Oil Declines as Rita Weakens

Elena
23 Sep, 2005
New York City

Asian-Pacific markets closed broadly lower on profit-taking with South Korea's Kospi down 2% and Japan's Nikkei closed for a national holiday. European stocks gained ground on oil prices drop, led by the German DAX 30 up 0.4%. Oracles, software supplier, posted 1Q profit of 10 cents a share on 25% higher revenue, but released disappointing 2Q revenue forecast. Alcoa, aluminum maker, posted 3Q earnings 39% below estimates.

U.S. MARKET AVERAGES

U.S. stock futures point to a flat or higher opening after the higher close of markets Thursday when oil prices started their retreat on news that Rita was losing power. Positive start of Friday dealings is expected on optimistic forecasts that Hurricane Rita which has weakened to category 4 from top strength of 5, might not directly hit the key oil refineries around Houston. Still, volatile trading session is expected as investors will be locked in recent gains, awaiting the impact of the storm.

Two major companies influenced the stock markets, releasing disappointing reports. Oracles, software supplier, met 1Q earnings expectations but posted 2Q revenue below analysts’ estimates. Alcoa, aluminum maker, reported 3Q income was 39% below expectations.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mostly down on profit-taking. The Japanese exchanges were closed for a public holiday. Across the region, South Korea’s Kospi dropped 2% with Samsung Electronics, SK Telecom and Hyundai Motor being the leading decliners. Shanghai Composite lost 0.2% after the central bank of China widened the yuan’s trading range against non-U.S. dollar currencies. Australia’s All Ordinaries was one of the few gainers, rising 0.6%.

European markets gained ground at mid-day dealings, boosted by higher U.S. markets close Thursday, following a decline in oil prices after Hurricane Rita weakened to category 4. Support to the stocks was also provided by some deal news, led by the Swedish insurer Skandia which rejected an offer for $6 billion from Old Mutual. The German DAX 30 gained 0.4%, the French CAC 40 added 0.2%, and London’s FTSE 100 rose 0.2%.

ENERGY, METALS, CURRENCIES

Oil prices dropped below $66 a barrel as Hurricane Rita weakened to category 4, but there are still lingering worries that it could hit key oil production facilities in Texas coast. Light sweet crude November delivery slipped 72 cents to $65.78 a barrel on the Nymex. Heating oil lost 5 cents to $2.000 a gallon, while gasoline slid more than 6cents to $2.0750 Natural gas fell to $12.702 per 1,000 cubic feet. London Brent declined 82 cents to trade at $63.78.

Gold declined in European trading. In London the precious metal traded at $464.40 per troy ounce, down from $466.35. In Hong Kong gold lost $7.70 to close at $465.05. Silver traded at $7.32, down from $7.35.

The U.S. dollar advanced against the other major currencies. The euro was quoted at $1.2122, down from $1.2146. The dollar changed hands at 111.54 yen, up from 111.65. The British pound was trading at $1.7853, down from $1.7891.

EARNINGS NEWS

Finish Line Inc., ((FINL)) athletic apparel and accessories retailer, posted 2Q net earnings of 38 cents a share, compared with restated earnings of 42 cents a share in the same time last year. Revenue was $341.6 million vs. restated revenue of $312.2 million last year. Same-store sales for the period dropped 2%, down from a rise of 6% in the year-earlier period.

Scientific Industries, ((ESIO)) chip and electronic equipment manufacturer, posted 1Q net earnings of 5 cents a share, down from 36 cents a share in the year-ago period on 39% sales decline. The company announced that its results included a $4.1 million charge resulting from the redemption of its 4.25% convertible notes, which eliminated its long-term debt.

Darden Restaurants Inc., ((DRI)) restaurant chain, posted 1Q net earnings of 53 cents a share, up vs. 44 cents a share in the same period a year earlier on revenue growth, beating analyst estimate by a penny. The company announced that same-store sales for its Olive Garden chain rose 7% to 8% in August and advanced 7.4% in 1Q. The company approved a semi-annual dividend of 20 cents, up from 4 cents a share.

Oracle Corp., ((ORCL)) software company, reported that 1Q net profit advanced to $519 million from $509 million a year earlier and remained the same as last year’s at 10 cents a share, missing analysts’ forecast of 14 cents a share. Excluding one-time items, the company would have gained 14 cents a share, up from 10 cents a share on the same basis a year ago. Revenue for the period soared 25% to $2.77 billion, up from $2.22 billion a year earlier.