Priceline.com helps stocks rally

The online travel company's results blow away estimates. Toyota and Polo Ralph Lauren also rise. Decent reports on private-sector jobs and services cheer investors.

By Charley Blaine Aug 4, 2010 2:51PM

Charley BlaineUpdated at 8:57 p.m. ET

 

Stocks finished higher today as a fresh batch of economic reports and earnings gave investors a reason to be more optimistic.

A report on private-sector payrolls was better than expected. So was a report on the health of the nonmanufacturing side of the economy.
Plus, results from Priceline.com (PCLN), Polo Ralph Lauren (RL) and Toyota Motor (TM) were better than expected.

The Dow Jones industrials ($INDU), meanwhile, closed up 44 points to 10,680. The Standard & Poor's 500 Index ($INX) added 7 points to 1,127. The Nasdaq Composite Index ($COMPX) was up 20 points to 2,304.

The Nasdaq's close was its first above 2,300 since June 18. The Dow and S&P 500 had their best finishes since May 13 and May 17, respectively.

Investors will cope with same-store sales reports from major retailers on Thursday as well as the weekly report on jobless claims.

Earnings are due from Kraft Foods (KFT), Cardinal Health (CAH), British bank Barclays (BCS) and Playboy Enterprises (PLA).

Investors seemed happy with results from News Corp. (NWSA) and insurance companies Allstate (ALL) and Prudential Financial (PRU).

Shares of News Corp., which owns the Fox Television Network, and The Wall Street Journal, were up 4.2% after hours to $14.43 from a regular close of $13.85.

The company earned $875 million, or 33 cents a share, for its fiscal fourth quarter, better than the Street estimate of 20 cents a share and up from a $203 million loss, or 8 cents a share, a year ago, when News Corp. took an impairment charge.

Allstate and Prudential also beat Street estimates. Allstate was up 1.5% after hours to $29.03, up from a regular close of $28.61. Prudential added 1.4% to $57.51, up from a regular close of $56.71.

Futures trading suggests a flat open for U.S. stocks.

Priceline's earnings are a market trigger
Priceline.com was the star of the day and a big reason why stocks moved higher.

The stock closed up about 22% to $281.30 this afternoon after blowing past just about every analyst estimate on its second-quarter results. The gain was tops among stocks in the S&P 500  and stocks in the Nasdaq-100 Index ($NDX.X). The Nasdaq-100 was up 19 points to 1,910.


Priceline said its results were due to more people traveling, especially to international destinations, and it appeared to affect other stocks that deal heavily in travel.

Expedia (EXPE) was up 6.4% to $24.32. Walt Disney (DIS) was up 1.8% to $34.83, Carnival Cruise Lines (CCL) added 1.7% to $35.98, and Starwood Hotels (HOT) added 2.7% to $51.36.

Why the excitement? Priceline.com revenues rose 27.1% year-over-year to $767.4 million versus the $733 million consensus. Gross bookings were $3.4 billion, up 43% year-over-year. Priceline expects to earn $4.78 to $4.98 a share in the third quarter, well above what had been the Street estimate of $4.18.

Priceline isn't alone in saying people are traveling. The airlines have been saying it all year. So, when you hear a lot of grumbling about the economy being stuck, it's not entirely stuck.

That's also why two other -- and admittedly larger -- catalysts helped stocks today.

  • The services sector grew slightly more than expected in July, according to the Institute for Supply Management index.
  • A separate report from payroll-processing company ADP showed that, in July, private employers added more jobs than forecast.
"ADP certainly gave a little glimmer of hope that the jobs number on Friday might be more positive than anticipated," Kim Caughey, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, told Reuters.


But she said the high unemployment rate keeps consumers jittery and retailers' margins are probably being hit as they try to drive sales.


Energy prices -- New York close
 

Wed.

Tues.

Month chg.

YTD chg.
Crude oil 

$82.47

$82.55

4.46%

3.92%
(per barrel)











Heating oil

$2.2022

$2.2000

5.46%

4.09%
(per gallon)











Natural gas 

$4.7370

$4.6390

-3.78%

-14.99%
(per mil. BTU)











Unleaded gasoline

$2.1750

$2.1935

2.48%

5.95%
(per gallon)











Retail gasoline

$2.7470

$2.7260

0.22%

4.09%
(per gallon; AAA)












A fairly broad rally
Twenty-one of the 30 Dow stocks were higher this afternoon, along with 72 Nasdaq-100 stocks. Gainers were ahead of decliners 2.7-to-1 on the New York Stock Exchange and 2-to-1 on Nasdaq.

DuPont (DD) was the top Dow performer, up 2.4% to $42.41, followed by Disney, Pfizer (PFE), up 1.7% to $16.44, and Kraft Foods (KFT), up 1.6% to $29.75.

Crude oil settled down 8 cents to $82.47 a barrel. Gold rose $8.40 to $1,195.90 an ounce. Interest rates were higher, with the 10-year Treasury yield rising to 2.952% from 2.914% on Tuesday. The dollar was higher against major currencies.

Some of the day's big movers
Polo Ralph Lauren reported better-than-expected quarterly profit and raised its sales forecast for the year, helped by a pickup in department-store orders and growth at its Club Monaco chain. Shares jumped 7.8% to $85.47.

AOL (AOL) was up 7.7% to $22.75. The Internet company spun off from Time Warner (TWX) reported a second-quarter loss because of goodwill-impairment costs tied to a decline in its stock price since April. Net loss was $1.06 billion, or $9.89 a share, compared with a net income of $90.7 million, or 86 cents a share, a year earlier.

Pultegroup (PHM) slipped 0.6% to $8.38. The largest U.S. homebuilder by revenue had a quarterly profit for the first time in almost four years as sales were boosted by buyers seeking to capture tax benefits. Pulte reported second-quarter profit of 20 cents a share. Analysts had expected a loss of 2 cents a share.

Time Warner rose 0.3% to $32.47. The owner of the TNT television channel and Time Inc. reported second-quarter profit that beat analysts' estimates after cable-television and magazine advertising increased. Excluding some items, earnings rose to 50 cents a share. Analysts projected 46 cents, the average of 21 estimates compiled by Bloomberg.

AutoNation (AN) gained 3.5% to $24.53. The largest U.S. new-car dealer said July retail new-vehicle sales rose 5% from a year earlier and 22% from June, in a Securities and Exchange Commission filing. CEO Mike Jackson told CNBC today that inventories are in "perfect shape" as automakers refrain from "overproducing."

Barnes & Noble (BKS) surged 19.2% to $15.31. The largest U.S. bookstore chain said Leonard Riggio, founder and its largest stockholder, may consider participating in an investor group to acquire the company. The company put itself up for sale on Tuesday.

CBS (CBS) rose 4.2% to $15.64. The broadcast network reported second-quarter adjusted earnings of 25 cents a share, topping the average estimate of 21 cents a share. It also said it was starting to see stronger advertising demand.

Toyota shares in New York were up 2% to $74.25. The auto giant raised its profit forecast for its fiscal year and posted its highest quarterly net profit in two years thanks to improvements in its U.S. finance division and cost-reduction efforts.

Goldman may spin off trading business
Goldman Sachs (GS), which rose 2.1% to $156.41, is considering spinning off its proprietary trading group due to concerns over compliance with the Volcker rule contained in financial reform legislation approved last month, CNBC reported today.

The Volcker rule limits commercial banking institutions and their subsidiaries from engaging in speculative trading activities unrelated to customer needs. It also prohibits investing in and sponsoring hedge funds or private equity funds.

Goldman's move comes following reports on Monday that Morgan Stanley (MS) would spin off its hedge fund, FrontPoint Partners, to comply with the rule. Morgan Stanley was up 1.4% to $27.87.

Short hits from the markets -- New York close
 
  Wed.

Tues.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.145%

0.150%

3.57%

190.00%
5-year Treasury note 

1.616%

1.554%

1.13%

-39.84%
10-year Treasury note

2.952%

2.914%

1.55%

-23.19%
30-year Treasury bond

4.071%

4.046%

2.36%

-12.28%
Currencies







 

 
U.S. Dollar Index

80.992

80.684

-0.81%

3.54%
British pound

$1.5901

$1.5954

1.34%

-1.70%
(in U.S. $)











U.S. $ in pounds

£0.6289

£0.6268

-1.32%

1.73%
Euro in dollars

$1.3163

$1.3231

0.83%

-8.16%
(in U.S. $)











U.S. $ in euros

€ 0.7597

€ 0.7558

-0.82%

8.89%
U.S. $ in yen 

86.43

85.80

-0.26%

-7.06%
Canada dollar

$0.983

$0.977

1.09%

3.35%
(in U.S. $)











U.S. dollar 

$1.018

$1.023

-1.01%

-3.25%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,195.90

$1,187.50

1.20%

9.10%
(per troy ounce)











Copper

$3.4045

$3.3585

2.81%

1.73%
(per pound)











Silver

$18.2780

$18.4220

1.53%

8.51%
(per troy ounce)











Corn

$4.0025

$3.8950

1.91%

-3.44%
(per bushel)











Crude oil 

$82.47

$82.55

4.46%

3.92%
(per barrel)










 

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