support their causes or candidates. They are pouring cash into TV commercials ahead of the presidential election in November. And SuperPacs pay the going rate, unlike candidates who get the lowest ad rates available.

"They're paying the same rate as McDonald's," Carroll said, adding that this can mean "a lot of spots for a station."

Horizon Media research analyst Brad Adgate predicted that this year will mark "the longest and most expensive political season to date."

But he added, "Come November 6th, it's all going to dry up."


The big media conglomerates' stock prices have also gained despite concerns that new entertainment options on the Internet would hurt them, said Lazard Capital Markets analyst Barton Crockett.

"These guys have been able to deliver their performances in the face of a wall of skepticism," said Crockett, who sees more room for stock prices to rise.

He has "buy" ratings on News Corp, Time Warner, Disney and Viacom.

Crockett added that producers of television shows and movies are negotiating higher fees from cable and satellite providers, while new revenue is streaming in from online players because content is in such demand due to all the new distribution platforms.

"You're getting checks from Amazon and Netflix, and you're getting more money from DirecTV and Comcast. That's a nice combination for the entertainment conglomerates," Crockett said.

New online players, including a coming joint venture between Coinstar Inc's Redbox and Verizon Inc, also need content to build their services.

Even with this year's gains, many media companies' stocks still trade at relatively low levels compared with earnings, said John Miller, a portfolio manager at Ariel Investments, which holds shares of CBS Corp and Viacom Inc.

"Valuations are quite attractive," Miller said. "These companies generate a lot of free cash flow. They can take advantage and either repurchase shares at ridiculously low valuations or pay a sizable dividend."


But at least one Wall Street analyst, Michael Nathanson of Nomura Securities, is warning bullish investors that coming results may disappoint.

Nathanson said he expected the 6.5 percent increase for national broadcast and cable network advertising revenue garnered in the first quarter to fall to a 2.2 percent increase in the second quarter.

This month, Nathanson reduced second-quarter earnings estimates for most of the big media companies, including Time Warner, Viacom and News Corp. He raised estimates for Disney.

"In order to fuel the rally further, earnings numbers need to start moving up, yet we do not see the scope for positive earnings revisions," Nathanson said in a note to clients.

(Reporting by Lisa Richwine in Los Angeles; Additional reporting by Yinka Adegoke in New York; Editing by Peter Lauria and Jan Paschal)

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