Lower Trade deficit and Lower Oil

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

The May trade deficit is though lower than April deficit but the annual deficit is still likely to top $700 billion. Apple reported 2Q earnings of 37 cents vs. 8 cents a year ago and expected 31 cents. AMD reports 2Q profit drop of 66% to 3 cents vs. 9 cents a year ago but tops the estimates of loss. YUM Brands reported 2Q earnings of 62 cents vs. 58 cents a year ago on 5% same-store U.S. sales.

U.S. MARKET AVERAGES

Market averages after trading in split fashion for the most of the day generally traded higher at the end of the session as investors digested the trade deficit report for the May month. The U.S. government reported 2.7% decline in trade deficit largely on the decline in prices for oil import.

The May trade deficit is though lower than April deficit but the annual deficit is still likely to top $700 billion. If oil prices spike in the 3rd quarter than the annual deficit may be even higher. The weekly Petroleum report from the Energy Department showed a mixed reading on the oil inventories. While the crude and gasoline inventories fell but that of propane and distillate fuel rose. The surprise rise in the inventory of the distillate kept the oil price under check during the session.

The U.S. government panel for merger review involving foreign companies is expected to not review the proposed merger between Unocal and Chinese company CNOOC until the companies are closed to definitive deal.

Tech sector reversed the early gains and materials and health care sectors are trading lower. The dollar is holding onto the morning gains as lower trade deficit number provides support to the higher dollar. Weaker forecast for the 2005 earnings from Abbott and pre-release from HCA International is dragging the hospital and pharmaceutical stocks.

Apple Computer, YUM Brands and Advanced Micro are some of the few companies to release earnings at the end of the day.

Oil traders are watching the fate of world’s largest off-shore oil rig on the coast of Gulf of Mexico. The rig not in production but scheduled to produce significant amount of oil and gas is likely to be damaged permanently. The rig jointly owned by BP (75%) and ExxonMobil (25%) may not be repaired and reduce the production growth targets set by BP for the year 2006 and beyond.

ECONOMIC NEWS

The U.S. government reported that the trade deficit for the month of May declined from the previous month. Total May exports of $106.9 billion and imports of $162.2 billion resulted in a goods and services deficit of $55.3 billion, $1.6 billion less than the $56.9 billion in April, revised. May exports were $0.2 billion more than April exports of $106.7 billion. May imports were $1.4 billion less than April imports of $163.6 billion.

In May, the goods deficit decreased $1.6 billion from April to $60.8 billion, and the services surplus was virtually unchanged at $5.4 billion. Exports of goods decreased $0.1 billion to $74.5 billion, and imports of goods decreased $1.6 billion to $135.3 billion. Exports of services increased $0.2 billion to $32.4 billion, and imports of services increased $0.2 billion to $27.0 billion.

In May, the goods and services deficit was up $6.6 billion from May 2004. Exports were up $10.5 billion, or 10.9 percent, and imports were up $17.1 billion, or 11.8 percent.

The deficit for the Jan-May period jumped from $207 billion in 2003 to $236 billion in 2004 to $284 billion on 2005.

The crude oil import for the month of May remained above 10 million barrels tracking the average import for the last two years for the similar months but average crude price per barrel jumped from $33.14 in 2004 to $43.08 per barrel. The 30% higher price of crude has not dampened the import of crude from a year ago. The crude price declined by 3% from April from that will reverse in June and July crude import data.

Stubborn deficits with four largest trading nations with the U.S. remained at the historic peak for the year-to-date trade balance in 2005. For the period, the deficit with China was reported at $72 billion, Japan at $34 billion, Canada at $27 billion, Mexico and Germany at $20 billion each. The deficit with Venezuela for the same period remained at $10 billion and with Saudi Arabia at $7.8 billion.

INTERNATIONAL MARKET NEWS

Markets in Europe advanced on gains made by oil majors as crude-oil resumed level over $60 a barrel and gains of automakers which reported monthly new-car sales increase. Germany’s DAX 30 added 0.58%, France’s CAC 40 gained 0.69%, and London’s FTSE climbed 0.55%. European oil companies BP and Total jumped 0.3% and 1.2% as oil hovered above $60 per barrel. European car registration jumped 4.5% for the June month. BMW reported 22% jump in unit sales, VW reported 8.2% rise in sales and Italian auto sales jumped 18%. Retailers in the U.K. Burberry Group reported 10% jump in sales for the first half carrying its share 6.2% higher in the trading session.

Asian benchmarks closed mixed as U.S. blue chips slipped and crude-oil climbed back to $61 a barrel on a new approaching summer storm. Japanese stocks ended down 0.3% as investors locked in profits awaiting corporate earnings reports in the U.S and Japan. South Korea’s Kospi gained 0.6% on strong demand for financial stocks. Hong Kong’s Hang Seng climbed 1.1% on solid gains for select blue chips. In Tokyo the dollar traded at 111.42 yen.

European shares advanced in mid-day dealings boosted by oil companies as crude-oil resumed higher levels of over $61 a barrel under the threat of the oncoming Tropical Storm Emily and gains posted by automakers. The German DAX 30 added 0.3%, the French CAC 40 rose 0.4%, and the U.K.’s FTSE 100 climbed 0.6%. In currency markets the euro and the pound lost ground against the dollar and quoted at $1.2183 and $1.7652 respectively.

Weekly Petroleum Report

The Energy department reported in its weekly report that while inventories for the crude oil and gasoline declined but that of distillate and propane gained in the last week. The surprise gain in distillate inventory put the oil on the slide for the day in the afternoon trading. The rise of 3.19 million millions of barrel of distillate softened the oil price rise.


ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil prices eased from $61 a barrel but held over $60 as the threat of oncoming storm receded because it changed its trajectory. August delivery for U.S crude-oil fell to $59.80 during the session and closed at $60.

Gold futures dropped as a decline in U.S trade deficient provided support for the dollar. August delivery fell by $2.50 to $424.60 bid per troy ounce on the NYME. Silver for September delivery was down 1.5 cent at $7.070 per ounce. Copper prices climbed up again lifting September contract to $1.5495 a pound, 1.05 cents up.

The dollar strengthened against major currencies on report showing narrower U.S. trade deficit. The euro bought $1.2116 in late European trading, the pound dropped to $1.7588. The dollar was up against the yen quoting at 111.88.

Oil futures climbed on fears of supply disruptions at U.S oil facilities caused by approaching summer storm Emily. But prices eased from stronger early gains amid news of weaker-than-expected Chinese consumption. U.S. crude delivery for August was up 13 cents at $60.75 after trading as high as $61.30 a barrel. London Brent was up 23 cents at $59. 05.

Gold prices dropped unlike the dollar which rose against other major currencies in European trading. Gold futures in London fell to $425.55 bid per troy ounce, down from $426.20. In Hong Kong gold fell $1.70 per ounce to close at $425.75. Silver in London traded at $7.03 bid per troy ounce, down from $7.10.

Copper futures fell for a second day after miners in Chile returned to work after an eight-day strike over wages that lifted up metal prices. Copper September delivery fell 0.6% to $3.991 a ton on the Shanghai Futures Exchange.

The dollar gained against the euro for the first day in seven on a U.S. government report that trade deficiency unexpectedly narrowed. The greenback rose to $1.2132 at 09.04 a.m in NY, up from $1.2241 late Tuesday.

EARNINGS AND CORPORATE NEWS

Vineyard National Bancorp posted 2Q earnings jump of 48 cents a share versus 37 cents for the comparable period last year. The Company reaffirmed its 2005 outlook of $2 to $2.10 a share.

Hi-Tech Pharmacal, pharmaceutical company, reported 4Q earnings rise of 22 cents per share compared with 12 cents a year earlier on improved sales. Full-year earnings translate to 96 cents a share vs. 74 cents a year ago.

Gannett, newspaper publisher, reported 2Q profit decline but per-share earnings rise of $1.37, up from $1.30 a year earlier as the company bought back enough stock to keep the bottom line rising. The results are due to higher interest cost and lower broadcasting revenues.

Community Trust Bancorp posted 2Q record earnings of 57 cents a share compared with 52 cents for the comparable last-year same period.
Commerce Bankshares, posted 2Q net income rise of $54.4 million versus $53.8 million a year ago on improving net interest margin and cost control.

BB&T, US bank, reported 2Q decline of 70 cents a share compared with 72 cents last year reflecting one-time charge.

AAR, provider of aviation overhaul and manufacturing services, reported 4Q more-than-doubled earnings of 17 cents a share compared with 8 cents a year ago on higher margins and increased sales.

Abbot Laboratories, drug maker, posted 2Q earnings of 56 cents a share against 40 cents a year ago. Excluding discontinued operations and one-time tax expenses, earnings would be 58 cents a share beating expectations of 57 cents. The company backed its 2005 profit of $2.47 to $2.53 a share excluding special items.

Datalink Corporation, independent information storage architect, posted 2Q profit of $04 a share compared with a net loss of $10 last year exceeding estimates of $08 loss to a net income of $02 a share.

Harley-Davidson, motorcycle seller, reported 2Q profit of 84 cents a share vs. 83 cents a year ago beating expectations of 79 cents a share. The company raised its 2005 outlook to 10% to 13% from 5% to 8% helped by share repurchases.

Wolverine World Wide, casual shoes maker, announced 2Q earnings rise of 22 cents per share vs. 18 cents last year on stronger sales and profit increases at its Outdoor Group & Hush Puppies unit. Analysts had expected net income of 21 cents per share.

International Electronics, electronic access control product maker, reported 3Q net loss of 8 cents per share down from a loss of 18 cents a share a year ago on 13% sales growth.

Party City, retailer of party supplies, posted decline in 4Q same-store sales of 0.8% citing weak demand for seasonal merchandise.

Winmark Corporation, financial services provider, reported 2Q net income fall of $08 per share compared with $11 per share last year.

Rocky Mountain Chocolate Factory, confectionery products maker, announced 1Q profit growth of 11 cents a share vs. 9 cents a year earlier on improved sales. Same-store sales rose 4.1%. The company backed its full-year outlook.

Resources Global Professional, business consulting firm, posted 4Q net income rise to 31 cents a share, up from 22 cents a year ago reflecting 40% jump in sales. The quarterly profit exceeded expectations of 22 cents a share.

Innoves, manufacturer of flexible circuits, reported 3Q narrower net loss of 13 cents per share compared with 88 cents last year on sales growth and strong demand for flat-panel display products. Analysts had expected a wider loss of 14 cents a share.

FRANKLIN COVEY CO, provider of professional leadership and training services, posted a narrowed loss of 34 cents a share against a loss of 37 cents in the comparable period last year.

Century Bancorop A, reported 2Q profit fall of 37 cents per share compared with 43 cents a year ago on higher operating expenses.

AMB Property Corporation, global developer and owner of industrial real estate, posted 2Q earnings rise of 45 cents a share vs. 20 cents a year ago on development and contribution gains. The quarterly results exceeded previous company’s guidance of earnings from 30 to 33 cents a share
BANK OF THE OZARKS, reported 2Q profit increase of 46 cents a share compared with 38 cents last year on record interest income and service charges.


OTHER NEWS

Mexican stocks traded sideways ahead of the earnings report for the second quarter in the coming weeks. Investors are generally expecting a strong reporting season and looking better results from construction, home builders, retail, and media sectors. The Mexican currency Peso is trading at a 2-year high to a dollar at 10.689.

Brazilian stocks traded up 1.47% on strong retail report for the month of May. Shares of Telemar, CVRD, and Usiminas traded higher by 1.2%, 0.9% and 5.2%. The retail report showed strength in sales for electronics and auto but decline in sales from April for consumer non-durables, food and beverages.