Oil Drives Averages Lower Again

123jump.com Staff
30 Nov, -0001
New York City

Equity market looks at oil and does not like what it trades at. Delta's cash warning and current woes of auto industry are just another example of long reach of oil. First the airlines and now the auto industry. Which industry is next? Investors and trades worry that higher oil prices will slow U.S. economy faster than most people expect.

The averages closed sharply lower. The volatility in oil market, Delta airlines warning related to cash infusion, and rumors related to hedge funds bet related to GM bonds.

The oil market continues to influence the events in equity markets. In the absence of any economic news traders paid closer attention to oil prices and the warnings from Delta. Delta declared in the morning that it will record ‘substantial losses’ and will need capital and find other alternatives to generate cash.

Traders also paid attention to the rumors that several hedge funds have taken beating on recent GM and F downgrade. The recent announcement from GM to keep its quarterly dividend at least for a quarter did not find favors among several investors. GM should do everything it can to conserve cash.

Oil at close was up only 4 cents after trading above $53 played havoc with the indexes. Traders continue to worry that the demand will outpace the OPEC’s output and U.S. may lack enough refining capacity.

The supermarket operator Great Atlantic & Pacific reported that it will sell half of its 650 stores including its operations in Midwest and Canadian operations. The shares surged 23%.

Church & Dwight and Chiquita Brands were few bright spots in the market in an otherwise down day for most stocks. CHD shares were up 8% on strong revenue and earnings growth and positive earnings guidance. CQB shares were up 2.6% on positive earnings.

S&P - DOWN 1.07%
DOW - DOWN 0.99%
NASDAQ - DOWN 0.85%



In Other News

Spanish airline reported 1Q loss of $20 million vs. $14 million a year ago on one-time charges and 31% rise in fuel costs.

Asian markets closed lower with Tokyo, Sydney, Hong Kong and Mumbai all falling on U.S. economic slow down and tomorrow’s U.S. trade deficit report.

Softbank’s 4Q loss widened due to higher promotional costs for broadband services.



Earnings Headlines

Cisco reported 3Q profit of 21 cents vs. 17 cents a year ago on revenue growth of 10%.

Toyota Group, parent of Toyota Motors, reported annual profit of $11 billion and sales of $176 billion for the fiscal 2004.

Church & Dwight reported 1Q profit of 56 cents vs. 46 cents a year ago and raised annual profit guidance for 2005 by 5 cents to at least $1.75.

Chiquita Brands, world’s largest grower of banana, reported 1Q profit of $1.94 vs. 46 cents a year ago.

Fossil, maker of watches and accessories reported 1Q profit of 32 cents vs. 22 cents a year ago, excluding one time charges related to profit repatriation; earnings would have been only 19 cents.

Kraft Foods, nation’s largest food operator, affirmed the annual guidance for operating profit of $1.73-$1.78 vs. estimates of $1.93.

El Paso, largest energy pipeline operator, reported 1Q profit of 17 cents vs. loss of 32 cents on surge in field operations revenue.