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Contributors: Douglas McIntyre Jon C. Ogg

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Tuesday, July 11, 2006

Market Wrap for July 11, 2006

DJIA 11,134.77; Up 31.22 (0.28%)
NASDAQ 2,128.86; Up 11.93 (0.56%)
S&P500 1,272.52; Up 5.18 (0.41%)
10YR-Bond 5.1%

Today’s initial losses may be mostly chalked up to India, but it was the weaker earnings that capped the bulls until later in the day. The global stock exchanges were spooked after reports of the terrorist attacks in train bombings that killed well over 100 people on trains in Mumbai, India. While the markets had been lower all day, KLA-Tencor (KLAC) comments brought on a mid-day rally in the tech sector after so many tech names had warned.

Shares of the active Indian shares that trade as ADR’s in the US were active and closed lower across the board. In US trading: Tata Motors (TTM) closed down 2,5% at $16.54; Satyam Computer Services Ltd. (SAY) closed down 1.3% at $32.85, India (REDF) closed up 1.4% at $15.20. Shares of Infosys Technologies Ltd. (INFY) closed up 0.33% at $78.01 ahead of their earnings that will post tonight.

We did have many stocks that moved on their own news, and the earnings reports have started coming out.

KLA-Tencor rallied 8.2%to $42.56 after it said at SEMICON West that its orders for June had topped prior expectations of 10% growth and said it was a very good quarter for the company.

DJIA component Alcoa (AA) reported earnings that were under expectations on the revenue side and were mixed on the EPS side. AA closed down 4.9% at $31.77 as the shares were up in anticipation of strong earnings and strong guidance from a company plagued by internal underperformance.

Shares of Lucent (LU) fell 5.8% to close down at $2.20 after they posted an earnings warning after yesterday’s close. Alcatel (ALA), its French acquirer, fell 4.7% to close at $11.72. They have labeled this as an ongoing merger but ALA’s market cap is $16 billion on a currency adjusted basis, and LU market cap is $10 billion. You do the math and see if that still sounds like a merger.

Pepsi Bottling (PBG) rose 4.9% to $33.95 after beating earnings with $0.61 EPS vs a $0.59 consensus estimates.

Websense (WBSN) had opened lower after an earnings warning and a series of downgrades and estimate cuts from the street analysts, but ended up 4.6% to $19.52. Websense had already been at 52-week lows and with its 24 P/E and high historic and future growth rates, so it looks like this may have been priced in.

Shares of Brookdale Senior Living Inc. (BKD) rose 2.00% to close at $45.39 after posting higher than expected earnings, even though it is going to have a secondary offering under its disclosure filed last month.

Talbots Inc. (TLB) rose a drastic 22.8% to close at $22.07 after increasing guidance and cost savings after it updated its J. Jill acquisition.

Audiovox (VOXX) was a bit lucky in closing up 2.6% at $13.13. It reported earnings of $0.07 EPS, but that was under the street estimate even with another penny that would have made it $0.08; it also added another 2 million shares to its buyback plan, which is above the remaining 200,000 shares under an existing buyback plan.

Shares of DJIA component Boeing (BA) fell after rival EADS announced it had snagged a $3.5 Billion order for helicopters from the US Army, but it recovered with the rest of the market to close up 1.5% at $81.61.

Williams-Sonoma (WSM) closed down 2.8% at $32.60. The company gave guidance that was acceptable, but they said the CEO was retiring effective July 14, 2006. Typically CEO’s announce retirement with a little more notice than 3 days, and this gave the street reason to worry that they were not being entirely forthcoming.

Microsoft (MSFT) fell 1.7% to close at $23.10 after Bill Gates was speaking in South Africa and said that he sees an 80% chance that Windows Vista will be on time for its January 2007 release date.

An interesting research note out of Piper Jaffray led to opposite moves in the US exchange stocks today. NYSE Group (NYX) fell 1.2% to close at $675.35 after Piper Jaffray initiated it with an Underperform rating; and it started NASDAQ (NDAQ) with an Outperform rating. Shares of NDAQ rose 1.5% to $28.80

Tonight we have earnings from Genentech (DNA), Infosys (INFY), and Ruby Tuesday (RI). We have earnings tomorrow from Ferro (FOE), Gannett (GCI), Genzyme (GENZ), Sealy (ZZ), Tekelec (TKLC) and Wolverine World Wide (WWW).

Jon C. Ogg
July 11, 2006

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