Late Rally Fails to Hold

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

The Index of leading indicators showed that economy is growing but at a declining rate. Cablevision management proposes $7.6 billion buyout. CarMax reports 13% rise in profit but misses the estimates by 2 cents. European shares sold-off as Crude traded high in the local markets and euro fell 1.2% against dollar.

MARKET AVERAGES

All three averages remain under pressure at mid-day trading in New York. Markets remain under pressure on the back of last week’s gain of more than one percent in averages, 9.2% gain in oil price and 3.5% gain in gold price. The traders are in the mood to take profit as index of leading economic indicators showed a larger drop in economic activities than anticipated.

ECONOMIC NEWS

In a prepared statement, the Conference Board announced today that the U.S. leading index decreased 0.5 percent, the coincident index increased 0.2 percent and the lagging index increased 0.3 percent in May. The growth in the 3Q could be lower as the data suggests.

One of the ten indicators that make up the leading index increased in May. The positive contributor was stock prices.

The negative contributors – beginning with the largest negative contributor – were interest rate spread, average weekly initial claims for unemployment insurance (inverted), building permits, vendor performance, average weekly manufacturing hours, index of consumer expectations, manufacturers’ new orders for non-defense capital goods, real money supply, and manufacturers’ new orders for consumer goods and materials.

U.S. CRPORATE AND EARNINGS NEWS

Shares of Cablevision jumped 19% after Dolan family presented a plan to take it private for $7.9 billion and spin-off entertainment properties and sports team as a public company.

Heinz has agreed to buy HP Foods and Lea and Perrins sauce divisions from French company Groupe Danone for $852 million.

CarMax, car retailer, posted 1Q earnings growth of 37 cents per share vs. 33 cents a year ago including a gain of 3 cents. Although the company increased its profit 13%, it missed estimates of adjusted earnings of 36 cents a share. Same-store sales grew 6%. The company issued cautious 2Q outlook with earnings ranging from 29 to 34 cents a share. Shares closed up 2%.

Culp, mattress fabrics marketer, reported 4Q net loss of 67 cents a share vs. a profit of 32 cents a share a year ago citing sales decrease. Excluding special items the net loss is 12 cents per share. Analysts expected a loss of 16 cents per share.

Steelcase, office furniture maker, reported 1Q profit of 5 cents a share compared with a loss of 4 cents last year on recovering demand. The company missed estimates of 8 cents per share. It announced 2Q earnings are expected to be between 8 and 13 cents per share. The shares closed unchanged.

BE Aerospace reaffirmed its 2005 earnings outlook of 50 cents per share and raised its 2006 guidance on record customer awards. Analysts forecast profit of 51 cents a share compared with the loss of 35 cents posted last year. The shares closed up 2.12%.

INTERNATIONAL MARKETS

Chinese government plans to sell stake in 42 companies and raise $200 billion in the near future. However, recently listed four companies have not found investors favor. Chinese government is trying to spark the stock market by listing companies and widening investors’ base. While more than 200 companies have been listed in the Shanghai market but Chinese Government retains controlling interest through non-tradable shares.

European stocks ended down from 3-year highs as crude-oil prices hit record heights and closed at $58.50 a barrel. Germany’s DAX 30 slid 0.38%, French CAC 40 declined 0.65%, and FTSE 100 fell 0.11%. The euro lost ground against the dollar with 1.2% down and quoted $1.2128.

Indian stock market hit all-time high of 7,000.27 before settling to 6,984 on the news that the largest private sector company Reliance Industries controlled by two Ambani brothers will be split to resolve seven-month-long family dispute. Shares of Reliance group of companies which accounts of 12% of the Mumbai stock index rose sharply.

Asian-Pacific markets closed mixed on rising oil prices. The Japanese shares declined 0.3% after a six-session winning streak. Some oil companies made gains but others were hurt by concerns over record crude-oil prices which reached $59.02 a barrel. South Korea’s Kospi closed down 0.9% while Hong Kong’s Hang Seng rose 0.2% and the Shanghai Composite index went up 2.8%.

Singapore and India agreed to sign free trade pact on June 29th as trade between the two nations have jumped 50% in the last year. Singapore has signed similar free trade pacts with six nations including the U.S., Japan and Australia in the last five years. The two nations also agreed to sign open skies agreement for charter air services only.

Mexico based Cemex, the third largest cement company in the world; said 2Q operating earning will be 56% higher at $730 million vs. $469 million and is more confident in reaching the annual operating profit target of $3.5 billion.

Exchanges in Latin America traded in divergent fashion. The Brazilian markets recovered after trading lower for most of the session on the weakness in CVRD, Acucar and Petrole de Brasileiro and Argentine markets closed lower by 1.2%. Shares in Mexico are traded higher by 0.52%.

OIL AND METAL MARKETS

Oil prices reached intra-day high to $60 a barrel in Europe and in New York on the traders’ nervousness on kidnapped oil workers in Nigeria over the week-end. At close in NY trading oil was up 57 cents to $59.75 per barrel.

The traders are also concerned that U.S. refineries will not meet the rising demand for gasoline in the coming weeks. The Crude oil prices have jumped 40% since the beginning of the year yet the U.S. demand is up 3% for the year.

Norway’s oil workers are likely to strike on Wednesday if their demand for salary rise is not met. In the event of the strike, at least one million barrels of oil will be removed from the international markets.