From Briefing.com: 4:20 pm : After being stuck in the tightest of trading ranges amid a lack of market-moving catalysts, renewed selling interest within the last hour of trading closed the major indices as well as nine of ten economic sectors in negative territory. However, much of the volatility late in the day can be directly tied to a lack of participation, as holiday-thinned trading desks resulted in much lighter than normal volumes.
Before the bell, initial jobless claims rose 3K to 322K, suggesting a strong 200K rise in Dec. nonfarm payrolls. Minutes after the market opened, Dec. Chicago PMI checked in at a strong 61.5 (consensus 60.0), which bodes well for an upcoming read on national manufacturing activity. However, neither report was enough to get investors excited about stocks, especially after a 1.7% decline in Nov. existing home sales to 6.97 mln, marking the first sub 7.0 mln pace since March, simply renewed worries that housing demand is waning.
With regard to sector strength and weakness, Technology turned in the day's worst performance as investors locked in semiconductor gains and wiped their hands of underperforming hardware and networking stocks heading into the final day of trading. Energy was another influential leader to lose ground, as a 0.7% gain in crude oil failed to prevent participants from consolidating gains in refiners, explorers and drillers - the year's Top Three performing industry groups. Despite a late turnaround in Treasuries which closed the 10-yr note up 3 ticks to yield 4.36%, ongoing hype about an inverted yield curve may have prompted some consolidation in Financial. Even Industrials, which provided some early support as railroad stocks like Burlington Northern Santa Fe (BNI 70.97 +0.19) - a suggested holding in Briefing.com's portfolio for active investors - flirted with historic highs following a stronger than expected rail freight carload traffic report.
Consumer Discretionary, however, eked out a small gain, benefiting from a late-day turnaround in General Motors (GM 19.01 +0.40) and strength in hotels amid confirmation that Hilton Hotels (HLT 24.00 +1.70) will buy Hilton Group PLC for $5.7 bln. BTK -0.4% DJ30 -11.44 DJTA +0.4% DJUA -0.1% DOT -0.5% NASDAQ -10.78 NQ100 -0.7% R2K -0.3% SOX -1.0% SP400 -0.3% SP500 -3.75 XOI -0.6% NASDAQ Dec/Adv/Vol 1658/1383/1.19 bln NYSE Dec/Adv/Vol 1622/1644/1.03 bln
9:26AM MEMC Elec conducts seizure and files suit against Soitec for patent infringement (WFR) 22.23 : Co announces that a lawsuit has been filed against Soitec for violation of the co's European patents on defect-free silicon, referred to as Perfect Silicon. The lawsuit, which was filed with the First Instance Court in Lyon, France, follows a seizure which the co conducted in accordance with French law at Soitec's facility in Bernin, France on Dec 15, 2005. This lawsuit pertains to the same family of patents for which the co recently received favorable rulings in the U.S. Court of Appeals and the European Patent Office. During the seizure, evidence was collected which the co believes shows clear violation of its patents by Soitec.
5:45AM United Microelectronics chairman resigns (UMC) 3.23 : Chairman Robert Tsao announces that he plans to resign from his positions as Chairman and Board Member of the co
09:06 am United Parcel Service (UPS)
76.40: Following its report Wednesday that United Parcel Service's pilot's union had hoped to win an end to 18 months of mediation with the company over compensation and pension benefits, The Wall Street Journal today reported that the National Mediation Board has declined to declare an impasse. The federally supervised contract negotiations will remain in recess until a federal mediator schedules another round of talks in 2006.
With the decision, the union, which represents 2,500 pilots at UPS, loses the leveraging ability to strike for at least several more months. If an impasse had been granted, a 30-day "cooling off" period would have followed under the Railway Labor Act, which governs collective bargaining at airlines. Outside of that window, the pilots would have been free to pursue actions that include a strike. Although both sides of the table are reported to have said that they've made significant progress in the latest week of negotiations, the cost differential between the parties' current proposals is about $40 million annually. Some of the union's requests, aside from higher compensation, include improved pension benefits for seniors, an increase in all pilots' healthcare premiums, and a limit on the use of nonunion pilots used by overseas UPS subsidiaries.
UPS contends that its pilots earn about $8,000 more than the average pilot per year - and, amid the ailing airline industry, calls that "an enviable position." The comparison is not that simple, though, as UPS remains highly profitable alongside languishing passenger airline companies. According to The Journal, the union commented that the National Mediation Board's decision was not a setback; its spokesman Brian Gaudet stated that, by making the request, the situation has moved a step closer to a strike.
--Lisa Beilfuss, Briefing.com
08:58 am Alkermes Inc. (ALKS)
17.79: Alkermes said Wednesday the U.S. Food and Drug Administration issued an approvable letter for its drug Vivitrol, an injectable treatment for alcohol dependence. The FDA's approval of the experimental drug, formerly known as Vivitrex, is contingent upon finalizing the product label and satisfying a request by the FDA for preclinical pharmacokinetic data to support reference to existing oral naltrexone preclinical data, noted the company.
According to the National Institute on Alcohol Abuse and Alcoholism, approximately 18 million American adults are physically dependent on the substance. With alcohol readily available to most people and widely used, alcohol abuse has raised a host of behavioral and medical issues.
The pharmaceutical company, based in Cambridge, Massachusetts, said the New Drug Application for Vivitrol was submitted on March 31, 2005. Both Alkermes and Cephalon (CEPH), which is co-promoting the drug, continue to prepare for the launch of Vivitrol during the second quarter of 2006.
Shares of Alkermes are trading sharply higher in pre-market action, gaining more than 6%. Meanwhile, Cephalon shares remained relatively flat before the open.
--Richard Jahnke, Briefing.com
08:28 am Hilton Hotels (HLT)
22.30: The Financial Times reported Hilton Hotels may be close to a deal to acquire Hilton Group PLC for $6.2 bln - uniting the US and international Hilton brands for the first time in 40 years. The news sent shares of the Watford, England-based hotelier higher by 1.6% in European trading. According to the article, the deal, which is expected to be announced later today, has been in the works for months with negotiations first disclosed back in October.
The deal will add 400 hotels in 80 countries to the 2,300 properties owned by Hilton Hotels, reuniting both businesses that have been separated since 1964. There has been speculation about such a deal for some time. Hilton Hotel CEO Stephen Bollenback in January said, merging the two companies was something he "thought about all the time." The London-based Ladbrokes is not included in the deal. But the Hilton Group has disclosed that it has filed separately for Ladbrokes, the world's largest bookmaker and the company's fastest growing business, according to Bloomberg.
Hilton Group Plc has soared almost 30% this year due in part to the relaxation of a 37-year old law governing gambling in the UK. According to the FT, Ladbrokes, which generates 60% of operating profit, said the gambling unit may fetch 3-4 bln pounds including debt. The US-based Hilton Hotels, on the other hand, has lost 2% after peaking in the summer. The deal will likely cast light on the industry, which is expected to go through further consolidation over the next year.
--Kimberly DuBord, Briefing.com
09:41 am Red Hat: Soleil initiates Hold. Target $31. The firm says that they expect mkt share expansion and additional Open Source Software applications to provide strength as the total Linux related application software mkt is expected to grow at a faster rate (>40% y/y). The firm also says that RHAT has a substantial lead over NOVL, its nearest competitor and is not hampered by declining legacy products.
09:41 am Novell: Soleil initiates Hold. Target $8. The firms says they expect the stock to trade in a range around its current share price as the co: undertakes a major restructuring; continues to see core NetWare revenue declines; and competes with Red Hat in the growing Linux market.
09:40 am Chubb: Sandler O'Neill reiterates Buy. Target $100 to $100. Raised target is a result of an increase in peer group valuations and the firms expectation that CB will benefit from modestly improved premium rates via its improved capital position next year.
09:38 am Kinder Morgan Prtnrs: Oppenheimer initiates Buy. Target $53. Firm is saying it has a number of organic growth projects that should help it to continue to growth operationally and increase its distribution. Firm believes investors should focus on M.L.Ps that have the ability to grow, especially vis--vis the current interest rate environment. KMP meets this criterion.
09:38 am Northern Border: Oppenheimer initiates Neutral. Firm is saying that the co has one of the highest yields in their Pipeline Universe, however, NBP's distribution has remained flat over the last several years and they believe the partnership will need to make an acquisition in order to raise its distribution
09:37 am Trex: BB&T Capital Mkts upgrades Underweight to Hold. Firm is saying that after collapsing on a massive pullback in forecasted earnings over Q2 and Q3, shares of TWP have strengthened since the co reported its Q3'05 results in late Oct. The firm says that a trip to the Virginia factory showed that inventory levels were not as high as originally thought and in fact were much lower than levels seen in previous visits, and that the co was busier than expected. The firm also notes the implementation of an 11% price hike on Jan 1, which bodes positively for margins beyond Q1.
09:37 am Business Objects: WR Hambrecht initiates Hold. Target $42. The firm says that they are bullish on the overall B.I. and B.P.M sectors and believe that BOBJ is currently in the midst of one of its most important product cycles which should drive solid license rev growth over the next year. However, they believe that recent appreciation in BOBJ shares has already factored in much of this expected good news. BOBJ shares are up 20% in the past three months, and they believe the shares offer little room for significant near-term appreciation.
09:36 am LivePerson: WR Hambrecht initiates Buy. Target $7.5. The firm believes that: 1) the co is well-positioned to capitalize on a huge market opportunity for online conversion technologies, online communications, and web analytics; 2) the co's hosted/subscription rev model provides excellent visibility; 3) they look for rev growth of 36% in 2005 and 32% in 2006; and 4) solid operating margin expansion is expected to drive EPS growth of 140+% in 2006 and 40+% in 2007.
09:36 am Interdigital Comm: Nollenberger Capital reiterates Buy. Target $27 to $27. Firm is saying they believe that InterDigital's victory in the Nokia (NOK) case is likely to lead to similar success in the case against Samsung, which is scheduled to go to arbitration in Feb. The firm expects Samsung may now settle with InterDigital for the $35 mln that InterDigital claims is owed by Samsung for past royalty infringements. Firm says they believe the case could lead to other handset licensing deals in 2006 with companies like LG as InterDigital's position gains strength.
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