NEW YORK, Oct. 11 (UPI) -- Here is a look at Friday's top business stories:
Stocks rally on GE earnings
NEW YORK, Oct. 11 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market were sharply higher in busy trading at midday Friday, lifted in a buying frenzy by a favorable earnings report from General Electric and a broker upgrade of IBM.
The blue-chip Dow Jones industrial average, which jumped 247.68 points Thursday, was ahead another 232.60 points, or 2.99 percent, to 7,766.50. The
tech-heavy Nasdaq composite index, which gained 49.26 points in the previous session, was ahead 35.16 points, or 2.93 percent, to 1,198.53.
The broader New York Stock Exchange composite index was ahead 12.89 to 447.06 while the Standard & Poor's 500 index was ahead 24.93 to 828.85.
The American Stock Exchange composite index was ahead 14.08 points to 789.32 while the Wilshire 5000 Index was ahead 242.81 to 7,833.99.
Big Board volume declined to an estimated 799.20 million shares from 914.80 million shares changing hands during the same period Thursday.
Analysts said stocks shot higher for a second straight day after bellwether blue chip General Electric posted upbeat quarterly results and an upgrade of International Business Machines.
GE, a component of the Dow industrials, jumped after it reported a 25 percent rise in third-quarter net income as double-digit profit growth in its power systems, NBC broadcasting and finance divisions offset losses in its insurance and equity-investment businesses.
Earnings of 41 cents a share matched Wall Street expectations. The Fairfield, Conn., conglomerate also maintained its full-year earnings forecast despite difficult economic conditions, though it has said it won't give guidance for next year until December.
Investors may have been expecting worse news from GE, and analysts at many Wall Street brokerage firms had been cutting 2003 earnings forecasts recently. So GE's ability to match expectations may have come as something of a relief to investors who have become accustomed to hearing the worst when it comes to corporate earnings, experts said.
Also helping stocks was an investment upgrade of fellow Dow component IBM by Lehman Brothers.
The brokerage firm raised its rating on the Armonk, N.Y., computer giant's shares to overweight from equal weight on the belief that concerns over the IT spending environment are overdone, as are worries over pension and stock options. Lehman thinks IT spending should improve slightly in 2003.
Meanwhile, on the economic front, a report from the Commerce Department showed that a drop in car sales drove down overall U.S. retail sales in September by 1.2 percent -- the largest monthly decline since last November.
Without auto sales, retail sales would have edged up by 0.1 percent for the month.
Both figures matched Wall Street's expectations.
Separately, the Labor Department said inflation at the wholesale level remained tame in September as food prices fell for a third consecutive month.
The Producer Price Index for finished goods rose 0.1 percent after holding steady in August. The increase reflected rising energy prices, which were mostly offset by falling food prices. The so-called core index, which excludes food and energy items, also rose 0.1 percent. Both figures were in line with Wall Street's expectations.
Investors seemed to look past a dip in consumer sentiment evident in the University of Michigan's mid-October reading, which came in at 80.4, its lowest reading in nine years, market sources said.
A moribund job market and punishing stock market losses dented consumer sentiment for a fifth straight month in early October, raising concerns the consumer-driven recovery could soon be in jeopardy.
The drop was led by a steep fall in the expectations index, which measures attitudes about the 12 months ahead, to 72.4 from 79.9. The current conditions index, which correlates more closely with spending, fell to 92.9 in October from 95.8.
The University of Michigan preliminary consumer sentiment survey is based on telephone interviews with about 300 Americans across the country on personal finances and business and buying conditions. It is rounded out with another 200 calls by month's end. The university releases the data directly to subscribers only and they are obtained through market sources.
Meanwhile, U.S. Treasury prices sank. The 10-year bond fell 24/32 to 105 5/32. Its yield, which moves in the opposite direction of its price, rose to 3.74 percent from 3.66 percent late Thursday.
In Europe, stock prices ended sharply higher in active trading in London, Frankfurt and Paris, supported by the fresh gains on Wall Street and strength in the insurance sector.
The London International Stock Exchange's blue-chip FTSE-100 index gained 160.8 points, or 4.26 percent, to 3,938.1. The German DAX index gained 123.20 points, or 4.51 percent, to 2,856.39 and the French CAC-40 index climbed 143.74 points, or 5.21 percent, to 2,902.27.
Analysts said European stocks were lifted by surging insurers and tech stocks, despite the weak U.S. data showing consumer sentiment deteriorated sharply in October.
Markets also drew support in a broad market rally fuelled by the fresh gains on Wall Street.
Lucent to cut an additional 10,000 jobs
MURRAY HILL, N.J., Oct. 11 (UPI) -- Telecommunications equipment maker Lucent Technologies said Friday it will report a wider than expected fourth-quarter loss and cut an additional 10,000 jobs and take a $3 billion charge due to a decline in its pension assets.
The company said it expects to post a fourth-quarter loss of as much as 65 cents a share. It previously forecast a loss of 45 cents a share.
The company said that by the end of fiscal year 2003, it expects to have 35,000 employees, about 10,000 less than it expects to employ by the end of this year.
Lucent said it would record a charge of about $3 billion due to a decline in its pension assets, primarily as a result of declines in the stock market.
Patricia Russo, chief executive officer, said, "Despite the market challenges, we intend to return to profitability in fiscal 2003 and we are taking more aggressive restructuring actions to bring our breakeven down even further.
"Based on conversations with our customers, we are tightly focusing our investments on the nearest and clearest market opportunities that will help them expand their existing networks and offer next generation services. We will play to our core strengths in optical, circuit and packet switching, mobility and network operations software and increase our focus on services," Russo said.
The company also indicated it still expects a 20 to 25 percent sequential decline from third fiscal quarter revenues of $2.95 billion, consistent with its previous guidance.
Frank D'Amelio, chief financial officer, said, "In light of our revised forecasts for fiscal 2003 and our new breakeven plan developed in the last few weeks, we re-evaluated several balance sheet items, including inventory.
"The resulting charges will significantly increase the previously forecasted pro forma loss of 45 cents per share for the fourth fiscal quarter. Although we have not finalized our results at this point, we anticipate an increase in the pro forma loss of up to 20 cents a share," D'Amelio said.
The company also announced that it has cancelled its $1.5 billion credit facility and its $500 million accounts receivable securitization vehicle in order to avoid an anticipated default on the financial covenants.
Lucent said it had no outstanding balance on the credit facility, which was scheduled to expire in February 2003, and nothing drawn against the accounts receivable securitization vehicle.
"Since we didn't expect to draw on our existing credit facility before it expired in February, we thought it made the most sense to cancel the facility now instead of risking the anticipated default on our covenants," said D'Amelio.
"We are in discussions with our bankers concerning a new and smaller credit facility," D'Amelio added.
The company also said it has notified lenders that it will exercise its right to re-purchase certain real estate properties, for approximately $100 million, under existing lease agreements.
The facilities will be sold as part of the restructuring efforts. The company said it was taking this action given the high probability of defaulting on the terms of the agreement.
Mortgage rates falls to 31-year low
WASHINGTON, Oct. 11 (UPI) -- Freddie Mac said Friday mortgage rates fell to their lowest level in 31 years and expects the current record-breaking low mortgage rates to stimulate demand for homes well into next year.
Freddie Mac said the 30-year loan fell to its lowest level since it began its survey back in April of 1971 and the shorter 15-year loan dropped to its
lowest level since August of 1991.
Freddie Mac, which adjusts mortgage rates according to prices that mortgage-backed securities bring in the secondary bond market, said the average rate on the popular 30-year loan to homebuyers fell to 5.98 percent from 6.01 percent last week and the 5.99 percent level lenders were offering two weeks earlier.
A year ago, the 30-year average was 6.58 percent, Freddie Mac noted.
Analysts still believe that mortgage rates will be fairly stable this year and will continue to support the housing market.
Mortgage rates climbed to a record 18.66 percent in October 1981 and have been hovering between the 6 and 6.5 percent level since January.
Mortgage rates peaked in mid-May last year when lenders were asking 8.64 percent for the popular 30-year loan, which was the highest level since lenders were asking 8.73 percent back during the week of Feb. 24, 1995.
Analysts noted rates had been moving lower as a result of the Federal Reserve's year long string of interest rates reductions during last year.
Meanwhile, Freddie Mac said the rate on the 15-year loan dropped to 5.34 percent from 5.40 percent last week and from the 5.41 percent level lenders
had been asking two weeks ago. A year ago, the 15-year loan averaged 6.06 percent.
The group said the rate on the 1-year adjustable mortgage fell to 4.23 percent from 4.29 percent last week but remained slightly above the 4.22 percent level lenders were asking two weeks ago. This time last year, the one-year ARM averaged 5.26 percent.
The rates do not include add-on fees known as points, which averaged 0.6 percent on all the loans.
Frank Nothaft, Freddie Mac chief economist, said, "Although the economy in the final quarter of 2002 looks to be weaker than the third quarter, the
housing sector still radiates vitality and vigor. "We continue to see new records being set, both in the low cost of mortgages and in the volume of business carried out this year," Nothaft said.
"And even though housing may have moderated somewhat in the last few months, current record-breaking low mortgage rates will stimulate demand for
homes well into 2003," the economist added.
The Federal Home Loan Mortgage Corporation, which has been tracking rates since 1971, surveys 125 banks, savings and loans and mortgage lenders, to
calculate rates.
Freddie Mac is a corporation chartered by Congress that buys mortgages from lenders and packages them into securities for investors.
