Crude Oil Drops 5.5%,U.S. Indexes Fall 1%; Rajaratnam Found Guilty

Bikram Pandey
11 May, 2011
New York City

U.S. indexes dropped more than 1% after crude oil plunged 5.5%. Higher than expected supplies in the weekly report dragged the oil lower and gasoline plunged 8%. Precious metals closed lower. Earnings lifted European stocks and inflation in China kept investors on the sidelines in Asia.

[R]4:10 PM New York – U.S. indexes dropped more than 1% after crude oil plunged 5.5%. Higher than expected supplies in the weekly report dragged the oil lower and gasoline plunged 8%. Precious metals closed lower. Earnings lifted European stocks and inflation in China kept investors on the sidelines in Asia.[/R]

U.S. stocks turned lower in the morning after trade deficit widened on higher oil price and sustained imports. Crude oil declined 5.5% and dragged down stocks in the oil complex with it. Chevron and Exxon Mobil declined more than 2%.

China reported inflation of 5.3% and bank loans rose at a slower pace. Walt Disney quarterly net missed earning estimates. Spectrum Brands gained on better than expected sales.

U.S. prosecutors won the first round against the billionaire hedge fund manager Raj Rajaratnam accused of insider trading. The jury convicted the fund manager on all 14 counts but narrowed the list of stocks that he benefitted from 37 to 14. Raj’s attorney said he will appeal the conviction.

Dean Foods first quarter net income fell to $25 million. Enbridge first quarter net income rose 15% to $393 million. Macy’s first quarter net income surged to $131 million. Rovi first quarter net income declined to $17.0 million. Walt Disney second quarter Net income in the quarter fell 1% to $942 million.

European stocks inched higher as earnings lifted trading sentiment despite the ongoing worries linked to Greece. German Chancellor Angela Merkel said Greece must do its part in rebuilding its economic foundation. Maersk gained more than 4% on better quarterly results. Hermes SCA quarterly sales surged 26%.

Bank of England lowered its economic growth views for 2011 and 2012 and lifted inflation warning to as high as 5%. Separately, UK trade deficit increased in March. HSBC declined after it plans to trim costs as much as $3.5 billion and ITV fell on weaker advertising outlook.

Stocks in Japan closed higher for the second day in a row. The yen weakened but held firm. Finance Ministry report showed that the central bank conducted only one currency intervention in the quarter to March.

Stocks in Mumbai traded in a tight range as banks, real estate developers and resources linked stocks led the most active list. State Bank of India lifted prime lending rate by 75 basis points following an increase of 50 basis points by the RBI. Oracle Financial Services soared 11% after annual net surged 44%.

Australian stocks advanced after China reported inflation above 5% but not high enough to slow down the economy. The Australian dollar edged up to $1.08. Westfield lifted outlook for development construction. David Jones after it reaffirmed annual earnings outlook. Myers estimated annual net to fall 5%.

Commodities, Bonds and Currencies

The 10-year bond yield decreased to 3.16% and 30-year bond fell to 4.30%.

The U.S. dollar increased to $1.421 to a euro and gained against the Japanese yen to 80.91 yen.

Immediate delivery futures of Texas crude oil increased $4.89 to $98.99 a barrel, of natural gas decreased 0.05 cents to $4.2 per mbtu and gasoline prices decreased 25.37 cents to 312.60 cents a gallon.

In metals trading, copper prices decreased 13.55 cents to $3.90 per pound, gold decreased $11.90 to $1,505.00 per ounce and silver decreased $3.27 to $35.21.