U.S. stocks dropped for the first time in three days, led by technology companies, after Smith Barney said Yahoo! Inc. shares are expensive and Morgan Stanley said Intel Corp.'s revenue may fall short of forecasts. General Motors Corp. sank after the company said June vehicle sales fell 12 percent. A report showing jobless claims unexpectedly rose last week also contributed to the decline. The S&P 500 dropped 11 points (-1.0%) to 1,128, the steepest loss in more than six weeks. Drug wholesaler Cardinal Health Inc. led the decline. The DJIA shed 101 points (-0.9%) to 10,334. The Nasdaq Composite lost 32 points (-1.6%) to 2,015. Four stocks fell for every three that rose on the New York Stock Exchange. Some 1.49 billion shares changed hands on the Big Board, 4.6 percent more than the three-month daily average. Today is the first day of the third quarter. The S&P 500 climbed 1.3 percent last period, pushing its first-half return to 2.6 percent.
Strong Sectors: with restaurants, department stores
Top Stories. . . The dollar firmed slightly against the euro on Thursday after generally solid economic data indicated a buoyant economy.
A report showed the number of U.S. workers filing new claims for jobless benefits climbed last week to 351,000, the second consecutive increase. Economists had expected them to fall to 342,000, based on the median forecasts of 41 economists.
General Motors Corp.'s June U.S. auto sales fell 12 percent and Ford Motor Co.'s declined 7.7 percent as incentives lured fewer buyers away from competitors' newer models. Sales rose 5.2 percent at DaimlerChrysler AG's Chrysler.
Crude oil futures rose to a two-week high on concern a terrorist attack or other event that might limit supplies may occur during the three-day Independence Day holiday weekend, when U.S. markets are closed.
A gauge of U.S. manufacturing held close to a 20-year high in June and construction spending increased for a fourth straight month, reinforcing forecasts that the U.S. economy is expanding and adding jobs.
Time Warner Inc., the world's largest media company, is in talks to buy Kirk Kerkorian's Metro-Goldwyn- Mayer Inc., which has a library of 4,000 films, according to people familiar with the matter.
Verizon Communications said on Thursday in a filing at the U.S. Securities and Exchange Commission it overstated its first-quarter long-distance lines by about 1.5 million, citing a technical systems error.
ConAgra Foods Inc. , maker of Healthy Choice meals and Wesson cooking oil, on Thursday posted a 41 percent increase in profit, as improved results in its ingredient and food-service businesses offset lower operating profit in packaged foods.
Housing. . . Barron's Online discusses mobile homes, which peaked in sales in 1998 when lenders slashed loan requirements for buyers who had marginal credit. But as those borrowers lost their jobs and quit paying their bills, banks were left holding the house keys. The result was a glut of trailers and other prefab homes on the market at deep discounts, and many of them still have "for-sale" signs. Still, Warren Buffett, who last year purchased Clayton Homes and Oakwood Homes, likes the industry. And money manager Mario Gabelli has been investing in the group for more than 3 months, although he thinks a turn could take 3 or 4 years. But, according to the article, the industry isn't out of the woods yet. Rising interest rates, combined with strict loan terms, may scare off potential buyers. Also, apartments are a cheap and plentiful alternative. So, lenders may loosen their purse strings for people who have riskier credit profiles, but that could come back to haunt them in the future. "You still have competition from repossessed manufactured houses, site-built houses and apartments," says Barbara Allen, an analyst at Natexis Bleischroeder. "The biggest problem has been demand: new lenders have been slow to offer loans." Allen thinks shares of most mobile home builders are fairly valued, already pricing in a healthy recovery. According to Allen, the Manufactured Housing Institute estd that shipments of new manufactured houses dropped 10% in May. And last week, Cavalier Homes disappointed investors by reporting a loss for the qrtr ending June 26. She also believes that Champion Enterprises and Palm Harbor Homes are overvalued at current prices, based on earnings for the next 12 months.
Investment Services. . . JP Morgan raises their Q2 and 2004 EPS ests on Chicago Mercantile Exchange slightly above consensus, to reflect slightly higher than anticipated volumes at both the CME and CBOT in Q2 as well as a modestly higher rate per trade in certain product areas owing to a higher level of electronic volumes.
Transportation. . . TK Shipping announced today that it has been awarded contracts to charter three liquefied natural gas ("LNG") carriers to Ras Laffan Liquefied Natural Gas Co. Limited, a joint venture company between a subsidiary of ExxonMobil Corp and Qatar Petroleum. The vessels will be chartered to RasGas II at fixed rates, with inflation adjustments, for a period of 20 years (with options to extend up to 35 years), commencing in late 2006 and early 2007. In connection with these charter contracts, TK has entered into agreements with Daewoo Shipbuilding & Marine Engineering Co. Ltd. to construct three LNG carriers, representing a total contract price of approx $510 mln. The charter contracts are expected to generate approx $55 mln in annualized cash flow from vessel operations.
Retail. . . JP Morgan initiates Home Depot with an Underweight based on: 1) Signs of maturity in the U.S., with the build up of cash ($4B as of Q104), under-leveraged balance sheet and decelerating total sales growth (1.5x the industry). 2) Co has competitive disadvantages to LOW, its primary competitor, as it needs to continue to focus on modernizing its store base, implementing better technology potentially installing a more centralized distribution infrastructure. 3) Co is nearing a crossroads, when mgmt will decide whether to return cash back to shareholders more aggressively, or pursue growth in other ways, such as through acquisitions, with latter more probable, thus leading to higher risks. 4) HD should trade at a deeper discount to LOW, given the risks.
Healthcare. . . Cardinal Health lowers Q4 guidance, receives SEC subpoena, NY Attorney's Office commenced inquiry. Company issues downside guidance for Q4 (Jun), sees EPS of $0.93-0.95 vs. Reuters Estimates consensus of $1.03; for Y04 sees EPS of $3.53-3.55, consensus $3.63. The company also affirmed its long-term goal to increase EPS at a mid-teens or better rate. CAH also announces it received an SEC subpoena that included a request for the production of documents relating to revenue classification, and the methods used for such classification, in company's pharmaceutical distribution business. In addition, Cardinal Health has learned that the U.S. Attorney's Office for the Southern District of New York has commenced an inquiry that the company understands relates to this same subject.
Education. . . Apollo Group authorizes $500 mln in co funds to repurchase shares of APOL common stock and UOPX common stock
Wireless. . . Merrill Lynch raises Qualcomm's price tgt to $90 from $75 based on view that: 1) Competition will continue to drive 3G deployment as US carriers are responding to Verizon's deployment of EV-DO. 2) West European mkts are going through the same path, with carriers responding to Vodafone's rollout of WCDMA. 3) Co's expected share growth in the WCDMA chip mkt. 4) Limited traction noticed for TI's CDMA chip. 5) Potential market for co's chip with DoCoMo in Japan. 6) A possibility for selling EV-DO chips to Nokia. Firm raises 2005 EPS est to $2.23 from $2.10 (Reuters consensus $2.21).
Software. . . The WSJ reports Microsoft plans to unveil the first tangible elements of its secretive push to be No. 1 in the increasingly lucrative business of searching the Internet. The co is replacing the search page on its MSN Web site with a cleaner and simpler design that resembles that of market leader Google. For now, Microsoft will continue to rely on Yahoo technology for its search results and related text ads. But also starting today, Microsoft is releasing a trial version of its own search technology. That trial, contained on a separate Web site, offers a much-awaited glimpse at the software giant's expensive, yearlong effort to create a Web-search engine to rival those of Google and Yahoo. By the end of the year, Microsoft plans to replace Yahoo's non-advertising tech on its site with its own. The co won't disclose how much money it is devoting to this effort overall, but puts a $100 mln price tag on the new MSN search site alone.
Oracle’s Chief Executive Larry Ellison on Wednesday testified that the company was considering three or four other possible takeover targets in addition to its hostile bid for PeopleSoft (PSFT), which the government is seeking to block. He did not name the companies. Ellison said that he considered PeopleSoft to be the best acquisition for Oracle because of the size of its customer base.
Based on its channel checks, Soundview says initial sales of Spider-Man 2 appear to be strong, with meaningful reorders expected in 2H04. Near-term sales of the title are likely to benefit from SM film debut, extensive marketing campaign, and international launch of the title. Another big hit for Activision also adds strength to the product catalog and increases visibility for the competitive holiday period. The firm is raising 2Q, 3Q and F05 estimates. Firm reits Outperform and $20 target on Activision.
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