Gold and Copper Slide

123jump.com Staff
19 May, 2006
Metals

Market averages closed higher led by a late hour rise in Nasdaq. Dell earnings supported rise of 8% in Advanced Micro. Fear of rising interest rates rattled markets around the world as markets in Europe, Asia and Latin America declnied between 5% and 19% during the week. Russia closed 19% lower and India lost 13%. Gold lost 10% and silver lost 12% in the last six trading days. Copper lost 7% in NY trading today. Benihana, Rackable Systems and retailer Hibbett Sporting Goods plunged.

[R]4:10PM Averages close higher after steep losses during the week.[/R]

-Dow closed up 15.37 points, Nasdaq up 13.57 and S&P 500 up 5.19.
-Yield on 10-year bond closed at 5.06% and 30-year bond at 5.15%.
-Crude oil 95 cents to $68.50 per barrel.
-Gold closed down $23.40 to $657.50 per ounce.
-Silver and copper closed 16 cents and 24 cents lower.

-European markets closed up with small gains led by a gain 0f 0.7% in France.
-Russia closed 2.7% lower on Friday and lost 19% in the last seven trading days.
-Latin American markets closed lower led by Mexico and Brazil closing 0.6% lower.
-Asian markets closed mixed on Friday but for the week lost ground across the board.
-India lost 13% since May 10th or declined 1,673 points from the record level at 12,612.

Markets around the world were unsettled as indexes in the American market slipped. Fall in Dow, Nasdaq and S&P 500 of between 4.5% and 6% led European markets with similar corrections and emerging markets with sell-offs of more than 5% and 18%. Fears of rising interest rates and commodity led higher inflation rattled nerves of investors first in New York and then in Europe and Asia. Russia lost 19%, India declined 13% and Latin American markets fell between 5% and 11%. For the day, Nasdaq led the rise in averages in the final hour of trading.

Metals markets finally began correcting after rising to 25-year highs. Gold has lost 10% in the last six trading days and silver in the period lost 17%, copper lost 12% during this period. Copper fell 6% in London trading as prices of Aluminum, zinc and precious metals came under pressure. Even after this correction, copper price is up close to 80% for the year.

British Airways, Plc. ((BAB)) shares closed up 9.3% after the company reported Q4 net profit jumped to £83 million up from £6 million a year ago. Pre-tax profit for the quarter of £91 million was ahead of analyst expectations of £51 million. Revenue rose 13% to £2.1 billion on higher-margin premium traffic and ticket surcharges. Net Debt at £1.6 billion fell by £1.3 billion during the year, a £5 billion reduction since its peak in December 2001. Operating cash flow increased £334 million to £1.3 billion. Operating profit for the year was £705 million, up from £556 million a year ago, with £93 million for the quarter, up from £46 million a year ago. The operating margin was 8.3% for the year and 4.4% for the quarter.

The company’s annual fuel bill rose by 44.7% to £1.6 billion. The company’s full-year total revenue is expected to improve by 5% to 6%, up from previous forecasts of 4% to 5% due to the latest fuel surcharges and increases in seat factor.

[R]2:20PM Benihana, Japanese restaurant chain dropped 25%.[/R]
Benihana, Inc. ((BNHN)), operator of teppanyaki-style Japanese restaurants, saw its shares decline after it cut its earnings outlook Thursday after the close. The company now expects Q4 earnings of 31 cents to 33 cents a share. The previous target was 34 cents to 36 cents a share. Analysts, on average, had been expecting forecasted earnings of 37 cents. The stock declined 24% in early afternoon trading.

A loss in operating profits arose from restaurants that were temporarily closed for renovations for 25 weeks. The company also said its accelerated renovation and revitalization program decision had impacted with more immediate and significant charges than previously planned. Benihana said that as its new design implementations get underway in 2007, it anticipates a loss of 175 to 200 lost restaurant operating weeks and charges plus ongoing expenditures for the locations under construction at $1.5 million to $1.8 million. The company said capital expenditures of the program will cost approximately $2 million per unit with overall earnings affected by 33 cents to 39 cents per share for 2007.

Hibbett Sporting Goods, Inc. ((HIBB)) reported Q1 diluted earnings of 35 cents a share up from 31 cents a year ago with revenues of $126.9 million up from $114.8 million in the year-earlier period. On average, analysts had expected earnings of 35 cents and revenues of $131 million. Same-store sales dropped 0.07% for the quarter. Net sales for Q1 increased 10.5% to $126.9 million, up from $114.8 million in the year-earlier period. Net income for Q1 increased 7.7% to $11.5 million compared with $10.7 million a year ago.

The company opened a net of 11 new stores during the first quarter. It now has 560 stores in 22 states. The company repurchased 0.5 million shares of common stock in the first quarter for a total expenditure of $15 million. Since August of 2004, the company has repurchased 3.7 million shares for a total expenditure of $81 million with $19 million left still for authorized future stock purchases.

In Q2, the company expects diluted earnings of approximately 14 cents to 16 cents a share with same-store sales increasing 1% to 2%. Full-year earnings are expected at approximately $1.08 to $1.12 per diluted share. Same-store sales are expected to increase 2% to 3%.

Rackable Systems, Inc. ((RACK)), a provider of high-density computer servers and high-capacity storage systems, filed its 10Q SEC report on Monday showing 23 cents diluted earnings per share, vs. a loss of 84 cents a share a year ago. The company’s stock was down 8.41% in the afternoon.


[R]12:30PM European markets closed mostly higher.[/R]
European markets closed mostly higher. Inflation worries which have hit markets in the last two weeks were offset by gains for BNP Paribas, British Airways and a lifted bid for steel maker Arcelor. BNP Paribas climbed 3.5% on 17% first-quarter earnings rise. British Airways was the U.K. main index''s biggest riser, adding 9.1% after announcing that Q4 profit rose to 83 million from $6 billion a year ago. Arcelor climbed 9% after Mittal raised its bud 34% to nearly $33 billion. The German DAX 30 added 0.1%, the French CAC 40 rose 0.7%, while London’s FTSE 100 fell 0.3%.

Oil hovered round $68 on concerns about rising inflation and slower economic growth. Light crude fell $1.25 to $68.10 a barrel. London Brent crude shed $1.14 to $68.53. European gold continued to decline. In London the precious metal fell to $653.60 an ounce from $690.70. In Zurich gold traded at $653.50, down from $690.20. In London silver fell to $12.70 from $12.90. The dollar advanced in European trading. The euro traded at $1.2718, down from $1.2829. The dollar bought 111.95 yen, up from 110.89. The British pound stood at $$1.8723, up from $1.8908.


[R]11:30AM Stock markets turned to lackluster trading.[/R]
The U.S. stock markets lost direction in late morning and turned to lackluster trading amid a lack of economic news and a limited amount of significant corporate news. The major averages were mixed, with the Dow and the Nasdaq posting modest losses while the S&P 500 was above the unchanged line. On Friday significant strength was shown by the semiconductor sector. The Philadelphia Semiconductor Index rose 1.9% after ending Thursday''s trading at a six-month closing low. Advanced Micro Devices ((AMD)) was one of the sector''s best performances, rising 9.7% on news that Dell ((DELL)) plans to offer AMD chips in its multi-processor servers. Intel ((INTC)) has moved lower on the heels of the news. Shares of Marvell Technology ((MRVL)) climbed 7.6% after the chip maker reported strong Q1 earnings growth.

Airline stocks posted some strength in morning trading, reflecting a considerable decrease in the price of oil, down to $68.15 a barrel. British Airways ((BAB)) was the most notable gainer, up 9%. The Amex Airline Index advanced 1%. At the same time, the price decrease contributed to significant weakness among energy stocks, with the Philadelphia Oil Service Index falling 1.2% while the Amex Oil Index is down 1%. Weakness in metals prices sent gold and other metal stocks lower. The price of gold steeply declined, with gold for June delivery currently down $26.40 at $654.50 an ounce. Among individual stocks, SafeNet ((SFNT)) posted a standout loss, with the information security company down 20.3%. The stock dropped after the company received a federal subpoena related to its granting of stocks options.

In corporate news, Mittal Steel ((MT)) raised its hostile bid for rival steelmaker Arcelor SA by 34% to $32.9 billion in cash and stock. Should the takeover take place, the two joined companies would have control of 10% of the world''s steel production. Arcelor rejected an earlier offer of $27 billion, but said it would consider the new bid.

[R]10:30AM A second day of losses on India’s bourse.[/R]
Sensex in India finished 452.82 points lower, or 4%, at 10,938.61. The turnover on the BSE totaled $1.2 billion or Rs 5,036 crore. Of the thirty stocks in Sensex index, 28 stocks were down, while only 2 up. The market breadth was heavily negative with only 344 shares higher and 2,138 lower. Cipla, generic drug manufacturer, led the decliners, down 9.35% to Rs 222 on a volume of 2.2 million shares. Tata Steel plunged 6.50% to Rs 510, after the news that it posted a 14% quarterly net profit decline. IT shares also took a dip, as Wipro lost 5.50% to Rs 482, Satyam Computers, down 5.37% to Rs 678 and TCS, shedding 2% to Rs 1885. HLL declined 5.61% to Rs 244.

The banking sector also witnessed losses. State Bank of India dived 5% to Rs 863.10, following a report of a 19.8% drop in quarterly net profit. Jammu and Kashmir Bank lost 11% to Rs 370 on weak quarterly results. Automotive stocks weren’t spared either. Tata Motors edged 0.91% down to Rs 865, following the quarterly release of a net profit after tax of $100 million or Rs 458.11 crore. Earlier in the session it plunged to Rs 810 but later retraced losses as results matched market forecasts. Among the small-cap and mid-cap losers were Today’s Writing Products, 20% lower to Rs 54.05, Birla Power, down 18% to Rs 27 and Mahindra Gesco Developers, losing 15% to Rs 876.


[R]10:00AM Stocks opened higher. Semiconductors advanced.[/R]
U.S. stocks opened higher, rebounding from the heavy sell-off which put the Nasdaq composite index in the red for 2006. The semiconductor sector was one of the best performers in the early going on Friday, rising 2.3%. The sector was lifted by news that Dell ((DELL)) will use chips from AMD ((AMD)) in some of its server products, ending Intel''s exclusivity with the computer making giant. Shares of AMD rose by 8.5%, while Dell gained 3%. On the news, Dow component Intel ((INTC)) dropped 1.2% to reach a new 52-week low. Other tech sectors also posted strength. The disk drive sector climbed about 1.5%, while the networking sector advanced nearly 1%. At the same time, the gold sector moved notably to the downside, down 1.6%, building on recent weakness. HMO and drug stocks showed some weakness as well.In the first hour of trading, the Dow Jones industrial average gained 13.85, or 0.12%. The Standard & Poor''s 500 index was up 2.23, or 0.18%, and the Nasdaq composite index rose 3.40, or 0.16%. Bonds trickled lower after Thursday''s surge, with the yield on the 10-year Treasury note rising to 5.07% from 5.06% late in the prior session.


[R] 9:00AM Stock futures rise, supported by Dell and AMD.[/R]
U.S. stock futures indicated a higher start of Friday session with tech shares boosted by Dell and AMD. Some traders seemed likely to turn to bargain hunting following the recent weakness, but lingering concerns about inflation and higher interest rates may keep buying interest subdued. Shares of Dell ((DELL)) rose 3.2% in pre-market trading after the computer maker reported Q1 earnings that fell to $762 million or 33 cents per share from $934 million or 37 cents per share in the year ago quarter. The earnings came in line with the downwardly revised guidance that the company provided last week. Shares of Advanced Micro Devices ((AMD)) also rose before the opening bell as Dell said that it plans to offer AMD Opteron processors in its multi-processor servers by the end of the year. Dell had previously relied on Intel ((INTC)) as its sole chip supplier. Intel shares fell 4.8%. Additionally, Autodesk ((ADSK)) and Gap ((GPS)) could see increased activity after the companies reported net earnings that fell year-over-year.

Autodesk Inc, ((ADSK)), design-software firm, reported Q1 profit dropped 36% to 20 cents a share, from 31 cents a share a year earlier on higher expenses such as those reflecting employee stock options weighing more than to offset a 23% surge in revenue. Excluding items that included $16 million of option-related expenses, the company''s profit would have risen 6.8% to 32 cents a share, up from 30 cents a share a year earlier. Revenue for Q1 rose to $436 million from $355.1 million amid strong sales of new software seats and subscriptions. The company beat analysts’ forecasts for a profit of 31 cents a share before option expenses.

Dell Inc, ((DELL)), computer maker, reported Q1 dropped to 33 cents a share, down from 37 cents a share a year earlier. The earnings results matched a revised forecast Dell gave on May 8. Revenue, however, advanced 6% due to the $13.4 billion the personal-computer maker recorded in the year-ago period.

British Airways Plc, ((BAB)), airline, reported Q4 net profit soared to 83 million pounds from 6 million pounds a year ago. Operating profit more than doubled to 93 million pounds and revenue jumped 13% to 2.12 billion pounds. Fuel costs surged 65%. The company added it still sees fuel costs at about 600 million pounds more than last year.

Ann Taylor Stores Corp, ((ANN)), women''s specialty retailer, reported Q1 earnings more than doubled to 53 cents a share, from 24 cents in the year-ago period on 17% higher sales, topping analysts’ estimates of 40 cents. Sales reached $556.2 million from $476.4 million and same-store sales advanced 5.6%. Gross-profit margin for Q1 broadened to 56.6% from 51%.

Kirkland''s Inc, ((KIRK)), home decorations retailer, reported a Q1 loss of 16 cents a share, broader than a loss of 9 cents a share a year-ago. Sales advanced 9.3% but same-store sales declined 5.1% in Q1. The company attributed the broader loss to weak customer traffic, especially in malls. The company met analysts’ estimates of for a loss of 16 cents a share. The company predicts a loss of 23 to 27 cents a share in Q2 on sales of between $93 million and $96 million with same-store sales down 4% to 7%. For the year, it expects earnings of 20 to 30 cents a share on sales of between $465 million and $475 million.


[R]8:00AM Bausch & Lomb is trying to handle a product-liability crisis.[/R]
Bausch & Lomb Inc., maker of contact lenses, ophthalmic drugs and vision-correction surgical instruments, permanently withdrew its contact lens solution MoistureLoc from the world markets on Monday. In April, federal regulators revealed they were investigating links between its new-formula contact lens cleaner and a rare fungal infection known to cause blindness. This revelation caused anxiety and confusion through the nation''s 30 million lens wearers that were magnified by its hesitation in removing MoistureLoc from drug stores. It took the company three days to withdraw ReNu with MoistureLoc from the U.S. market.

The company voluntarily suspended U.S. shipments April 10 when the Centers of Disease Control and Prevention revealed an unusual incidence of the fungal infections in Americans using MoistureLoc. However, it didn''t withdraw the product from sale until April 13. After a month-long testing, the company acknowledged for the first time that its $100 million-a-year solution appeared to be the ‘root cause’ behind an unusual spike in Fusarium keratitis infections in U.S. and Asian markets. Scores of victims have undergone corneal transplants to restore their vision, and a flurry of lawsuits could wind up costing the company anywhere from $500 million to $1 billion in damages.

Lens care has generated more than $500 million, or 23%, of Bausch & Lomb''s sales and an even bigger slice of profits. It had a 43% share of lens care sales among U.S. retailers in March versus its rival Alcon''s 41%. But a survey of optometrists indicated its share had tumbled to 26% by mid-May while Alcon''s shot up to 60%. The delay in dealing with the outbreaks has rebounded badly as in the last two months, the company''s stock has plunged 30%.The stock has rebounded 10% this week, reflecting investors'' hopes that the medical mystery has been solved.


[R]7:30AM Asian markets closed mixed. Nikkei advances. [/R]
Asian markets ended mixed. The Nikkei Stock Average closed 0.4 % higher at 16,155.45, despite the influence of U.S. consumer-price data impacting across Asia. Securities houses staged the greatest comeback swinging from morning losses to close 2% higher. Nomura rose 1.3% and Daiwa Securities advanced 3.3%. Techs stocks were mixed with Softbank rising 2.4%. Hong Kong’s Hang Seng Index lost 2.1% while chief constituent HSBC Holdings gained 0.2%. The Korea Composite Stock Price Index, or Kospi, dropped 2.6%. In Hong Kong, the benchmark Hang Seng Index shed 2.1%. In Singapore, the Straits Times Index lost 1.8%.


[R]6:30AM Europe rises against expectations of continued decline.[/R]
European markets rose in early trade. The FTSE 100 in London advanced 0.2% to 5,683.1 in early session, as did the Xetra Dax up also 0.2% to 5,677.52 and the CAC-40 in Paris rising 0.4% higher to 4,926.69. Euronext shareholders have put a deadline to the NYSE until next Tuesday to make a final offer for the Paris-based bourse or they will vote to support a rival offer from Deutsche Börse. On the corporate front BNP Paribas will top analyst expectations with its first-quarter earnings results, allowing the French bank to add 2.5%. DNBNor also added 2.9% and Capitalia rose 1.9%, to wrap up a head start for the banking sector. Lufthansa advanced 1.3% and Ryanair put 1.4% up, following strong results from British Airways, which was up 5.3%.

Oil added up new gains Friday. Light, sweet crude for June delivery advanced 36 cents to $69.81 a barrel and July Brent crude futures increased 33 cents to $70.00 a barrel. Gold bullion opened Friday at a bid price of $686.75 a troy ounce, lower than $690.70 in U.S. trading session late Thursday. The dollar gained slightly against the European currency. The euro bought $1.2825 in morning European trading, just short of the $1.2829 it bought in New York late Thursday. The British pound dropped to $1.8889 from $1.8908. The dollar was virtually unchanged against the Japanese yen, buying 110.90 yen from 110.89 yen.