Preview
Will Data Show Pickup
for Manufacturing?
Despite the holiday this week, the economic-data calendar holds several major announcements, including readings on manufacturing activity and unemployment.
For the first time, Wall Street will get the re-christened Institute for Supply Management index for December in data set for release Wednesday. The ISM, the old National Assn. of Purchasing Management index, measures manufacturing activity. The gauge is expected to come in at 45.6. Any number below 50 indicates a contraction. The previous reading was 44.5.
“NAPM is the most important” data point for next week, said Edgar Peters, chief investment officer of PanAgora Asset Management, which oversees $12.5 billion, in Boston.
“It’ll give us some indication of whether there’s a pickup going on in manufacturing, which has been in a slump the longest [compared with other sectors],” he said. “We’ll have to see some recovery there before we see a real sustainable recovery overall. Stocks will trade on it somewhat.”
Thursday, Detroit’s Big Three and other auto makers will report December car and truck sales.
Friday brings the December unemployment report. Non-farm payrolls are expected to decline 139,000 from the previous decline of 331,000. The unemployment rate is predicted to rise to 5.8% from 5.7% in November.
Reuters
PUC Meets to Review
Power-Rate Increase
California’s Public Utility Commission will meet Wednesday to review a power-rate increase it approved this year for customers of the state’s two largest utilities, units of Edison International and PG&E; Corp.
Edison, PG&E; and the Utility Reform Network, a San Francisco-based consumer group, asked regulators to reconsider the increase and a related change in how the utilities account for debt, commission spokeswoman Terrie Prosper said.
The commission raised rates 46% in March after PG&E;’s Pacific Gas & Electric and Edison’s Southern California Edison accrued billions of dollars in losses buying power at prices far above what California law allowed them to charge customers.
Both utilities have said the increase was too small, and the reform network said it wasn’t needed. Pacific Gas & Electric filed for bankruptcy protection in April. Southern California Edison reached an agreement with the utilities commission in October to avert bankruptcy.
The meeting will be closed to the public, Prosper said. The commission also will consider whether it should take any legal action in Pacific Gas & Electric’s bankruptcy proceeding.
Bloomberg News
More Promising Year
Ahead for IPO Market
Next year looks more promising for initial public offerings after a tough 2001, but newly public companies still will have to pass muster with choosy investors.
“The IPO market pretty much follows the total equity market. When investors pull in their equity horns, the IPOs follow,” said Ward Morgenthau, senior vice president at Laidlaw Global Securities.
Luckily, many analysts are predicting gains of about 10% for the stock market in 2002. New issues are likely to track the broader market, recovering from a year of paltry volume and giving a somewhat healthier showing next year.
Only 97 companies went public in 2001, pocketing a light $35.8 billion in proceeds, according to Thomson Financial. That was the smallest number of deals since 1979, when 62 companies when public, and the lowest dollar amount since 1995, when $32.6 billion was raised, the research firm said.
In 2000, which began at the height of the Internet bubble and ended in its collapse, 384 initial public offerings raised $58.9 billion. The average first-day gain for IPOs weighed in at a hefty 54% in 2000, compared with just 13% in 2001.
Not a single initial public offering was priced during the month of September, but then a host of businesses made their debut on Wall Street in the following weeks. Thirty-one companies went public in the fourth quarter, according to Thomson Financial, taking advantage of the healthier tone in the market and making up almost one-third of the year’s total offerings.
Most analysts see a quiet start to 2002, followed by a pickup in the number--and quality--of deals as the year goes on. Investors have suffered as a result of two brutal years in the stock market and are demanding more reliable places to park their money.
Jay Ritter, professor of finance at the University of Florida, said the median age of companies that went public in 2001 was 12, the oldest since he began keeping records in 1980.
The median age of companies going public in the last two decades has been about 7, he said.
“Investors want to have some anchor for their investment in the IPO marketplace. It doesn’t even necessarily have to be a company that has to make earnings,” said Richard Peterson, market strategist at Thomson Financial. “But a company has to have a solid business model as opposed to an idea or concept.”
Reuters
Burger King Plans
to Expand in Britain
U.S. fast food chain Burger King will expand its operations in Britain, creating 1,250 new jobs in the process.
Burger King, owned by drinks giant Diageo, will generate the full- and part-time positions by opening 35 restaurants during 2002, bringing the total number of British outlets to 720, the company said.
The move is part of a long-term plan to open 300 new restaurants in the next five years, creating a total of 11,000 new jobs.
The expansion plans come after a difficult period for the chain. It watched its profit slump when the slowing global economy, the foot-and-mouth crisis and “mad-cow” disease all hit home.
Burger King’s British general manager, Eric Bonnot, said he remained positive despite the setbacks.
“We have enjoyed consistently good sales levels, and the long-term growth prospects are very encouraging,” he said.
Diageo intends to spin off Burger King but earlier this year said it could not separate out the company until its performance had improved.
In June, Burger King posted a 12% drop in annual operating profit to $255 million from the previous year’s $290 million.
Associated Press
