Market Rallies On the Hopes of Lower Inflation

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

Market interpreted Dallas Fed comment on interest rate that Fed may closed to finishing rate tightening. Oil rose 5% for the day closed at $54.58 per barrel. Exit polls suggest that Dutch voters have rejected EU treaty, dollar rose against Euro on the worries of future direction of EU expansion. Auto sales fell for GM, F, and Honda but rose for Chrysler, Toyota, and Nissan.

Dallas Fed President’s remark on financial TV suggested that Fed may be near its interest rate tightening goals and in the near term the Fed may not need to raise interest rate anymore.

Crude oil prices in NY traded jumped 5%. In NY oil traded above $54 at $54.58 per barrel. The summer driving season, hospitalization of Saudi King, and unexpected fall in U.S. crude inventories have turned market very volatile in the last three weeks. Crude price has jumped from $47 in mid-May. Now oil traders believe that $60 per barrel this summer is possible again.

The Institute for Supply Management manufacturing index declined to 51.4 in May from 53.3 in April. The Institute suggested that manufacturing sector is still growing but at a lower rate. The separate report from Commerce Department showed that construction spending rose 0.5% in April after rising 0.6% in March and 1.2% in February. Office construction drove the construction spending to record level of seasonally adjusted $1.066 trillion in April.

Shares of Kohl’s and Best Buy traded higher. Kohl’s had 2% jump in May same-store sales and confirmed the guidance for the quarter. Best buy stock was upgraded by Goldman Sachs.

May Auto sales for Ford and GM and Honda fell but that of Toyota, Nissan and Chrysler increased. GM sales declined 5%, Ford by 3%, and at Honda declined by 8%. Toyota sales jumped 8% and that of Nissan rose 15.5%, and that of Chrysler’s domestic division rose 6%.

Terex reported 1Q profit of 59 cents per share compared to 34 cents a year ago on sales jump from $1.04 billion to $1.45 billion. The company raised full-year guidance to $3.77 from $3.50.

Hovnanian Enterprises, homebuilder, posted 2Q earnings jumped 51% net income jump to $1.62 from $1.06 on higher home sales exceeding analyst's' expectations of $1.61. The revenue rose 32% to $1.2 billion. The company raised its 2005 outlook. The stock fell $1.50 in the morning trading.

Navarre, publisher & software maker, announced 4Q and fiscal 2005 financial results postponed.

Nortel Networks, Canadian communication & networking equipment company, swung to $49 million loss, or a penny per share compared with net earnings of $59 million or a penny per share last year. The stock rallied 8%.

Semetech posted lower 1Q earnings of 14 cents a share from 19 cents a year ago on decline in revenue from $61.9 million to $54.2 million. The company expects 2Q earnings of 14 cents per share.

Westaff posted 2Q profit loss of $371,000 or 2 cents a share vs. earnings of $168,000 or a penny per share a year ago.

Daktronics, electronic displays maker, reported 4Q earnings drop of 27% reflecting decline in profit margin. Net income fell to 15 cents per share compared to 23 cents last year missing estimates of 23 cents.

Medical Action, medical supplier, announced 4Q 10% profit rise of 26 cents a share compared with 24 cents the prior-year period due to strong production growth and sales increase of 16%. Analysts had expected 27 cents a share.

Engineered Support, military electronic equipment maker, posted 2Q net earnings of 46 cents per diluted share vs. 44 cents a year ago on record increase in revenue of 25%, or $263.8 million. The company lowered its full-year guidance to a range of $2/2.03 from previously estimated $2.09/2.12.

Haemonetics, hospital equipment maker, backed its 2006 outlook with annual earnings expected to be $1.73/1.83 per share compared to $1.52 in 2005. The stocks rose 47% to $ 41.17 in morning trading on NYSE.

IDX systems, health care software maker, confirmed its 2005 earnings guidance of $1.25 to $1.31 per share, but cut its outlook for 2006 stating $1.50/1.60 per share down from previously targeted $1.65/1.75.


Markets in Asia closed mildly higher with averages in Tokyo up 0.47%, HK up 0.04%, Philippines up 1.81% and Singapore up 0.7%. Tokyo tech stocks were favored by investors in overnight trading with Yahoo Japan up 0.9% on the news that the company will work two local brokerage firms to provide online stock trading and other financial services.
Australian Dollar fell to 75.62 U.S. cents and is likely to fall even further in the coming months. The unexpected fall in retail sales and widening of current account deficit contributed to the negative sentiment for the dollar. The Aussie dollar’s drop in May of 3.4% was its biggest monthly drop since April 2004.

India’s federal budget deficit for the 1Q was at 4.1% GDP vs. target of 4.3%. The Central government is waiting for the deficit numbers at the state level which in the past have been at times as high as federal deficit. The fourth largest Asian economy is expected to surpass South Korean economy in the next two years.

April German retail sales dropped 3% compared to a year ago on highest unemployment since WW II and higher savings rate. U.K. retails sales for May declined but at lower rate than in April of this year according to the local industry trade group survey.

European markets at mid-day trading were higher on higher oil price, expected No vote in the Netherlands and Euro weakening further to a eight-month low. Market average in Norway led the rally and was up 1.4% followed by Switzerland up 0.8%, German 0.45%, France up 0.4%, and U.K. up 0.26%. Auto and Oil sectors rose across the region.

Airbus delivery of the A380, the latest aircraft for long-range passenger transport, will be delayed from 2 to 6 months. Quantas, Air France-KLM, and Singapore airlines will be affected. These airlines are considering to ask for compensation from Airbus for the delay.