Widespread Bearish Tone

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

May durable orders fell 0.2% ex-transportation orders. New home sales up but median house price falls. Asian and European markets sell-off on higher oil price. Oil stays close to $60. Gold and silver fall but copper manages to hold on to marginal gains. Citigroup and Legg Mason in a deal to swap brokerage and asset management businesses. Textronix, Micron, Xyratex and Solectron earnings disappoint market.

MARKET AVERAGES

Widespread bearish persisted throughout the day. Investors were cautious with the mixed reading from May durable orders report but then in the late morning trading earnings disappointment from Xyratex, Micron, Tibco and Textronix put the tech sector under selling pressure. Solectron reported loss did not help either.

Sale of new single-family homes in May continued at a robust annual pace of 1.3 million units but decline in median home price of $10,000 did not sit well with investors. Home builders faced selling as well in the session.

ECONOMIC NEWS

New orders for manufactured durable goods in May increased $11.0 billion or 5.5 percent to $210.7 billion, the U.S. Census Bureau announced today. This followed a 1.4 percent April increase. Excluding transportation, new orders decreased 0.2 percent.

Excluding defense, new orders increased 5.3 percent. Transportation equipment, up for the second consecutive month, had the largest increase, $11.3 billion or 21.2 percent to $64.7 billion. This was led by non-defense aircraft and parts, which increased $11.6 billion.

The government also revised April data. Revised seasonally adjusted April figures for all manufacturing industries are: new orders, $382.7 billion (revised from $383.6 billion); shipments, $390.7 billion (revised from $390.9 billion); unfilled orders, $553.2 billion (revised from $554.0 billion); and total inventories, $484.9 billion (revised from $485.2 billion).

NEW HOME SALES

Sales of new one-family houses in May 2005 were at a seasonally adjusted annual rate of 1,298,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.1 percent above the revised April rate of 1,271,000 and is 4.4 percent above the May 2004 estimate of 1,243,000.

The median sales price of new houses sold in May 2005 was $217,000; the average sales price was $281,400. The seasonally adjusted estimate of new houses for sale at the end of May was 442,000. This represents a supply of 4.2 months at the current sales rate.


OIL AND METALS MARKETS

The crude traded in usual volatile manner but mostly up and closed up 42 cents to $59.84 per barrel. Crude traded heavily in the overnight trading in Asia and then this morning in Europe. Speculation and rampant fears of refinery glitches in the U.S. drove several traders in the buying mood.

British Air announced fuel surcharge hike on all airlines and rival discount carriers characterized this move as customer ‘rip-off’. BA has been operating in high cost environment and has not achieved labor cost savings similar to the U.S. and other discount carriers. BA said that its fuel bill for the fiscal year 2006 will be closer to $2.9 billion jump of 39%.

August contracts for gold closed down $1.20 at $442 but up $2 for the week. September copper added 2.3 cents after rallying more than 5 cents and closed at $1.5505.

Crude-oil prices reached $60 a barrel on speculative buying and fears of short supply due to refinery glitches.

Euro regained some ground against dollar after falling below $1.20 in overnight trading in Asia. Weaker than expected that May durable orders and in the housing sector brought euro back to 1.2086 from 1.2035 to dollar.

EARNINGS AND CORPORATE NEWS

Citigroup and Legg Mason have agreed to swap its asset management business with the broker-dealer network of Legg Mason for $3.7 billion. The agreement excludes the Citigroup’s Mexican asset management business. Separately Legg Mason also acquired 80% in fund of hedge-funds company for at least $960 million.

Micron Technology, semiconductor maker, reported 3Q loss of 20 cents per share compared with a profit of 13 cents last year reflecting decline in prices of memory chips and stiffer competition. Analysts had expected a profit of 2 cents a share.

Rite Aid, drugstore chain, posted lower 1Q and full-year earnings of 5 cents per share vs. 10 cents a year ago on lower sales and higher store-closing costs. Same-store sales fell 0.3%.

Tektronix, test & measurement equipment maker, reported earnings decline for fiscal 2005 of 89 cents a share compared with $1.37 last year. Although sales grew more than $1 billion the net income fell on acquisition and other costs.

Tibco Software, business applications maker, posted 2Q earnings of 10 cents per share compared with 5 cents per share last year on higher revenue and one-time tax benefit.

Xyratex, data storage products maker, posted 2Q doubled profit and earnings of 38 cents a share vs. 46 cents a year ago. The company projected 3Q earnings in the range of 18 to 25 cents.

Isle of Capri Casinos, riverboat gambling operator, reported 4Q profit of 11 cents a share vs. a loss of 15 cents per share last year on higher revenue.

Cognos, business management software maker, posted 1Q net earnings of 25 cents a share vs. 22 cents a share a year ago beating expectations of 22 cents per share. The company predicted 2Q profit ranging from 28 cents to 31 cents per share.

AG Edwards, financial services holding firm, reported 1Q income rise of 71 cents per share compared with 57 cents for the prior-year same period. The favorable results are due to one-time gain and 14% rise in asset-management.

IBM is reported to hire 14,000 people in India as it gears up to compete in the global market place against Indian software service providers.


INTERNATIONAL MARKETS

Most Asian benchmarks traded in the negative territory after a considerable drop of U.S. stocks as a spike in crude-oil futures raised concerns about corporate profits. The Nikkei lost 0.3%, South Korea’s Kospi declined 0.8%, and Taiwan’s Taiex fell 0.5%. The dollar was trading at 108.93 yen.

European markets slipped as the U.S. stocks fell overnight hurt by rising crude-oil prices. Oil-sensitive airlines and carmakers were lower and further pressed by the euro which gained 0.5% to $1.2083. Averages in Germany retreated 1.32%, in France 0.95%, and in the U.K. slid 0.69%.