Record-high Oil and Mixed Earnings

albena
30 Nov, -0001
New York City

Stocks declined Wednesday morning amid record crude prices and weaker dollar. U.S. light crude oil for September delivery hit an all-time trading high of $62.47 a barrel ahead of the weekly oil inventory report due at around 10:30 a.m. Weaker-than-expected earnings at Time Warner and Adidas-Salomon's $3.8 billion acquisition of Reebok International were also in the spotlight.

U.S. AVERAGES

Rising oil ahead of fuel inventory report weighed on stocks and dragged them off their 4-year highs hit Tuesday. As many as 21 named storms and 11 hurricanes are forecast for the 2005 hurricane season, matching a record set in 1933, according to U.S. government forecasters.

The euro surged versus the dollar on speculation that Middle Eastern oil producers were shifting revenue away from dollars.

Treasury prices were higher as the U.S. Treasury Department is expected to announce the return of the 30-year bond Wednesday, according to some reports.

There are no market segments under considerable selling pressure in the early hours of trading, though tech shares are down after the broad rally Tuesday.

The semiconductor sector slightly retreats. The disk drive sector is also down.

The gold sector is a noteworthy advancer in the early dealings, jumping by 1.6%. The HMO and biotech sectors are higher as well, together with the energy segment as oil prices reached record highs.

On the earnings front, shares of Time Warner Inc. ((TWX)) fell 2.1% to $17.05 after the media giant posted a 2Q loss of $321 million as it set aside $3 billion to cover legal reserves for a settlement.

ECONOMIC NEWS

According to the report from the Institute for Supply Management business activity in the service sector saw continued growth in the month of July, although the pace of growth slowed more than economists had estimated. The report also marked a sharp increase in prices that may result in to some inflation worries.

The ISM’s index of business activity in the service sector fell to 60.5 in July from 62.2 in June. Economists had expected a decline to 61.5.

The drop in the pace of business activity growth comes in spite of continued improvement in new orders, with the new orders index advancing to 61.9 in July vs. 59.5 in June. The backlog of orders index also grew to 53.5 in July versus 52.5 in June.

The pace of employment growth in the service sector slowed, with the employment index falling to 56.2 in July from 57.4 in June.

Prices saw a sharp rise in July, with the prices index climbing to 70.3 vs. 59.8 in June.

Mortgage application volume declined in the most recent week, according to industry report released Wednesday, with a rise in purchase activity not quite overcoming a fall in refinancing.

The Mortgage Bankers Association reported that its market composite index of mortgage loan application volume declined 0.3% for the week ended July 29. The 4-week moving average for the market index, which flattens out week-to-week volatility, slid 3.2% The index of purchase activity advanced by 1.9%, while the index of refinancing activity declined by 3%. The refinance share of total applications dropped to 41.7% versus 42.9% in the previous week.

INTERNATIONAL MARKET NEWS

Asian-Pacific markets closed mixed after higher early trading, following Wall Street gains. The Nikkei advanced 0.4% led by auto makers, mining and steel stocks. As crude-oil prices rose above $62 a barrel, Nippon Oil jumped 4.4% to become the biggest gainer in the index. The other regional markets ended mostly down. Hong Kong’ Hang Seng lost 0.1%, South Korea’s Kospi fell 0.2%, and Singapore’s Straits Times dropped 0.5%. The dollar traded at the lower end of 111-yen range in early Tokyo trading.

European markets traded lower at mid-day after several consecutive gaining sessions, reflecting mixed earnings reports from major companies, although deal news provided some upside. The German DAX 30 lost 0.3%, the French CAC 40 declined 0.4%, and London’s FTSE 100 dropped 0.3%

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices hit a new high on expectations that U.S. data would indicate fall in the crude stocks of the world’s biggest consumer and on supply worries, caused by the forthcoming hurricane season. Light sweet crude for September delivery advanced 58 cents to reach $62.47 a barrel. London Brent traded up 63 cents at $61. 25.

The declining dollar sent gold futures higher. At mid-morning trading dealers in London fixed a recommended price of $433.60 per troy ounce, up from $432.10. In Hong Kong gold gained $1.10 to close at $433.25 per ounce. Silver opened unchanged at $7.22.

The U.S. dollar lost ground against other major currencies. The euro was trading at $1.2312, up from $1.2199. The greenback stood at 111.29 yen, down from 111.38. The British pound was quoted at $1.7825, up from $1.7705.

EARNINGS NEWS

Calpine, electricity generator, posted a 2Q loss of 66 cents a share, down from a loss of 7 cents a share in the year-ago period despite revenue growth, missing analyst estimate of a loss of 29 cents a share.

Omnicare, pharmaceutical care provider, posted 2Q net income rise of 59 cents a share vs. 55 cents a year ago on revenue growth of $1.12 billion. Excluding non-recurring items, earnings would have been 50 cents a share, matching analysts’ expectations.

Per-Se Technologies, healthcare solutions company, reported 2Q net income jump of 23 cents per share compared with 7 cents last year on higher revenue of $93.3 million.

Littelfuse, circuit products maker, reported 2Q profit decline of 19 cents a share, down from 46 cents a year ago on 4% lower sales with decrease in electronic sales on weakness in telecom markets. The quarterly results missed expectations of 20 cents a share.

All American Semiconductor, electronic distributor, announced 2Q net income fell to 8 cents a share, down from 25 cents a share for the same period last year despite an increase in net sales.

Gerdau Ameristeel, steel mini-mills operator, said net income dropped to 24 cents a share, from 48 cents a share in the year-ago period despite sales rise.

Kansas City Southern, railroad operator, posted a 2Q widened net loss of 32 cents a share, down from a loss of 11 cents a share in the same period last year on railroad acquisition.

Cox Radio, radio stations operator, announced 2Q net income was 20 cents a share compared with 20 cents, or breakeven a year ago on revenue growth, matching analyst estimate.

Hecla Mining, precious and nonferrous metals company, posted a 2Q loss of 5 cents a share, from a profit of 2 cents a share in the same period last year, owing to a strike at the company's Mexico operations, missing expectations of a penny a share profit.

Sunoco, petroleum refiner and chemicals manufacturer, posted 2Q earnings of $1.75 a share, up vs. $1.53 a share in the same period last year on revenue growth.

Apartment Investment and Management, investment trust, announced 2Q funds from operations, a key profitability measure for real estate investment trusts, was up to 67 cents a share vs. 63 cents in the same period last year, missing analysts’ expectations of 69 cents.

Domino's Pizza, pizza delivery stores operator, posted 2Q earnings of 35 cents a share, up vs. 24 cents a share in the same period last year on revenue growth, topping analysts’ forecasts of 32 cents a share.

Sinclair Broadcasting, programming services provider, posted a 2Q net income increase on asset sale gain. Earnings per share from continuing operations were up to 22 cents, from 16 cents a year ago, beating analyst estimate of11 cents a share.

Dominion Resources, gas and electric energy provider, posted 2Q profit of 97 cents a share, up from 76 cents a share in the year-earlier period, beating analyst estimate of 99 cents a share.

Aqua America, water or wastewater services provider, posted 2Q net income of 23 cents a share, up vs. 19 cents a share in the year-ago period on revenue growth, beating analysts’ forecasts by a penny.

Nice Systems, Web, radio and video communications company, announced 2Q net income went up to 33 cents a share, vs. 24 cents in the year-ago period on strong revenue, missing analysts’ forecasts by a penny.

Dean Foods, dairy products distributor, posted 2Q earnings of 55 cents a share, up vs. 47 cents a share in the same period last year on flat revenue, matching market expectations. Apart from non-recurring items, earnings would have risen to 53 cents a share from last year's 39 cents, and topped analyst forecast of 51 cents.

Duke Energy, integrated energy services provider, posted 2Q earnings of 32 cents a share, down vs. 45 cents a share in the same period a year earlier despite revenue growth, missing expectations of 38 cents a share.

CVS, pharmacy and drugstore chain, announced 2Q net income climbed to 33 cents a share, up vs. 28 cents a share in the year-ago period on strong sales growth, beating estimates of 31 cents a share.

Speedway Motorsports, marketer and promoter of motor sports entertainment, posted 2Q net income of $1.26 a share, up vs. 92 cents in the year-ago period on revenue growth, beating forecasts by a penny.

Hanson, building materials company, posted first-half 28% pretax income rise, or 172.3 million pounds on 9.3% sales growth, good performance and high property profits.

Allied Irish Banks reported firs-half earnings of 71.7 euro cents vs. 63.8 euro cents a year ago on loan and deposit growth. The company raised its 2005 outlook to earnings in the range of 1.40 to 1.42 pounds, up from earlier forecast of 1.38 to 1.40 pounds.

Rio Tinto, Anglo-Austrian miner, posted first-half net income increase of $2.17 billion, up from $1.61 billion a year ago, beating estimates of $1.95 billion. The company raised its interim dividend to 38.5 cents from previous 32 cents.

Marconi, telecom equipment maker, reported 1Q wider net loss of 36 million pounds compared with a loss of 10 million pounds last year on 15.9% sales decrease.

Swift Energy, oil and gas properties operator, posted 2Q net income of 96 cents a share, up vs. 46 cents, gained in the same period last year on strong revenue growth, beating analysts’ forecasts of 90 cents a share.

Las Vegas Sands, casino operator, announced 2Q net income declined to 24 cents a share, down from $1.42 a share in the year-ago period despite revenue growth. Adjusted net income was up at 27 cents a share from 12 cents a share a year earlier.

Time Warner, Internet services and high-speed broadband services provider, posted 2Q loss of 7 cents a share after agreeing to settle litigation for $3 billion. It would've missed consensus forecasts of 19 cents a share after the 25 cents a share charge impact is taken away on declines from film and AOL divisions.
Ritchie Bros., industrial equipment auctioneer, posted earnings for the first half of $1 a share, up from 63 cents a share for the same period last year on an increase in gross auction sales.

Citadel Broadcasting, radio stations operator, posted 2Q net income rise of up to 16 cents a share, or breakeven a year ago, on revenue growth, matching analysts’ estimate.

Earle M. Jorgensen, metal products distributor, announced 1Q profit fell 48 cents vs. 58 cents in the same period last year, due to a rise in the number of diluted shares and despite an increase in net income and strong revenue.

Cigna, health care provider, posted a 2Q net income rise of up to $5.48 a share, up vs. $3.59 a share last year on strong results and related benefits businesses.

Commerzbank, commercial bank, posted a first-half net profit rise of up to 570 million euros, up from 486 million euros last year in the same period, after encouraging developments in net interest and net commission income trends.

BMW, car maker, announced 2Q pre-tax profit declined to 916 million euros on higher raw material prices and stiffer competition. Net profit fell 1.2% to 663 million euros despite good performance from new models, matching analysts’ expectations of between 606 million and 714 million euros.

Havas, French advertising group, announced sales were up to 370 million euros in 2Q on strong recovery and sales growth outside France.

Westlake Chemical, basic chemicals manufacturer, posted 2Q net income rise, with earnings reaching 74 cents a share, up from 69 cents in the year-ago period on higher sales, missing expectations of 80 cents a share.

Gildan Activewear, active wear apparel manufacturer, posted third quarter net earnings of 57 cents a share, up vs. 44 cents, gained in the same period in fiscal 2004 on increased sales, beating analysts’ expectations by a penny.

CORPORATE NEWS

Adidas-Salomon AG said Wednesday that it has agreed to buy Reebok International ((RBK)) for $3.8 billion. Under the deal, which could be completed during the first half of 2006, the German shoe and apparel maker will acquire its U.S. rival for $59 per share.

Time Warner announced that it has reached an agreement in principle to resolve its primary securities class action litigation and established reserves of $3 billion related to this and other related securities litigation matters.

XM Satellite Radio reached a deal to carry news, information and music programming from New York Times Co.'s newly established radio unit. Under the agreement, XM will place news, features, reviews and commentary from newspaper and radio employees of the Times company on its satellite channels.

Tenn Co. ((RKT)) said that it has decided to close its Waco, Texas, folding carton plant in 1Q of fiscal 2006. The company plans to transfer the majority of the Waco facility's current production to other plants. Tenn Co. expects to incur cash costs of about $3.5 million related to closure. The closure is expected to cut annual operating costs by $3 million, which would contribute to the $20 million of synergies.

Central European Distribution Corp. ((CEDC)) said that it has entered into a purchase deal for the private placement of 3.36 million common shares at $34.69 per share, for gross proceeds of about $116.56 million. The company noted that the closing of the private placement is subject to the completion of its acquisition from the Polish Treasury of 61% of the outstanding shares of Polmos Bialystok. The net proceeds of the private placement, combined with the funds raised from offering of its 325 million euro senior secured notes due 2012, would be used to fund the acquisitions of Bols Sp. and stake in Polmos Bialystok.

Popular Inc. ((BPOP)) and E-LOAN Inc. ((EELN)) disclosed the signing of a definitive merger agreement under which Popular would buy E-LOAN for $4.25 per share in cash or about $300 million. E-LOAN will maintain its brand identity and become a subsidiary of Popular Financial Holdings, Inc. and will also retain substantially all its employees. The deal is planned to be completed in the fourth quarter.

FuelCell Energy Inc. ((FCEL)) said that it has been awarded a subcontract by Air Products ((APD)), under a United States Department of Energy Cooperative Agreement to evaluate, design and demonstrate a next-generation Hydrogen Energy Station. The Hydrogen Energy Station would build upon FuelCell's ultra-clean Direct FuelCell power plants and Air Products' advanced gas separation technologies.

OTHER NEWS

Japan’s Prime Minister Junichiro Koizumi has threatened to dissolve parliament for a snap election if the upper house fails to pass postal privatization legislation before the current session ends on August 13th. A vote on the bill could be held as soon as Friday, according to reports.