New CEO at Ford, Markets Trade Lackluster

123jump.com Staff
05 Sep, 2006
New York City

Market averages gained a little in a lackluster trading on a moderate volume. Shares of Chevron, Statoil and Devon Energy advacned on the news that the consortium of three companies have discovered oil in the Gulf of Mexico region. Ford Motor appointed Alan Mulally as its CEO and president. Oil dropped but gold advanced. Asian and European markets closed lower.

[R]4:30PM Oil discovery led Devon and Statoil to rise.[/R]

-Yield on 10-year bond closed at 4.78% and 30-year bond to close at 4.93%.

-Crude oil dropped 59 cents to $68.70 per barrel and natural gas bounced back 16 cents to close at $6.04 per mBTU.

-Gold gained $14.10 to close at $640.70 per ounce, silver edged 7 cents to $13.14 and copper gained 16 cents to close at $3.63.

-Asian Markets closed lower except Japan, Philippines, Australia and South Korea. Manila led the region with a gain of 0.9%, Sydney edged up 0.4%, Tokyo and Seoul advanced 0.17% but Hong Kong and Thailand fell 0.4%. India, Indonesia and Singapore were nearly unchanged.

-European markets closed lower led by a decline of 0.6% in France and Spain and 0.4% loss in Germany and the Netherlands. Switzerland and the UK were unchanged but Norway gained 0.45% and Russia advanced 1.3%.

-In Latin America, Brazil and Mexico lost 0.9% and 0.6% respectively, but Chile and Argentina gained 0.6% and 0.1% respectively.

Oil discovery in the Gulf of Mexico region by a consortium of three companies led by Chevron helped to improve stocks of oil companies; however, general market did not make significant headway. Nasdaq gained 12.5 points, Dow rose 5.13 points and S&P 500 edged only 2.24 points at close. Trading volume on NYSE trading system crossed 2 billion shares and on Nasdaq system was above 1.7 billion shares.

Oil discovery in the Gulf of Mexico region lifted stocks of three partners (Devon Energy, Stat Oil and Chevron) in a consortium led by Chevron. Chevron reported that test wells were drilled in 300 square mile region with the deepest well reaching 27,000 below sea level or 20,000 below surface level under the sea. The company estimates that the region may hold between 3 billion and 15 billion of oil and liquid gas.

Current U.S. oil consumption runs at of 5.6 billion of oil barrels per year.

Stocks of three partners advanced, led by 12% rise in Devon Energy ((DVN)) and 2.4% gain in Chevron ((CVX)) and Norwegian oil company Statoil ((STO)). Chevron owns 50% and other two companies hold 25% each in the partnership.

Bill Ford decided to step down from the chief executive position and appoint Alan Mulally as the new chief executive and president of Ford Motor Co. Mr. Ford will remain as chairman of the company. Mulally, 61 year old, before the recent appointment, worked as executive vice president at Boeing ((BA)) and president and CEO of commercial airplane division at the company.

[R]2:00PM Market averages remain under pressure after early gains.[/R]
In the early afternoon trading popular averages traded nearly unchanged with a slight negative bias. October delivery of gold was trading up $13 to $634.30 per ounce and silver was up 7 cents to $13.033 per ounce. Oil was trading 53 cents lower on NYMEX trading to $68.66 per barrel.

Biotech firm Adolor Corp ((ADLR)) dropped 46% to $13.31 on heavy volume of ten times to daily average trading volume, on the report that the two of the three clinical studies for their intestinal treatment drug Entereg did not show statistically significant improvements.

Redback Networks ((RBAK)) shares were down 14% to $16.04 on stock downgrade from UBS. The broker said that the company is not likely to win a secondary contract for router technology order from Verizon Communicatons ((VZ)).

Medifast Inc. ((MED)) fell $1.95 to $9.77 on the report that the cost of acquiring new clients may be rising and questions on the significance of weight loss study. According to a report in a weekly published in Barron’s cited that study may have been focused on too few patients.

The Hershey Company ((HSY)) fell $2.61 or 4.8% to $51.65 on down grade by J P Morgan. The broker downgraded the stock to ‘Neutral’ from ‘Overweight’ and lowered its 2006 earnings guidance by 8 cents to $2.50 and 2007 guidance by 23 cents to $2.66.

[R]12:30PM European markets closed in the negative.[/R]
European markets closed in the negative influenced by a choppy trading on Wall Street after an extended holiday weekend. The oil-services sector was in focus after France's Compagnie Generale de Geophysique agreed to buy U.S. Veritas for $3.1 billion, and Wood Group said it will beat profit forecasts for the year. Shares of CGG dropped 8%, while Wood gained 3.8%. European economic data weighed on markets, after the euro zone purchasing managers index slipped to 57.1 in August from 57.9 in July, missing economist forecasts. The French CAC 40 was the biggest decliner, falling 0.6%, followed by the German CAX 30, down 0.4%, and London FTSE 100, down 0.1%.

Oil prices slipped below $69 on easing supply concerns with the end of the summer driving season. Light crude October delivery fell 86 cents to $68.33 a barrel. London Brent October delivery gained 27 cents to $67.98. The dollar regained strength versus major currencies. The euro traded at $1.2799, down from $1.2863. The dollar bought 116.16 yen, up from 115.89. The British pound stood at $1.8922, down from $1.9061. European gold prices extended gains. In London the precious metal traded at $638, up from $626.40 per ounce. In Zurich gold traded at $634.90, up from $626.40. Silver closed at $13.08, up from $12.98.

[R]11:30AM Stocks lacked direction.[/R]
The U.S. stock markets turned to choppy trading Tuesday, with traders expressing some uncertainty about the outlook for the markets. Corporate news and oil prices are expected to be the main market drivers this week as little economic data are due out. Among the biggest gainers Tuesday were oil companies after the discovery of a major new oil source in the Gulf of Mexico by Chevron Corp. ((CVX)).

One of the biggest decliners on the Nasdaq was Adolor Corp. ((ADLR)), falling 46.22% on mixed study results for a bowel drug. Another notable tech loser was Redback Networks ((RBAK)), down 15% on UBS downgrade. Elbit Medical Imaging ((EMITF)) dropped 6.8% after reporting wider profit loss in Q2. Tractor Supply Co. ((TSCO)) fell 5.46% following a brokerage downgrade of its stock. Medifast ((MED)) stood out as one of he biggest decliners on the NYSE, down 16% on profit outlook. Sierra Health Services ((SIE)) dropped 7.4% on stock downgrade by UBS. Holly Corp. ((HOC)) lost 4%, while Frontier Oil ((FTO)) dropped 6.12%.

In merger and acquisition news, Illinois Tool Works Inc. ((ITW)), a maker of engineered parts for various industries, agreed to acquire Click Commerce Inc., a maker of supply chain management software, for $292 million. Illinois Tool Works offered to buy the outstanding shares of Click Commerce for $22.75 each, representing a 27% premium over Friday's closing price of $17.95 on the Nasdaq. In late morning trading, the Dow Jones industrial average fell 11.36, or 0.10%.The Standard & Poor's 500 index was down 0.71, or 0.05%, and the Nasdaq composite index fell 0.63, or 0.03%.

[R]10:30AM The Sensex ends lower in flat trading, metals, cement gain.[/R]
The Sensex on BSE declined 9.61 points (0.08%) to close at 11,904.60. The market-breadth was slightly negative as 1,229 shares advanced on BSE, 1,290 declined and 83 shares were unchanged. The market traded within a range of 100 points, between a low of 11,847.93 and a high of 11,945.53. The turnover on BSE was Rs 2,797 crore, compared to Monday’s Rs 2,879 crore. The turnover on NSE was Rs 5,753.64.

IT stocks and few auto shares declined on profit-taking. Auto component makers and construction shares were in focus. Metal stocks led the advancers in the latter part of the trading. Sterlite Industries surged 4.4% to Rs 452.50, Hindustan Zinc advanced 4% to Rs 592.30, Hindalco gained 2.9% to Rs 179.80, and National Aluminium Company edged up 1.8% to Rs 207.80. Oil exploration large-cap ONGC increased 1.1% to Rs 1,226 after London’s Brent crude oil rose above $68 a barrel.

Cement shares advanced too, on expectations of an increase in demand after the monsoon season. ACC rose 2.4% to Rs 942.25, Gujarat Ambuja Cements advanced 1.1% to Rs 115.55, Grasim gained 1.4% to Rs 2,310 and UltraTech Cement moved 2.3% higher to Rs 789. Reliance Communications gained 2.5%, to Rs 307.40, following introduction of an undersea cable on Tuesday, aimed at providing cheaper bandwidth to retail and commercial users.

Reliance Petroleum rose on a heavy volume. The stock advanced 3%, to Rs 67.55. Reliance Industries, though, slipped 0.7% to Rs 1,122.50. IT stocks also declined on profit-taking. TCS sank 1.4% to Rs 1,003, Wipro declined 1.4% to Rs 515, and Infosys edged down 0.8% to Rs 1,833. Auto shares, too, lost on profit-taking. Tata Motors shed 1.3% to Rs 885 and Maruti Udyog lost 1.3% to Rs 891.

United Western Bank surged 7% to Rs 17.35, on heavy volume, after the private sector bank forwarded a reconstruction scheme to RBI. A group of banks including ICICI Bank and state-run banks Canara Bank, Allahabad Bank and Andhra Bank submitted bid for the bank. Ashok Leyland advanced 1% to Rs 43.45 after the its sales in August jumped 37% to 6,483 from 4,737 units a year earlier.

UK-based oil explorer Cairn Energy Plc is planning for an initial public offering of its Indian operations in December but stated its biggest oil field would come on-stream later than planned.

[R]09:45AM Stocks lost ground in early trading.[/R]
U.S. stocks lost direction at opening hours Tuesday as investors opted for profit taking after returning to work from a three-day break. Another retreat by the oil price and little other data helped stocks move lower.

Among companies in focus, Chevron ((CVX)) added 1.1% after it announced the discovery of a major new oil source. Caterpillar ((CAT)) shares rose 1.3% after the company said it would be raising machinery and engine prices from January 2007. Inco Ltd ((N)) terminated its merger agreement with Phelps Dodge ((PD)) and as part of the termination Inco paid Phelps Dodge $125 million and will pay another $350 million if it completes an alternative merger by Thursday. Shares of Phelps Dodge rose 3.3%. At the same time, shares of Viacom ((VIA)) were off 4% as CEO and President Tom Freston is stepping down. Bristol-Myers Squibb ((BMY)) fell 1.4% after the pharmaceutical company cut its earnings projection for this year. Procter & Gamble ((PG)) stock fell 0.8% after the company affirmed its outlook for fiscal Q1 earnings and sales.

Disk drive stocks posted some early weakness, contributing to a 1.4% loss by the Amex Disk Drive Index. Some networking, internet, and biotechnology stocks also came under pressure in early trading, leading the tech-heavy Nasdaq notably lower. Meanwhile, gold stocks showed a strong upward move, benefiting from higher gold prices. In the first hour of trading, the Dow Jones industrial average fell 17.85, or 0.16%. The Standard & Poor's 500 index was down 1.71, or 0.13%, and the Nasdaq composite index fell 3.96, or 0.18%.

[R]9:00AM Stock futures recovered on oil weakness.[/R]
U.S. equity futures recovered from earlier declines to move slightly higher Tuesday as another drop by crude-oil futures provided a boost to market sentiment. Crude-oil futures fell 65 cents to $68.54 a barrel following the Labor Day holiday, which usually marks the end of driving season.

There is very little data on the economic agenda Tuesday, with the highlight being the Organization of Economic Cooperation and Development keeping its forecast for U.S. economic growth in 2006 unchanged, at 3.6%.

In merger-and-acquisition deals, Co. Generale de Geophysiqueshot agreed to pay $3.1 billion in cash and stock for Veritas DGC. Verita’s shares rose 4.4% in pre-market trading. In other M&A activity, Click Commerce surged ((CKCM)) jumped 26% to $22.51 in the pre-open after Illinois Tool Works ((ITW)) said it was buying the Chicago on-demand supply management services company for $292 million, or $22.75 a share.

On the corporate news front, Viacom ((VIA)) named insider Philippe P. Dauman, as president and CEO after Tom Freston resigned his positions with the company. Company's shares gained 1.7% in pre-market trading. Phelps Dodge ((PD)) said it was terminating its merger agreement with Inco LTD. As part of the termination, Inco paid Phelps Dodge $125 million, and will pay it an additional $350 million if it enters an alternative merger agreement before September. Aluminum giant Alcoa ((AA)) lost 1.3% in Germany after a broker downgraded the stock, citing concerns over demand. S&P 500 futures gained 1.40 points to 1,314.00 and Nasdaq 100 futures added 3.50 points to 1,594.00. Dow industrial futures rose 6 points to 11,478.

Procter & Gamble Co, ((PG)), consumer products company, reported its Q1 earnings and sales outlooks. The company continues to see earnings at 76 cents to 78 cents a share on sales growth of 23% to 27%. Analysts forecast earnings of 78 cents a share.

Admiral Group, ((UK:ADM)), motor insurance firm, reported that its first-half net profit advanced to 48.1 million pounds ($91.7 million) after net revenue jumped 23.8% to 151.8 million pounds. Admiral stated that the growth was driven by increased underwriting activity, with total motor insurance premiums up 10% to 294 million pounds, as well as a stronger contribution from its Confused.com Web site, where the number of quotes provided more than doubled to 3.8 million. Admiral also raised its interim dividend by 25% to 12.1 pence a share.

Republic Airways Holdings, ((RJET)), air carrier, reported that August load factor advanced to 73.5% from 66.9% a year earlier, as the pace of traffic growth increased more than capacity. Traffic in the August month rose 64% to 624.8 million revenue passenger miles from last year's 381.5 million. Capacity grew 49% to 850.5 million available seat miles from last year's 570.4 million.

Walgreen Co, ((WAG)), operator of retail drugstores reported August same-store sales rose 10.6%. Analysts expected it to post a same-store sales gain of 9.2%. Total sales for the month rose 17.2% to $4.18 billion

[R]8:00AM Veritas DGC to acquire Co. Generale de Geophysique [/R]
Co. Generale de Geophysique ((GGY)), French provider of equipment and services to the oil and gas industry, agreed to acquire Veritas DGC ((VTS)), the Houston provider of geophysical information and services, in a deal worth $3.1 billion. The deal indicates a premium of 35% over the average closing price of Veritas for the 30 days ended on Aug. 29, which was $55.69. Holders can choose cash or stock, subject to a 51% stock, 49% cash split, the companies said. The deal is expected to close around the end of 2006, subject to regulatory clearances and other conditions. CGG was financially advised by Credit Suisse, while Veritas was advised by Goldman.

The combined company aims at creating ‘a strong global pure-play seismic company, offering a broad range’ of seismic services and geophysical equipment. The new company, to be called CGG-Veritas, will be controlled 65% by CCG's shareholders. CGG expects the deal to add to profit in 2008. The companies estimate cost savings of $65 million a year. In Paris, CGG's shares declined 2.6% following a half-day suspension.

[R]7:30AM Japan recovers on gains in steel sector, HK dips.[/R]
Asian markets traded mixed on Tuesday. The Nikkei 225 Average ended up 0.2% at 16,385.96, with advances countered by profit taking among leading blue chips after Monday's sharp gains. Shares of Nippon Steel were up 2% after the business daily Nihon Keizai Shimbun reported the steelmaker is close to a deal with South Korea's Posco. Shares of Toshiba Corp decreased 0.7%, and Sony Corp sank 0.8%.

Hong Kong's Hang Seng Index ended down 0.4% to 17,438.80. Gains were focused among large mainland industrial and consumer shares. Mainland China electronics retailer Gome was up 2.3%, while cement maker Anhui Conch rose 1.9%. Shares of Bank of Communications dropped 0.2%. Oil refiner Sinopec added 0.2%. Lower oil prices are beneficial to Sinopec, which faces state-mandated price caps on what it can charge at the pump.

Australia S&P/ASX 200 index gained 0.4% at 5,150.60. Shares of mining company BHP Billiton advanced 1.3%, while shares of Rio Tinto ended up 1.7%. Shanghai Composite was up 0.4%, while New Zealand leading index ended 0.6% higher.

[R]6:30AM European markets are trading lower ahead of U.S. market starts again.[/R]
European markets were lower by mid-morning on Tuesday. The U.K. FTSE 100 index edged down 0.2% at 5,974, the German DAX Xetra 30 index declined 0.2% at 5,896 and the French CAC-40 index decreased 0.3% at 5,189. French car maker Peugeot declined 0.9% while peer Renault retreated 0.7%. Compagnie Generale de Geophysique, provider of equipment and services to the oil and gas industry agreed to pay $3.1 billion for Veritas DGC, provider of geophysical information and services.

London crude oil prices bounced back to around $68 a barrel on Tuesday after falling to a more than 10-week low the day before, with many dealers moving to the sidelines to await the next step in Iran's atomic stand-off. Brent crude for October delivery traded up 29 cents at $68.00 a barrel by 0650 GMT, after dropping $1.44 on Monday.

The euro was down slightly Tuesday against the U.S. dollar after a light day of trading with markets in the United States closed for the Labor Day holiday. In morning trading the euro bought $1.2839, from $1.2863 the night before. The British pound fell to purchase $1.9036 from $1.9061 on Monday, while the dollar rose slightly to buy 115.94 Japanese yen from 115.89 the night before.