Rebounding Averages

123jump.com Staff
22 Sep, 2005
New York City

Hurricane Rita remains in focus. Rita, one of the strongest hurricanes to hit the Gulf of Mexico region, could cause severe damage to more than 25% of nation's oil production and refining facilities. The 23% of domestic refining capacity is shut down with the unknow damage to the oil platforms in the region. KB Home earnings powered the home builders rally.

U.S. MARKET AVERAGES

Market continued its roller coaster in tandem with the oil price movement. The grip of oil on the trader psychology is palpable. Traders ignored data from the Labor Department on initial claims on unemployment and report on index of Leading Indicators. Markets reached its low at mid-day as oil climbed above $68 per barrel and gold crossed $475 per ounce. With the change in direction of Hurricane Rita, market sighed a breath of relief in the hope that the refineries and oil infrastructure will be spared.

The Hurricane Rita, at category four, has potential to be one of the deadliest and dangerous hurricanes ever to hit the Gulf of Mexico region. And no one is taking chances. Exxon Mobil shut their largest refinery located in Texas. Eleven refineries are totally shut and three are partially shut and other eighteen are in the direct path of Rita. With app 26% of Gulf of Mexico oil and gas production infrastructure in the direct path of Rita. Stakes are high.

Market still showed its resilience during the last half hour of trading. The buyers were busy bidding up shares in home builders, retailers, casinos and financial stocks.

The long-term rate of 10-year notes fell again during the session. In the last two days they have fallen eleven basis points to 4.17% even after Fed’s increase of interest rate on Tuesday by 25 basis points.


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

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. However at close, light sweet crude November delivery lost 30 cents to $66.50 a barrel on the Nymex. Heating oil added 3.5 cents to $2.065 a gallon, while gasoline gained 6.6 cents to $2.04. Natural gas reached $13.04 per 1,000 cubic feet before settling at $12.79. 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. In New York gold closed down at $467 per ounce dropping $2.40 after climbing to $475.

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.