PortfolioCrafter - Market Commentary 9/29/06
Saturday, September 30th, 2006
Stocks closed lower today, although the major averages recorded solid quarterly gains due to lower oil prices, allowing the Dow Jones Industrial Average to give its best third-quarter performance in 11 years. A string of economic reports over the last three months also helped investors rally to the idea that U.S. economic growth will moderate, but remain at adequate levels to sustain corporate profits and job creation.
Today, the Dow Jones Industrial Average closed down 39.38 or 0.34% to 11,679.07, the broader S&P 500 closed down 3.30 or 0.25% to 1,335.85, and the tech-heavy Nasdaq composite closed down 11.59 or 0.51% to 2,258.43. For the quarter, the Dow gained 4.7%, the S&P rose 5.2% and the Nasdaq gained 4%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by 19 to 13 on volume of 1.463 billion shares. On the Nasdaq, advancers eclipsed decliners by 17 to 11 on volume of 1.878 billion shares.
Investors appear considering that the economy is slowing, but not contracting or turning lower. That’s why the market is inching higher rather than striding higher. The quarter has been helped by a sharp fall in energy prices that has helped offset some of the concern over a slowing housing market and its impact on economic growth.
Amongst economic news today, the Chicago PMI rose more than expected and this reassured investors who were worried about a pronounced slowdown in manufacturing following the recent weak Philadelphia Fed index. The Chicago purchasing managers’ index rose to 62.1% in September from 57.1% in August. It’s the highest reading in a year. Personal spending rose 0.1% in August, and income rose 0.3%, as expected. The report’s inflation component rose 0.2% to 2.5% - within acceptable limits of the Fed policymakers. Consumer prices rose 0.2% in August, and are up 3.2% in the past year.
Shares of Hewlett-Packard closed up $0.72 or 2.5% to $36.69, as investors responded well to the information from the congressional probe into the boardroom leak investigation. The CEO Mark Hurd testified that ultimately is responsible for what goes on at HP. Hurd and former chairman Patricia Dunn both distanced themselves from the potentially illegal techniques used in the investigation.
Shares of Research in Motion closed up $16.79 or 19% to $102.85, after the company reported higher-than-expected second quarter profits, despite announcing a review of stock option practices. Its revenue boosted 34% through addition of about 705,000 BlackBerry subscriber accounts. The company reported a net profit of $140.8 million, compared to $111 million last year. It reported revenue of $658.5 million, against the expected $643.63 million. This prompted Deutsche Bank to upgrade the company, while Citigroup cut the stock to a sell.
Shares in Ford Motor closed down $0.07 or 0.9% to $8.09, after the company declared it will cut one in four jobs at its Ford Credit unit and close its branch office network to cut costs. The planned job cuts would be made through a combination of attrition, early retirements, voluntary separations and, if necessary, involuntary separations. Ford Motor Co. is planning to cut 16 plants and shed 30,000 jobs in North America. Ford Motor Credit will distill its 59 U.S. branches into six existing service centers.
U.S. light crude oil for November delivery rose 15 cents to $62.91 a barrel on the New York Mercantile Exchange. However, the cost of crude slid 12% on the month.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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