Wall Street ended 2006 in the black, and the paint and coatings industry suppliers were especially robust as stocks closed out the year with impressive gains for the two-month session that ended December 29, 2006. Although the depressed housing market is seen weighing on the market as a whole, the sale of new homes rose by 3.4 percent in November in every region but the South. The increase was better than expected, and the backlog of unsold homes dropped for the fourth month in a row.
Blue chips remained strong: the Dow Jones Industrials kept making and breaking records and closed above 12,500 for the first time near the end of our session. “What you’re seeing is window dressing, people want to finish up the year looking like they own the best names,” said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher. “And for those that missed the market, they’re trying to put their cash to work and play catch-up. You’ve got momentum on your side this year.”
Paint and coatings industry suppliers did quite well for themselves as the PCI Suppliers’ Index makes its debut, ending the year 35.51 points, or 3.37 percent to the good. Of the 36 companies tracked in the index, advancing issues handily beat declining issues by a 28-to-8 count. The PCI Suppliers’ Index ended 2006 at 1088.88.
Despite positive momentum, several PCI stocks displayed a contrarian streak. Even though Ashland learned that it will lose a supply agreement with Dow Chemical, shares of Ashland jumped 17.06 percent this session to close at 69.18. Ashland said it will lose its North American supply contract with Dow at the beginning of March 2007. Ratings on Ashland were cut by two investment firms to “neutral.” JP Morgan’s rating had been “overweight” and Credit Suisse’s rating was “outperform.” Ashland ended at 69.18, an increase of 10.08 points, and was the top dollar gainer this session. Dow lost 0.89 points, or 2.18 percent and ended at 39.90.
OM Group was the top dollar and percentage loser this trading session despite soaring third-quarter results. OM Group reported net income of $88 million, or $2.97 per share, compared to net income of $3.4 million, or $0.12 per share earned in last year’s third quarter. Those results bested Wall Street expectations: analysts surveyed by Thomson Financial were expecting OM Group to earn $2.92 per share. Even though KeyBanc Capital Markets analyst Saul Ludwig said his long-term prospects on OM Group were positive, OM Group Chairman and CEO Jo Scaminace said he wants to restructure the company into a diversified specialty chemicals company. OM Group said it will no longer issue guidance due to volatility in the metals market. OM Group shed 11.72 points, or 20.56 percent, and closed at 45.28.
W.R. Grace bounded ahead to a new 52-week high after a bankruptcy court ruled that the company’s Zolonite Attic Insulation did not cause “an unreasonable risk of harm.” The Delaware court scheduled a conference in January to resolve the status of asbestos claims against Grace. Grace added 6.40 points, or 47.76 percent, and was the top percentage gainer this session. W.R. Grace closed at 19.80.