8/16/99,,,,U.S. Stocks Rise Before CPI Report, Led by Hewlett-Packard
New York, Aug. 16 (Bloomberg) -- The Dow Jones Industrial
Average rose for a fourth day, led by Hewlett-Packard Co., as
investors speculated the company would report profit that
surpassed analysts' published forecasts.
''There's a larger-than-expected demand for PCs in the third
quarter,'' said Robert Finch, a money manager for Aeltus
Investment Management Inc., which oversees $60 billion in
Hartford, Connecticut.
Major indexes flipped between gains and losses in the
year's slowest session. Until the last hour, investors were
unwilling to bid stocks higher on concern a key economic report
tomorrow will show inflation is picking up, suggesting the
Federal Reserve will have to raise interest rates more than once.
The Dow average rose 73.14, or 0.7 percent, to 11,046.79,
the first time it has closed above 11,000 since July 21. The
Standard & Poor's 500 Index climbed 3.09, or 0.2 percent, to
1330.77. The Nasdaq Composite Index gained 7.47, or 0.3 percent,
to 2645.28. Eight stocks fell for every seven that rose on the
New York Stock Exchange.
Investors are eager to see the U.S. consumer price index,
due out at 8:30 a.m. New York time tomorrow. Economists surveyed
by Bloomberg News expect an increase of 0.3 percent in July --
mainly reflecting higher energy costs -- after showing no change
in June and May. The core rate of inflation, excluding food and
energy, probably rose 0.2 percent last month.
H-P
Hewlett-Packard, the world's No. 2 computer maker, rose 4
5/16 to 110 5/16. The company said after U.S. exchanges closed
that it earned 85 cents a share in the quarter ended July 31
before some one-time costs, up from 58 cents a year earlier.
Analysts surveyed by First Call Corp. had projected 80 cents, and
some unpublished forecasts were as high as 87 cents.
Hewlett also filed to sell stock in its Agilent Technologies
Inc. medical equipment and electronic measurement business, in
what is expected to be among the biggest U.S. initial public
offerings ever.
International Business Machines Corp., the No. 1 computer
maker, rose 4 to 127 3/8.
Applied Materials Inc. rose 3/4 to 70 1/2 as investors
anticipated rapid profit growth from the world's biggest maker of
equipment used to produce semiconductors. Analysts surveyed by
First Call expect the company to report after exchanges close
tomorrow that it earned 53 cents a share in its fiscal third
quarter.
Analyst Sue Billat at BancBoston Robertson Stephens, who
rates Applied Materials a ''strong buy,'' said in a note to
clients that forecast could be too low -- she expects 55 cents --
and she raised her earnings estimates for the full year.
Makers of computer disk drives rallied after a parts
distributor said shortages are appearing in some markets. Seagate
Technology Inc., the No. 1 maker of computer disk-drives, rose 1
7/16 to 30 11/16. Quantum Corp.'s disk-drive tracking stock
gained 1/4 to 7 1/4, Western Digital Corp. climbed 5/8 to 4 3/8
and Maxtor Corp. advanced 1/2 to 5 17/32.
Volume
Some 579 million shares traded on the Big Board, the slowest
day this year. Trading picked up in the last hour, though, with
some investors betting that stocks had fallen farther than
justified by the inflation and earnings outlook.
''It doesn't take a lot of buying to get the market
moving,'' said Dan Mathisson, head trader at D.E. Shaw
Securities. ''You tend to have greater volatility on lower volume
days.''
The Dow average remains 1.5 percent below its record. The
S&P 500 has lost 6.2 percent from its high, and the Nasdaq 7.7
percent. All three records were set July 16.
Oil stocks fell as crude futures on the New York Mercantile
Exchange declined 1.3 percent. Some investors are betting that
crude oil prices, which almost doubled this year, may have
peaked, said Finch.
Royal Dutch Petroleum Co. fell 1 3/8 to 64 7/16 and Chevron
Corp. lost 7/8 to 95 7/8. Oil prices are up 79 percent this year,
lifting the S&P index of international oil companies to a 21
percent return versus an 8.4 percent return for the S&P 500.
Profit and takeover news will remain secondary to
speculation about interest rates. The Fed last raised the federal
funds rate -- its target for overnight lending between banks --by
a quarter of a percentage point to 5 percent on June 30. The Fed
meets next on Aug. 24, and many investors expect the central bank
to raise rates then. Whether further rate increases will follow
is the question preoccupying many people in the market.
Higher rates typically send stocks lower because they reduce
the amount investors are willing to pay for a share of a
company's future earnings, especially in industries such as
computers and the Internet where expectations are high.
Concern about higher rates has sent stocks down from their
records. ''The market is paranoid about interest rates right
now,'' said George Mairs, who oversees about $1.3 billion as
president of Mairs & Power Inc. in St. Paul, Minnesota.
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Hewlett-Packard's 3rd-Qtr Profit Rises on Asia, PCs (Update2)
Hewlett-Packard's 3rd-Qtr Profit Rises on Asia, PCs (Update2) (Adds comment on PCs from CFO in 10th paragraph.)
Palo Alto, California, Aug. 16 (Bloomberg) -- Hewlett- Packard Co., the world's No. 2 computer maker, said its fiscal third-quarter earnings rose 37 percent, bolstered by personal- computer sales and a revival in some businesses in Asia.
Net income rose to $853 million, or 81 cents a share, for the quarter ended July 31, from $621 million, or 58 cents, a year ago. Sales rose 11 percent to $12.2 billion from $10.98 billion. Excluding costs associated with the planned spinoff of its measurement businesses, H-P earned 85 cents a share.
H-P's Asian sales rose 24 percent to $1.7 billion. Its PC business also improved, with sales rising more than 20 percent, as the company sold its machines without slashing prices the way manufacturers did in the year-earlier period. H-P said it expects further gains this quarter, with overall sales forecast to rise 10 percent to 13 percent from a year ago. ''It's another quarter of consistent results for H-P,'' said Art Russell, an Edward Jones analyst in St. Louis who rates the shares ''buy.'' That's an achievement because, in the past, ''they've been pretty unpredictable,'' he said.
Until earlier this year, H-P disappointed investors quarter after quarter with weaker-than-expected earnings, prompting Chairman Lew Platt to cut costs. That effort is expected to continue under Carly Fiorina, the former Lucent Technologies Inc. executive who succeeded Platt as chief executive last month.
H-P was expected to earn 80 cents a share, the average estimate from analysts surveyed by First Call Corp. Some unpublished forecasts were for profit of as much as 87 cents.
Shares of Palo Alto, California-based H-P rose 4 1/4 to 110 1/4. They were little changed in trading after the report. The stock has risen 61 percent so far this year.
Asia Sales Rise
Shipments of PCs sold to consumers rose to a record, H-P said. Sales to companies also were strong, as were notebook PC sales. The unit was profitable enough to give H-P, the No. 4 PC maker, room to cut prices further to win sales. ''We have some room to be more aggressive,'' H-P Chief Financial Officer Bob Wayman said on a conference call.
The No. 1 maker of computer printers also said shipments of those machines reached their highest growth rates in three years.
The one blot on H-P's earnings was an unspecified decline in sales of machines used to store computer information. H-P attributed the slump to a decision to stop selling storage systems made by EMC Corp. in favor of marketing its own products. H-P said at the time that sales would suffer at first.
H-P said costs associated with the spinoff of its measurement unit, to be called Agilent Technlogies, totaled about $60 million, and cut 4 cents off per-share earnings. H-P today filed with the Securities and Exchange Commission for an initial public offering of shares in Agilent, to be held next year.
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