Retailers, Oil and Gold Shine

123jump.com Staff
06 Apr, 2006
New York City

Market traded lackluster as metals and oil market dominated news. Oil jumped up. Gold traded for the first time since 1981 above $600 and sivler rose to $12. 3M rose 6% on better earnings outlook but Merck lost 3% on court verdict. Parker Hannifin lost 5% on lower sales. Apple rose added 6% after rising 10% in previous session. In emerging markets Hong Kong rose 1.93%.

[R]4:45PM Gold close at $600 and oil trades near $70.[/R]

-Dow down 23.05, Nasdaq up 1.42 and S&P down 2.52 points.
-June gold up $7.20 to $599.70 and silver rose 34 cents to $12.045.
-Crude oil up 87 cents to $67.94 per barrel and gasoline up 5 cents to $2.00 per gallon.
- Yield on 10-year bond rose to 4.897% and 30-year bond to 4.966%.

Weekly unemployment report showed that the claims dropped by 5,000 to 299,000, however traders ignored the report as they waited for a monthly non-farm payroll to be released on Friday. Oil, retailers and precious metals drove the market sentiment. Oil rose and closed to $68 a barrel in Europe and in New York and in precious metal market gold crossed $600 price for the first time since 1981. Silver closed above $12 and copper reached a new record. Metal traders have been forecasting a long climb of the metal and several bullish traders are predicting the gold price to rise higher than $700 in the near future.

Among large cap stocks Merck fell 3% on court verdict against the company but 3M managed to rise 5.5% on the better earnings forecast. Parker Hannifin ((PH)) fell 4.5% on lower sales for the month of March. Home builders, utilities and transportation stocks declined as yields on short and long bonds rose. Lehman Brothers ((LEH)) rose 1.7% on the news that the company board has approved 2-for-1 split to shareholders on record of April 18 on April 28.


Retailers were in focus on the release of same-store sales data. Apparel retailers, despite reporting weaker than expected data rose for the most part. Bebe Stores ((BEBE)) and Citi Trends rose more than 10% and Mother Works and Costco ((COST)) rose at close. Drug store chain CVS ((CVS)) rose close to 5% and luxury retailer Nordstrom rose 4.8% at close. Federated Department ((FD) rose less than 1% on weak sales report.

Emerging markets rose in Asia but fell in Latin America and Hong Kong led the markets around the world.

[R]4:00PM Hong Kong advance 1.93% to lead emerging markets.[/R]
Philippines, Indonesia and Hong Kong traded near record level at close. Other emerging markets in Asia closed higher as investors kept the funds flowing into equities in Taiwan, South Korea and Australia. Hang Seng index in Hong Kong rose 1.93% as HSBC and China Mobile led gainers. China Mobile rose 5% and was responsible for half the gain in the index. HSBC added 0.9%. Index in Taiwan rose 1.4% to close at 6,760 and reached a two-year high led by semiconductor stocks. Taiwan Semi and United Micro rose 2.2% and 1.4% respectively. Despite rising precious metal prices South African main index closed 0.26% lower to 20,631. Brazil managed to rise 0.6% but Mexico and Argentina each lost 0.3% at close. Russia’s main index RTS rose 0.58% to a record level on the strength in oil and metal prices in international markets. Russian market is up 30% for the year and after rising more than 80% in 2005 is up 3,300% since 1998.


[R]3:30PM Gold reached $600 and up 10% for the year.[/R]
Gold closed at $599.70 but reached as high as $602 per ounce for the first time since 1981. Gold has risen more than 10% for the year. Gold stocks have not performed as well as gold price have done in the last four years. After languishing between $200 and $230 price for the most of the years between 1999 and 2001, gold has climbed steadily to $600. Gold has been a store of value in India, China and Middle Eastern cultures and a hedge against inflation in the western countries. Rising incomes in Asian and Middle Eastern countries have only increased demand for gold. European and especially the U.S. governments have generated sizable annual deficits. The U.S. government is expected generate a sizable budget deficit in the last four years and is likely to continue to generate budget deficit.

[R]3:00PM Apparel retailer Bebe Stores and Children’s Place shine in March sales.[/R]
Most retail stores reported lower same-store sales than a year ago but managed to beat the expectations of the analysts. Apparel retailer Abercrombie and Fitch ((ANF)) rose 2.4% and reported flat March sales, American Eagle ((AEOS)) rose 4% on 3% rise in sales, Bebe Stores ((BEBE)) rose 13% on sales rise of 4% and Aeropostale ((ARO)) rose 7% on sales drop of 9%. Mothers Work ((MWRK)) rose 11% on 2% rise in same store sales and earnings guidance of at least 6 cents from a loss of 5 cents to 1 cent profit in the second quarter. Nordstrom ((JWN)) rose 6% on same store sales rise of 4.3%.

Bed Bath & Beyond ((BBBY)) rose 7% after company reported earnings of 67 cents vs. 75 cents a year ago. Christopher Banks ((CBK)) reported earnings of 18 cents vs. 17 cents a year ago. Costco rose Wholesale Corp ((COST)) rose 1.5% on the same-store sales rise of 7% in the U.S. and 9% for international stores.

Apple Computer ((AAPL)) rose 7% after adding close to 10% yesterday. Industrial products manufacturer 3M ((MMM)) rose 5.5% as it raised its outlook for the first quarter of this year. The company raised its earnings forecast between $1.15 an $1.16 from between $1.10 and $1.14 per share.


[R]12:30PM European markets recover on interest rate comments.[/R]
European markets recovered from mid-day weakness to close in the positive, reflecting comments from European Central Bank President Jean-Claude Trichet on interest rates after the bank left its key interest rate unchanged at 2.5%. Energy, metals and tech stocks led advancers with gains for Italian Tenaris, Anglo-Dutch Corus Group, German SAP and Dutch ASML. Auto stocks like DaimlerChrysler and Volkswagen fell after oil prices increased and Credit Suisse downgraded the whole sector. The German DAX 30 edged up 0.04%, the French CAC 40 gained 0.03%, and London FTSE 100 added 0.03%.

Crude oil prices jumped to $68 on weaker domestic gasoline supplies. Light sweet crude May delivery rose 93 cents to $68 a barrel. Gasoline futures gained 4 cents to $1.989. London Brent climbed 68 cents to $68.67. European gold neared $600 per ounce, setting a new 25-year high as the rising oil prices increased the appeal of the precious metal. In London gold traded at $593 per troy ounce, up from $586.90. In Zurich the precious metal rose to $593.60 from $584.30. In Hong Kong gold rose $9 to 594.80. Silver climbed to $11.80 from $11.70. The U.S. dollar traded up versus major currencies. The euro traded at $1.2229, down from $1.2291. The dollar bought 117.69, up from 117.36. The British pound was quoted at $1.7526, down from $1.7532.


[R]11:30AM Stocks were under pressure.[/R]
Surging oil prices put stocks under pressure Thursday morning. The three major averages remained below the flat line, moving off their intraday lows. The released petroleum report on Wednesday, showing weaker-than-expected gasoline supplies, sent crude oil to $67.75 a barrel. The price increase contributed to significant weakness among airline stocks, with the Amex Airline Index currently down 1.7%. Continental Airlines ((CAL)) and AMR ((AMR)) stood out as the worst performers in the sector, falling on worries about higher fuel costs. Utilities stocks also showed weakness on inflation concerns and further interest rate hikes. The Dow Jones Utilities Average fell 1%. The biotechnology sector notably moved to the downside, with 1.7% loss posted by the Amex Biotechnology Index. Among biotechnology stocks, Celgene ((CELG)) dropped 5.4% on warning about the stock's valuation. Health care and housing stocks together with the housing sector also showed considerable weakness. Gold stocks sharply advanced, benefiting from a continued increase in the price of the precious metal. The semiconductor sector moved steeply to the upside, extending yesterday’s gains.

[R]Initial jobless claims unexpectedly dropped.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended April, showing that jobless claims unexpectedly fell. The Labor Dept. said that jobless claims fell to 299,000 from the previous week's revised figure of 304,000. Economists had been expecting claims to increase to 305,000 from the 302,000 originally reported for the previous week. The report also showed that the less volatile four-week moving average fell to 308,500 from the previous week's revised average of 311,250. With the decrease, the moving average moved lower for the second consecutive week. Additionally, the report said continuing claims in the week ended March 25 fell to 2.440 million from the preceding week's revised level of 2.462 million. While the report sheds some light on the strength of the labor market, most traders are likely to continue to look ahead to the release of the March employment report on Friday. Economists currently expect the employment report to show that the economy added around 190,000 jobs in March following an increase of 243,000 jobs in February. At the same time, the unemployment rate is expected to remain unchanged at 4.8 percent.


[R] 9:45AM Stocks opened lower on inflation concerns.[/R]
U.S. stocks opened in the negative on surging oil prices, decrease in jobless claims and generally weak same-store sales reports for April which dampened investors’ enthusiasm. Traders were also reluctant to make significant moves ahead of the release of the March employment report on Friday. The weakness in the markets was partly due to losses among airline stocks as rising oil prices raised concerns about higher fuel costs. The airline sector fell 1.4%. At the same time, the increase in the price of oil contributed to some strength among energy stocks. Gold and other metal stocks also advanced, benefiting from a continued increase in metal prices with the price of gold reaching a 25-year high above $600 an ounce. In the first hour of trading, the Dow Jones industrial average fell 17.21, or 0.15%. The Standard & Poor's 500 index lost 2.55, or 0.19%, and the Nasdaq composite index dropped 3.14, or 0.13%. Bonds also fell, with the yield on the benchmark 10-year Treasury note rising to 4.87% from 4.84% late Wednesday.


[R]9:15AM Stock futures pointed to a flat opening.[/R]
U.S. stock index futures pointed to a flat start of the session, with investors cautious as retailers report March sales and before the release of employment data on Friday. Retail stocks will be in the spotlight on Thursday with a number of retailers releasing their March sales results. The quarterly sales reported to the present moment were generally disappointing as retailers cited colder weather and a later Easter. Wal-Mart ((WMT)), the world's largest retailer, reported 1.4% same-store sales rise in March. The growth was slightly above the 1.3% growth predicted by the company, but was still the smallest increase in sales since April of 2005. The retailer projected stronger sales growth in April, forecasting same-store sales growth of 4 to 6%. Wal-Mart also reaffirmed its Q1 earning guidance of 58/62 cents per share. Among other retailers, Target ((TGT)) said same-store sales rose 2.2%, Costco Wholesale reported same-store sales increase of 7%. Teen apparel retailers came under pressure, dragged by Abercrombie & Fitch ((ANF)), Pacific Sunwear ((PSUN)), and Hot Topic ((HOTT)) which posted flat to lower March same-store sales. But other retailers, oriented to young customers continued to show strength, with Chico’s FAS Inc. reporting an 8.4% climb, Guess Inc. seeing an 8.1% increase and Wet Seal Inc. reporting a 16.2% jump. Comparable sales at Bebe Stores Inc. rose 4.1%.

Crude oil prices jumped above $67 on weaker domestic gasoline supplies. Light sweet crude May delivery rose 45 cents to $67.52 a barrel. Gasoline futures gained 3 cents to $1.98 a gallon, while heating oil added a penny to $1.8825. Natural gas climbed 7 cents to $7.140 per 1,000 cubic feet. London Brent climbed 58 cents to $67.68. European gold neared $600 per ounce, setting a new 25-year high as the rising oil prices increased the appeal of the precious metal. In London gold traded at $595.50 per troy ounce, up from $586.90. In Zurich the precious metal rose to $595.40 from $584.30. In Hong Kong gold rose $9 to 594.80. Silver climbed to $11.80 from $11.70. The U.S. dollar declined versus major currencies. The euro traded at $1.2319, up from $1.2291. The dollar bought 117.35, down from 117.36. The British pound was quoted at $1.7581, up from $1.7532.

Bebe Stores Inc, ((BEBE)), women's apparel retailer, reported same-store sales in Q3 advanced 4.1% compared with the same period a year ago, beating analyst expectation of 1.5%. The company added that total sales climbed 12.3% and same-store sales for Q3 advanced 4.7%. Total sales for Q3 gained 13.2%.

Dress Barn Inc, ((DBRN)), specialty apparel retailer, reported that same-store sales in March advanced 2% from the same time the previous year, missing analyst estimate of a rise of 3%. The company added that total sales for the period ended April 1 rose 5%.

Pier 1 Imports Inc., ((PIR)), home furnishings retailer, reversed to a Q4 net loss of $9.98 million, or 11 cents a share, a decline from a net profit of $18.8 million in the year-ago period. Sales from continuing operations advanced 0.7%, but same-store sales declined 2.9%. The company announced that an accelerated program of store closures as well as corporate office restructuring led to charges of up to $9.8 million. Pier 1 also added it plans to reclassify its consolidated statements of cash flows for the years ending Feb. 26, 2005 and Feb. 28, 2004 to properly reflect the exchange of credit-card receivables for interests in securitized receivables.

RPM International Inc, ((RPM)), holding company for subsidiaries in specialty coatings, reported that its Q3 loss was narrower than the year-ago period on 19% higher sales. The loss came to 2 cents a share, from 4 cents in the year-ago period. If not for $15 million in pre-tax reserve charges for asbestos liability in both periods, RPM earned 6 cents against 4 cents, beating on that basis analyst estimate of a nickel a share.

American Greetings Corp, ((AM)), seasonal greeting cards producer, reported Q4 profit of 58 cents a share, up from 28 cents a share a year-ago boosted by a lower tax rate, even as it spent money to improve its greeting card business. A share repurchase also boosted per-share earnings.

[R]8:15 AM European averages were mixed at mid-day.[/R]
European markets were mixed at mid-day dealings ahead of key interest-rate decisions in Europe. Policy makers at the Central European Bank and the Bank of England are expected to leave interest rates on hold, 4.5% in the U.K and 2.5% in the euro zone. The euro rose 0.2% against the dollar to trade at $1.2308, while the sterling gained 0.3% to $1.7575. Gains in the energy and tech sectors supported market sentiment with oil companies Royal Dutch Shell and Total moving higher, as well as tech firms SAP and ASML also pushing up. Auto stocks like DaimlerChrysler and Volkswagen fell in Germany after Credit Suisse downgraded the whole sector. The German DAX 30 edged down 0.3%, the French CAC 40 fell 0.2%, and London FTSE 100 added 0.1%.


[R]7:45AM Stocks in Japan and Hong Kong surged.[/R]
Asian-Pacific benchmarks advanced across the region, led by gains in high-tech stocks, following a strong performance of the tech sector in U.S. markets and a five-year high of the Nasdaq. The Nikkei rose 1.4% to 17,489.33 with semiconductors lifted by news that Toshiba will enter a joint venture with U.S. company ScanDisk to build a factory, producing NAND-type flash memory chips. Shares of Tokyo Electron rose 3%, while chip equipment maker Advantest climbed 3.7%. Shares of the biggest Asian retailing group Aeon also contributed to the general strength, rising 4% on record profit. Hong Kong’s Hang Seng climbed 1.93%, lifted by banking giant HSBC Holdings and wireless provider China Mobile. Australia’s All Ordinaries gained 0.6% on higher oil and metals prices, while South Korea’s Kospi gained 0.6% on semiconductors.