Modest Rally in Evening Trading

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

Refinery storm Rita, at the end of the week, has managed to shut down 99% of oil and 72% of gas production in the Gulf of Mexico region. Total loss of production for both the hurricanes is likely to exceed 8% of annual output for oil and natural gas. Regardless of the strength of Hurricane Rita, gasoline prices at pump are likely to rise in the next two weeks.

U.S. MARKET AVERAGES

On a day with little news on the economic and corporate front, the tracking of Hurricane Katrina dominated trading. Energy sectors rise and fall of the day reflected oil traders willingness to let oil price slip for the day. The nervous traders not looking to add week end risk to their positions decided to sell as oil declined.

During the session oil slipped close to 4%, gasoline and heating oil settled at $2 per gallon and gold declined by $3.10 per ounce. Copper fell for the day, but metals and mineral stocks jumped during the days.

Stocks advancing by better than one percent are as follows. Phelps Dodge ((PD)), Boyd Gaming ((BYD)), American Eagle ((AEOS)), Coach ((COH)), Advanced Micro Devices ((AMD)), and Cia. Vale. Doce Rio ((RIO)), Apple Computer ((AAPL)), SanDisk ((SNDK)) and Netflix ((NFLX)).

Stocks dropping by more than one percent are as follows. Fording Canadian trust ((FDG)), EOG Resources ((EOG)), Nabor Industries ((NBR)), Valero ((VLO)), and Exxon Mobil ((XOM)).

The government agency monitoring the Gulf of Mexico exploration activity, Mineral and Management Services reported that as of mid-day 77% of 819 manned platforms in the Gulf of Mexico and 67% of 134 rigs have been evacuated. About 99% of the daily oil production has been shut down, which is currently approximately 1.5 million BOPD. Approximately 72% of the daily gas production in the Gulf of Mexico has been shut down, which is currently approximately 10 BCFPD.

Among the gaining stocks American International Group ((AIG)) is posting a notable gain of 1.67%, boosting the whole insurance sector. Honeywell ((HON)) has risen by 2.13%, United Technologies ((UTX)) has gained 1.10%, and Caterpillar ((CAT)) has added 0.90%.

The following stocks stand out among the biggest decliners of the day. Valero Energy ((VLO)) lost 1.86%, Tesoro Corp. ((TSO)) dropped 3.26%, Murphy Oil ((MUR)) slid 2.33%, Exxon Mobil ((XOM)) declined 1.18%, and Rowan Cos. ((RDC)) fell 1.92%.

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, projected 3Q profit 39% below expectations.

MOVERS AND SHAKERS

Alcoa Inc. ((AA)) dropped 7% due to the company forecasting lower third-quarter profit. The lower margins are resulting from Hurricane Rita, lower aluminum prices and higher raw-material costs. The brokers Prudential and Goldman Sachs downgraded the company citing its profit warning.

Software company Oracle Corp ((ORCL)) announced gloomy sales outlook that confused investors. The company reported a 2% rise in fiscal first-quarter profit, but its shares declined 5.1% due to its sales outlook.

Palm Inc. ((PALM)) fell 20% before the bell after the computer maker posted discouraging fiscal first-quarter earnings and revenue, and announced a lower-than-expected earnings.

Tire manufacturer Goodyear Tire & Rubber Co. ((GT)) forecasted $150-$250 million restructuring charges over the next three years. The company intends to cut down its manufacturing capacity by 8%-12% in that time. Goodyear is expecting to lower expenses by $750 million-$1 billion by 2008. The company’s stock was down 0.2% yesterday.

ECONOMIC NEWS
No major economic news release is due Friday.

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 closed in the positive territory on the back of declining oil prices as 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 0.7%, the French CAC 40 added 0.7%, and London’s FTSE 100 rose 0.6%.

ENERGY, METALS, CURRENCIES

Oil prices further declined as Hurricane Rita weakened to category 4, suggesting that the damage to the refinery capacity will be less than feared. Light sweet crude November delivery slipped $2.31 to $64.19 a barrel in late morning trading on the Nymex. Heating oil lost 8 cents to $1.96 a gallon, while gasoline slid 5 cents to $1.99. At close, London Brent declined $1.28 to trade at $63.32.

Gold declined in European trading. In London the precious metal closed at $463.90 per troy ounce, down $3.10. In Hong Kong gold lost $7.70 to close at $465.05. Silver closed at $7.25, down from $7.35.

The U.S. dollar advanced against the other major currencies in European trading. The euro was quoted at $1.2076, down from $1.2146. The dollar changed hands at 112.05 yen, up from 111.65. The British pound was trading at $1.7784, down from $1.7891.

EARNINGS NEWS

3Com Corp., ((COMS)) converged networking solutions provider, posted 3Q loss of 11 cents a share, down from 9 cents a share in the year-ago period on revenue growth, missing analyst estimate of a loss of 8 cents a share. Apart from restructuring and other charges, which equaled 2 cents a share, 3Com would have lost 9 cents a share.

Tibco Software Inc. ((TIBX)), integration and process management software company, posted 3Q net earnings of 6 cents a share, up from 4 cents a share in the year-earlier period on a slight revenue growth, beating analyst estimate of 4 cents a share. On a pro forma basis, the company announced income of $10.2 million, or 5 cents a share.

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.

INTERNATIONAL NEWS

The central bank of Mexico reduced its benchmark lending rate for a second time to help support a slowing economy, taking advantage of slowing inflation. The interest rate has been lowered to 9.25% from 9.50%.