Oil Marches Ahead

Elena
19 Sep, 2005
New York City

Yesterday's German election fails to elect a clear leader. The German DAX 30 dropped 1.3% at mid-day on uncertainty of economic reforms. Days of chaos ahead. Nike posted 1Q 32% earnings rise of $1.61 per share due to strong sales, beating expectations of $1.42. Spinnaker Exploration has agreed to be acquired by Norsk Hydro for $65.50 per share in cash. German election analysis.

U.S. MARKET AVERAGES

U.S. stock markets opened lower in line with pre-market trading indications. Since opening the three major averages have been in the negative territory, reflecting a new spike of oil prices and uncertainty over the Fed Reserve’s decision on interest rate Tuesday.

Crude-oil jumped $1.52 to $64.52 a barrel on another tropical storm approaching the Gulf Coast. Traders are not very active in dealings, awaiting FOMC’s decision of interest-rate increases. Although a pause of the interest-rate hikes was expected as it was considered a good support to the economic recovery, economists now tend to see an increase of the benchmark rate by 3.75%.

The gold sector gains considerably, rising 2.8% after three straight successful sessions last week. Since then the space has risen by 14%. Another gainer is energy sector, climbing 2.2% .
Among the decliners the airline sector loses 1.4$. Bank stocks also drop 1%, erasing some of Friday’s gains.

In the first hour of trading, the Dow Jones industrial average fell 34.23, or 0.32 percent, to 10,607.71. Broader stock indicators were also lower. The Standard & Poor's 500 index fell 2.47, or 0.2 percent, to 1,235.44, and the Nasdaq composite index dropped 2.49, or 0.12 percent, to 2,157.86.
Bonds remained flat, with the yield on the 10-year Treasury note unchanged at 4.27 percent.


MOVERS AND SHAKERS

Spinnaker Exploration rose 16% before the opening due to the news that Norsk Hydro will buy the company.

TBC jumped 32% in premarket trading benefited from the news that it will become a unit of Sumitomo.

Nike ((NKE)) was up 4.5% after announcing its first-quarter earnings of $432.3 million, well above analysts' expectations. Revenue soars 8% to $3.9 billion from $3.6 billion a year earlier.

EBay Inc. ((EBAY)) fell 2.1% in premarket trading. Bear Sterns downgraded the company to peer perform from outperform after the broker traveled to China.

E.W. Scripps Co. ((SSP)) was upgraded at JP Morgan to overweight from neutral. The broker pointed awaited strength in cable networks. There were bare premarket quotes.

Dominion Resources ((D)) was upgraded to buy at Citigroup. The broker cited big rise in commodity prices. Premarket quotes were not available.

ECONOMIC NEWS

No major economic news release is due today.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks ended generally higher, lifted by special treatment shares of companies which have reported losses for two successive years. The Japanese and Hong Kong stock markets were closed for holidays. Among the regional markets, Shanghai’s Composite rose 0.6%, South Korea’s Kospi gained 0.4%, and India’s BSE 30 added 0.5%. In currency markets the dollar bought 111.42 yen.

European stocks were trading mostly down at mid-day with the German DAX 30 declining 1.3% after the general election brought uncertainty and caused concerns over the pace of economic reforms. The French CAC 40 fell 0.1%, while London’s FTSE 100 added 0.1% on deals and restructuring talk. The euro lost 0.8% to $1.2142.

ENERGY, METALS, CURRENCIES

Oil prices advanced more than $1 on tropical storm Rita approaching the Gulf Coast and speculations of a new interest-rate increase. U.S. light sweet crude October delivery rose $1.20 to $64.20 a barrel.

Gold prices reached a 17-year high as the appeal for the precious metal increased on inflation concerns and uncertainty about U.S. economy. Since last week the precious metal has risen 4%. In London gold traded at $461.95 per troy ounce, up from $458.70. Silver opened at $7.20, up from $7.03.

The U.S. dollar climbed against the other major currencies in European trading. The euro was quoted at $1.2132, down from $1.2225. The dollar changed hands at 111.42 yen, up from 110.33. The British pound traded at $1.8003, down from $1.8059.

EARNINGS NEWS

Nike Inc., ((NIKE)) footwear and apparel maker, posted 1Q earnings of $1.61 a share, up from a year-earlier profit of $1.21 a share on 8% revenue growth, beating analyst estimate of $1.42 a share.

Steelcase, ((SCS)) office furniture company, posted 2Q earnings of 9 cents a share, up from a nickel a share in the year-earlier period on 8% revenue growth, missing analysts’ forecasts of 14 cents a share.

Sycamore Networks, Inc. ((SCMRE)) optical networking company, reported 3Q net loss on a generally accepted accounting principles (GAAP) basis was 4 cents per share, flat with the year-ago period. 3Q non-GAAP net loss was 0 cents a share, up from 3 cents per share in the same period last year. 3Q revenue was $17.8 million, up vs. $14.7 million in the year-ago period.

Marcus Corp., ((MCS)) operator of movie theaters and hotel properties, posted 1Q earnings of 51 cents a share, down vs. a year-earlier profit of 61 cents a share on revenue growth, beating analyst estimate of 39 cents a share. On a continuing operations basis, the Milwaukee gained $12.3 million, or 40 cents a share in the quarter.

CORPORATE NEWS

Spinnaker Exploration ((SKE)) has agreed to be acquired by affiliates of Norsk Hydro ASA for $65.50 per share in cash. The transaction is expected to be completed in the fourth quarter.

TBC Corp. ((TBCC)) has agreed to be acquired by Sumitomo Corporation of America for $35 per share in cash. The transaction, which is expected to close by the end of the year, has a total value of about $1.1 billion, excluding debt.