Declining Oil Fails to Spark Market

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

Fed Chairman delivered one of his most cautious speech at Central Bankers gathering. While the topic was central banking but he openely worried about recent housing boom, after-efffect of low interest rate in the long run and economic imbalances due to current account and trade deficift in the U.S. economy. Univ. of Michigan consumer sentimet Index dropped. Verizon stock closed at new 52 week low.

U.S. AVERAGES

Late hour 2% sell-off in oil failed to halt market decline.

Lower read on consumer Sentiment and Fed Chairman’s cautious remarks put market in the sell-off mood this morning. Oil traders remain focused on the Florida hurricane and as the likelihood of hurricane damages to oil infrastructure declined oil sold-off in the final hour dragging with it energy exploration and service stocks.

Fed Chairman made a final appearance at the Fed’s annual gathering of central bankers organized by Federal Reserve Bank of Kansas. Mr. Greenspan delivered one of his most cautious remarks in the health of the economy and his views on budget and trade deficit. The comments highlighted long term economic imbalances in the economy recent housing boom.

The chairman said that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

The housing sector is still among one of the day's worst performers, down 1.5% in the afternoon only to recover to 1% loss at close, after comments by Fed Chairman Greenspan, who called the housing boom an economic ""imbalance"" and warned about the possible consequences of low risk premiums-like those evidenced by low treasury yields and low mortgage rates. The housing stocks closed at two-month low.

Very few sectors are to the upside. The gold segment remains slightly above the flat line at present.

Precision Castparts ((PCP)) hit a fresh 52-week high after announcement that it has agreed to buy Special Metals Corp. in a $540 million accretive transaction. Liberty Corp. ((LC)) has also reached a new high with its own 26% acquisition-related rise.

Verizon ((VZ)) has declined to new 52-week low it hit yesterday. PETCO ((PETC)) has extended its low with an earnings-related 14% decline.

Home Depot Inc. ((HD)), the world's biggest home improvement retailer, dropped 1.1% and is among the Dow's biggest percentage losers. Rival home improvement chain Lowe's Companies Inc. ((LOW)) slid 1.7%.

DOV Pharmaceutical is down $2.70 to $15.27 after the drug-maker said Thursday that it has suspended a clinical trial of its experimental anti-anxiety drug. Pixar slipped $0.83 to $42.17 on news that the SEC has started an informal probe into the company.

Omnivision Technologies climbed nearly 13% after the chipmaker announced that 2Q earnings and revenue are likely to beat forecasts.

Chico’s after reporting 35% growth in earnings and cautioning on lower third quarter margin saw its stock declined by 8.3%.

Of the 30 DOW components six stocks were up, two unchanged and 22 declined.

ECONOMIC NEWS

The consumer sentiment index of the University of Michigan declined to 89.1 in late August from 96.5 in July and 92.7 in early August. It's the first drop since May and the lowest level since May. Economists were expecting the index to fall to 92.6.

INTERNATIONAL MARKET NEWS

European markets ended lower Friday after oil held above $67 a barrel and U.S. markets dipped into the negative territory. The German DAX 30 shed 1.5% at 4,783, the French CAC 40 dropped 0.8% to 4,342 and the U.K.'s FTSE 100 index declined 0.5% to 5,2282.

Asian markets closed higher on Friday benefiting from modest gains on U.S. market and firm crude-oil prices. Tokyo's Nikkei Average closed up 0.28%, at 12,439.48 on interest in steel and auto shares. Elsewhere in the region, Hong Kong's Hang Seng index gained 0.63% to 14,983.89, Australia's All Ordinaries index added 0.35% to 4,419.10 and in Singapore, the Straits Times index rose 0.09% to 2,286.55. Seoul's Kospi index went against the upward trend shedding 0.98% to 1.086.55 on broad foreign selling of financial stocks and surging oil fears.

The Chinese Yuan reached its highest level since a July 21 revaluation, closing at 8.0965 Yuan per $1. It finished at 8.1002 per $1 Thursday.

GDP in the U.K. in the second quarter climbed 0.5% vs. the previous quarter, revised up from the previous estimate of 0.4%, the Office of National Statistics announced. Year-on-year, the Office said the U.K. economy grew 1.8%, up vs. the previous estimate of 1.7%.

ENERGY, METALS AND CURRENCIES MARKETS

Oil prices closed 2% lower as Hurricane Katrina took a course that would probably miss most of the oil platforms in the region. Light, sweet crude for October delivery declined 1.36 cents to $66.13 a barrel in New York.

In NY Gasoline lost nearly two and a half cent to $1.8534 a gallon while heating oil slid to $1.8712. Natural gas traded above $10 to close at $9.806 per MBTU. In London, October Brent crude oil futures on the International Petroleum Exchange added 3 cents at $66.30 a barrel.

Major currencies were higher against the dollar on surging oil and expectations for higher U.S. interest rates. The euro added 0.1% vs. the greenback to $1.2303. Against the Japanese yen, the dollar dropped 0.5% to 109.62. The greenback also declined vs. the British pound after UK reports showing the economy grew 0.5% in 2Q vs. the previous quarter, revised up from the previous estimate of 0.4%. Last, the British pound was up 0.3% at $1.8040.

Bonds dropped, with the yield on the 10-year Treasury note rising to 4.18% vs. 4.16% Thursday.

Gold futures retreated from early morning gains, with the benchmark December contract up 60 cents at $440.60 an ounce.

EARNINGS NEWS

Chico's FAS, specialty clothing retailer, reported 2Q net income increased to 27 cents per share from 20 cents per share in the year-ago period. The company’s profit advanced 38 %, supported by considerable sales growth, but warned on 3Q results. Sales rose 35% to $343 million from $255 million last year. Same-store sales for the quarter increased 15.7% compared with the year-ago period.

Results matched analysts’ earnings forecasts and topped the consensus revenue estimate of $339.8 million. Chico's announced it is poised to open between 105 and 120 new Chico's and White House Black Market stores in fiscal 2006. It also plans to open 20 new Soma by Chico's stores during fiscal 2006. The stock is trading 9% lower at mid-day.


CORPORATE NEWS

Hewlett-Packard Co. ((HPQ)) announced that the company’s board authorized an additional $4 billion to repurchase its common stock. Through the repurchase, the company plans to offset the dilution of shares issued under employee benefit plans, and return cash to its shareholders. Hewlett-Packard said it repurchased $2.1 billion in stock in the three fiscal quarters ended July 31, and has about $800 million left under its $3 billion repurchase program approved last September. According to reports, HP plans to invest $150 million over the next 5 years to boost its capabilities in radio frequency identification technology, to compete with Sun Microsystems and Symbol Technologies.