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Durable goods order fall 5.9% in September

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Durable goods orders fell 5.9% in September as orders for civilian aircraft plummeted 46.3%. The 5.9% decline was much larger than the -1.8% drop economists had forecast and the biggest drop since November 2001.

Excluding transportation, new orders decreased 1%. Excluding defense, new orders decreased 6%. Year to date, new orders for 2002 were 0.6% below the same period a year ago.

Shipments of manufactured durable goods in September decreased $1.9 billion or 1.1 percent to $173.9 billion. This followed a 1.6 percent August decrease. Year to date, shipments for 2002 were 1.4 percent below the same period a year ago

Unfilled Orders for manufactured durable goods in September decreased $6.3 billion or 1.3 percent to $485.0 billion. This followed a 0.5 percent August increase and was at the lowest level since October 1996.

Inventories of manufactured durable goods in September, down twenty consecutive months, decreased $0.5 billion or 0.2 percent to $263.5 billion. This followed a 0.2 percent August decrease and was at the lowest level since December 1995.

New orders for defense decreased $0.3 billion or 4.1 percent to $6.7 billion.

New orders for non-defense decreased $7.5 billion or 12.6 percent to $52.1 billion, the largest decrease since December 1997.

The release of September's durable goods data had stock futures reversing earlier gains and now has S&P futures (sp02z) off their worst levels of the morning and trading down just 0.50 points at 880.00. NASDAQ futures (nd02z) are lower by 0.50 points at 967 and Dow futures (dj02z) are off 15 points at 8,260.

Fair value for the S&P 500 today is $0.31. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.39 and set for program selling at $-1.62. Fair value for the NASDAQ-100 today is $2.46.

Treasuries are seeing buying in the early morning session with the 10-year December Treasury futures (ty02z) 113'020 +0.28% higher, with the benchmark bond's YIELD ($TNX.X) falling to 4.09%.

Cigna warning

Shares of employee benefits service provider Cigna (NYSE:CI) $63.60 are falling 31.9% to $43.25 in response to a Q3/full yr earnings warning and extremely negative commentary on the part of analysts. The company guided Q3 to approx. $1.47 a share versus consensus $1.99. The change in expectations primarily reflects weaker than expected health care results in the Employee Health Care, Life and Disability segment. For 2002, CI sees EPS of $6.50-$6.75 versus consensus $7.97.

However, several firms are calling CI problems company-specific and would view a pullback in competitors as a buying opportunity. CIBC World Markets is going so far as to upgrade AET in anticipation of a lower open on the CI news. CIBC also recommends buying CVH, UNH, and WLP if the group trades down today. Early indication is that investors will be given a chance to buy some of these stocks down this morning, as WLP is indicated 4.3% lower, UNH -3.3%, AET -2.4%.

Amazon.com is most active

Shares of internet retailer Amazon.com (NASDAQ:AMZN) $19.86 are the most actively traded NASDAQ stock in the pre-market and trading lower at $18.80 (-5.3% from their close) after reporting Q3 net of breakeven, which was $0.04 better than the consensus. Sales rose 33% to $851 million (consensus $807.8 mln). For Q4, the company said it sees sales of $1.325-$1.425 billion (consensus $1.264 bln) with pro forma profit of $70-$95 mln. Amazon.com forecasted 2003 sales growth of over 10% and pro forma profit of over $200 million. "We've lowered prices five times over the last 15 months, and simply put, it's working." The retailer said it plans to extend free shipping promotion on order over $25 at least through the holidays.

While Amazon.com beat estimates, broker Prudential has come out this morning and downgraded the stock to "sell" from "hold" and maintains their $10 price target, saying they do not believe the company's fundamentals of the business are exciting enough to justify the current valuation. Separately, RBC Capital downgraded AMZN to "sector perform" from "outperform" based on valuation, with a price target of $20.

Jeff Bailey

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