Market Retreats as Oil Rises

Elena
08 Sep, 2005
New York City

Homebuilders advanced after Hovnanian Enterprises posted net income of $1.76 a share for the third quarter , 2 cents below expectations. The company said it expects to post earnings exceeding $7 a share for fiscal 2005. Analysts had forecast earnings of $7.26 a share. Hovnanian slumped 6%. Toll Brothers fell 4.2%, KB Homes shed 3.1% and Pulte Homes lost 3.2%.

U.S. MARKET AVERAGES

The U.S. averages lost ground in early morning trading as crude-oil took the upward direction ahead of oil inventory report, expected to show huge declines in crude and gasoline supplies after Katrina.

The market was also driven by a number of M&A news, including News Corp.’s $650 million purchase of IGN Entertainment and the possible acquisition of Skype Technology by eBay. Investors ignored a surprising drop in first-time jobless claims, or 319,000 for the week ended on Sept 3, which is 1,000 less than the previous week.

The Housing sector has declined by 2.9% on disappointing news from Hovnanian Enterprise. The retaler sector dropped 1.3%. Insurance and Internet stocks also lost ground.

The gold sector is the leading gainer, jumping 2.2%, the highest level since mid-March.
Energy stocks made modest gains.

The 3 major U.S. equity indices are each showing losses of about 0.4%. Dow -37.10, Nasdaq -8.87, S&P 500 -4.97. NYSE Adv/Dec 769/1539, Nasdaq Adv/Dec 805/1547.

On the bond market, long-term Treasury prices rose, sending yields lower. The benchmark 10-year note, which is used to set mortgages, was up 5/32 at 101 1/32, with its yield at 4.12% vs. 4.14% on Wednesday.

MOVERS AND SHAKERS

Northwest Airlines Corp. ((NWAC)) advanced 5.9% in pre-market dealings as a result of rising hopes that the company may solve the problems with its striking mechanics.

eBay Inc ((EBAY)) was down 2.7% in pre-market trading because of the rumors that it intents to buy Internet phone service Skype Technologies SA.

News Corp. ((NWS)) rose 0.64% after the company said it acquires IGN Entertainment Inc. for about $650 million.

Ford Motor Co. ((F)) is expected to announce the sale of its Hertz Corp. unit to a group of corporate buyout firms. The company rose 1.4% in pre-market trading.

Sears Holdings ((SHLD)) lost 3.6% as it announced a 4.4% decline in same-store sales for the second quarter.

Coca-Cola Enterprises Inc. ((CCE)) was down 3.9% in pre-market dealings after it said third-quarter earnings won't reach analysts’ estimates of 51 cents per share.


ECONOMIC NEWS

On the data front, first-time claims for state unemployment benefits fell by 1,000 to 319,000 last week, the Labor Department estimated.The four-week average of new claims rose by 2,000 to 318,500, the highest in seven weeks. The figures include about 10,000 claims related to Hurricane Katrina, a Labor Department spokesman said, adding that upward revisions to last week's data are possible.

July wholesale trade data are due out at 10 a.m. ET and consumer credit numbers for July are slated for release at 3 p.m. ET.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed on declining crude-oil prices to a three-week low. The Nikkei shed 0.56% as investors sold steel, bank and real estate issues, the central bank said that it would keep monetary policy and national elections approached. Across the region Hong Kong’s Hang Seng lost0.38%, while South Korea’s Kospi reached a record high, rising 0.2% on interest-rate hikes speculations. The dollar bought 110.40 yen.

European markets traded near the flat line at mid-day dealings, pressured by slightly rising crude-oil prices and mixed earnings reports, including declining building-materials maker Lafrage and gaining luxury retailer PPR. The German DAX 30 was unchanged, the French CAC 40 lost 0.3%, and London’s FTSE 100 slipped 0.1%.

ENERGY, METALS, CURRENCIES

Crude-oil prices started rising ahead of U.S. data, expected to show a sharp decline in crude and product stocks. Light sweet crude gained 57 cents to $64.94 a barrel. London Brent climbed 65 cents to $63.54.

Gold advanced sharply, lifted by strong demand and inflation fears. Gold for December delivery climbed to $453.90 per troy ounce on the Nymex.Silver December contract was up 3.7 cents to $7.155.

Copper for December delivery edged up 0.3 cents to $1.65 a pound.

The U.S. dollar was mixed against its major counterparts in European trading. The euro was quoted at 1.2413, down from $1.2416. The dollar bought 110.48 yen, up from 110.06. The British pound traded at $1.8369, up from $1.8356.

EARNINGS NEWS

SWS Group, ((SWS)) investment and financial-services holding company, expects to post 4Q net income of $5.3 million, or 30 cents a share, up from the year-ago period when the company recorded a net loss of $4.3 million, together with an $8 million charge to settle an anticipated regulatory enforcement action.

Powell Industries,((POWL)) manufacturer of electricity management equipment, posted 3Q net income of 19 cents a share, up vs. 7 cents in the same period last year on strong revenue growth to $66.9 million from last year's $52.8 million, beating analyst estimate of 13 cents a share.

InBev , ((BE)) brewer, announced first-half adjusted EBITDA advanced 20.8% to 1.36 billion euros, on 6.8% revenue growth up to 5.22 billion euros. The company announced that it’s going to meet EBITDA margins of 30% by 2007, after posting adjusted EBITDA margins of 26.1% in the first half.

PPR, ((PPR)) luxury goods retailer, reported that first-half net income climbed 12.5% to 169.6 million euros, with sales up 3.1% to 8.1 billion euros, on a strong performance at its Gucci and Bottega Veneta brands.

Havas, ((HAVS)) French media company, announced that first-half net income rose 52% to 8 cents a share despite a sales decline of 6.4%, mainly due to changes in scope and exchange rate variations. Sales advanced 2.2% on a comparable basis.

CORPORATE NEWS

eBay Inc. is in talks to acquire Internet-telephony company Skype Technology for $2 billion to $3 billion. So far Skype has been in deal talks with other companies but none of them has proved successful.

Bear Stearns ((BSC)) and Calpine ((CPN)) said they have reached a deal to form an energy marketing and trading venture, which will be called CalBear Energy LP and is going to focus on physical natural gas and power trading. Trading operations are scheduled to start in 4Q, according to the companies