More Refineries Close

Elena
22 Sep, 2005
New York City

About 18 Texan oil refineries are threatened by Hurricane Rita, with a combined production capacity of about 4 million bpd, the U.S. Energy Information Administration said. The Labor Dept. released initial jobless claims in the week ended Sept. 17, showing that claims rose to 432,000 from the previous week's revised figure of 424,000. Economists had expected claims to rise to 450,000.

U.S. MARKET AVERAGES

Stock markets lack a definite trading direction as two of the major indexes Dow and S&P 500 have been hovering near the flat line but Nasdaq is in the negative territory, reflecting considerable losses by software, biotechnology and disk drive stocks. Dow posts only modest losses, being supported by Exxon Mobil Corp. which gained on rising oil, McDonald’s which increased sales on forthcoming IPO for its Chipotle brand, and Caterpillar which gained on speculations of post-Rita rebuilding related profits.

Trading activity is missing to a large extent as investors wait cautiously what the impact of Hurricane Rita will be. The hurricane of category 5 which has gathered strength along its march towards the Texas coast and is expected to hit tomorrow, sent oil prices near $68 a barrel and made oil majors evacuate their rigs in the Mexican Gulf.

The second hurricane after devastating Katrina raises concerns about its impact on gasoline prices which could hurt consumer spending, the key indicator of economic growth.

Markets also weigh Initial claims which were the highest since July 2003, but came below the average analysts’ estimate of 440,000.

Retailers and homebuilders are two of the day's brightest spots, gaining 0.5% and 1.5%, respectively. Energy stocks remain in the positive, but the sector has retreated from its earlier highs as oil prices declined.

The gold sector posts losses on profit taking, with traders using a decrease in the price of the precious metal as an opportunity to cash in on the recent gains among gold stocks. Some industrial and technology stocks also decline.

MOVERS AND SHAKERS

General Mills ((GIS)) advanced 1.4% after posting first-quarter results that were over the expectations. The company also restated its profit prospect for year 2006.

Sprint Nextel ((S)) gained 2.3% after the telecommunications company narrowed its forecast for cost savings for the recently joined company by 20%.

Cognos Inc. ((COGN)) dropped 4.7% after the company posted yesterday a second-quarter earnings that were below analyst predictions, and presented a worst-than-expected third-quarter outlook.

Scholastic Corp. ((SCHL)), the New York publisher, announced a lower first-quarter loss and repeated its earnings forecast for fiscal 2006. The loss for the quarter ended August 31 fell to $21.2 million from $50.5 million a year earlier.

Ingersoll-Rand ((IR)) could gain in early trading after the company was upgraded at UBS to buy from neutral, citing valuation. The company fell 1.3% yesterday.

ECONOMIC NEWS

UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT
SEASONALLY ADJUSTED DATA

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended September 17. The report showed that claims increased only modestly compared to a significantly upwardly revised figure for the previous week.
The Labor Dept. said that jobless claims rose to 432,000 from the previous week's revised figure of 424,000. Economists had expected claims to rise to 450,000 from the 398,000 originally reported for the previous week.
The upward revision to the previous week's figure reflected an increase in claims made by people dislodged by the Hurricane Katrina disaster.
The report also showed that the 4-week moving average rose to 376,250 from the previous week's revised average of 347,250. This marks the sixth consecutive increase for the less volatile moving average.
The Labor Dept. also said that continuing claims rose to 2.666 million from the preceding week's revised level of 2.578 million.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks ended mostly in the red on sharp declines of U.S. stock markets overnight and soaring oil prices, boosted by threatening Hurricane Rita. The Nikkei fell 0.3%, dragged by consumer-electronics group Sony Corp. and other decliners like Advantest Corp., Honda Motor. Across the region, South Korea’s Kospi added 0.3% and Australia’s All Ordinaries gained 0.2%. Markets in Hong Kong, Shanghai and Singapore finished down.

European markets closed largely down, reflecting surging oil prices as Hurricane Rita threatens to hit key refineries in the Mexican Gulf The German DAX 30 declined 0.5% on post-election economic uncertainty. The French CAC 40 lost 0.5%, dragged by beverage producer Pernod Ricar and insurer AXA. In contrast, oil heavy London’s FTSE gained 0.3% as oil majors, mining stocks, and retailers provided support.

ENERGY, METALS, CURRENCIES

Oil prices surged near $68 a barrel on Hurricane Rita, category 5, threatening to hit key oil production facilities in the Mexican Gulf. Light sweet crude November delivery climbed 90 cents to $67.70 a barrel on the Nymex. Heating oil added 3.6 cents to $2.075 a gallon, while gasoline gained 13.7 cents to $2.19. Natural gas reached $13.04per 1,000 cubic feet. London Brent rose 71 cents to trade at $65.44.

Gold fell in European trading. In London the precious metal closed at $466.10 per troy ounce, down from $468.50. In Hong Kong gold climbed $4.50 to close at $472.75. Silver closed unchanged at $7.35.

The U.S. dollar gained ground against the other major currencies. The euro was quoted at $1.2137, down from $1.2217. The dollar changed hands at 111.62 yen, up from 111.24. The British pound was trading at $1.7882, down from $1.8100.

EARNINGS NEWS

KB Home, ((KBH)) homebuilder, posted fiscal 3Q earnings of $2.55 a share, up from $1.42 a share in the year-ago period, beating the analyst estimate of $2.39 a share on 44% revenue growth.

General Mills, Inc. ((GIS)), packaged consumer producer, reported 1Q results of fiscal 2006. Earnings per share rose to 64 cents, up from 45 cents in the comparable period last year. Net sales for the period increased 3 % to $2.66 billion over the same period a year earlier, as unit volume grew 1 percent worldwide. Segment operating profits rose 21 % to $500 million. Earnings after tax amounted to $252 million, up 38 % from $183 million in the year-ago period.

Rite Aid Corp., ((RAD)) drugstore chain, reported a 2Q loss of 3 cents a share, down vs. year-ago earnings of nil per share, hurt by sluggish pharmacy sales and rising expenses, matching analysts’ expectations of a loss of 3 cents a share.
Texas Industries Swings to Loss from Year-Earlier Profit

Texas Industries, ((TXI)) construction materials producer, posted 1Q loss of $2.25 a share, down vs. a profit of $1.62 a share in the same period a year earlier despite revenue growth, missing widely the analyst estimate of 63 cents a share. Excluding discontinued operations and debt retirement costs, earnings would have amounted to 59 cents a share.

CORPORATE NEWS

Sony Corp, consumer-electronics group, announced a decision to cut 10,000 jobs, or 6% of its global workforce, shut down 11 plants and terminate 15 unprofitable restructuring operations in order to revive its electronics business. The company expects losses of $90 million for 2005.

Delta Air Lines Inc., nation’s third-largest carrier, said it will slash 9,000 jobs, lower employee payment and shift its focus on international flights as part of a cost-saving restructuring plan. The company aims at achieving additional $3 billion in annual cost savings by the end of 2007.