Weekly Market Report 06-17-2005

Markets have good week

By Rick Paler


It was a good week for the stock market with all the major indices posting gains for the week. Corporate news and earnings releases of any significance were none existent. Economic news this week helped to support stock prices.

Volume remained light and should stay that way for some time as traders and investors focus more on their summer vacations than the market. Despite the low volume, sediment remains positive for the market. This is due to the speculation that the Federal Reserve has inflation under control.

In corporate news this week, Adobe Systems (ADBE) posted nice numbers. The maker of the popular acrobat software which makes PDF files reported earnings of $0.29 per share which was a penny above estimates. Revenues surged 21% to $496 million. Giving guidance the company expects earnings of between $0.25 and $0.27 per share for quarter three.

KB Homes (KBH) reported a 36% rise in revenues and a 72% jump in earnings. The home builder reported earnings of $2.06 per share on revenues of $2.1 billion. Wall Streets estimates had been for the company to earn only $1.78 per share. Giving guidance the home builder stated that their backlog increased 52% and that they now expect their full year earnings to come in at $9.00 per share.

Pfizer Inc. (PFE) announced that it would acquire Vicuron Pharmaceuticals (MICU) for $1.9 billion or $29.10 per share. Shares of Vicuron soared on the news.

Both Target (TGT) and Wal-Mart (WMT) reported their same store sales estimates for June. Target said that they see sales coming in at the high end of their prior range of 4% to 6%. Wal-Mart said they see sales growth for June coming in at 2% to 4%.

In economic news traders watched closely for the release of the May PPI and CPI numbers. The May Producers Price Index reported a drop of 0.6% and the core rate was up just 0.1%. The Consumer Price Index was also bullish for the market. The CPI for May fell 0.1% economist had expected a 0.1% rise. The core rate which excludes food and energy rose only 0.1% versus the estimate of a 0.2% rise. This signaled that the Federal Reserve does have inflation under control and might be at the end of their policy of raising interest rates. Traders will be watching the next FOMC meeting very closely to see if the Federal Reserve changes its language in its policy statement.

Next week expect traders to react quickly to earnings warnings. We are now in the period where companies will warn if they are not going to be able to meet their earnings estimates. Companies that announce warnings have the ability to move those sectors of the market.

Companies releasing earnings next week are the following; FastSet Research Systems (FDS), Lennar Corporation (LEN), Bed Bath & Beyond (BBBY) and FedEx (FDX).