Modest Gains as Oil Slides Below $63

Elena
12 Sep, 2005
New York City

U.S. markets trade mixed on M&A news. Oracle agreed to acquire Siebel System at the total value of $5.85 billion. Wachovia agreed to acquire Westcorp for $3.42 billion. eBay is buying Skype Technologies for $2.6 billion. The tech sector rose by 1%, together with the airline sector which was also up 1%. Energy and gold sectors declined.

U.S. MARKET AVERAGES

The stock markets have very little changed their trading fashion since the beginning of Monday session. The morning dealings have been within narrow ranges with the major averages posting only modest gains.
Stocks have been largely driven by merger and acquisition deals and declining oil prices. The merger news brought positive sentiment to the market as traders believe that consolidation is a sign of corporate confidence in the economic outlook.

A considerable contribution to the market stability was provided by the tech sector, rising up 0.6% on a series of M&A news. The business software Oracle is acquiring its rival Siebel Systems; the online auctioneer eBay is buying Skype Technologies and the financial services company Wachovia Corp. is acquiring the automobile finance company Westcorp.

The leading gainers of the morning session were the software sector, rising 1% and the computer hardware space , climbing higher by 1%. The airline sector rallied recently, posting advance of 1%, although it started below the flat level.

Oil prices put their stamp on the market falling below $63 a barrel on signs of slowdown in global demand growth and dragged the energy sector down to make it the worst performer, down 1.7%.
Gold sector notably declined 1%.

Several stocks like GTECK ((GTK)), Corning ((GLW)), and Agilent ((A)) posted considerable gains.
Delta ((DAL)) and OSI Pharmaceuticals ((OSIP)) were among the declining stocks.

MOVERS AND SHAKERS

Siebel Systems ((SEBL)) advanced 13.5% after Oracle Corp. ((ORCL)) said it would buy the company for $3.6 billion. Oracle lost 1.3% while its German competitor SAP ((SAP)) gain 0.65%.

eBay Inc. ((EBAY)) dropped 0.9% after it agreed to aquire Skype Technologies SA for $2.6 billion in cash and stock and up to $1.5 billion in incentives.

Wachovia Corp. ((WB)) could gain in early dealings due to its $3.91 billion stock acquistion of Westcorp ((WES)) that would increase earnings in the second year after the purchase. Westcorp owns 84% of WFS Financial ((WFSI)) and Wachovia bought the rest 16% of the company. Wachovia jumped 0.55%, Westcorp was up 0.75% while WFS Financial climbed 0.15%.

Delta Air Lines ((DAL)) was down 23% due to the rumours about a bankruptcy protection as early as Thursday.

Northwest Airlines Corp. ((NWAC)) are expected to rise after the company ended talks with its striking mechanics on Sunday without an agreement. The company lost 4 cents on Friday.

Citigroup Inc. ((C)) was 1.4% higher after the bank was upgraded to overweight from neutral by Prudential.

ECONOMIC NEWS

No major economic news is expected today.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed the trading session in the positive territory with the Nikkei rising to a new four-year high of 1.6% after the general election victory of Prime Minister Junichiro Koizumi’s LDP and on better-than-anticipated GDP data. In the regional markets, South Korea’s Kospi rose 0.5%, Singapore Strait Times gained 0.75%, and Hong Kong’s Hang Seng added 0.2%. In currency markets the dollar bought 109.78 yen.

European stocks closed mixed on falling oil prices, weak euro and deal news from the insurance and utility sector. The focus was on the German companies and policy because of the approaching general elections in the country. The German DAX 30 lost 0.3%, the French CAC 40 finished flat, and London’s FTSE 100 advanced 0.3%.

ENERGY, METALS, CURRENCIES

Oil prices tumbled below $63 a barrel on signs of slowdown in global demand growth. Light sweet crude October delivery slid $1.23 to $62.85 a barrel. London Brent dropped $1.24 to $61.60.

Gold prices declined in European trading. In London gold closed at 4447.30 per troy ounce, down from 4449.00. In Hong Kong the precious metal rose $2.30 to close at $449.35. Silver closed at $6.97, down from $7.01.

The U.S. dollar advanced against most of its major counterparts. The euro fell ahead of national elections in Germany. The European currency traded at $1.2282, down from $1.2406. The dollar bought 109.89 yen, down from 110.48. The British pound was quoted at $1.8223, down from $1.8392.

EARNINGS NEWS

Lowrance Electronics, Inc., ((LEIX)) telecommunication company, reported a dividend of 30 cents per share on record 4Q results for fiscal 2005, with 59% sales increase compared to the same period last year.

Greg Manning Auctions Inc., ((GMAI)) merchant and auction house network operator, reported 4Q net income for the year was $1.33 per share, up from $1.14 per share in the year-ago period on 28% revenue growth, including inventory sales plus commission income. Aggregate sales, that consist of inventory sales and consignment sales advanced 36%% in the same quarter, compared with the previous fiscal year period.

Metal Storm, ((MTSC)) industrial position sensors producer, reported a half year loss that totaled $5.9 million for the six months ended 30 June 2005, down from a loss of $5.7 million in the last year’s period. This result includes a $1.4 million loss from Metal Storm's former US subsidiary, ProCam Machine LLC (ProCam), sold on 1 June 2005. Some key objectives were achieved in the first half including the announcement in June of a $422,297 contract with Dragonfly Pictures to integrate Metal Storm's first flying demonstration of its technology on an Unmanned Aerial Vehicle (UAV).

Bakers Footwear Group Inc., ((BKRS)) specialty retailer of fashion footwear, announced 2Q earnings per share of $0.19, up vs. a net loss of 10 cents a share in the second quarter last year. Comparable store sales rose 12.7% up from a 3.0% rise last year and net sales advanced 27.8% to $45.3 million from $35.4 million for the comparable year-ago period.


CORPORATE NEWS

Delta Air Lines Inc. is likely to file for bankruptcy-court protection this week at the earliest and is closing in on an agreement on $1.7 billion in financing that would keep the carrier airborne while it takes badly needed steps to restructure. The filing, due to be made in U.S. Bankruptcy Court in New York, would occur as soon as Delta directors proceed with a final vote to authorize Chapter 11. The board must give the go-ahead to debtor-in-possession financing, bound to be released by creditors led by General Electric's commercial finance unit. Terms of the pact in question will enable Delta to cash in on $650 million approximately in new financing, with the remaining $1 billion or so meant to pay off a loan from GE last November. Thursday is the most likely date to complete the debtor-in-possession financing and other details so that the board could convene for a vote.

Oracle (ORCL) agreed to acquire Siebel Systems (SEBL) for $10.66 per share. The total value of the deal is $5.85 billion, or $3.61 billion net of Siebel’s cash on hand of $2.24 billion.company said the deal, which is expected to close in early 2006, has a total value of $5.85 billion, or $3.61 billion net of Siebel's cash on hand of $2.24 billion. The deal is expected to close at the beginning of 2006.

Wachovia (WB) revealed that it has agreed to acquire Westcorp (WES) for $3.42 billion in stock. Wachovia also revealed that it will acquire the publicly-held stake of WFS Financial (WFSI), a company that is 84%-owned by Westcorp, for $490 million. Wachovia said that the owing to the acquisition it will become the nation's 9th largest auto loan originator.

eBay, online auctioneer, has agreed to acquire Skype Technologies, Internet-telephone company, for at least $2.6 billion, $1.3 billion in cash and $32.4 million in stock, but the total value may rise as high as $4.1 billion depending on whether Skype would be able to meet a number of performance targets.