Stock Ticker from 2 hr 7 min ago[BRIEFING.COM] The market...

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2 hr 7 min ago

[BRIEFING.COM] The market rebounded nicely in the wake of Monday's late day sell-off, as the absence of more strong economic data provided some relief on the interest-rate front and placed extra emphasis on another batch of better than expected earnings. As a result, the Dow closed at a fresh six-year high and eight of ten economic sectors posted gains.

Dow component Verizon Communications (VZ 32.64 -0.15) beat Wall Street's estimates by a penny and added a record 1.7 mln customers, which plays into our Overweight rating on Telecom. However, the stock consolidated late in the day as an anticipated increase in operating costs clouded future earnings visibility. Nonetheless, with or without intraday leadership from the nation's No. 2 phone company, investors continued to rally around Archer Daniels Midland (ADM 41.90 +3.90), which soared to another historic high after posting a stronger than expected 29% increase in profits, keeping the S&P 500 on track for an 11th straight quarter of double-digit profit growth.

With regard to sector strength and weakness, Energy continued to provide some influential leadership to the upside. The sector extended its leading 15.6% year-to-date gain with 2.3% advance. Crude oil prices futures closing up 1.4% at $74.70 a barrel after Iran Deputy Oil Minister predicted crude will hit $100 a barrel by winter was the main catalyst stalling recent consolidation efforts. Devon Energy (DVN 62.87 +2.09) raising its long-term production growth outlook for 2006 through 2009 to 9.5% from 8% ahead of its earnings report tomorrow and Noble Energy (NBL 48.01 +1.91) more than doubling Q1 profits also provided sector support. As an aside, with Energy sector profits unlikely to grow at the same rate as over the past year, coupled with the likelihood of rising interest rates leading to slower economic growth, our market view remains Neutral as we believe the S&P's streak of 10% profit growth or more will come to an end in Q2 with aggregate growth currently projected at 7%.

The sense that yesterday's ensuing late day sell-off was overdone also prompted some bargain hunting opportunities in depressed areas, like Utilities. The year's second worst performing sector was Tuesday's second best performer, completely paring its 1.6% 2006 decline and turning positive for the year following strong earnings from TXU Corp (TXU 56.51 +6.60), FPL Group (FPL 39.78 +0.68), Entergy (ETR 69.51 +0.50), and NICOR (GAS 40.39 +0.67). Falling yields also restored buying support for the rate-sensitive Financials, which got an even bigger lift from a rebound in brokerage and strength in insurance. St. Paul Travelers' (STA 45.61 +0.21) Q1 net income rose nearly fivefold, which led to a boost in 2006 guidance, a 13% increase in its dividend and the authorization of a $2.0 bln share buyback.

Toyota Motor (TM 121.07 +3.69) and Honda Motor (HMC 36.99 +1.30) posted record-breaking sales for April, versus a 0.7% decline from General Motors (GM 23.21 +0.57), but the fact that the market had priced in an even larger disappointment restored some of the momentum behind GM reaching two-month highs. Strength in autos helped offset more consolidation in homebuilding and close the Consumer Discretionary sector in positive territory. Homebuilders were weak all day after Hovnanian Enterprises (HOV 36.39 -2.39) cut its Q2 and FY06 EPS outlook, providing another indication that the U.S. housing market is cooling.

Despite growing sales contributions related to Medicare prescription drug benefits plan, which helped Caremark Rx (CMX 46.81 +2.18) post a 16% rise in profits, raise its full-year guidance and plays into our Overweight rating on Health Care, the sector traded lower amid further consolidation in biotech, HMOs and medical equipment.
NYSE Adv/Dec 2023/1222...Nasdaq Adv/Dec 1686/1369