Retailers Decline Fourth Day in a Row

Elena
21 Sep, 2005
New York City

Japan's Nikkei reached a new four-year high of 13,196 and South Korea's Kospi hit a record of 1,196. European markets lost ground at mid-day on raised U.S. interest rates. Avon Products lowered earnings guidance on weak sales. ConAgra Foods posted 1Q earnings of 68 cents a share, beating estimates of 23 cents. FedEx reported 1Q income of $1.10 a share vs. $1.08 on 10% revenue growth. The company raised its 2006 outlook to $5.25 to $5.50.

U.S. MARKET AVERAGES

U.S. market averages have further declined during the first half an hour of Wednesday session, following a weak opening. Stocks have been trading in the red because of a new surge of oil prices which started rising again on fears that the new Hurricane Rita of category 4, could hit Texas oil facilities by the weekend. Oil has recently traded at $67.90 a barrel. Heating oil, gasoline and natural gas also rose.

The Nasdaq is leading the decline with a 0.6% slide. The Dow and S&P 500 are each showing losses of 0.4%. Dow -46.81, Nasdaq -12.24, S&P 500 -4.61. Bonds rose, with the yield on the 10-year Treasury note falling to 4.19 percent from 4.25 percent late Tuesday.

Energy stocks are among the best performers in early trading, boosted by rising oil prices. The natural gas space and the oil service sector have risen to multi-year highs, going up 2% and 1.4% respectively. The gold sector also shows strength, rising by 2.2%.

The airline sector has fallen sharply to a new two-year low of 2.2% as fuel prices seem likely o continue their surge. Retail stocks are also weak, adding to losses posted over the past week and a half.

FedEx Corp., ((FDX)) transportation and supply chain management services provider, posted 1Q earnings of $1.10 a share, up from $1.08 a share in the same period last year on 10% revenue growth for the comparable quarter.

Morgan Stanley ((MWD)), financial services provider, reported 3Q net income drop of 83% from the year-earlier period and gained 13 cents per share compared with 76 cents per share a year ago. The results include an aftertax charge of $1 billion.

MOVERS AND SHAKERS

American Eagle Outfitters ((AEOS))lost 4.5% as the company lowered its 3Q earnings outlook.

Fedex Corp ((FDX)) advanced 6% after the shipping and package delivery company expanded its profit forecast for 2006 after the first-quarter results appeared to be over analyst expectations.

ConAgra Foods Inc ((CAG)) is likely to be in play in early trading after the company posted first-quarter profit more than 50% above, higher selling prices and lower costs. Sale of its part in Pilgrim's Pride Corp. helped the company to achieve this higher profit. ConAgra Foods was down 2% yesterday.

Merrill Lynch send shares of two rival companies in the semiconductor sector in different directions before the bell. The broker upgraded Intel Inc. ((INTC)) to buy from neutral due to relative valuation. At the same time Merrill Lynch downgraded Advanced Micro Devices ((AMD)) from buy to neutral also pointing valuation. Intel was last up 1.6%, while Advanced Micro Devices was down 2.6%.

ECONOMIC NEWS

Crude oil inventories added to their recent declines with a slight dip in the latest week, according to government data released Wednesday, but the losses were far less steep than in the previous 2 weeks. Stocks of gasoline ticked up during the period. The Department of Energy's Energy Information Administration revealed that crude oil inventories dropped by 300,000 barrels for the week ended September 16, falling to 308.1 million barrels from the 308.4 million barrels recorded in the previous week. This followed a decline of 6.6 million barrels for the prior week and a drop of 6.4 million barrels in the week before that. Even with the recent declines, oil inventories are still 11.7% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week advance of 3.4 million barrels, adding to the more moderate gain posted in the prior week. Gasoline stocks are now 5.4% below their levels of last year. Inventories of distillate fuel oil rose by 800,000 barrels for the most recent week.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed with Japan’s Nikkei and South Korea’s Kospi reaching record highs. The Japanese stocks rose 0.4% to hit another peak of 13 196 mainly on strong confidence in the economic growth of the country which has risen since Prime Minister Junichiro Koizumi was reelected. South Korean shares accumulated further 0.5% to yesterday gains and reached the record 1196. Among the other regional markets, Hong Kong’s Hang Seng lost 0.1%, while Sydney’s All Ordinaries dropped 0.6%.

European markets fell across the region at mid-day, hurt by increased U.S. interest rates and another spike in oil prices over $67 a barrel as Hurricane Rita neared the Gulf Coast. The German DAX 30 tumbled 1.3%, the French CAC 40 dropped 1.2%, and London’s FTSE lost 0.6%. The euro gained 0.9% to $1.2222.

ENERGY, METALS, CURRENCIES

Oil prices surged over $67 a barrel on fears that Hurricane Rita could hit the still recovering oil facilities in the Gulf of Mexico, ignoring to a great extent the agreement of OPEC to release daily 2million barrels of spare crude in order to ensure oil supplies. Light sweet crude November delivery climbed 96 cents to $67.15 a barrel on the Nymex. Heating oil added 3 cents to $2.0401 a gallon, while gasoline gained 6 cents to $2.0400. Natural gas reached a new peak of $12.790 per 1,000 cubic feet.. London Brent rose 98 cents to trade at $65.18.

Gold advanced in European trading. In London the precious metal traded at the recommended price of $467.00 per troy ounce, up from $465.50. In Hong Kong gold fell $2 to close at $468.25. Silver was trading at $7.31 per ounce, down from $7.36.

The U.S. dollar fell against the other major currencies on raised interest rates. The euro was quoted at $1.2197, up from $2162. The dollar changed hands at 111.33 yen, down from 111.61. The British pound was trading at $1.8067, up from $1.8038.

EARNINGS NEWS

Biomet,((BMET)) medical products maker, announced 1Q net profit rose 66% to 40 cents a share, with sales up 10.7% on continued strong sales of orthopedic reconstructive devices and dental reconstructive implants for its record quarter, missing analysts’ forecasts of 41 cents. The company said it was comfortable with 2Q consensus earnings forecasts of 42 to 44 cents a share.

FedEx Corp., ((FDX)) transportation and supply chain management services provider, posted 1Q earnings of $1.10 a share, up from $1.08 a share in the same period last year on 10% revenue growth for the comparable quarter. 1Q income included a $79 million charge for facility leases, without which Memphis-based FedEx said it would have earned $1.25 a share, beating analyst estimate for earnings of $1.17 a share. FedEx expects 2Q income $1.30 to $1.45 a share and raised its 2006 outlook to $5.25 to $5.50 a share.

CarMax Inc., ((KMX)) used car chain provider, reported that 2Q profit jumped 39 % to 39 cents per share, compared with 28 cents per share a year earlier, beating analysts’ forecasts of 37 cents per share. Revenue from used autos rose 25% to $1.24 billion as volume rose 21%. Meanwhile, new vehicle revenue grew 11 percent to $151.9 million and wholesale revenue rose 25% to $190.8 million.

ConAgra Foods Inc. ((CAG)), packaged food company, reported that 1Q earnings more than doubled to 68 cents per share from 26 cents per share in the year-ago period, following a large gain from selling its remaining shares in Pilgrim's Pride Corp. as well as strong performance in several areas of the business. Analysts were expecting 1Q earnings of 23 cents per share.

Morgan Stanley ((MWD)), financial services provider, reported 3Q net income dropped 83% from the year-earlier period and gained 13 cents per share compared with 76 cents per share a year ago. The results include an aftertax charge of $1 billion to reflect the planned sale of the company's aircraft financing business. From continuing operations, Morgan Stanley gained $1.17 billion, or $1.09 a share, up 34% from last year’s period.


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