Rally Fades in Rising Oil

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

Texas Jury awards $230 million in punitive damages in Voixx trial, dragging down Merck and other pharmaceutical stocks with it. Retailers cautious outlook contniued as Ann Taylor and Gap released earnings. Asian and European markets closed lower. Gold and Platinum were trading lower. Autodesk deliver stellar earning growth.

U.S. MARKET AVERAGES

Market strength turned to weakness as oil rose steadily in the session. Market’s fight in the face of rising oil was lost in the last twenty minutes of trading. During the afternoon trading market was caught in tight trading range with no real conviction in either direction.

On a day when there is no economic news, market is focused on recent Jury verdict against Merck, upgrade on Coca Cola and IBM and Wal-Mart falls to near three year low.

Texas jury awarded widow $230 million in damages in Vioxx trial against Merck. The jury found the company guilty on all three counts. Merck stock is trading 7% down dragging other pharmaceutical stocks with it.

As market averages are caught in summer doldrums Coca Cola and IBM are up 2% and more on analysts’ upgrades.

Another factor driving the market is the rising crude-oil. Market is also attentive to cautious retailer earnings. Limited released pessimistic outlook yesterday and today market did not like what they heard from Gap. It seems that since Wal-Mart released earnings not a day passes without a warning from yet another retailer. Wal-Mart is trading 1.4% lower.

Oil prices advanced more than $1, recuperating from lows this week as markets responded to a fire at a refining complex in Venezuela and slowing production protests in Ecuador. Traders remained also cautious about Iran's nuclear ambitions, with expectations that the situation could get worse. Light sweet crude for September delivery rose $2.23 to $65.50 a barrel in electronic trading on the NYMEX and gasoline gained nearly 3.7 cents to $1.90 a gallon, while heating oil rose by nearly 4 cents to $1.8285.

The U.S. dollar made its biggest gain against the euro since June on speculations of further interest rate increases. This week the dollar has advanced 2.2%. Against the euro it stood at $1.2176.

Investors had several disappointing quarterly earnings reports from retailer companies.

AnnTaylor Stores, women's clothing retailer, reported a sharp decline in 2Q profit of 10 cents per share from 41 cents the year earlier on weak sales and one-time costs from moving its corporate headquarters.. Excluding relocation costs, adjusted earnings were 18 cents per share, a penny higher than analysts’ forecasts. Same-store sales were down 6.1%.

Gap, retailer company, posted 2Q 39% net income rise of $272 million, or 30 cents a share vs. $195 million, or 21 cents a share after a record gain of $58 million. Due to lower sales in the second quarter, the company lowered its 2005 earnings forecast to the range of $1.30 to $1.34, down from $1.44 to $1.48.

Software company Autodesk Inc. shares rose 6 percent to $40.65 after its net profit nearly doubled and it raised its outlook for the year. Autodesk closed at $38.35 on Nasdaq.

Shares of Advanced Digital Information Corp jumped 12 percent to $9.67 from a Nasdaq close at $8.63 after its quarterly revenues surpassed analysts' forecast.

Shares of children's apparel retailer Gymboree Corp. fell 4.5 percent in extended hours of trading on Thursday after the company's quarterly revenues just met analysts' forecasts

Shares of Sharper Image Corp. fell 2.5 percent to $12.70 on Inet after the retailer posted an unexpectedly deep second-quarter loss. The shares closed at $13.02 on Nasdaq.

The stock of ScanSource Inc. , a reseller of bar-code scanner-related products, dropped nearly 13 percent to $45.26 after it lowered its first-quarter revenue outlook. ScanSource closed at $52.01 on Nasdaq.

Marvell Technology Group reported its profit nearly tripled from a year ago and retailer Aeropostale Inc. projected third- and fourth-quarter earnings that missed the Wall Street estimate by a wide margin.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished the session mixed, deprived of fresh trading news as crude-oil steadied and U.S. stocks ended mixed overnight. Traders were selling steel, real estate and banking issues to take profit from recent gains. The leading decliners were Nippon Steel, Mitsubishi Estate and the automotive sector. The Japanese Nikkei lost 0.13%, Hong Kong’s Hang Seng ended down 0.7%, South Korea’s Kospi lost 0.3%. Markets in Australia, Thailand, and Singapore closed higher. The dollar stood at 110.82 yen.

European markets gained ground after seven consecutive trading sessions in the red. Regional markets were boosted by higher opening of U.S. markets, oil and mining stocks gains and positive expectations for the telecom sector. The German DAX 30 added 1.62%, the French CAC 40 climbed 1.31%, and London’s FTSE 100 rose 0.82%. The euro fell 0.3%.