Markets Rise on Lower Oil and Bond Yields

123jump.com Staff
06 Sep, 2005
New York City

Dropping oil price and bond yield supported a broad rally in the market acorss several sectors. Investors remain focused on Hurricane Katrina ravaged Gulf of Mexico as they count and recount its impact on the broader economy. Only two refineries in the region are reporting a close to 100% production pre-Katrina level. Six refineries are still in the state of repair.

U.S. MARKET AVERAGES

Lower rates in the bond market, lower oil prices in NY, optimism on Katrina aftermath recovery fed the rising averages across the board. All three major averages closed up at least 1.2% higher, with the Dow leading the averages with 1.36% rise during the session. The general positive sentiment for the day was also supported by the three-year high close in European market averages.

Retail, tech, Internet, financials, hotels and leisure sectors jumped as investors largely kept buying shares in recently sold-off sectors. Marriott, Choice Hotels, and Hilton hotel stocks rose during the session. The energy sector which sold-off during the morning bounced back and closed in the positive as oil did dip below $66 per barrel.

Home Depot and Coca Cola stocks found investors’ favor as Hurricane Katrina drove higher sales in the Gulf of Mexico region, Wal-Mart saw rise in share price of 3% on affirming same store sales guidance of 2.4% for the current month.




ECONOMIC NEWS

The Institute for Supply Management's measure of financial services, retail trade and other non-manufacturing businesses climbed to 65 from 60.5 in July. A reading above 50 indicates expansion.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks ended the session mixed after trading in the positive at mid-day on crude-oil prices down at $66.46 a barrel. The Nikkei declined 0.3% as investors digested domestic economic data and took profit in steel and retailer stocks sell-off. Across the region, Hong Hong’s Hang Seng lost 0.4%, while South Korea’s Kospi gained 0.7%. The dollar edged up versus the yen to 109.45.

European markets closed the session higher, making solid gains on merger and acquisition news coming from the utility sector, a positive earnings report from the French insurer AXA and strong performance of the U.S. market averages. Declining oil prices also provided support to the stock markets. The German DAX 30 added 1.2%, the French CAC 40 rose 1%, and London’s FTSE 100 climbed 0.4%.


ENERGY, METALS, CURRENCIES

Oil prices declined as oil facilities have started recovering. Light sweet crude for October delivery fell $1.61 to $65.96 in New York on the Nymex. Gasoline futures fell 12 cents to $2.0587 a gallon. London Brent was up 46 cents to $65.31.

Gold fell in European trading as the U.S. dollar edged up. In London gold stood at $443.50 per troy ounce, down from $445.00. In Hong Kong the precious metal lost $2.50 to close at $443.35. Silver closed at $7.02, down from $7.05.

The U.S. dollar advanced against other major currencies in European trading. The euro was quoted at $1.2472, down from $1.2521. The dollar bought 109.68 yen, up from 109.16. The British pound stood at $1.8405, down from $1.8443.

EARNINGS NEWS


Core-Mark, convenience retail industry distributor, reported today first-half net income of 2005 advanced to 56 cents per share, up vs.14 cents per share for the same period last year on a strong net sales growth and a significant income increase from operations for the same period of 2005.

Lowrance Electronics, reported 4Q net income advanced to 49 cents a share, slightly down from 51 cents a share in the year-ago period despite 59% sales growth. 5.1 million diluted shares were outstanding in the current quarter, up from 4 million diluted shares a year ago.

Psychiatric Solutions, behavioral health care services provider, improved its 2006 earnings outlook to $2.10 to $2.15 a share from $1.97 to $2.05 a share owing to better-than-expected terms of its new credit facilities and sustained growth in its existing and acquired operations. The forecast takes into account the impact of planned 3.5 million share offering, but does not include the influence of any future acquisitions. The analyst estimate had been of earnings of $2.09 a share.

TradeStation Group, Internet-based securities brokerage provider, reported its daily average revenue trades for August advanced 32%. Client assets increased 15% as of Aug 31. The company stock went up 7 cents to $9.32 on Friday.

JoS A Bank Clothiers, retailer, announced 2Q earnings went up 55.8% to 37 cents a share, and raised its full year earnings guidance to a $2.15 to $2.19 range. Analysts expected 2Q earnings per share of 33 cents and $2.14 a share fro the full year. JoS. A Bank Clothiers had posted before a 20.2% sales increase. Comparable store sales advanced 4.9%.

CORPORATE NEWS

Capital Automotive REIT agreed to be acquired by clients advised by DRA Advisors LLC for the total value of $3.4 billion, or $38.75 a share, including assumption of debt and preferred shares. The transaction is expected to close at the end of 2005 or the beginning of 2006.

The Spanish Gas Natural SDG made a takeover bid for Endesa, Spanish power utility, for 23 billion euros, or 21.30 euros a share, as 65% of the deal will be in stock and the rest in cash. The successful completion of the deal is expected to create one of the biggest energy producers in Europe.

General Motors GM should be observed as Deutsche Bank cut down its rating on the world's biggest car maker's debt to sell from hold, and affirmed a sell rating on the share, while also downgrading stocks of three suppliers, American Axle and Manufacturing AXL, Dana Corp. (DCN and Lear Corp. LEA.

American National Insurance ANAT announced that its subsidiaries estimate the pre-tax net loss, net of reinsurance will be in the $17 million range, following Hurricane Katrina. Estimated pre-reinsurance losses might go up to the $100 million range based on preliminary modeled losses.

British Airways BAB said passenger traffic decreased 0.7% in August, damaged by the strike that came as a result of catering firm Gate Gourmet firing several workers. Premium traffic declined 4.7% during the month.

Carnival Corp. CCL found it impossible to go ahead with one cruise and shortened the voyages of two others because of hurricanes. The cruise line operator announced it's chartered its cruise ships Ecstasy, Sensation and Holiday to the Military Sealift Command for the Federal Emergency Management Agency. The ships will ensure emergency housing to about 7,000 evacuees.