- The Washington Times - Tuesday, April 11, 2006

Alcoa profitsgive initial lift


U.S. stocks tumbled to four-week lows as speculation that surging commodity prices will trigger inflation overshadowed record profit at Alcoa Inc., the world’s largest aluminum maker.

After rising initially on Alcoa’s results, the unofficial start of first-quarter earnings reporting, stocks slid as Iran announced that the country enriched uranium in defiance of the United Nations. Crude oil climbed to the highest price since September on concern that the dispute may disrupt shipments.

The market has “pre-earnings jitters,” said John Kattar, chief investment officer at Eastern Investment Advisors in Boston, which manages $1.7 billion. “The relentless march higher of commodities ignites fears” that the Federal Reserve will raise interest rates higher than forecast, he said.

Telephone companies including Verizon Communications Inc., the year’s best-performing industry group, led the retreat. The Nasdaq Composite Index had its biggest decline since February as shares of Google Inc. and Apple Computer Inc. fell.

The Standard & Poor’s 500 Index lost 10.03, or 0.8 percent, to 1286.57. The index, which was up as much as 0.3 percent after the open, closed at its lowest since March 13. The Dow Jones Industrial Average slumped 51.70, or 0.5 percent, to 11,089.63. The Nasdaq fell 22.92, or 1 percent, to 2310.35, the biggest drop since Feb. 28.

The Russell 2000 Index, a benchmark for companies with a median market value of $645 million, fell 10.84 to 742.11.

More than five stocks declined for every one that rose on the New York Stock Exchange for the broadest sell-off this year. About 1.58 billion shares changed hands on the Big Board, a volume 4.8 percent lower than the three-month average.

Iranian President Mahmoud Ahmadinejad said his country completed its first enrichment of uranium a few days ago. The U.N. Security Council demanded last month that Iran suspend the enrichment work. Crude oil for May delivery rose 0.4 percent to $68.98 a barrel, the highest close since Sept. 1.

The S&P; has declined three of the past four days from levels not seen since May 2001. Copper and zinc have reached records during that span, while gold hit a 25-year high. Fed policy-makers raised the main U.S. interest rate a 15th straight time to 4.75 percent at the end of last month and said higher commodity prices may add to inflation pressures.

Alcoa, the first Dow member to report first-quarter earnings, surged $1.26, or 3.8 percent, to $34.09. Alcoa said after the close Monday that first-quarter profit more than doubled to $608 million as metal prices soared. Net income was 69 cents a share. Analysts, on average, expected 51 cents a share in a survey by Thomson Financial. Sales rose 16 percent to a record $7.24 billion.

“Part of the good news on the Alcoa side is continued inflation in commodity prices, which means interest rates probably still have to go a bit higher before the Fed is done,” said Stephen Auth, who helps manage $29.8 billion as chief investment officer for equities at Federated Investors Inc. in New York.

Profit growth for S&P; 500 companies increased 10.4 percent in the first quarter, the 11th straight period above 10 percent, according to analyst estimates collected by Thomson and actual results. The streak may end if commodity prices and interest rates keep going higher, investors said.

Google, the most-used Internet search engine, fell $6.72 to $409.66. The company, which reports quarterly results on April 20, traded over $471 in January.

Apple fell 68 cents to $67.99. Shares of the maker of IPod music player and Macintosh computers had jumped 16 percent last week after it said it was introducing software that allows its Intel-based computers to run Microsoft Corp.’s Windows XP. Apple reports fiscal second-quarter results next Wednesday. Yahoo Inc., which operates the most-visited U.S. Web site, dropped $1.16 to $31.39. It reports Tuesday.

A gauge of telecommunications shares lost 1.6 percent for the biggest drop among the 10 groups in the S&P; 500.

Verizon, the second-largest U.S. telephone company, fell 74 cents to $32.74. AT&T; Inc. declined 25 cents to $25.78.

Bausch & Lomb slumped $8.41, or 15 percent, to $49.03 for the worst performance in the S&P; 500 and its steepest decline in five years. The maker of contact lenses and eye-care products said it is temporarily halting shipments of its ReNu solution with MoistureLoc after reports of fungal infections in the United States. Piper Jaffray Cos. cut the shares to “market perform” from “outperform,” and JPMorgan lowered the rating to “underweight” from “neutral.”

Competitor Alcon Inc., the world’s biggest eye-care company, jumped $2.80 to $104.02.

Piper Jaffray, a Minneapolis investment bank, jumped $5.90, or 11 percent, its biggest rally ever, to $61.10. UBS AG, the world’s No. 1 money manager, agreed to buy Piper Jaffray’s brokerage unit for wealthy investors for as much as $575 million in cash to gain ground on U.S. competitors. UBS also will buy client loans valued at about $300 million.

International Paper Co. rose after its shares were upgraded to “overweight” from “equal-weight” by analyst Edings Thibault at Morgan Stanley, who wrote in a note that North America’s largest paper maker will benefit from rising paper and pulp prices and debt reduction through forest sales.

The company said yesterday it was selling 275,000 acres in New York state for $137 million, part of its plan to reduce debt by selling 85 percent of its timberlands. International Paper shares rose 47 cents to $34.47.

Micron Technology Inc., the largest U.S. maker of computer-memory chips, added 19 cents to $15.10. Second-quarter profit rose 64 percent to $193.2 million, or 27 cents a share, the company said Monday after the market closed.

Nokia Oyj’s American depositary receipts, each representing one share, rose 79 cents to $21.19. The world’s No. 1 maker of mobile phones said the selling price in the first quarter for handsets was $125, more than the company’s forecast. Nokia said more advanced models were sold.



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