Daily Spike in Oil

albena
25 Aug, 2005
New York City

Oil slightly retreated after hitting a record high and stocks opened slightly above flat line. Re-organization at Eastman Kodak and GE's $1.6 billion purchase of a stake in Turkey's No. 3 bank are in the spotlight. The number of Americans filing new claims for unemployment benefits dropped last week with the four-week average for people receiving benefits reaching a 4-year low.

U.S. AVERAGES

Retreating crude oil prices relieved some of the pressure from stocks, after earlier reaching a record $68 per barrel in overnight electronic trading.

The housing sector is up, following the release of better-than-expected new home sales report for July. The broker/dealer sector is close to its lowest level in more than 2 weeks. Energy sector is slightly down in the early trading.

General Electric Co. ((GE)) has agreed to pay $1.55 billion for a 25% stake in Turkish bank Garanti Bank AS. According to reports, GE agreed to acquire the stake from Turkish conglomerate Dogus Holding AS, which owns 51% of Garanti, Turkey's No.3 privately owned bank. General Electric shares lost a penny.

Shares of Six Flags Inc. ((PKS)) climbed 12% after the board of the theme park operator decided to put the company up for sale.

Eastman Kodak ((EK)) continued its job-cutting program, saying it planned to reduce about 900 jobs as the result of shuttering some facilities and expects to take charges worth $153 million. About half the job cuts will take place in Rochester, N.Y., where Kodak is based.

Vonage Holdings Corp., provider of residential phone services over the Internet, is planning an initial public offering to raise as much as $600 million, according to reports. Vonage provides discounted local and long-distance phone services to about 800,000 households. The Edison, New Jersey-based company declined comments on the matter.

Toll Brothers, luxury homebuilder, said its 3Q profits more than doubled on strong land position and pricing power in its affluent markets. Toll Brothers’ shares added 85 cents to $50.85.

Johnson Controls said it agreed to pay $2.4 billion for York International, heating, ventilating, air-conditioning and refrigeration equipment and services suppplier.

JoS. A. Bank Clothiers ((JOSB)) said it plans to open about 46 new stores in the second half of fiscal 2005, giving it a full-year total of 60. At least 25 of these are expected during the third quarter, according to the company. Over the next 4 years, JoS. A. Bank Clothiers plans to grow the chain to about 500 stores.

Wells Fargo & Co. ((WFC)), the fifth largest U.S. bank, will also be in focus on news that it was interested in bidding for British bank Lloyds TSB.

Motorola shares shed 7 cents at $20.89 while U.S.-listed shares of Ericsson dropped 47 cents to $33.74 in morning dealings.

ECONOMIC NEWS

First-time filings for state unemployment benefits declined by 4,000 to a seasonally adjusted 315,000 last week, the Labor Department reported. This is the lowest level since the week ended August 6. The growth in claims met economists' expectations. The four-week average of new claims advanced by 1,250 to 315,000, the highest since July 3.

INTERNATIONAL MARKET NEWS

European shares slipped in mid-day dealings after oil prices hit record levels in electronic trading, dragging airlines and auto makers down. The German DAX 30 Index dropped 1.2% to 4857.9 and the French CAC 40 Index lost 1.1% to 4375.3. The U.K.'s FTSE 100 Index slid 0.2% to 5253.5.

Indonesian shares climbed after a week of declines on expectations that the central bank and government would soon unite to defend the rupiah, which dropped to a 3 1/2-year low. The Jakarta Stock Exchange's Composite Index closed up 2.6% at 1,061.847. The Indonesian currency closed at 10,340 vs. the dollar from 10,280 Wednesday.

Brazil's currency and stocks advanced in early trading Thursday. The real added 0.9% to 2.418 per U.S. dollar, while the Sao Paulo Stock Exchange's benchmark Bovespa index was up 0.71% at 26,901 points.

Tokyo's benchmark stock index dropped from a four-year high Thursday. The Nikkei 225 index closed at 12,405.16 points on the Tokyo Stock Exchange; down 0.78% vs. Wednesday.

Markets elsewhere in Asia closed mixed Thursday. Hong Kong's Hang Seng Index finished almost flat at 14,887.71. Australia's All Ordinaries index slid 0.5% to 4,403.80. Singapore's Straits Times index added 0.4% to 2,287.56, while in Taipei, the Weighted index shed 0.3% to 6,109.66. In Seoul, the Kospi index closed up 0.3% at 1,097.29, trimming earlier losses.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil prices lost 41 cents to $66.91 a barrel in early trading Thursday. Energy prices continued climbing yesterday, as both oil and natural gas reached fresh records.

The benchmark 10-year Treasury added 1/32, or 31 cents per $1,000 invested, to yield 4.167%. The 30-year bond declined 5/32 to yield 4.381%.

The dollar weakened to 109.92 yen, off from 110.21 yen late Wednesday, while the euro remained unchanged at $1.2273.

EARNINGS NEWS

Smithfield Foods, pork processor, reported that 1Q net income profit fell to 44 cents a share, down vs. 49 cents a share for the comparable period last year despite a 12% sales increase, matching the analysts’ forecasts. The company attributes its underperformance to weakness in the pork market. Smithfield’s international segment posted a 1Q operational loss on account of a plant shutdown in Poland and strong competition from France.

Jackson Hewitt Tax Services, tax returns preparer, reported that 1Q net loss extended to 35 cents a share, down from 30 cents a share in the year-ago period on revenue decline, missing analyst estimate of 31 cents a share.

Party City, party goods chain, reported it reversed to a 4Q net loss of 1 cent a share on a decline in net sales and a higher tax rate, missing analysts’ expectations of a 4 cents a share. Sales remained flat and same-store sales were down 0.8%.

Patterson, distributor of dental products, reported 1Q net income advanced 5% to 31 cents a share from the year-ago period on sales growth, missing analysts’ forecasts by a penny. The company foresees 2Q earnings in the range of 35 cents to 37 cents a share.

Tech Data, distributor of computer products, posted a 2Q loss of $1.02 per share, including a one-time charge, down vs. a profit of 52 cents per share in the year-ago period. Aside from the charge, the company recorded a 2Q profit of $0.27 per share, beating analyst estimate by 2 cents. Net sales for the period totaled $4.83 billion, up from $4.58 billion the year earlier.

Invensys, software and information manufacturer, announced that 1Q net loss was reduced to 26 million pounds from 42 million pounds for the comparable period last year despite revenue decline.

Hilton, hotel and gaming company, announced that pretax profit for the first half advanced to 201.9 million pounds from 193.7 million pounds for the year-ago period on revenue growth. Profit at its betting chain Ladbrokes was down by 6.3%.

Toll Brothers, luxury homes builder, reported 3Q net income of $1.27 per share, up from 66 cents per share in the year-ago period on strong revenue growth, beating analysts’ expectations of $1.19 per share.

Vimpel-Com, wireless telecommunications services provider, reported 2Q net income advanced to $3.11 a share, up from $2.24 a share a year earlier on strong operating revenues growth and more than 4.3 million new subscribers.

Stewart & Stevenson, industrial equipment maker, announced that 2Q net income increased to 31 cents a share on revenue growth of Earnings from continuing operations totaled 56 cents a share, up vs. 40 cents in the same period last year.

CORPORATE NEWS

The European Commission approved Johnson & Johnson's takeover of Guidant Corp. for 18 billion euro on condition the new company sell off some of its smaller units.

Johnson Controls, auto parts maker, agreed to acquire air conditioner maker York International for $3.2 billion in cash and assumed debt. The offer of $56.50 a share represents a premium of 35% from Wednesday's close level. York shares added 32%, to $55.11 in after-market trading.

Nokia ((NOK)) disclosed its plans to open a Global Networks Operation Center in India by the end of the year. The center is planned to perform network operation tasks mainly for selected operators in the Asia Pacific region as well as Europe, the Middle East and Africa.

Alliant Techsystems ((ATK)) said that it has been awarded contracts for $126 million to continue managing and modernizing the Radford Army Ammunition Plant, Radford, Virginia, and produce a variety of medium-caliber ammunition and rocket propellants. According to the company, if all options are exercised the total value of contracts could total approximately $427 million. The company received $23.3 million from U.S. Army Joint Munitions Command, Rock Island Arsenal, Ill., for the first year of a five-year contract to manage the Radford Army Ammunition Plant.