Oil, Gold, Copper and Earnings

123jump.com Staff
17 Apr, 2006
Metals

Market averages closed lower as earnings from banks dominted the calendar. Oil above $70 and gold, silver and copper at a new high took a bite out of the market mild climb in the morning. Wachovia, Citigroup and SunTrust reported earnings that met expectations. Gardner Denver raised earnings outlook. Goldman to underwrite $2.45 billion MasterCard IPO. India, Russia and Mexico lead rise in emerging markets.

[R]4:15PM Oil and metal markets overshadow earnings news.[/R]

-Dow down 63.87 Nasdaq down 14.95 S&P down 3.79.
-Crude oil rose $1.08 to $70.40/barrel and gasoline rose 6 cents to $2.17 per gallon.
-Gold rose $18.70 to $618.80 and silver rose 51 cents $13.36 and copper closed at $2.90.
- Yield on 10-year bond rose to 5.005% and on 30-year bond rose to 5.075%.

It was oil and metals market that dominated the earnings news on the Wall Street trading. Traders faced rising oil and metals price at the opening and market averages retreated in the face of it. Averages never recovered from the morning losses as Nasdaq index one point traded as low as 1% below yesterday’s close. Oil jumped up in Asian and European markets and in New York rose in the face of speculators belief that the rising international tension and tight oil supplies may lead oil to higher prices. Several traders suggested that oil price may cross $75 a barrel and wholesale gasoline price may rise as high as $2.30 per gallon. Gold and silver rose to a new 25-year high as dollar weakened in the international markets. Oil refiners Valero ((VLO)) and Tesoro ((TSO)) reached new 52 week highs.

Earnings were a plenty but did not help the trading. Banks including Citigroup, Wachovia and SunTrust reported mild improvement from a year ago but investors did not reward these stocks. Trucking and transportation company J B Hunt ((JBHT)) reported better than expected earnings and the stock rose 8%. Alabama based Compass Bancshares ((CBSS)) rose 3% after reporting earnings of 85 cents vs. 74 cents a year ago. Eaton Coro rose on earnings news. Pacific Ethanol ((PEIX)) rose close to 15% after reporting a completion of preferred share offering and convertible debt offering of $118 million. The proposed ethanol plant is to begin operation in Q4 2006.


[R]3:30PM Russia and India advance 1.5% and 2.7% respectively on familiar reasons.[/R]
Emerging markets led a strong assault on the upside supported by earnings in India, rise in global energy prices helping Russia and jump in international metals prices in supporting Latin American stocks. Asian emerging markets rose in Philippines, India and Taiwan. Taiwan index crossed 7,000 level for the first time. Stocks in Korea lost after registering tow straight days of gain. Stocks in India after losing more than 3% lost in the previous gained 2.7% on earnings from software, banking plus the cement companies. Shanghai Composite Index rose 1.4% on the news that the Chinese government has relaxed the rules for capital raising in the local markets for the currently trading companies but not for Initial Public Offerings.

In lackluster trading in Moscow, RTS index gained 1.52% to 1,582.73. The market trading was influenced by the rise in international prices in oil and gas. In local news AvtoVaz is exploring ways for the company sale and Gazprom is to continue to sell gas to Belarus at market price beginning January 1, 2007.

Rise of 2.21% in Argentina’s Merval Index led general rise in Latin markets. Stocks rose in Mexico and Brazil on strong buying from international funds managers and in Chile on higher metals prices in international markets. Venezuela declined 0.6% at close. Mexican index IPC rose 251 points or 1.3% as stocks in telecom, cement and construction led the early advance. Cemex gained close to 0.8% but lost all its gains near close in the ADR trading in New York. Femsa and Homex rose by a fraction at close. In Brazil, Sao Paolo index rose close 0.9% as large cap stocks continued their advance. Shares of Telemar rose 7% on news that all the company stocks will be converted to one class and trade on investor friendlier exchange. CVRD ((RIO)), Bradesco ((BBD)) and Gol Air ((GOL)) rose but TAM Air ((TAM)) air fell after rising more than 15% in last week trading.



[R]1:50PM Banks report mediocre earnings, transportation report exceed expectations.[/R]
Eaton Corp ((ETN)), truck parts maker, reported Q1 net income of $1.36 vs. $1.19 a year ago on revenue growth of 14% to $3 billion. The strong demand from the transportation industry helped the company to record better earnings. Gardner Denver ((GDI)) stock rose 12% on the news that the company raised earnings outlook for the first quarter of this year to $1.13 to $1.17 from the range of 65 cents to 75 cents. The maker of pumps and blowers reported higher shipments helped to raise the guidance. Infosys, Indian software service exporter, reported 56 cents vs. 47 cents a year ago and guided net margin growth in the range of 26% and 28%. The stock rose 12% at mid-day trading. J B Hunt ((JBH)), a transportation company, reported earnings of 31 cents vs. 29 cents a year ago on 10% rise in revenue. The company suggested that the demand for the trucking services outpaces the available supply in the industry. Citigroup, Wachovia and SunTrust reported earnings. SunTrust reported $1.46 vs. $1.43 and Wachovia reported $1.09 vs. $1.12 a year ago. W. W. Grainger reported earnings of 93 cents vs. 88 cents a year ago.


[R]11:30AM Stocks were little changed in late morning.[/R]
Stocks traded higher in the morning session, although buying remained subdued as investors were reluctant to make significant moves ahead of key inflation data. The markets continued to benefit from significant strength among metal stocks. Gold stocks showed considerable move to the upside after gold June delivery jumped to $610.70 an ounce, reflecting some weakness in the value of the U.S. dollar. Strength among energy stocks was brought by a sharply higher price of oil. Crude for May delivery reached $70 a barrel. The oil sector climbed 1.3%, while the natural gas and oil service sectors both rose 1.2%.

Some brokerage stocks advanced after Citigroup ((C)) reported better-than-expected Q1 earnings growth on record investment banking revenues. Shares of Citigroup rose 0.7%. Climbing oil prices sent airline stocks notably lower with Continental ((CAL)), AMR ((AMR)), and JetBlue ((JBLU)) turning in some of the sector''s worst performances. The Amex Airline Index showed 2.4% loss. Health insurance stocks reversed from recent gains to post weakness in early going with UnitedHealth ((UNH)) currently falling 1.9%. Among gaining stocks, TiVo Inc. ((TIVO)), rose 12% after the company announced it had won a patent suit against EchoStar Communications. Analysts at Citigroup raised price target for TiVo''s shares to $15 from $9. Shares of Eaton Corp. ((ETN)) gained 2.2% as the company reported stronger-than-expected quarterly profit on improved demand and boosted its full-year forecast.


[R]10:30AM Sensex rebounds on strong earnings news.[/R]
Sensex index in India rose 2.6% or 302.45 points to close at 11,539.68. The volatile index in the last week had lost over 3% on Asian markets sell-off and earnings worries from Infosys. Sensex’s climb of 2.6% was the best one day gain in last two years of trading but was achieved on a lower daily turnover of $800 million. The second largest software exporter, Infosys reported strong earnings and declared a stock split of two for one for the stock trading on Bombay Stock Exchange. HDFC and Gujarat Ambuja Cement reported better than expected earnings. Sensex average remained in the positive territory and jumped high at the opening on earnings reports from Infosys.

Infosys ((INFY)) stock rose 7% to Rs. 3,231 at close in Mumbai and is up 11% to $84 in New York trading on first quarter earnings of 56 cents vs. 47 cents and declared a special dividend of 67 cents to mark the 25th year of the company. It was the company’s revenue and earnings guidance that excited the investors. The company forecasted 28% to 30% revenue growth for the fiscal 2007 and earnings growth of 26% and 28% for the same period. The company sees no decline in the gross margin for the year and plans to add 25,000 people in the fiscal year.

Gujarat Ambuja reported third quarter earnings jumped 95% on revenue growth of 39% and stock rose 9% at close to Rs. 119. The company performance helped the other cement stocks in the day’s trading. Grasim Cement, UltraTech Cement and ACC rose 9%, 8% and 5% respectively at close. Metal stocks rose again reflecting the rally in global metal prices. Tata Steel rose 5.2% and Nalco and Hindalco jumped 8% and 4%. BSE Metal index rose 4.2% at close. Banking stocks rose on the earnings news from HDFC Bank ((HDB)). The bank stock rose 0.6% on the 44% rise in net interest income and 15% rise in net profit. ICICI Bank ((IBN)) and State Bank of India rose 3% and 1.8% at close. UTI Bank rose 5% on the earnings growth of 30%. Reserve Bank of India is scheduled to announce credit policy revision tomorrow and market is expecting interest rates to rise 5.75% up 25 basis points.


[R] 9:45AM Stocks opened above the flat line.[/R]
Stocks opened in the positive as upbeat earnings from Citigroup ((C)) boosted optimism on corporate results and helped to limit losses from surging oil prices. Other Dow components scheduled to report their earnings during the week include General Motors Corp. ((GM)) and International Business Machines Corp ((IBM)). Commodity stocks showed strength in the early going on Monday. The gold sector climbed about 2.3% to reach a new multi-year high. Energy stocks also advanced on climbing oil prices with the oil service sector up 1.1% and the oil sector posting an advance of approximately 1%. The broker/dealer, semiconductor and insurance sectors showed strength less than 1%. The airline stocks moved notably to the negative on surging oil prices. The airline sector declined 1.4% by the mid-morning. HMO stocks showed modest losses as well. Weakness was also visible in the retail sector. In the first hour of trading, the Dow advanced 17.13, or 0.15%. The Standard & Poor''s 500 index was up 1.99, or 0.15%, and the Nasdaq composite index rose 2.44, or 0.1%. Bonds lingered at a multiyear low, with the yield on the 10-year Treasury note off slightly at 5.02% from 5.05% late Thursday.


[R]9:00 AM Stock futures indicated a slightly positive opening.[/R]
U.S. stock futures pointed to a slightly higher opening of Monday session. On the one hand, strong earnings report from Citigroup renewed optimism about corporate profits, but on the other hand, surging oil prices weighed on market sentiment. Citigroup Inc. ((C)), the largest U.S. bank and a Dow component, reported Q1 profit rose 4% on revenue growth from foreign operations. Other banks scheduled to release earnings are JPMorgan Chase & Co. ((JPM)), Bank of America Corp. ((BAC)) and Merrill Lynch & Co. ((MER)). However, a steep jump in oil to $70 a barrel for the first time in seven and a half months is likely to limit gains. Giant tech companies like Intel Corp. (INTC)) and Apple Computer Inc. ((AAPL)), as well as major internet companies Google Inc. ((GOOG)), Yahoo Inc. ((YHOO)) and eBay Inc. ((EBAY)), are expected to report quarterly results this week. S&P 500 futures were up 1.90 points, above fair value. Dow Jones industrial average futures were up 14 points, and Nasdaq 100 futures fell 1.25 point.

Crude oil prices jumped to eight-month highs on speculations the U.S. might take military actions against Iran because of its pursuit of its nuclear program. Light sweet crude May delivery rose 45 cents to $69.75 a barrel. London Brent climbed 54 cents to reach $71.11. Gold hit a 25-year high on fears of oil disruptions. Gold futures for June delivery rose $9.40 to $609.70 per troy ounce on the Comex division. In London gold for immediate delivery climbed $3.08 to $606.07 per troy ounce. Silver jumped nearly 30 cents to $13.15 on Comex. The U.S. dollar traded sharply down vs. the yen and the euro ahead of the Treasury report. The dollar declined to $1.2246 per euro from $1.2110. The dollar bought 117.70, down from 118.69.

Corus Bankshares Inc, ((CORS)), provider consumer and corporate banking products, reported Q1 net income of $1.50 a share, up from 97 cents earned in the same period of 2005. The company’s quarterly net operating revenue totaled $88 million from $55.7 million in the year-ago period. Analysts had been expecting earnings of $1.35 a share on revenue of $80 million. Total assets came to $9.2 billion, up 65% from a year earlier.

Invitrogen Corp, ((IVGN)), biotechnology company, announced that it expects Q1 pro forma earnings to be a bit higher than previously expected on an improved product mix, lower royalty expenses, and a lower share count. The company expects sales of about $309 million for Q1 - approximately 3% lower than anticipated on weak performances for its U.S. Bioproduction and Japan businesses. Analysts expect the company to post a profit of 77 cents a share in Q1 on revenue of $319.9 million.

W.W. Grainger Inc ((WWG)), maker of building maintenance supplies, reported Q1 net income of 93 cents a share, up from 79 cents a share in the year-ago period, beating analysts’ forecasts of 88 cents a share. The company added that revenue in Q1 advanced 6% but stock-based compensation charges reduced its earnings by 3 cents a share.

HCA Inc, ((HCA)), hospital company, said it expects Q1 earnings in a range of 89 cents a share to 93 cents a share, down from the 95 cents a share it posted in the year-earlier period. Q1 of 2006 results take into account 11 cents a share in gains on sales of investments, and 2 cents a share in compensation costs. The company anticipates to post revenue of $6.42 billion for Q1. Same-facility revenues rose 5%, and same-facility revenue per equivalent admission rose 5.1% in Q1 of 2006. Analysts’ views are for the company to to post a profit of 89 cents a share on revenue of $6.45 billion.

J.B. Hunt Transport Services Inc., ((JBHT)), transportation logistics provider, reported Q1 net income of 31 cents a share, up from 29 cents a share in the year-ago period on 10% revenue growth, matching analysts’ estimates.

Wachovia Corp, ((WB)), commercial and retail banking provider, reported that its Q1 net income advanced to $1.09 a share, up from $1.01 a share a year earlier. If not for merger costs, the company said it earned $1.12 a share. The $1.12 a share incorporated $98 million of costs for a new accounting method for options. The company missed analyst estimate of $1.12 which included the cost for the new options accounting rule.

Citigroup ((C)), financial services provider, reported that its Q1 net income advanced 4% to $1.12 a share, up from $1.04 a share in the same period a year earlier on strong results in its global consumer banking and corporate investment banking operations, beating analyst estimate for earnings of $1.02 a share. That estimate included the effect of a non-cash accounting adjustments for stock option costs. The results incorporated a $648 million charge to account for options awards under new accounting rules. The new accounting rules require companies to count stock-based compensation as expenses.

Eaton Corp, ((ETN)), diversified industrial manufacturer, reported that its Q1 net income advanced to $1.36 a share, up from $1.19 a share a year ago. The company announced that operating income excluding charges grew to $1.40 a share, up from $1.23 a share a year ago. The company topped analysts’ estimate of $1.32 a share. Revenue advanced 14%.

Knight Ridder, ((KRI)), media company, reported Q1 earnings of 42 cents a share, down from a profit 79 cents a share year-ago despite revenue growth, missing analyst estimate of 59 cents a share. Q1 results include 6 cents a share in expenses related to the company''s review of its strategic options, and 5 cents a share in costs related to equity-based compensation. The company added earnings in Q1 were hurt by an increase in interest expense of roughly 74% year-over-year due to increased borrowing and higher rates.

SunTrust Banks Inc, ((STI)), investment services provider, reported Q1 net income of $1.46 a share, up from $1.36 a share in the same period last year on 9% revenue growth, beating analyst forecasts for earning of $1.43 a share. Loan growth was 13%.

Texas Regional Bancshares Inc, ((TRBS)), financial services provider, reported Q1 income of 42 cents a share, down a penny from 43 cents a share in the year-earlier period, beating analysts’ views for earnings of 41 cents a share. Provision for loan losses of about $4.9 million for Q1 declined 9.9% from a year earlier.

Regions Financial Corp, ((FR)), banking and financial-services company, reported Q1 net income advanced 22% to 64 cents a share, up from 51 cents in the year-ago period. The year-ago figure takes into account 6 cents of merger-related and other charges. The company beat analysts estimate of 62 cents a share. Net interest income grew 9%. The net interest margin grew 0.34 percentage point to 4.18%.


[R]7:45AM Asian markets closed mixed.[/R]
Asian-Pacific benchmarks ended Monday session mixed. The Nikkei led decliners, falling 1.4% to 17,000.36 on surging oil and gold prices. The index decline also reflected weakness in property and consumer-finance stocks, following concerns about recent sharp increases in Japan''s long-term interest rates. Among losers, Aiful dropped 6.8% on government sanction for aggressive loan-collection practices, Sumitomo Mitsui Financial fell 1.5%, and Mitsubishi UFJ Financial lost 1.1%. In addition, many investors were reluctant to buy ahead of the new rush of U.S. and Japanese earnings reports from major companies. South Korea’s Kospi abandoned record-high levels reached on Friday to close down 0.7% on profit taking in major financial and tech stocks. China Shanghai Composite sharply rose to 1.4% on investor fund flows into heavyweight stocks. Taiwan Weighted index closed at a two-year high of 0.7% on strong tourism and construction shares, boosted by expectations of improved trade relations with China.