Market Remains Unsettled

123jump.com Staff
17 Aug, 2005
New York City

Higher wholesale inflation kept market nervous during the trading session. Oil fell close t0 4% dragging with it energy and metals and mining stock on lower copper prices. Despite lower oil price of the day, traders worry that oil will only bounce back in the coming days. Nordstrom and Hewlett Packard delivered strong earnings. ANF drops despite higher earnings.

U.S. MARKET AVERAGES

Market ignored the early morning weakness despite the higher July wholesale inflation at mid-day and stayed in the positive till the close. The positive push was largely driven by tech stocks and did not reached out to broader market.

Tech and semiconductor stocks led the rally on Nasdaq closing higher. Shares of HP jumped 13% on better than expected earnings. Intel, AMD and other DRAM manufacturers joined the rally in anticipation of Apple Computer launching flash memory based ipod music devices. Applied Materials stock jumped more than 6% on meeting the anlaysts’ estimates and on cautiously positive outlook.

Gold sector lost ground on strengthening dollar, falling 1.5%. Housing stocks also have a weak trading session losing 1%. Shares of Toll Brothers, D R Hortons, and Lennar traded lower by more than 1%.

Nordstrom stock jumped up 11% on better-than expected earnings and revised earnings outlook for the rest of the year. The company plans to open three stores during the rest of the year. Abercrombie & Fitch shares traded as low as 8% before rebounding to loss of 4%. Investors can not shake-off the worries related to higher denim inventories despite company delivered 40% increase in earnings and second-best gross margin ever.

Big Lots, liquidator and discount retailer’s shares jumped 4% on loss of 12 cents vs estimates of 13 cents loss for the quarter. Talbots shares dropped 1% on meeting the earnings estimates.

In the stock market

The tech sector rose as Hewlett-Packard reported 3Q earnings of 36 cents a share excluding special items and exceeded expectations of 31 cents a share. Quarterly sales rose 10% to $20.8 billion. The company projected 4Q revenue of $22.4 to $22.8 billion with earnings between 44 and 47 cents a share. Company’s shares rose 10%.

Applied Materials rose 5.9% after announcing a likely rise in orders. The chip maker posted 3Q 27% sales and 16% earnings decline on industry slowdown. The company earned $369.6 million, or 23 cents a share, down from $440.6 million, or 26 cents a share, beating estimates by a penny, but missing revenue forecasts of $1.65 billion.

The good news from Hewlett-Packard and Applied Materials spilled over to help other tech shares, with Intel up 7 cents to $26.11.

In the retail stock market Nordstrom rose 8% as the luxury retailer reported 2Q 39% profit rise of $148.9 million, or 53 cents a share vs. 37 cents a year ago on 7.8% revenue growth to 2.1$ billion with same-store sales increase of 6.2%.

The oil markets gyrated immediately upon release of the weekly petroleum report this morning at 10:30 AM.

In a tight supply and demand situation market is paying a close attention to the inventories situation. Over the last week, crude inventories increased by 0.3 million barrels and gasoline inventories declined by 5 million barrels. The crude inventory build up was expected to be $1.25 million barrels and gasoline inventory drawdown was expected to be less than 1.5 million.

ECONOMIC NEWS

The wholesale price index reported largest increase in nine months of 1% during July. Many of the factors driving the wholesale inflation are the same that are driving the consumer price inflation.

The wholesale index measures the rate of inflation before it reaches at the consumer level.

The only difference between the two reports was that the automobile prices declined in the consumer price inflation by 1% whereas at the wholesale level measurement they increased by 1%.

The PPI data showed that the prices rose for energy by 4.4%, electricity by 0.7%, gasoline by 10.9%, natural gas by 3.7% but for food dropped by 0.3%. The prices for pharmaceuticals rose by 1.3%.

INTERNATIONAL MARKET NEWS

Asian benchmarks closed broadly down, reflecting U.S. markets decline overnight, oil prices and profit-taking. The Nikkei had a day of volatile trading. It opened lower, following losses in Wall Street, later recovered on gains in banks and property developers and eventually finished the session down 0.35%. Among the decliners in the regional markets, Hong Kong’s Hang Seng was flat on blue chip losses, South Korea’s Kospi shed 0.3%, and Singapore’s Staits Times dropped 1.1%. The dollar traded in the upper 109-yen range.

European markets traded under pressure throughout the whole session and closed down on sharp decline in U.S. averages Tuesday and poor reception of Nestle and Adecco earnings reports. The German DAX 30 slipped 0.25%, the French CAC 40 fell 0.1%, and London’s FTSE lost 0.56% after several major companies began trading without having dividend rights.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices tumbled below $65 a barrel on economic data, showing higher energy prices were in favor of the U.S. inflation. Gasoline stocks dropped. U.S. light sweet crude declined to $64.70 a barrel after earlier trading at $66.60. London Brent dropped $1.44 to reach $63.44.

Gold prices went down in European trading as the U.S. dollar rose on the back of wholesale prices data. In London gold closed at $441.80 per ounce, down from $443.80. Silver closed at $6.96, down from $7.00.

Copper prices declined 3.3%, or 5.65 cents to $1.658 a pound after yesterday’s record closing at $1.7145.

The U.S. dollar climbed against the other major currencies in European trading. The euro stood at $1.2299, down from $1.2346. The dollar changed hands at 109.65 yen, up from 109.50. The British pound was quoted at $1.8087, up from $1.8075.

EARNINGS NEWS

Too, specialty retailer, reported 2Q net income advanced to 12 cents a share from 5 cents a share in the same time last year on sales growth, beating analyst estimate by a penny.

Talbots, women’s and children's classic apparel marketer, posted 2Q earnings of 35 cents a share, up from 34 cents in the same period last year, beating analyst estimate by a penny. Same-store sales gained 6.7%.

Eaton Vance, mutual funds management company, announced 3Q earnings of 29 cents a share, up vs. 25 cents per share for the same period last year on revenue growth, matching analysts’ forecasts.

Big Lots, retailer, reported 2Q net loss widened to 12 cents a share from 7 cents a share in the year-ago period despite revenue growth.

Hewlett-Packard, high-tech equipment maker, posted fiscal 3Q results of 3 cents per share profit, down vs. 19 cents per share for the year-ago period. Excluding one-time tax adjustments, the earnings would have been 36 cents per share compared to 24 cents per share for the comparable period last year, beating, on that basis, analyst estimate of 31 cents per share.

Nestle, food company, posted first-half net profit rise of 32% to 3.68 billion Swiss francs up vs. net profit of 2.78 billion francs in the year-ago period on sales growth.

Adecco, Swiss staffing agency, announced that its 2Q net profit was up 5% to 100 million euros from the year-ago period, missing analysts' expectations of 107 million euros. Revenue for the period rose 6%, matching forecasts.

CORPORATE NEWS

Deutsche Telecom AG and KPN NV announced termination of their talks on a possible bid for U.K.’s wireless operator O2 PLC as the two sides involved could not reach an agreement on the price for O2’s German operations. KPN failed to buy all of O2 last year on valuation issues.

Qwest Communications and its largest union reached a contract agreement late Tuesday, putting the final touches on a tentative pact after several days of intermittent negotiations, removing the threat of a strike by 25,000 telephone workers in 13 states.

OTHER NEWS

The annual consumer-price inflation for July reached its highest level of 2.3% mainly due to higher energy costs, but also helped by a number of products like cars, bank charges and insurance premiums. On this basis the Bank of England is expected to keep interest rates unchanged for the rest of 2005.