Market Volatility: Stocks React to Earnings, Economic Projections

Strategic Insights -

The Dow Jones Commodities News reports a jump in gold prices is providing a slight boost to mining stocks, which have suffered a dismal month. Weakness in the dollar versus the yen is thought to be behind the gold surge, but some traders attribute it to short-covering at the end of the month. Precious metals consulting firm GFMS of London issued a bullish gold report, forecasting "clear upside" for gold due to growing U.S. budget deficits and a potential sharp slowdown in the U.S. economy. Meanwhile, Prudential analyst John Tumazos cuts price targets on US Steel, Nucor, and Worthington Industries, citing a possible "multiyear glut."

Key Takeaways:

  • Newmont Mining shares are up 3.5% at $38.10, while Stillwater Mining is up 5.7% at $7.41, with both companies benefiting from the gold price surge.
  • Prudential analyst John Tumazos cuts price targets on US Steel (X) to $30 from $35, Nucor (NUE) to $36 from $48, and Worthington Industries (WOR) to $12 from $15.
  • Alliance Capital shares slip 2.3% to $44.45 after the company's earnings report came in flat at 58c/share, 5c below the Street target.
  • Columbia Sportswear's (COLM) 1Q report is "brutal," according to Prudential, with a backlog and guidance that are "significantly worse than Street expectations."
  • CP Ships (TEU) sees a 4% pop after rumors of a potential hostile takeover by China Shipping Container Lines (2866.HKS).
  • ChevronTexaco (CVX) expects its refineries to run at higher rates in the 2Q due to less planned maintenance.
  • Best Buy (BBY) is upgraded to overweight by Prudential analyst Mark Rowen, citing a significant price pullback and potential acceleration in big screen TV sales.
  • Wendy's (WEN) may be a victim of "pie-in-the-sky portfolio evaluations" according to Piper Jaffray, which concludes that some valuations ignore corporate expense.
  • Banc of America upgrades IBM to buy from neutral, citing an attractive valuation, but leading indicators in the Services business are "worrisome."
  • ChevronTexaco's (CVX) 1Q EPS miss is "annoying but not disastrous" according to CSFB, which assumes weak operating results in U.S. refining can be turned around quickly.

Statistics:

  • Gold prices have surged, providing a slight boost to mining stocks.
  • Newmont Mining shares are up 3.5% at $38.10.
  • Stillwater Mining is up 5.7% at $7.41.
  • US Steel's price target is cut to $30 from $35.
  • Nucor's price target is cut to $36 from $48.
  • Worthington Industries' price target is cut to $12 from $15.
  • Alliance Capital shares are down 2.3% at $44.45.
  • Columbia Sportswear's (COLM) 1Q backlog is "significantly worse than Street expectations."
  • CP Ships (TEU) shares are up 4% at $13.94.
  • ChevronTexaco (CVX) expects 2Q refineries to run at higher rates.
  • Best Buy (BBY) price target is upgraded to $55 from $42.
  • IBM's valuation is attractive, according to Banc of America.

Sources:

  • Dow Jones Commodities News (Apr 29, 2005)
  • GFMS of London (Apr 28, 2005)
  • Prudential (Apr 29, 2005)
  • Alliance Capital (Apr 28, 2005)
  • Columbia Sportswear (Apr 28, 2005)
  • CP Ships (Apr 29, 2005)
  • ChevronTexaco (Apr 28, 2005)
  • Prudential (Apr 29, 2005)
  • Best Buy (Apr 28, 2005)
  • Piper Jaffray (Apr 29, 2005)
  • Banc of America (Apr 29, 2005)
  • CSFB (Apr 29, 2005)
  • Verizon (Apr 28, 2005)
  • MCI (Apr 28, 2005)
  • Qwest (Apr 28, 2005)