Inflation drives sell-off in Equities

13 Apr, 2005
New York City

The sell-off in equities started early on and continued through out the day. Weak retail sales data and market

Oil drops $1.61, Apple and AMD earnings weigh on tech stocks, weak retail sales

The sell-off in equities started early on and continued through out the day. Weak retail sales data and market’s nervousness on the earnings release of Apple computer and Advanced Micro Devices did not help technology stocks either Sell off in the treasury market on the inflation concern was not allayed by the oil price decline of another 3.4% for the day. Overall investors only found reasons to sell stocks.

In the morning report Commerce department reported that retail sales increased by meager 0.3%. Consumer decided to not spend on clothing and many durable items as higher oil prices limited family discretionary budget. Most economists were looking for 0.8% increase disappointing the markets. This report was followed by 0.4% and 0.1% increase in February and January respectively.

Investors remain concerned that Apple Computer will not be able to repeat its blowout out-performance of 3 cents for each of the last eight quarters. Market believes that Apple will not be able deliver another blow out quarter. Advanced Micro stock is also in spotlight as company reports earnings after the close. Investors are concerned that 43% of the company’s business, flash memory business, may not be healthy enough. Intel has only 7% of its business in memory modules.

May Crude futures dropped $1.61, nearly dropping 3.4%, closing at $50.25 per barrel. This is the eighth trading day where crude oil prices have dropped and prices are now 13% below from its peak reached last week. Gasoline and heating oil futures also declined during the day. In the metals market May delivery of Copper dropped 3.65 cents to close at $1.4595 a pound, May silver rose 7 cents closing at $7.225, while June Gold closed at $431 an ounce adding $1.70.

After the closing, following major companies announce earning.

Dow Jones, Apple, AMD, Sun Micro, Pepsi, Southwest Air, United Health, New York Times.

S&P down 1.22%
Nasdaq down 1.50%
Dow down 1.07%


In Other News

Abercrombie & Fitch settled shareholder lawsuits related to CEO compensation and its disclosure and agreed to cut in half $12 million ‘stay bonus’ to its CEO
Two lead Morgan Stanley bankers resign amid continuing executive shuffle
Italian Prime Minister’s family decided to reduce holding in Mediaset by selling 17.4% stake in public markets amidst heavy defeat in regional election by the ruling coalition

Earnings Headlines

Murphy Oil forecasted lower 1Q earnings of $1.10-$1.15 vs. expectation of $1.34
Lamson & Sessions forecasted 1Q earnings of 12-15 cents vs. 8-10 cents previous guidance
Merck forecast 1Q earnings of 62 cents vs. analysts expectation of 56 cents excluding Vioxx related reserves
Bluefly March sales jumped 35% compared to a year ago
Commerce Bancorp 1Q earnings met expectations of 45 cents
International Rectifier will release earnings on April 28th