Weak Oil Lifts Averages at Opening

Elena
08 Sep, 2006
New York City

Stock markets advanced modestly at opening, lifted by a sharp decline by crude oil prices, helping to offset inflation worries. Investors were also digesting news that another home builder cut its profit outlook. Lennar lowered its Q3 earnings guidance, joining Beazer Homes and Hovnanian Enterprises.

[R]09:45AM Stocks opened higher on sharply lower oil.[/R]
Stock markets advanced modestly at opening, lifted by a sharp decline by crude oil prices, helping to offset inflation worries. Investors were also digesting news that another home builder cut its profit outlook. Lennar ((LEN)) lowered its Q3 earnings guidance, joining Beazer Homes and Hovnanian Enterprises.In early trading, significant strength emerged in the health insurance sector, helped by Health Net ((HNT)), which advanced after forecasting earnings in line with analyst estimates. Significant weakness in the gold sector helped to limit the upside for the broader markets. In the first hour of trading, the Dow Jones industrial average rose 26.57, or 0.23%. The Standard & Poor''s 500 index was up 2.96, or 0.23%, and the Nasdaq composite index gained 5.53, or 0.26%.


[R]8:30AM Stock futures pointed to a rebound.[/R]
U.S. stock futures moved to the upside, pointing to a rebound after two straight sessions of sharp losses. Steadily falling oil prices helped lift sentiment. Oil fell under $67 after U.S. distillate supplies rose sharply and BP said it might be able to restore its Alaskan oil field sooner than expected. Meanwhile, another profit warning in the home building sector and a disappointing outlook from National Semiconductor tempered the outlook.

Lennar Corp. ((LEN)) shares fell 2.9% in pre-market trading as it became the latest home builder to warn of weakness in the U.S. housing market. The company lowered its Q3 earnings estimate, projecting profit in a range of $1.25 to $1.35 a share. The lowered guidance is sharply below the $1.81 consensus of analysts. Chip makers are likely to lose, as National Semiconductor Corp. ((NSM)) gave a disappointing outlook for the current quarter, sending its stock lower by 3%. Shares of Broadcom Corp. ((BRCM)) fell 3.5% before the bell after the microchip maker said it had found more irregularities in the dates of past stock option grants. S&P 500 futures were up 2.80 points, above fair value. Dow Jones industrial average futures were up 12 points, and Nasdaq 100 futures rose 1.5 points.

Lennar Corp, ((LEN)), home builder, cut its earnings estimates when it said it expects its Q3 earnings to be in a range of $1.25 to $1.35 a share on continuing deterioration of the U.S. housing market. The new guidance is sharply below the $1.81 analysts’ estimate. Lennar said increased sales incentives along with certain land adjustments were the main factors behind lowering its estimate.

Volt Information Sciences Inc, ((VOL)), staffing and telecommunications services company, reported Q3 earnings rose to 53 cents a share, from 32 cents a share a year earlier on 8% revenue growth. The company said strong growth in its higher-margin staffing services business and lower workers compensation and payroll taxes, helped offset the negative effects of rising interest rates and higher professional fees. The company also said it implemented a 1.5 million share stock repurchase program.

AirTran Holdings Inc, ((AAI)), airways operator, lowered its revenue and costs estimates for Q3, citing a softening of demand in August was continuing into September. The company said in a regulatory filing late Thursday that it was also seeking to reduce its growth in 2007 and 2008 as a result, which it said was due to partly to the threat of recent terrorist events, Tropical Storm Ernesto and capacity additions on the East Coast. Q3 revenue per available seat mile will now be in the low single digits range, rather than an estimated 20%; non-fuel costs per available seat mile will improve, declining 3% to 5% in the third quarter; and fuel costs should be $2.28 to $2.33 a gallon.


[R]7:30AM Asian markets gain as Bank of Japan leaves rates unchanged.[/R]
Asian markets closed higher on Friday. The Nikkei 225 Average ended the day up 0.42% to 16,080.46 after paring earlier declines. Nissan Motor dropped about 1% after bouncing back from sharper morning losses. Canon Inc shed 0.34%. Toshiba Corp turned around from a morning drop to finish up 0.5%.

Japan Airlines gained 2.17%. The Nikkei daily reported Friday that the company, along with All Nippon Airways would start offering business class seats on smaller aircraft flying between Japan and China. All Nippon Airways shares advanced 1.93%. Nippon Steel added 1% after revising its profit outlook upward Thursday afternoon. Softbank Corp. rose 0.45%, recovering from an earlier decline of 3%.

Hong Kong Hang Seng Index finished up 0.29% to 17,145.76. The Hang Seng China Enterprises Index of Hong Kong-listed mainland shares shed 0.2%, weighted down by commodity stocks Jiangxi Copper and Sinopec. Container-terminal operator Cosco Pacific dropped 3.42% due to a larger-than-expected decline in first-half profit. Hang Lung Properties added 2.61% after losing more than 2% on Thursday.

The Kospi index in South Korea advanced 0.28%. Hyundai Motor fell 0.85% on concerns over a slowdown in the key U.S. market, but carrier Korean Air gained 2.41%. China Shanghai Composite index moved up 0.4% but Australia S&P/ASX 200 lost 0.2% as commodity stocks including BHP Billiton and Woodside Petroleum declined on weakness in metal and oil prices.


[R]AM 6:30AM European markets advance on banks and telecoms.[/R]
European markets were higher by mid-morning on Friday. The U.K. FTSE 100 index gained 0.4% at 5,878, the German DAX 30 index rose 0.2% at 5,785 and the French CAC 40 index added 0.3% at 5,074. Telecoms equipment maker Alcatel and its US rival Lucent Technologies are very close to merging after shareholders at both companies approved the French group’s $10.9bn all-share offer.

Deutsche Telekom advanced 1% after a report from the Financial Times Deutschland that the company is about to make further job cuts, in a bid to save 5 billion euros by 2010. Telecom Italia gained 1.4% in Milan and Vodafone Group added 1.1% in London.

Bank shares advanced in Europe. Capitalia, the Italian bank, advanced 0.9% after raising its 2007 earnings per share target, having said it would beat its 2006 forecast based on annualised data. Banca Monte dei Paschi di Siena reported a 28.9% rise in first half net profit. The shares gained 0.7%. German retailer Metro fell 3.1% after J.P. Morgan sold 17.5 million shares on behalf of the controlling Schmidt-Ruthenbeck family to other investors.

Oil extended a week of losses to strike a new five-month low under $67 on Friday after U.S. distillate supplies rose sharply and BP said it might be able to restore its Alaskan oilfield sooner than expected. Oil extended a week of losses to strike a new five-month low under $67 on Friday after U.S. distillate supplies rose sharply and BP said it might be able to restore its Alaskan oilfield sooner than expected. London Brent crude fell 49 cents to $66.04.

Gold opened Friday at a bid price of $617.10 a troy ounce, down from $635.50 on Thursday. The euro declined on Friday against the U.S. dollar on strong economic news from Washington and speculation that U.S. interest rates may rise higher. In morning European trading the euro bought $1.2714, down from $1.2728 late in New York the night before and nearly a cent weaker than the end of the day Wednesday. The British pound dropped to $1.8735 from $1.8748, while the dollar dropped slightly to purchase 116.40 Japanese yen from 116.18 the day before.