$65 Oil Weighs on the Market

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

Early morning enthusiasm lifted averages but as oil climbed to $65 the market meltdown began. The 100 plus point rally in Dow turns 25 points sell-off. American Italian Pasta shares are down 34%. AIG, Disney, Cisco, Ralph Lauren trade on earnings news.

U.S. AVERAGES

Traders looked at the sunny side of the Fed’s transcript or may be it was summer heat. Market traded higher after the Fed’s widely expected short-term rate hike and traders’ focus on the Fed’s statement that the economic expansion is on track with inflation contained led to higher opening.

Just before two hours of close the market was well below its day’s high but still trading in the plus. The markets enthusiasm was reflected in tech, retailers and other consumer driven sectors. But market can not ignore the oil’s climb to $65 per barrel. Energy Department release of weekly petroleum report showed that the U.S. imported record amount of oil during the last week.

Whirlpool raised for the third time its offer for Maytag to $21 per share. The latest revised offer is 50% cash and 50% stock and reverse break-up fee if the regulatory do not approve the merger. Triton, the original bidder is likely to raise the offer in the next two days.

Shares of Federated Department Stores are trading up by better than $2 on meeting the earnings estimates. Cisco is trading lower by 4% after reporting rise of 11% in revenue and 12% in earning, however, the company lowered the guidance for the next quarter.

AIG shares were up by $0.82. The company reported this morning earning of $1.52 vs. $1.21 estimates.

Stocks in financial services sector traded higher with significant gains. The shares of Legg Mason, T.Rowe Price, Alliance Capital were up.

Mittal Steel, largest steel maker, reported 15% lower earnings and predicted lower earnings in the third quarter.

American Italian Pasta shares declined to all-time low a day after company delayed the quarterly filing and estimated net loss for the year. The company stated in a written statement that $60.7 million one-time charge will cover impairment of certain trademarks and write-down of certain inventories. The company also stated that SEC and NYSE are conducting inquiring related to certain stock transactions related to outsiders.

IPO NEWS

Recently listed shares of Morningstar rose by $3.70 at mid-day trading on better-than-expected news. The 2Q earnings rose 22 cents vs. 3 cents a year ago on revenue growth of 30%. The company benefited from research sales to investment banks which are required under the settlement with the SEC to provide second research report to clients.

Three IPOs were priced today.

Reddy Ice Holdings offered 10.2 million shares at $18 per share. The icemaker company’s stock is traded as high as $20.09.

RBC Bearings Incorporated sold 9.3 million shares at $14.50 per share through Merrill Lynch. The shares traded as high as $15.80.

Coley Pharmaceutical Group sold 6 million shares at $16 per share through Merrill Lynch. The biotech cancer research company shares closed at $18.40.

ECONOMIC NEWS

The weekly crude inventories rose by 2.8 million barrels vs. one million barrels draw down estimated by the market. The gasoline inventory fell by 0.1 million more than estimated and distillate inventories rose by 0.9 million barrels more than anticipated by the market.

The Energy Information Administration lowered annual global consumption target to 1.7 million from 2.2 million based on lower demand from China to 84.2 million barrels per day.

EARNINGS NEWS

Cisco Systems’s 4Q net income rose 11.6% to 24 cents a share vs. 20 cents a share a year ago. Sales at the network equipment maker rose 11.1% to $6.58 billion.

Walt Disney Co. reported a 41% jump in earnings to 41 cents a share vs. 29 cents a share a year ago. Revenue was $7.72 billion vs. last year's $7.47 billion.

Panera Bread’s 2Q net earnings rose 61% to 33 cents a share vs. 21 cents a share, in the year-ago period, meeting analysts’ forecasts. The company expects a 3Q per-share profit of 34 - 35 cents, and 4Q net earnings of 46 - 47 cents a share. For 2005, Panera forecast net earnings of $1.57 - $1.59 a share and comparable sales growth of 6.2% - 7.8%

ECost.com, online discount retailer, reported a 2Q net loss of 54 cents a share vs. breakeven last year, citing cited additional operating costs and increased public company costs from its spinoff from PC Mall Inc., as well as a $6.5 million non-cash tax provision.

AIG Inc., posted 2Q profit of $1.53 per share vs. $1.01 per share last year, attributing the increase to large accounting gains booked during the quarter. Analysts expected the New York-based insurer to earn $1.21 per share during the period.

Allianz AG, insurer, said 2Q net income, adjusted for goodwill amortization, climbed 65% to 846 million euros, with revenue up 6.6% to 23.7 billion euros, beating the company’s expectations.

Lenovo Group, PC maker, said 4Q earnings rose 6% to HK$357 million ($46 million), with revenue up 234% to HK$19.6 billion.

Lufthansa, airline company, said it reversed to a 2Q profit of 116 million euros as operating profit rose 87.2% and revenue was up 4.3% on increased sales and better average fares.