Oil, Gold, Alcoa and Earnings

123jump.com Staff
10 Apr, 2006
Metals

Market averages rose in the early hours of trading but tech stocks lost momentum in the afternoon and failed to recover. Oil traded up and closed near $70. Gold and silver advanced with gold above $600 and silve racing to $13. Emerging markets and European markets closed up led by Russia, Norway,India and Mexico. Alco reported 69 cents vs. 30 cents a year ago. Newspaper publishers and GE and Genentech to report earnings this week.

[R]4:30PM Gold, Oil, earnings and Averages.[/R]

-Dow up 21.29, Nasdaq down 5.75 and S&P up 1.12
-Alcoa reported Q1earnings of 69 cents vs. 31 cents a year ago on revenue of $7.24 billion.

-Crude oil up $1.35 to $68.74. Gasoline rose 3 cents to $2 per gallon.
-Gold up $9.10 to $601.80 and silver up 49 cents $12.56.
-Yield on 10-year bonds rose to 4.959% and 30-year bond to 5.036%.

-Russia finishes up 2.2% to gain more than 32% for the year.

Earnings, gold and oil dictated market mood for the day. Market rose in the early trading only to lose its momentum as tech stocks lost the early drive and in the afternoon weakened. Semiconductors led the decline. Elections in Peru and Italy are still undecided.

In Italy, Berlusconi coalition is expected to be ahead but it is still too early to know. Italy has managed to deliver economic growth despite political instability for the last fifty years. However, economic growth in the last five years has been close to zero as several industries are suffering from fierce competition from Asian countries including China and India.

In Peru nationalist candidate Mr. Humala is ahead when only 45% of the votes are counted. It is not clear whether he will be able to avoid a run-off election in a three way contest. Peruvian economy has been lackluster in the last three years and in other Latin American nations Argentina, Brazil and Venezuela have elected leaders and government with agenda focused on poverty elimination.

Steady climb in price oil nearing $70 per barrel affected market averages. International tensions arising from Iran related stand-off and with Nigerian oil supply still in question, speculators and traders wasted no time in demanding more for a barrel of oil. Gold rose on the possibilities of strike against Iran and general worries related to the U.S. dollar. Gold, above $600 for the second time in 25 years, rose 1.5% in today’s trading. Silver rose above $12 and appears to be racing to $13 soon.

Earnings season is in full swing with Alcoa, Genentech, General Electric and newspaper publishers are set to release earnings. S&P 500 companies have delivered double digit earnings growth for the last 10 quarters in a row. Investors are hoping that first quarter results will not be any different. Alcoa after the close reported first quarter earnings of 69 cents vs. 30 cents and beat the estimate of 51 cents on revenue of $7.24 billion.


[R]3:00PM Russia and India lead emerging markets at close.[/R]
Sensex Index in India rose 0.63% or 73.11 points to 11,662.55 at close. Metals and steel makers and cement companies rallied. Tata Steel jumped 7% to Rs. 580, Jindal Stainless Steel rose 14% to Rs. 127, Kayani Steel up 20% to Rs. 375 and government owned Steel Authority of India, SAIL, rose 5% to Rs. 84.25. Cement makers have been rallying for the last three weeks on the hopes that higher earnings will continue for the rest of the year and foreign interest in buying several smaller companies will materialize. Gujarat Ambuja, Grasim and ACC rose close to 4%. Banking stocks declined as ICICI Bank and SBI lost ground.

Other Asian markets mostly traded near flat level. Thailand lost 1.66% and Australia lost 0.8% but Indonesia reached a new high. Philippines and South Korea lost 0.4% and 0.3% respectively. In Europe South Africa registered a strong rise of 0.6% and Norway gained 1.5% on robust gains in oil and gas prices. Local giants Norsk Hydro and Statoil rose more than 5%. Index in Brazil lost 1.4% but in Mexico gained 0.3% near close. Argentina rose 0.47% but Chile fell 0.6%. In Russia main RTS index rose 2.2% on strong energy costs in Europe. Russia’s main index is now up more than 32% for the year after adding 83% in 2005. Several local analysts expect the index to pass 1,700 from the current level of 1,555.06.

[R]2:20PM Boeing leads gain in large cap stocks.[/R]
Market focus has started to turn to the earnings for the first quarter. With Alcoa ((AA)) set to release first quarter earnings after the close, a total of eight companies in S&P 500 index are to release earnings this week. Genentech, General Electric, Harley Davidson are other notable companies to release earnings. Several newspaper publishing companies including Gannett, Tribune, The McClatchy Company and New York Times Company and Media General are to release earning this week as well. Market remained under pressure with less than two hours of trading. Semiconductor equipment companies declined and led a decline of 11 points in Nasdaq. Tech stocks remained weak across the board. Red Hat ((RHAT)) traded up 9% on an acquisition and Citrix ((CTXS)) gained 3% on price target revision from Bank of America.


[R]12:30PM European markets closed sharply higher. [/R]
European markets reversed from earlier weakness to finish in the positive, supported by oil, mining and auto stocks. Oil companies like BP and Royal Dutch Shell advanced as crude prices moved higher. The Italian MIB-30 climbed 1.3% after exit polls pointed to an opposition election victory. The German DAX 30 jumped 0.9%, London FTSE 100 rose 0.7%, while the French CAC 40 gained 0.3%, reflecting disappointing industrial production data which sent major automakers like Renault and Peugeot-Citroen lower.

Crude oil prices advanced on supply worries, raised by Iran’s nuclear standoff with the international community and violence in Nigeria. Light sweet crude May delivery gained 71 cents to $68.10 a barrel. Gasoline added 3 cents to $2.007 a gallon, while heating oil was up 2 cents to $1.904. Natural gas futures were steady at $6.740 per 1,000 cubic feet. London Brent rose 63 cents to $67.92. European gold sharply rose on weaker dollar, higher energy prices and strong speculative buying. In London gold closed unchanged at $587.30. In Zurich the precious metal rose to 592.90 from $587.10. In Hong Kong gold added 35 cents to close at $596.50. Silver closed unchanged at $11.90. The U.S. dollar was mixed versus major currencies ahead of jobs report. The euro traded at $1.2109, up from $1.2106. The dollar bought 118.42, up from 117.27. The British pound was quoted at $1.7432, up from $1.7431.

[R]11:30AM Stocks turned mixed in late morning.[/R]
Stocks turned to lackluster trading fashion in late morning session with investors looking ahead to the opening of the earnings season and economic data release. The major averages came off intraday highs with the Nasdaq falling below the flat line, while the Dow and S&P 500 posting modest gains. Significant weakness was visible among HMO stocks. The sector dropped 2.4% to reach its worst intraday level in over two months, dragged by Coventry Health Care ((CVH)) and UnitedHealth ((UNH)). Airline stocks were under pressure on higher fuel costs concerns.
Meanwhile, the increase in the price of oil contributed to notable gains by oil service, oil and natural gas stocks. Utilities stocks posted strength, sending the Dow Jones Utilities Average up 0.8%. Financial stocks also showed strength, with the brokerage and banking sectors both rising 0.7%. Shares of Thomas Weisel ((TWPG)) rose 9.4% on upgrade. J.P. Morgan ((JPM)) gained 1.3% on announcement of a swap deal with Bank of New York. The Dow was also helped by strong gains for Disney ((DIS)), McDonald's ((MCD)), and Boeing ((BA)). Alcoa (AA) moved higher ahead of its quarterly report. In late morning trading, the Dow Jones industrial average rose 50.51, or 0.45%. The Standard & Poor's 500 index was up 3.71, or 0.29%, and the Nasdaq composite index lost 0.63, or 0.03%. Bonds stayed flat following last week's plunge, with the yield on the benchmark 10-year Treasury note unchanged at 4.96% from late Friday.

[R]10:30AM Oil and gold stocks surged.[/R]
Energy stocks stood out as the best performers in early trading, rebounding from Friday losses on profit taking. Rallying oil prices to $68 helped stocks to resume their upward momentum with the oil service sector rising 1.9%, the oil sector also up 1.9% and natural gas sector up 1.2%. The gold sector was another notable gainer in early Monday session, with an advance of 1.3% to erase most losses posted Friday.
Financial stocks moved modestly higher, followed by the utility sector. Meanwhile, airline stocks were pressured by rising oil prices. The sector fell about 1.8% in early trading. The HMO sector was another notable loser in the early going, down about 1.4%, led lower by Health Net ((HNT)), which dropped more than 2.5%. UnitedHealth ((UNH)) and Coventry Health ((CVH)) were down more than 2% as well. In morning trading, the Dow Jones industrial average rose 36.58, or 0.33%. The Standard & Poor's 500 index was up 3.45, or 0.27%, and the Nasdaq composite index gained 2.86, or 0.12%. Bonds stayed flat following last week's plunge, with the yield on the benchmark 10-year Treasury note unchanged at 4.96% from late Friday.
[R] 9:45AM Stocks opened in the positive.[/R]
Stocks started trading above the flat line as investors looked past Friday’s declines, awaiting earnings season. Gains among energy and metal stocks contributed to the initial strength. Recovering from last-week weakness, gold prices jumped to $600 an ounce to send gold stocks significantly higher. An increase in the price of oil contributed to the early strength among energy stocks. Meanwhile, the higher price caused weakness in the airline sector. In the opening minutes, the Dow Jones industrial average is up 8.89 at 11,128.93, the Nasdaq Composite Index has gained 1.37 at 2,340.39 and the S & P 500 index has inched up 1.30 at 1,296.80.

[R]9:15AM Stock futures indicated a flat start.[/R]
U.S. stock futures pointed to a flat market opening Monday, following the sharp declines on Friday after the release of better-than-expected jobs report raised interest rate concerns. JPMorgan Chase & Co. ((JPM)) is expected to be in focus as it announced plans to swap its corporate trust unit for Bank of New York Co.'s ((BK)) 338 retail branches and small business banking network. The JPMorgan deal values the Bank of New York business at $3.1 billion, and JPMorgan's trust unit at $2.8 billion. According to the agreement, Bank of New York will receive $150 million in cash. Market also awaited the start of the new earnings season, with aluminum maker Alcoa ((AA)) reporting Q1 earnings report due out after the closing bell. Other major companies releasing quarterly results during the week are Genentech ((DNA)), Circuit City ((CC)), Gannett ((GCI)), Advanced Micro Devices ((AMD)) and General Electric ((GE)). S&P 500 futures were down 0.40 point, slightly above fair value. Dow Jones industrial average futures rose 2 points, and Nasdaq 100 futures fell 1.5 points.

Crude oil prices advanced on supply worries, rising from Iran’s nuclear standoff, violence in Nigeria and declining gasoline stockpiles. Light sweet crude May delivery gained 37 cents to $67.76 a barrel. Gasoline added 1 cent to $1.9867 a gallon, while heating oil was marginally up to $1.8854. Natural gas futures fell 2 cents to $6.722 per 1,000 cubic feet. London Brent rose 31 cents to $67.60. European gold sharply rose on weaker dollar, higher energy prices and strong speculative buying. In London gold climbed to $597.50 per troy ounce, up from $587.30. In Zurich the precious metal rose to 596.90 from $587.10 In Hong Kong gold added 35 cents to close at $596.50. Silver opened at $12.30, up from $11.90. The U.S. dollar was mixed versus major currencies ahead of jobs report. The euro traded at $1.2122, up from $1.2106. The dollar bought 118.35, up from 117.27. The British pound was quoted at $1.7465, up from $1.7431.

Schnitzer Steel Industries, ((SCHN)), metals company, reported Q2 earnings of 68 cents a share, down from a profit of $1.15 a share a year earlier despite revenue growth, missing analysts’ estimates for a profit of 72 cents a share.

GenCorp Inc, ((GY)), maker of aerospace and defense products, reported Q1 net loss of 29 cents a share, up from 58 cents a share in the year-ago. The company added that sales dropped to $128.7 million from $139.9 million in the quarter.

Frisch's Restaurants Inc, ((FRS)), restaurant operator, reported that Q3 profit dropped to 43 cents a share, from $1.20 in the year-ago period. Sales for Q3 advanced to $67.3 million from $62.8 million in last year's Q3. If not for a gain in the year-ago period the company would have reported a 26% increase in Q3 profit.

Orange 21 Inc., ((ORNG)), a leading developer of premium eyewear products, reported Q4 net loss of 22 cents per share on approximately 8.0 million weighted average shares outstanding, down from a net income of 13 cents per share on 5.8 million weighted average shares outstanding in the same period a year ago. Orange’s net sales for Q4 of 2005 declined 7.1%, compared to the same time previous year.

[R]8:15 AM European averages traded mixed at mid-day.[/R]
European markets traded mixed at mid-day as strength among energy, resource and auto stocks sent the British and German averages slightly higher, but concerns over the French economy offset the positive sentiment. Oil companies like BP and Royal Dutch Shell advanced as crude prices moved higher. The German DAX 30 gained 0.04%, London FTSE 100 rose 0.3%, while the French CAC 40 declined 0.3%, reflecting disappointing industrial production data. Major automakers like Renault, Peugeot-Citroen dropped as the report showed that automobile was the worst affected sector, down 3.9%.

[R]7:45AM Asia closed mostly down.[/R]
Asian-Pacific benchmarks finished mostly in the negative, reflecting weakness among interest-rate sensitive stocks on renewed concerns about further rate increases. The Nikkei slipped 0.6% to 17,456.58 on profit taking. Investors sold off technology, machinery and other stocks, following the strong rally last weak and remaining cautious ahead of the forthcoming earnings season. Sony dropped 1.2% on news that Samsung Electronics is planning to invest $2 billion to expand its joint production. Among major machinery stocks, Komatsu dropped 2% and Fanuc fell 0.6%. Hong Kong’s Hang Seng advanced for a fifth consecutive session. The index rose 0.3%, led by gains for MTR, up 5.3% and China Mobile, up 1.2%. China Shanghai Composite climbed 1.2%, boosted by automakers, while Singapore Straits Times lost 0.2% on property shares, and Australia All Ordinaries dropped 0.8% on weak resource and financial stocks.