Stocks Rise on Earnings, Merger News
The major stock averages climbed to four-year highs, as strong profit news from General Electric (GE ) and Hewlett-Packard (HPQ ) overshadowed disappointing quarterly earnings from Walt Disney (DIS ), says Standard & Poor's MarketScope. There were no economic reports on Friday.
The Dow Jones industrial average rose 46.11 points to 10,766.33. The broader Standard & Poor's 500 index was up 5.47 points to 1,248.27. The tech-heavy Nasdaq composite index added 6.61 points to 2,227.07.
December crude oil futures fell 20 cents to $56.14 a barrel. Ample crude supplies, and word that OPEC exports would reach record levels in December led to crude's early sharp sell off, though support was seen from local traders, covering shorts ahead of the contract expiration, says Action Economics.
The economic calendar is light next week due to the Thanksgiving Day holiday on Thursday. One key release, says Action Economics, will be the FOMC's minutes from the Nov. 1 policy meeting, due out at 2 p.m. EST Tuesday. The markets will be keen to see if there are any hints of an imminent change in the policy statement at the Dec. 13 meeting or in January, says Action Economics.
Mergers dominated the news Friday. Scientific-Atlanta (SFA ) agreed to be acquired by Cisco Systems (CSCO ) for $43 per share, or $6.9 billion. Scientific-Atlanta makes cable TV set boxes, and will help Cisco attempt to reach the consumer market directly vs. providing Internet backbone equipment to just corporations, says Action Economics.
Liz Claiborne (LIZ ) offered to acquire J. Jill Group (JILL ) for $18 per share in cash.
General Electric (GE ) raised 2006 guidance and confirmed a $6.8 billion sale of its insurance businesses to Swiss Re.
General Motors (GM ) gained ground on reports that GM would announce a restructuring plan next week.
In earnings news, Hewlett-Packard (HPQ ) beat the consensus forecast for earnings. It reported fourth-quarter earnings per share of 51 cents, vs. 41 cents a year ago (non-GAAP), on a 7% revenue rise. The company sees 46-48 cents first-quarter non-GAAP EPS and 42-44 cents including stock-based compensation expense.
Walt Disney (DIS ) missed analysts' estimate. It posted fourth-quarter EPS of 23 cents, vs. 25 cents a year ago (excluding stock option expense), despite a 2.5% total revenue rise. It says studio entertainment revenue fell 20% and consumer products down 16%. CIBC World cut the stock to underperform from sector perform.
Another loser was Gap (GPS ), which said third-quarter earnings dropped to 24 cents, from 28 cents a year ago, on 7% lower same-store sales and 2.5% lower total sales. The apparel retailer cited deteriorating traffic trends continuing beyond anticipated levels. It cut its $1.30-$1.34 fiscal year 2006 (January) EPS estimate to $1.12-$1.17.
European stock markets finished higher on Friday. In Japan, the Nikkei 225 index jumped 211.33 points to 14,623.12 -- the highest close in four and a half years. In Hong Kong, the Hang Seng index rose 95.34 points to 14,883.32.
Treasury yields rose after a surprisingly hawkish statement from European Central Bank president Trichet set off a round of selling in the eurozone fixed income markets, swept U.S. yields higher and curtailed the recent bull run, says Action Economics. The ECB stands ready to embark on a tightening cycle in December, while the U.S. Fed cycle nears the end of its long run, says Action Economics. The 10-year yield rose to 4.50%.