U.S. MARKET AVERAGES
U.S stocks sharply declined at the start of Tuesday session, as higher oil prices, a heavy drop in Japan's Nikkei stock average and disappointing bank earnings encouraged some selling in the opening hours. In addition, investors expected earnings reports from companies like Intel Corp., International Business Machines Corp. and Yahoo Inc, due out after the closing bell.
Crude prices hit a 3 1/2-month high above $65 a barrel after militants said they would broaden attacks on Nigeria''s oil industry. A barrel of light crude was quoted at $65.30, up $1.38.
The airline sector posted a decline of 2.3% on the prospect of higher fuel prices. Technology stocks, which helped drive the advance of the first week and a half of 2006, were weak in the early going. The semiconductor sector dropped by 1.5% and the disk drive sector fell by 1.3%.
Climbimg energy prices sent shares of energy-related companies higher. The oil service sector was among the notable gainers, leading the advance, with a gain of about 1.9%.
The Dow Jones industrial average was down 53.54 points, or 0.49%. The Standard & Poor''s 500 Index was down 5.76 points, or 0.45%. The technology-laced Nasdaq Composite Index was down 16.91 points, or 0.73%.
Bonds fell, with the yield on the 10-year Treasury note rising to 4.38% from 4.36% late Friday.
MOVERS AND SHAKERS
Boston Scientific (
BSX: chart) lifted its proposal to acquire
Guidant Corp. (
GDT: chart) to roughly $27 billion, or $80 a share from earlier $25 billion. Boston Scientific noted its bid represents a premium of $3.3 billion, or $9 per share, over the competing offer of
Johnson & Johnson (
JNJ: chart). Boston Scientific said its amended offer expires at 5:00 pm ET unless its offer is declared ‘superior’ by Guidant's board, a condition that would move the offer's expiration back to Jan. 25. Boston Scientific’s shares fell 4.8%. Guidant’s stock rose 7.6%.
Quanex Corp. (
NX: chart), maker of engineered materials for vehicles and the construction industry, raised its Q1 earnings outlook by 35%, citing better-than-expected results. The company said it expects adjusted earnings of $1.00 to $1.05, above the average forecast for earnings of 84 cents a share. The stock climbed 12%.
Furniture Brands (
FBN: chart) dropped over 6% after CS First Boston downgraded the furniture seller to underperform from neutral, citing valuation and lofty expectations for margin improvement. The stock dropped 7.9%.
Innovex (
INVX: chart) reported Q1 loss of $9.77 million, or 51 cents a share, vs. a net loss of $1.01 million, or 5 cents a share, in the year-ago period. Excluding 52 cents a share in restructuring charges, the company earned $160,000, or a penny a share on 26% revenue growth to $50.5 million from $40 million last year. Innovex said it plans to move all prototyping and high volume manufacturing to its Thailand manufacturing facility over the next 12 months. The company expects to reduce its workforce and see annual cost savings of $8 million once the transition is complete. The company’s shares slipped 9.3%.
Toll Brothers (
TOL: chart) was downgraded to sell from neutral by Banc of America Securities, citing lower demand on higher prices. The stock fell 1.4%.
SanDisk Corp. (
SNDK: chart) dropped 3% after it was downgraded to hold at Citirgroup.
ECONOMIC NEWS
Tuesday morning, the Federal Reserve released its report on industrial production and capacity utilization in the month of December. The report showed that industrial production growth and the capacity utilization rate both came in slightly above economist estimates.
The Fed said that
industrial production grew by 0.6 percent in December after an upwardly revised increase of 0.8 percent in November. Economists had expected industrial production to grow by 0.5 percent compared to the 0.7 percent growth originally reported for November.
The report showed that the December industrial production growth reflected a 0.2 percent increase in manufacturing output as well as a 2.7 percent increase in output from utilities and a 2.5 percent increase in output from mines.
The Fed added that industrial production rose 2.8 percent over the twelve months of 2005, rising to 109.8 percent of its 2002 average. Total industrial capacity rose 1.7 percent in 2005.
The report also showed that the capacity utilization rate rose to 80.7 percent in December from an upwardly revised 80.3 percent in November. Economists had expected the rate to increase to 80.6 percent compared to the rate of 80.2 percent previously reported for November.
