Katrina's Aftermath Weighs on Stocks

Elena
30 Aug, 2005
New York City

U.S. averages lost ground on hurricane damages assessment. Insurance and airline companies lead the decliners. Oil majors gain.Consumer confidence jumped unexpectedly to 105.6 in August from a revised 103.6 in July. Factory orders fell 1.9% in July, a smaller-than expected drop.

U.S. MARKET AVERAGES

Stock futures are trading in the negative territory in the first hour after the opening of Tuesday session as crude-oil prices increased $1.40 in early trading. Investors’ relief that Hurricane Katrina had caused less damages than expected was replaced by concerns that tight oil supplies could be further constraint after damages had been assessed. According to estimates, it killed at least 55 people and caused insured losses of approximately $26 billion.

In the first hour of trading on Wall Street, the Dow Jones industrial average fell 34.31, or 0.33 percent, to 10,428.74.

Bonds rose as stocks fell, with the yield on the 10-year Treasury note falling to 4.15 % from 4.17 % late Monday.

MOVERS AND SHAKERS

Insurance stocks led the decliners on hurricane damages assessment.
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[Hartford Financial Services Group fell 16 cents to $73.18; Allstate Corp. fell 35 cents to $56.83 and MetLife Inc. fell 1 cent to $49.11.

The airline sector also dropped.

AMR Corp. fell 15 cents to $18.70; Northwest Airlines Corp. fell 2 cents to $5.17 and Delta Air Lines fell 1 cent to $1.26.

Oil companies are among the gainers on the back of rising crude.

Exxon Mobil Corp. rose 10 cents to $58.52; Chevron Corp. rose 20 cents to $59.71; ConocoPhillips rose 43 cents to $63.50 and Valero Energy Corp. rose 87 cents to $92.75.

Some gaming stocks fell again as casino operators assessed the damage to their Gulf Coast properties.

Pinnacle Entertainment Inc. fell 28 cents to $21.79. Isle of Capri Casinos Inc. fell 44 cents to $23.

ECONOMIC NEWS

Consumer confidence surprisingly advanced to 105.6 in August from a revised 103.6 in July,according to the Conference Board. The news came unexpected for many economists, who forecasted confidence to decline due to the surging oil prices in the recent months.

Factory orders lost 1.9% in July, a smaller-than-expected drop.

Later today the Federal Open Market Committee will release the minutes of its meeting on Aug 9 which is likely to give some clues about the central bank rate-hiking.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished generally higher, boosted by easing oil prices and recovered U.S. markets with rallying steel, shipping and bank shares. The Nikkei rose 1.16% despite some disappointing economic news, lifted by exporter issues on the back of retreating oil prices to $67.97 a barrel. Among the other regional markets, Hong Kong’s Hang Seng advanced 0.6%, South Korea’s Kospi added 0.9%, while China stocks lost 0.7% on blue chips sell-off.

European markets traded in the positive territory at mid-day as crude-oil prices fell off record highs and as South African insurance company Old Mutual announced having bid talks with Swedish insurer Skandia Forsakring. Crude-oil stayed above $68 a barrel sending BP up 1%. Oil-sensitive airline companies and carmakers made gains. The German DAX 30 rose 0.3%, the French CAC 40 added 0.3%, and the U.K.’s FTSE 100 gained 0.5%.

ENERGY, METALS AND CURRENCIES MARKETS

Oil advanced more than $2 on the assessment report of the damages Hurricane Katrina had caused to the oil refineries in the Gulf of Mexico. Light sweet crude for October delivery gained $2.05 to $69.25 a barrel on the Nymex. Gasoline added 8.6 cents to trade at $2.1470 a gallon, while heating oil rose 5 cents to $1.9615. London Brent October contract rose $2.27 to $67.14 a barrel.

Gold declined in Europe to its lowest trading level in more than two weeks on concerns that speculators may sell their holdings. In London gold traded at $436.15 per ounce, down from $438.60. In Hong Kong the precious metal lost $3.40 to close at $436.35. Silver traded at $6.75, down from $6.78.

The dollar reached a three-week high against the yen prior to key U.S. consumer-confidence data release. Earlier the dollar gained by more than 8% vs. the Indonesian rupiah, putting pressure on Asian currencies including the yen. The greenback was steady at $1.2228 a euro after briefly reaching a 12-day low against the euro on Monday on high crude oil prices. The dollar was up 0.4 percent at 111.12 yen.

EARNINGS NEWS

Maidenform, intimate apparel maker, announced it reversed to a 2Q profit of $2.6 million versus a year-ago loss of $2.4 million. The company posted a 58 cents loss per share, down from a loss of 23 cents for the same period last year because of preferred stock dividends and changes in redemption value related to its July 22 initial public offering. Sales for the quarter rose to $102.3 million from $50.1 million in the year-ago period.

Zale, jewelry retailer, posted 4Q earnings of 8 cents a share, down vs. profit of 13 cents a share in the year-ago period on revenue growth, matching analysts’ forecasts. The company has approved the buyback of up to $100 million worth of its common stock. It also expects that its adoption of new accounting standards as of August 1 will cut down earnings by about 10 cents a share in fiscal 2006.

Engineered Support Systems, military equipment manufacturer, posted 3Q net income of 52 cents a share, up from 49 cents a share in the same period last year on revenue growth, beating analysts forecasts of 50 cents a share. The company reaffirmed its outlook for earnings from continuing operations in 2005 of $2 to $2.03 a share and revenue of $1.02 billion to $1.05 billion.

CNOOC, China's offshore oil producer, reported net profit in the first half of 2005 jumped 68.6 percent on year to 11.83 billion yuan ($1.46 billion), spurred by high oil prices. CNOOC's net production offshore China advanced 20.1 % to 383,583 barrels of oil equivalent. CNOOC is due to hold a teleconference later Tuesday give more information on its results.

CRH, Irish constructions material company, posted first-half profit advanced to 55.7 euro cents a share, up vs. 47.4 euro cents a share in the year-ago period on 13% sales growth and an operating profit rise of 20%. The group lifted its dividend for the period by 17% to 11.25 euro cents a share.

CORPORATE NEWS

Sprint Nextel, wireless company, is about to buy two of its small wireless affiliates for a total price of approximately $700 million. The third largest U.S. wireless company was near to a purchase agreement with IWO Holdings Inc, wireless operator with 237,000 subscribers, for about $400 million. It was also near a $288 million acquisition of Gulf Coast Wireless, a Louisiana-based company with some 93,000 subscribers.

Internet Gold, internet access service company, said that MSN-Israel, the subsidiary it possesses with Microsoft Corporation, has acquired 51% of the rights in getprice.co.il - one of Israel's most popular price comparison sites. Together with GetPrice, MSN-Israel intends to establish a new price comparison site called MSN-Compare. MSN-Compare will work in parallel to GetPrice, but will target users of other MSN-Israel services.

Starwin Media Holdings announced that they have reached an agreement to acquire majority control of Strategic Media International Limited, a Hong Kong corporation - parent company of three corporations traded on the Hong Kong Stock Exchange and the other publicly traded on the Shenzhen Stock Exchange. These four publicly traded corporations are the holding corporations of the premier leading media corporation in the Asia Pacific region.