A New Day, A New Oil High

albena
12 Aug, 2005
New York City

Futures pointed to a lower opening for stocks due to record high oil prices and lower earnings guidance from Dell. Expectations of a widening trade gap also helped drag futures lower on Friday. Information on the trade deficit and data on import and export prices are expected before the start of trading Friday. Shortly after the opening bell, the University of Michigan is due to announce its preliminary index of August consumer sentiment.

U.S. AVERAGES

U.S. stock pointed to a lower opening for stocks due to record high oil prices and lower earnings guidance from Dell.

Shares of Dell ((DELL)) lost almost 8% in after-hours trading after the world's No. 1 PC maker met views for better 2Q earnings, but missed the revenue guidance and issued disappointing forecast for both revenue and profit in the current period.

Oil prices topped $66 a barrel early Friday, although it afterwards slid from that record high level.

Treasury prices were higher, cutting the yield on the 10-year note to 4.30% vs. 4.32% level late Thursday.

Embraer-Empresa Brasileira ((ERJ)) is due to report 2Q earnings of 41 cents a share according to analysts.

Movie Gallery Inc. ((MOVI)) posted a 2Q loss due to weak video rentals and merger related charges, below analysts’ estimateis of earnings of 51 cents.

Red Robin Gourmet Burgers Inc. issued guidance below expectations for 3Q and full year, and announced the resignation of two executives following an internal investigation into improper expenses.

Intel, the No.1 computer chipmaker, is preparing to announce new chip architecture at a conference later this month. It would mark the company's response to pressures that are forcing changes in computer design.

Maytag's board is set to formally back an offer by Whirlpool to acquire Maytag for around $1.7 billion, or $21 a share, according to reports.

According to reports, economists expect the Federal Reserve to lift short-term rates to 4.5% before it completes its current tightening effort, which would be a full percentage point above current levels.

ECONOMIC NEWS

The data of the trade deficit is due before the opening bell on Friday. Economists expect that the measure will grow to $57.5 billion in June vs. May's level of $53.3 billion.

The University of Michigan is scheduled to release its preliminary index of August consumer sentiment shortly after the opening bell.

Economists expect the measure to come at 96.0, slightly down versus the 96.5 recorded for July.

The Labor Department is due to release the import price index at 8:30 a.m. Economists look for import prices to rise by a moderate 0.6% in July after a 1.0% gain in June.

INTERNATIONAL MARKET NEWS

Asian-Pacific markets finished mixed with the Japanese Nikkei flat on disappointing quarterly economic growth of 0.3%, erasing early gains by stocks sensitive to domestic economy as well as by energy-related issues on the back of record-high oil prices. The regional markets gained mainly on energy and mining stocks. Hong Kong’s Hang Seng added 0.04%, South Korea’s Kospi rose 0.6%, while Shanghai Composite declined 1.3%.

European stocks were lower in mid-day dealings on oil prices surging to $66 a barrel, disappointing French GDP data, strike disruption at British Airways, and caution in the tech sector. Averages in Germany slipped 0.1%, in France lost 0.5%, and in the U.K. declined 0.1%. The euro and the pound gained 0.1% to trade at $1.2476 and $1.8130 respectively.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices hit record highs above $66 a barrel as investors worry about the world’s capacity to refine and pump oil. Light crude slipped to $66.05 after soaring to an all-time high of $66.15 and London Brent was up 36 cents, eventually edging slightly off at $65.75, after breaking record highs at $65.88.

Gold advanced to an eight-month high on weak dollar and soaring crude-oil prices. Gold for immediate delivery rose $3.70 to $499.60 an ounce. In London gold futures gained $2.88 to trade at $448.77 per ounce. This week gold has risen 2.6%.

The U.S. dollar traded lower against other major currencies. Against the euro it stood at $1.2473 compared with $1.2470. The greenback bought 109.55 yen, down from 109.70.

IPO Market

12 IPOs hit the market in this busy summer IPO week and what’s more - several deals have made double-digit price gains in their market debut.

Refco, a brokerage firm, priced 26.5 million shares at $22, above its expected range of $19 to $21. By the end of trading on the NYSE, the company's stock was traded at $27.48, or 25% above the IPO price. The deal's underwriters were led by CS First Boston, Goldman Sachs and Banc of America Securities.

Heartland Payment, a credit- and debit-card payment processor for U.S. businesses, priced its IPO of 6.7 million shares at $18 apiece. The stock closed at $24.51, or 36% above the initial price.

CF Industries, a maker and distributor of fertilizer, priced its IPO of 41.25 million shares at $16 each, at the midpoint of its $15 to $17 range. Shares closed at $16.20, 1.2% above the offering price.

EARNINGS NEWS

Movie Gallery ((MOVI)), retail home video provider, posted a loss of 39 cents a share, down vs. profit of 32 cents a share for the second quarter last year on strong revenue growth, missing analysts’ expectations of earnings of 51 cents a share.

Nvidia Corp. ((NVDA)), graphic and digital media processor company, reported 2Q net income of 41 cents a share vs. 3 cents a share, a year ago, beating analysts’ estimate of 34 cents. Revenue rose to $574.8 million vs. $456.1 million last year, while analysts had expected $585 million.

Cree Inc. ((CREE)) 4Q earnings remained flat despite a 9% rise in revenue. For 4Q the company posted earnings of 27 cents a share vs. 28 cents last year. Analysts were expecting earnings of 27 cents a share. The company also forecast earnings and revenue for 1Q below analysts' estimates.

U-Store-It Trust, self-storage facilities developer, posted 2Q net income of 6 cents a share on slightly lower-than expected growth in revenue, missing analyst estimate by a penny. Same-store revenue rose 6.8%.

Analog Devices Inc. ((ADI)) said its 3Q profit fell 28% as revenue dropped 19% on weaker sales of digital-signal processor products to wireless handset customers in Asia. The company earned 32 cents a share for 3Q vs. 43 cents a share a year ago. The company sees 4Q earnings at 32 - 34 cents a share, while analysts expect 33 cents a share.

Kohl's Corp. ((KSS)), general-merchandise retailer, posted a 2Q profit of 54 cents a share vs. 47 cents a year ago, as revenue climbed 16% to $2.89 billion. Analysts expected Kohl's to earn 52 cents a share.

Dell Inc. ((DELL)) posted a 2Q profit of 41 cents a share vs. 31 cents a share in the year-ago quarter. Excluding one-time items, Dell earned 38 cents a share, in line with estimate. Revenue rose to $13.43 billion vs. $11.7 billion, missing analysts' $13.7 billion forecast.

DreamWorks Animation SKG, producer of computer animated features, reported a 2Q net loss of 4 cents a share vs. a profit of $1.89 per share in the same period a year ago on revenue decline, beating analyst estimate of 7 cents a share.

CORPORATE NEWS

Hewlett-Packard Co. ((HPQ)) said that it has signed an agreement to acquire substantially all of the assets of Scitex Vision for $230 million from Scitex Corporation Ltd. ((SCIX)). The transaction is subject to certain closing conditions and is due to be completed within approximately 90 days. Following completion, the business acquired from Scitex Vision will be fully integrated into HP's Imaging and Printing Group.

Polaris Industries Inc. ((PII)) said late Thursday it has completed its purchase of a 24.9% interest in Austrian motorcycle manufacturer KTM Power Sports AG through its Austrian subsidiary from an institutional investor. Polaris bought 24.9% of the outstanding capital stock of KTM Power Sports AG for about $75.5 million. Polaris said the purchase was financed from borrowings under its existing bank line of credit arrangement.

As part of its commitment to repurchase 10 million shares over the next 6-9 months, Knight Ridder ((KRI)) said late Thursday that it bought 5 million shares of its common stock from Goldman Sachs ((GS)) for $62.36 per share, or $312 million. The company said that it has repurchased 8.3 million shares for about $525 million during 2005, representing 11% of its outstanding stock.

OTHER NEWS

Shortly before the Tokyo financial markets opened, the government announced that Japan's economy expanded 0.3% in real terms in the April-June period vs. the previous quarter. That was less than the private-sector economists' forecast of 0.5% growth.

GDP data from France showed that GDP slowed to 0.1% in the second quarter, from 0.4% in the first quarter, with year-on-year growth of 1.2%. Analysts had expected a 0.2% quarterly rise. The first quarter of 2005 was revised higher to 0.4% from 0.3%.