Expected Rally Despite Oil at $61

albena
30 Nov, -0001
New York City

After most of the S&P 500 already reported their quarterly earnings, investors will have to shift their focus to oil prices and the economy releases. Other companies to report include Tyson Foods, Devon Energy, Entergy, Ivax and Unocal, HSBC and ABN Amro Bank.

U.S. MARKET AVERAGES

Rising oil is likely to keep investors on edge in the coming week along with expectations for the July jobs report, due Friday.

The rise in the 10-year bond yield will also be in the spotlight, after it increased from 3.92% on the last trading day of June to 4.27% Friday. If the yield continues to increase, that would undoubtedly provoke concerns about the impact on housing and the economy.
Inflation concerns are likely to remain, particularly ahead of the August 9 Federal Reserve policy-setting meeting.

But even with all these challenges, the tone of the stock market remains remarkably upbeat, analysts say, with investors continuing to bet on a stronger second half of 2005.

About 12% of S&P 500 companies are due to post their earnings this week, including Dow member Procter & Gamble and media companies Time Warner, Comcast and Viacom.

2Q earnings are expected to rise 11.1% vs. the comparable quarter last year, beating expectations of an increase of 7.4%.

69% of the companies had posted better-than-expected earnings as of Friday, and around 15% had reported earnings that either met or missed forecasts.

ECONOMIC NEWS

The Institute for Supply Management is scheduled to release the July manufacturing report at 10:00 a.m. Monday. Economists expect a reading of 54.0 for the ISM manufacturing index in July versus 53.8 in June.

The Commerce Department is due to report on construction spending at 10:00 a.m. Economists expect construction spending up 0.8% in June, versus a 0.9% decline in May.

The release of the July employment report due Friday will be the major highlight of this week's economic calendar. Economists are expecting the U.S. economy to have created 179,000 jobs in July, up versus 146,000 in June. The jobless rate is seen to remain unchanged at 5%.

INTERNATIONAL MARKET NEWS

Asian stock markets were generally higher Monday, shrugging off U.S. losses, weaker-than-expected economic reports and increasing crude oil prices.

Tokyo's Nikkei 225 was up 0.33% by mid-afternoon to 11,939.39, helped by positive corporate earnings from Komatsu Ltd., which added 6.41%, and NTT DoCoMo Inc. which gained 4.6%.

Sydney's S&P/ASX 200 bounced back from the early losses to add 0.01% to 4,389.20, while Seoul's Kospi reversed early losses to add 0.23% to 1.13.83. Taipei's index added 0.02% to 6,313.03 and Hong Kong's Hang Seng gained 0.20% to 14,910.06. Among the decliners, Manila shed 0.62% to 1,987.80, Singapore lost 0.13% to 2,349.52.

European markets were higher Monday, with rising oil stocks in the highlights after the early wire releases that King Fahd Bin Abdul Aziz of Saudi Arabia has died. Front-dated crude touched $61.11 a barrel, fueling oil companies, but driving airlines and some automakers lower in early Monday trade.

Germany's DAX 30 index gained 0.3% to 4,902.46, France's CAC 40 advanced 0.2% to 4,451.7, while the U.K.'s FTSE 100 index added 0.1% to 5,288.90.

ENERGY, METALS AND CURRENCIES MARKETS

Crude oil prices briefly jumped above $61 a barrel on Monday after Iran threatened to restart its nuclear enrichment program. Mid-afternoon in Singapore, light, sweet crude for September delivery added 21 cents to $60.78 on the New York Mercantile Exchange, after jumping to a session high of $61.02 in Asian trading Monday. The contract had reached $61.05 Friday, its highest level in more than two weeks, before ending at $60.57, up 63 cents.

September Brent futures at London's International Petroleum Exchange opened 48 cents up at $59.85 a barrel, before sliding back to $59.60.

The euro slightly advanced versus the U.S. dollar in Monday trading as investors await the key interest rate decisions from Frankfurt and London later this week. The euro quoted at $1.2174 in early European trading, up slightly versus $1.2129 in New York late Friday.

The British pound advanced to $1.7609 versus $1.7576. The Bank of England is due to meet Thursday to decide whether to adjust interest rates for the 12-nation euro zone or leave them unchanged at 2%.

The greenback declined versus the Japanese yen, sliding to 112.21 versus 112.31 yen, following Tokyo announcements that it would slap 15% levies on U.S. steel imports starting Sept. 1 in retaliation for American steel industry protection measures.

EARNINGS NEWS

Entergy, energy company, reported 2Q profit rise of $1.33 a share compared with $1.14 a year ago on 9% revenue growth. The company backed its 2005 forecast of earnings between $4.60 and $4.85 a share.

Prrocter & Gamble, household products company, posted 4Q net income rise of 56 cents a share, up from 50 cents a year ago on 10% revenue growth, beating estimates of 55 cents a year.

Lincoln Educational Services, reported 2Q profit decline of 0 cents a share compared with 4 cents last year on higher costs.

CommScope, cables and fiber optic cable producer, posted 2Q earnings of 25 cents a share, down vs. $1.16 a share, despite a rise in revenue, beating analysts’ forecasts of 18 cents a share.

Holly Energy Partners, pipelines and distribution terminals operator, announced it gained 40 cents a share in 2Q on strong revenue, missing analysts’ predictions of 48 cents a share.

Harvest Natural Resources, oil and gas producer, posted 2Q earnings of 37 cents a share, up vs. 16 cents for the year-ago period on revenue growth.

Oregon Steel Mills, commodity steel products manufacturer, posted 2Q net income of 80 cents a share, up vs. 52 cents gained last year on strong sales, missing analyst forecasts by a penny.

Humana, health insurer, announced 2Q net profit was up to 51 cents a share on strong revenue growth, meeting analyst forecasts.

HSBC, banking and related financial services group, announced first-half pre-tax profit was up to 5.1%, following a 8.66% gain in North American pre-tax profits and 32.1% growth in Asian ex-Hong Kong profits on expanding personal financial services and commercial banking businesses in new and emerging markets.

Teva, pharmaceuticals group, posted 2Q net income earnings per share rose up to 36 cents, compared with last year the same period on strong net sales and balanced business model.

Playtex, consumer and personal products manufacturer, posted 2Q earnings of 10 cents a share, down against 13 cents a share in the same period a year earlier. Non-recurring items aside, earnings would have been 14 cents a share, topping analyst estimates of 12 cents a share on decline in revenue.

CORPORATE NEWS

Allied Holdings Inc. sought Chapter 11 bankruptcy-court protection last night. Allied, which posted $895 million in revenue last year and has been struggling with losses, has been making efforts to deal with increasing labor and fuel costs, high debt, and a drop in delivery volume. The filing by Allied follows a row of bankruptcy-protection filings by auto-parts makers such as Collins & Aikman Corp. and Tower Automotive Inc.

General Electric Co. is in talks to buy technology used in offshore oil and natural-gas production, in a deal of more than $1 billion, as the company tries to expand its role in the fast growing market. Under the conditions of the future deal, GE would buy parts of oilfield-services company Vetco International from a consortium of private-equity firms, including Candover, 3i and JPMorgan Partners. According to reports, negotiations are in progress and could be completed in two weeks.

ITT Educational Services Inc. announced that the U.S. SEC terminated its investigation of the company and recommended no action be taken against them.

Home Depot Inc. said it got a grand jury subpoena from the U.S. Attorney's Office in Los Angeles for documents connected to the company's handling, storage and disposal of hazardous waste.

Avon Products Inc. became the target of a class action alleging that the direct seller of cosmetics failed to make material statements to the marketplace regarding the state of its business.

OTHER NEWS

King Fahd, Saudi Arabia's monarch, died early Monday, and Crown Price Abdullah, has taken over as the official head of state. Though Fahd had been in poor health for years and no change in Saudi policy is expected, oil prices edged higher following the news.

Iran on Sunday threatened to restart uranium reprocessing work if negotiators from Britain, France and Germany do not immediately offer a promised package of incentives to entice Tehran to freeze its nuclear program.