Rising Oil Hurts Market Mood

Elena
03 Nov, 2006
New York City

U.S. stocks turned mixed, as a rebound in oil prices overshadowed better-than-expected jobs data. Shares of oil companies Exxon Mobil Corp. and Chevron Corp. rose 1.1% and 1.4%, respectively. At the same time, consumer-oriented stocks such as Starbucks Corp. and McDonald''s Corp. slipped 1.8% and 1%.

[R]11:30AM Stocks turned mixed amid strengthening oil prices.[/R]
U.S. stocks turned in a lackluster trading fashion, as a rebound in oil prices overshadowed better-than-expected jobs data. Shares of oil companies Exxon Mobil Corp. ((XOM)) and Chevron Corp. ((CVX)) rose 1.1% and 1.4%, respectively, as crude oil rose 80 cents to $58.68 a barrel. At the same time, consumer-oriented stocks such as Starbucks Corp. ((SBUX))) and McDonald''s Corp. ((MCD)) slipped 1.8% and 1%. Retreating worries about the sharp economic slowdown sent economically-sensitive stocks like Boeing ((BA)) and General Motors ((GM)) up 1.1% and 0.8% respectively.

By sector, the disk drive sector posted some strength in morning trading, helped by Western Digital ((WDC)) with a gain of 5.2% after reporting better-than-expected Q1 earnings growth. The gold sector also moved higher as the price of gold regained some ground after recent losses.

Among stocks driven by analyst comments, Intersil ((ISIL)), manufacturer of analog integrated circuits, rose 2.9% after Goldman Sachs upgraded its rating on the company''s stock to buy from neutral. On the other hand, shares of Alnylam Pharmaceuticals ((ALNY)) dropped 5% after Bear Stearns downgraded its rating on the biopharmaceutical company to peer perform from outperform. In late morning trading, the Dow Jones industrial average fell 30.02, or 0.25%, to 11,988.52. The Standard & Poor's 500 index was down 1.02, or 0.07%, to 1.366.32, and the Nasdaq composite index fell 6.29, or 0.27%, to 2,327.73. The economic data sent bonds falling sharply; the yield on the benchmark 10-year Treasury note rose to 4.69% from 4.60% late Thursday.


[R]Business activity accelerated in October.[/R]
The Institute for Supply Management released its report on business activity in the service sector in the month of October on Friday, showing that the pace of growth in the sector accelerated faster than economists had expected. The report showed that the business activity index rose to 57.1 in October from 52.9 in September, with a reading above 50 indicating growth in the sector. Economists had expected a more modest increase by the index to 54.5. The acceleration in the pace of growth in the service sector came despite a slowdown in the pace of new orders growth, as the new orders index fell to 56.5 in October from 57.2 in September. The report also showed a slowdown in the pace of employment growth, with the employment index falling to 51.0 in October from 53.6 in September. The ISM also noted that the prices index fell to 51.9 in October from 56.7 in September, indicating a slowdown in the pace of price growth.


[R]10:30AM The Sensex continues its winning streak today on large-caps rally.[/R]
The Sensex on BSE finished 39.67 points, or 0.3%, higher to 13,130.79. The benchmark index traded in a range of 129 points. The market breadth was weak. For 1,431 shares that declined, 1,076 shares advanced and 77 shares were unchanged. For Every six decliners there were five advancers. From the Sensex stocks, 15 advanced while the rest declined. The turnover on BSE was Rs 4,007 crore, lower than the turnover of Rs 4,034 crore on Wednesday. The turnover on NSE was Rs 7,346.74 crore.

Economic news

The wholesale price index advanced 5.41% in the 12 months to Oct. 21, from 5.26% in the previous week, leading bond yields up and triggering concerns of a rate increase in coming months. The rise is mainly due to increase in prices of food and manufactured items.

Foreign funds inflow in October 2006 totaled Rs 8,013 crore, compared to their inflow of Rs 5,425 crore in September and Rs 4,643 crore in August 2006. The fund-flows into India can be attributed to strong earnings growth, together with increasing recognition of the long-term growth prospects of India.

The Indian rupee advanced today to its highest level against the dollar in more than six months on strong capital inflows and exporter selling.

The infrastructure sector output jumped 9.9% in September 2006 from a year earlier, much faster than the revised annual growth of 5.7% in August 2006 showed the latest economic data.

Advancers

ONGC surged 5% to Rs 884.50. The stock was bolstered by news on Thursday that Norsk Hydro of Norway had offered it stakes in two exploration blocks. The stock had surged on Thursday on reports the oil exploration large-cap is plotting tie-ups with Russian state oil firms.

Cement companies were in focus today. Gujarat Ambuja Cements advanced 3% to Rs 123, ACC rose 2.4% to Rs 1,006, UltraTech Cement gained 1.8% to Rs 897 and Grasim added 0.3% to Rs 2,790. At the beginning of this month, cement firms had lifted prices by Rs 5 per 50 kg bag in Maharashtra and Gujarat states.

Reliance Energy advanced 6% to Rs 509. Reliance Industries advanced 0.4% to Rs 1,289. The stock made a solid intra-day rebound. It had lost as much as 1.1% to a low of Rs 1,269.10 in early afternoon trade.

Dr Reddy’s Lab rose 2.5% to Rs 780. Last week, the company reported strong second-quarter results. Bajaj Auto gained 1.7% to Rs 2,828. Power generation company NTPC gained 1.6% to Rs 131.60. Software company Infosys ended flat at Rs 2,085. The stock recovered from Rs 2,063 in the afternoon.

Decliners

The major decliners on BSE were led by Tata Motors with a plung of 1.83% to Rs 813.90, Hindalco, which fell 1.24 % to Rs 186.80, TCS down 1.12 % to Rs 1,068, Hindustan Lever off 0.95 % to Rs 235.30 and ITC declining 0.77 % to Rs 187.15.


[R]9:45AM Market opened higher on strong employment data.[/R]
Stronger-than-expected employment data in October pushed stocks higher at opening, easing concerns about the fast pace of the slowing U.S. economy. The Labor Department said that the economy added 92,000 and the unemployment rate unexpectedly dropped to a five-year low of 4.4%. The market also benefited from some early strength among energy stocks, which moved back to the upside together with the price of oil.

Economically sensitive shares such as Boeing ((BA)) and United Technologies Corp. ((UTX)) advanced 1.2% and 0.7% respectively. Shares of Electronic Arts ((ERTS)) lifted the Nasdaq and the S&P 500 after the world''s largest video game publisher posted higher-than-expected quarterly revenue. Company''s shares jumped 10%. Whole Foods ((WMFI)) dropped 21% on sales warning. In corporate news, Stellenet ((STEL)) shares surged 26% after Oracle ((ORCL)) agreed to buy the company for $440 million, or $13.50 a share, a 27% premium to its closing price.

In the first hour of trading, the Dow Jones industrial average rose 26.97, or 0.22%, to 12,045.51 after its first five-day decline since June 2005. The Standard & Poor''s 500 index was up 2.94, or 0.22%, to 1,370.28, and the Nasdaq composite index advanced 5.01, or 0.21%, to 2,339.03. Treasurys tumbled, sending yields higher, after the October jobs report showed a strong U.S. labor market.The benchmark 10-year note was down 31/32 at 101 6/32. Its yield, which moves in the opposite direction to price, rose to 4.720% from 4.596% late Thursday.


[R]9:30AM The FTSE 100 held firm Friday buoyed by US employment data.[/R]
In mid-session trade the FTSE 100 in London was 0.2% higher at 6,164.2, an increase of 15 points.

Advancers

BSkyB gained in view of its first quarter numbers. News of strong demand for its new broadband offering provided upside, as did strong subscriber growth taking its customer base over 8 million.

British Energy continued to recover, as the sharp sell-off following news of problems with the infrastructure of its generators left it looking undervalued. Shares in the company were up 1.8%.

AstraZeneca was stable despite a report that major shareholders are demanding that executives at the pharmaceuticals group spend $4 billion to rebuild its weak pipeline of new drugs with new acquisitions.

Decliners

British Airways fell 0.9% following its interim numbers. The airline stated that the summer security alert at UK airports cost the company around 100 million pounds.

Rexam, the packaging maker, were 3.6% weaker after it warned of a 10 million pounds restructuring charge after lower than forecast orders from the cosmetics sector.

Shares in St Ives fell 2.6% after Tangent Communications said it was no longer interested in bidding for the specialist printer.


[R]9:00AM Stock futures pushed up on strong jobs data[/R]
U.S. stock market futures recovered from earlier uncertainty to turn higher Friday, boosted by stronger-than-expected payrolls data which showed that the labor market was on firmer footing than expected. The Labor Department reported that Although U.S. nonfarm payrolls grew by a lower-than-expected 92,000 in October, while unemployment rate fell to a five-year low of 4.4%.Economists had been expecting payroll growth of about 123,000, while the jobless rate was expected to remain at 4.6%.

In earnings news, wireless technologies giant Qualcomm Inc. ((QCOM)) reported Q4 earnings and revenue that rose above year-earlier levels. For Q1, the company projected revenue of $1.98 billion to $2.08 billion, vs. the average estimate of $2.07 billion. Whole Foods ((WFMI)) tumbled 20% in pre-open trading after warning that next-year revenue growth will come in between 6% and 8%, down from 11% this year. Shares of Red Robin Gourmet Burgers ((RRGB)) plunged 26% after it cut its full-year earnings and revenue outlook. Red Hat ((RHAT)) shares dropped 2.1% on continuous pressure from the Microsoft-Novell partnership announced late Thursday. On the deal news front, Oracle ((ORCL)) announced it agreed to buy Stellent ((STEL)) for $440 million, or $13.50 a share, a 27% premium to its closing price. Stellent shares soared 26% in pre-open trading. S&P 500 futures rose 3.00 points at 1,374.30 and Nasdaq 100 futures were up 4.00 points at 1,720.50. Dow industrial futures advanced 24 points at 12,060.

[R]Non-farm payrolls data rose by 92,000 in October.[/R]
Friday morning, the Department of Labor released its report on the employment situation in the month of October, showing that the U.S. economy added fewer than expected jobs. At the same time, there was a significant upward revision to September employment growth. The report showed that non-farm payrolls rose by 92,000 in October following an upwardly revised increase of 148,000 jobs in September. Economists had expected an increase of 125,000 jobs compared to the increase of 51,000 jobs originally reported for the previous month. The Labor Department said that the October job growth reflected continued growth in several service-providing industries, although it noted that employment declined in the manufacturing and construction sectors. The report showed that service producing industries added 152,000 jobs in October, reflecting notable growth in professional and business service jobs. The education and health services, leisure and hospitality, and government sectors also added jobs, while retailers lost 3,000 jobs.

The increase in service producing jobs was partly offset by a decrease of 6,000 jobs in goods-producing industries. The manufacturing sector lost 39,000 jobs while the construction sector lost 26,000 jobs. The Labor Department added that the unemployment rate unexpectedly fell to a five-year low of 4.4 percent in October from 4.6 percent in September. Economists had been expecting the unemployment rate to come in unchanged. The report also showed that average hourly earnings rose 0.4 percent in October to $16.91, while average weekly earnings rose 0.7 percent to $573.25. On an annual basis, average hourly earnings were up 3.9 percent and average weekly earnings were up 4.2 percent.


[R]8:00AMMicrosoft’s Windows and Novell’s Linux to work together.[/R]
Microsoft Corp. ((MSFT)) announced late Thursday that it’s willing to partner with Novell Inc. ((NOVL)), its rival in the market for computer operating system software, to support Novell''s version of Linux.

The companies want to develop technology for computer systems in which Linux and Microsoft''s Windows work together. Microsoft and Novell also agreed not to sue customers who use both operating systems, removing the legal uncertainty over mixing Linux and Windows. Financial terms of the arrangement were not disclosed.

The alliance aims mainly at the growing number of major companies and government agencies that rely on elements of Redmond, Microsoft''s Windows and Linux to operate their computers. Under the partnership, Microsoft''s team will offer its corporate customers a chance to license its Windows operating system as part of a package offering maintenance and support for Novell''s Suse Linux platform. The partnership will relieve concerns of corporate users, reluctant to use Linux because of fears that Microsoft might retaliate with patent-infringement claims.

Following the news, Novell''s shares jumped 15.7%, to close Thursday at $6.79 on the Nasdaq Stock Market, while Microsoft''s shares dipped 4 cents to finish at $28.77.


[R]7:30AM Asian markets end mostly higher, Australia leads the way.[/R]
Asian markets closed mostly higher on Friday. Japanese market was closed for public holiday. Australia S&P/ASX 200 gained 0.4% to end at 5,432.00, topping a record set in the previous session on strong results from the biggest lender of the nation, National Australia Bank.

The Hang Seng Index in Hong Kong set an intraday record peak of 18,771.01, before settling back to end up 34.01 points, or 0.2%, at 18,749.69, with gains connected with advances in property shares and wireless giant China Mobile. Other indexes around the region also gained. The Kospi in South Korea bounced back from earlier losses to end marginally 0.01% higher.

Taiwan Weighted Price Index advanced 1.2% and Malaysia KLSE Composite Index was up 0.1%. Singapore Straits Times Index traded nearly flat. Indonesia JSX Composite Index reached 1,617.00, before easing slightly to end 0.2% higher at 1,611.50, a record close.


[R]6:30AM European stocks gain modestly in early Friday trading on banks.[/R]
European markets were slightly higher by mid morning on Friday. The FTSE 100 in London was flat at 6,147.4, Frankfurt Xetra Dax added 0.2% to 6,232.71 and the CAC 40 in Paris edged fractionally higher to 5,311.98.

Advancers

Commerzbank led the advancers after it topped forecasts with third-quarter net profit and announced it was on track to deliver one of the best full-year results in its history. Commerzbank shares gained 3.7%.

Allianz gained 1%. The insurance giant said that its third-quarter net income rose 100.4% to 1.6 billion euros ($2 billion) after a gain of 300 million euros from selling one of its units.

Swiss recruitment group Adecco moved 3.4% higher after beating expectations with a 38% rise in third-quarter net profit as its recent merger with Germany DIS paid off and it focused on professional staffing.

Saipem, the Italian oilfield services group, rose 2.9% after Merrill Lynch raised its rating to buy and its price target. Merrill said the recent lackluster performance of Saipem reflected concerns about its Snamprogetti engineering division.

Decliners

British Airways lost 1.5% after it its second-quarter pretax profit dropped 27% to 176 million pounds, while sales rose 4.9% to 2.3 billion pounds.

Packaging company and can maker Rexam declined 4.2% after it said that, although the majority of its plastic packaging operation continues to trade matching expectations, customer product launches in make-up have not materialized.

Oil and gold

Crude oil for December delivery rose 2 cents to $57.90 a barrel in Asian electronic trading on the New York Mercantile Exchange. December Brent crude on London''s ICE Futures Exchange gained 6 cents to $57.93 a barrel.

Gold opened Friday at a bid price of $622.80 a troy ounce, up from $621.00 late Thursday.

Currencies

The euro was little changed against the U.S. dollar on Friday ahead of new jobs data from the US economy. The euro bought $1.2773 in morning European trading, only just below its level of $1.2779 in New York late Thursday. The British pound stood at $1.9086, compared with $1.9088 on Thursday. The dollar slipped to 117.04 Japanese yen from 117.12 yen.