Falling Oil and Mergers Help the Early Rally

albena
30 Nov, -0001
New York City

Stocks led an early rally Monday on a slide in oil prices and various merger news. Crude oil for August delivery marked the third trading day in a row that oil prices have declined as Hurricane Dennis missed the platforms in the Gulf of Mexico and helped relieve worries about U.S. supplies. No major economic data is due Monday.

U.S. MARKET AVERAGES

The Dow Jones industrial average was up 146.85 to 10,449.14, and the Nasdaq composite was up 2.87 to 2,115.75, while the broader Standard & Poor's 500 advanced 0.94 to 1,212.80.

The airline sector is advancing in Monday's early trading hours and the sector is currently up 2.2%.

Tech shares also rally, especially semiconductor, disk drive and Internet spaces, which made the biggest gains.

Energy stocks are among the biggest decliners as Hurricane Dennis causes oil prices to vary further. The oil service sector declined about 1.3%.

DreamWorks Animation SKG on Monday announced it received an informal request for information from the SEC, concerning trading in its securities and the disclosure of its financial results on May 10. The SEC has informed DreamWorks Animation that the informal investigation should not be construed as an indication that any violations of law have occurred and the company added it intends to cooperate fully with the inquiry.

Shares of DreamWorks are down 14% to $23.01 after the company abandoned a $500 million secondary offering and warned of disappointing financial results.

Sprint Corp. gained 8 cents to $25.46 after it said it would acquire U.S. Unwired Inc. for $1.3 billion. U.S. Unwired, which provides Sprint PCS cellular services in nine states, is valued at $6.25 per share in the agreement. U.S. Unwired dropped 1 cent $6.15.

Pilgrim's Pride, poultry processor, added 9.9% after it lifted its third-quarter profit target on better-than-expected results from both its U.S and Mexico chicken operations.

INTERNATIONAL MARKET NEWS

Asian stocks finished mostly higher returning to solid gains in reaction to strong U.S. market close Friday, positive U.S. jobs data and falling crude-oil prices. In early Asian trading crude-oil futures dipped to $58.66 a barrel, 77 cents down, as the expected hurricane Dennis was downgraded to a tropical storm. Japan’s Nikkei gained 1%, Hong Kong’s Heng Sang added 1.4%, and South Korea’s Kospi rose 2%. Through the region only China’s Shanghai Composite and Thailand’s SET ended down. In early trading the greenback quoted near 112.20.

European stocks advanced at mid-day trading following a strong close in U.S. markets Friday, gains in technology shares after the report of LG Philips, and crude-oil prices below $59 a barrel supporting airlines and carmakers. Averages in Germany added 1.1%, in France gained 0.6%, and in the U.K. rose 0.3% as business returned to normal after the attacks last week.

ENERGY, METALS AND CURRENCIES MARKETS

Oil futures fell more than a dollar after hitting a record high of $62.10 last week as worries about damage to U.S. oil and gas facilities eased following the passage of Hurricane Dennis. August delivery dropped $1.13 to $58.50 a barrel, and London Brent slid $1.19 to $57.01.

Gold futures advanced in morning trading with August delivery up 70 cents to $424.50 per troy ounce. Indexes tracking the metals sector are also up with the Amex Gold Bugs Index 1% higher.

The U.S. dollar fell from last-week 14-month highs against the euro and 19-month highs against the pound as weaker-than expected jobs report hindered the greenback’s rally and investors waited for U.S. trade data later in the week. The euro gained ground after the EU Constitution was approved and the dollar dropped to $1.2010 per euro, down from $1.8666. The dollar was 0.4% down vs. the pound at $1.7453.

EARNINGS AND CORPORATE NEWS

McKesson Corp said it reached an agreement to buy D&K Healthcare Resources in a $14.50 a share cash deal that values the regional wholesale-drug distributor at $206.8 million. D&K's shares gained 69% to $14.34, while McKesson shares added 1.1% to $ 45.04.

Hewlett-Packard, technology giant, is releasing a new photo printer today based on a new technology for inkjet printers which will significantly increase speed and decrease printing costs. The new photo printer will deliver the printed photo within 14 seconds compared with current 30 seconds. The company has also announced a slew of new digital products.

DreamWorks Animation, media company, announced preliminary 2Q loss of 7 to 9 cents a share compared with earlier forecast of ‘no profit’ citing an increase in return reserves for its 2004 titles. The company lowered 2005 earnings to 80 to 90 cents per share from previous $1 to $1.25 a share.

Komag, thin-film media maker, lifted its 2Q revenue by 20% over the prior quarter on stronger thin-film disk shipments. Analysts expect earnings of 77 cents per share.

Helen of Troy, consumer products designer and developer, reported 1Q earnings decline to 33 cents a share from 44 cents a year ago on lower-than expected sales missing expectations of 39 cents a share. The company reiterated full-year earnings of $2.50 to $2.60 a share.

Mylan, pharmaceutical producer, reported preliminary 1Q net income of 14 to 16 cents a share. The company backed its 2006 and 2007 adjusted earnings outlook.

LG Philips, flat screen maker, said its 2Q net income plunged 94% on weaker prices for LCDs but compared with the1Q when it posted a loss of $76 million, swung to a profit.

Posco, steelmaker, reported 38% profit increase for the second quarter on higher steel prices.

Pilgrim’s Pride, chicken products maker, raised its 3Q earnings outlook to the range of $1.17 to $1.22 a share vs. previously announced 81 cents to $1 per share. The lifted expectations are due to better results in U.S. and Mexico chicken operations.

ECONOMIC NEWS

No major economic data is scheduled for release Monday.

International Trade Balance Data, or the difference between imports and exports of both tangible goods and services, is scheduled to be released Wednesday. Economists see trade difference for May at $57 billion, level with the previous April’s reading, when the nation’s trade gap increased to $57 million, or a billion less than expected. Exports in April soared 4.1% to $163.4 billion, while exports grew by 3% to $106.4 billion.

Also on Wednesday, the weekly Petroleum inventory data for the week ended, is scheduled to be released.

Consumer Price index reading for June is due on Thursday. Analysts forecast CPI to rise 0.3% in June. Excluding food and energy, the measure is seen to have risen by 0.2%. CPI for May showed a 0.1% decrease vs. expectations of a 0.1% positive growth. The May CPI reading showed the first downward shift in 10 months. The core CPI data, excluding food and energy, marked a 0.1% growth against expectations of a 0.2% growth.

The customary Jobless Claims data is slated to be released Thursday. Analysts expect Jobless Claims for the week ended July 9th to stay inchanged at 319,000.

Retail sales for the month of June are expected to have advanced by 0.9%. Excluding auto, analysts see 0.5% growth in retail sales. The reading is expected on Thursday.

Business Inventory data to be released on Friday is forecasted to mark a growth of 0.4% in May.

Producer Price, which is to be released on Friday, is expected to advance by 0.5% for June. Producer Prices in May fell 0.6%, the decline coming about mainly due to a 3.5% drop in energy prices. Excluding the volatile components, namely food and energy, the core Producer Price index edged up 0.1% for the month.

Industrial Production, which measures the physical output of the nation’s factories, mines and utilities is also expected Friday. Analysts look for 0.4% growth in the month of June. Industrial Production data for May rose 0.4%, higher than expectations of a 0.2% advance.

University of Michigan’s Consumer Sentiment index is to be released also Friday. Economists expect the index to be 94.6 for the month of July vs. 96 in June.