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Stocks Moderately Higher In Midday Trading

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The major indexes were up moderately in midday trading after some uneven movement.

Just past 1 p.m. ET, the S&P 500 was up 0.3%. The Dow rose 0.2% while the Nasdaq and NYSE composite were flat after being up and down on the day. The small-cap S&P 600 fell 0.3%.

Volume was modestly lower across the board, about 5% lighter on the NYSE and 2% on the Nasdaq.

Medical stocks were among market leaders. Warren Buffett’s Berkshire Hathaway () nearly doubled its stake in Johnson & Johnson () and added shares of French drugmaker Sanofi-Aventis in Q1. It also disclosed an investment in HMO WellPoint (). WellPoint rose 1% and J&J 2%.

CNH Global () rose 0.66 to 45.81, although it had been up as high as 48.15 earlier. The maker of farm machiner was part of a rally in some agriculture-related stocks after Deere & Co. () beat earnings expectations thanks to strong sales of tractors and other agricultural equipment. U.S. farmers are boosting corn production to meet growing demand for ethanol.

But Deere shares fell 0.94 to 119.72 amid a cautious profit outlook for the rest of the year.

Color Kinetics () followed up on a breakout from a high handle, rising 1.06 to 25.31.

Jack in the Box () was still up from its earnings-inspired rally but reversed lower, turning a 6% gain into a 2% rise.

On the downside, Digital River () plunged 3.22 to 50.97. The e-commerce technology firm pierced its 200-day moving average, one day after it closed below its 50-day line.

11 a.m. update: Stocks Edge Higher On Weak Volume

Stocks tentatively sought higher ground in early trading as April housing data and an industrial output report ran counter to forecasts for slowing growth.

The NYSE composite was up 0.1% at 10:56 a.m. ET. The Nasdaq and the Dow were up less than 0.1%. The S&P 500 gained 0.2%. Trading volume was tracking lower then Wednesday, down 12% on the NYSE, minus 62% on the Nasdaq.

Foreign exchanges were mostly higher. London’s FTSE 100 surged 3.6%. The Shanghai composite rose 2.2%. Tokyo’s Nikkei 225 crawled up less than 0.1%.

A Federal Reserve report said autos, trucks and utilities helped boost April industrial output by 0.7%, above forecasts.

Commerce Department data showed housing starts jumped an unexpected 2.5% in April. The increase was well above March’s 0.3% gain, but 16% lower than year-ago levels. An index of builder confidence released by the National Association of Home Builders Tuesday fell back to its September 2006 level. “The crisis in the subprime sector has infected other parts of the mortgage market as well as consumer psychology,” according to the NAHB release, “and as a result the housing outlook has deteriorated.”

Jack In The Box () gapped up, gaining 3.69 to 78.52 after reporting Q2 earnings rose 25%, vs. estimates for 15% growth. The fast-food chain raised guidance for the year to $3.45 to $3.50 a share, well above current estimates for 10% earnings growth. The stock broke out of a base-on-base pattern Monday. It’s up 10% for the week.

TBS International () rose 1.23 to 20.80. The international operator of dry bulk tanker ships has reported hit-and-miss earnings and sales growth since early 2006. First-quarter earnings rose 108%, on 11% sales growth. Analysts see 62% profit growth for the year. TBS has missed views in four of the past seven quarters.

Shares of Guangshen Railway (), operator of the sole railway through China’s Pearl River Delta, gapped up, gaining 2.42 to 42.39. The Guangzhou Railway Group owns 67% of the company, which is thinly traded on U.S. exchanges. The stock rose three consecutive days prior to Wednesday. It is up 29% for the year.

Few leaders were breaking down in early trading, but Varian Semiconductor () fell 2.04 to 60.09. The stock has lost 15% since its Q2 earnings release April 27. The Electronics-Semiconductor group has dropped 6% during the same period. The company beat views in its quarterly report, with 165% EPS growth and 42% sales growth.

IBM lays off another 1,500 workers

BOSTON - IBM Corp. laid off 1,570 people Wednesday, primarily from an ongoing overhaul of operations in its giant technology services unit.

The company carried out a similar level of job cuts at the beginning of the month, for a total of 3,023 in this quarter and 3,720 for the year, according to IBM spokesman Edward Barbini.

That amounts to roughly 1 percent of the company, which employed 355,000 people at the beginning of the year. But even these small numbers reflect a big project inside IBM to transform its business.

Services is IBM’s biggest division by revenue, but the advent of lower-cost competition overseas has forced IBM to work harder to improve the unit’s profit margins. In the first quarter, pretax income for IBM’s tech services fell 19 percent, even as revenue rose 7 percent.

Wednesday’s job cuts were largely part of the company’s response. Although IBM did not disclose where the layoffs were being made, the company had blamed the first-quarter profit shortfall on problems in its U.S. outsourcing business.

IBM executives say they expect no more layoffs this quarter. But other shifts like this IBM calls it “rebalancing” figure to follow from time to time.

That’s because IBM’s services overhaul not only involves cheaper labor IBM’s work force in India rose from 9,000 in 2003 to 52,000 last year but also a quest to use less labor. That means rethinking and sometimes automating the ways that services contracts are carried out. IBM launched a program called LEAN last year to find such opportunities.

Robert Moffat, the IBM executive overseeing LEAN, acknowledges it will reduce the need for some services labor, but he contends that it will also create new work for the company overall because customers will be getting more for their money.

To some degree, that dynamic could explain another figure disclosed Wednesday: that even as it has laid off 3,700 people this year, IBM has hired 19,000 others. Barbini would not provide a geographic breakdown. 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Trichet: ECB rates policy must be credible in ensuring price stability UPDATE

(adds further Almunia comments)

BRUSSELS (AFX) - European Central Bank president Jean-Claude Trichet said the bank’s monetary policy must be credible in ensuring price stability.

“The decisive contribution the ECB’s single monetary policy makes to the smooth functioning of economic and monetary union is to maintain price stability — and be credible in the deliver in the future — in the euro area as a whole,” Trichet said in a speech at the European Parliament.

EU economic and monetary affairs commissioner Joaquin Almunia said that despite the ECB’s monetary tightening over the past year “lending conditions remain fairly favourable”.

The ECB’s governing council is widely expected to raise interest rates further next Thursday, citing the need to control inflation.

In figures published today, euro zone inflation for January eased to 1.8 pct from 1.9 pct in December. This tallies with the ECB’s inflation target of below or close to 2.0 pct.

Almunia said those blaming the strength of the euro for their economic problems are being “totally unfair”.

He said such claims are “not backed up by facts or figures”.

victoria.main@afxnews.com

vm/am/am

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TYCOON TRIO LIFTS STOCKS

May 17, 2007 — U.S. stocks rallied, carrying the Dow Jones industrial average to its eighth record this month, after billionaire investors Warren Buffett, Eddie Lampert and Carl Icahn boosted their holdings of drugmakers, banks and railroads.

The Dow industrials climbed 103.69 points to 13,487.53, the S&P 500 index added 12.95 to 1,514.14, and the Nasdaq composite index rose 22.13 to 2,547.42.

Health-care shares climbed the most in four weeks after Buffett’s Berkshire Hathaway almost doubled its investment in Johnson & Johnson. Citigroup had its biggest jump since 2003 after Lampert disclosed an $800 million stake in the largest U.S. bank.

Icahn joined Buffett in acquiring railroad shares by building up a position in CSX Corp. Stocks that are 34 percent cheaper relative to earnings than the average this decade helped fuel more than $2 trillion in mergers and acquisitions worldwide this year.

Citigroup advanced $2.12, or 4 percent, to $54.91, helping financial companies rally 1.1 percent and contribute the most to the S&P 500’s rise.

Dutch March PPI up 1.7 pct yr-on-yr

AMSTERDAM (Thomson Financial) - Producer prices in March rose 1.7 pct from a year earlier, the Central Bureau for Statistics said.

The bureau noted there were large differences in price developments between the various industries.

Metal prices increased sharply, with over 9.5 pct higher prices for the base metals and wood processing industries in March, while the petrochemical industry by contrast saw an 8.6 pct fall in prices.

tfn.amsterdam@thomson.com

ls/jlw

COPYRIGHT

Copyright AFX News Limited 2007. All rights reserved.

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.