Oil Drops, Market Stage a Broad Rally

Elena
26 Sep, 2005
New York City

Asian-Pacific markets made solid gains on falling oil prices with the Nikkei up 1.8% and South Korea's Kospi climbing 2.6%. European stocks also gained at mid-day, led by the German DAX 30, rising 1.9%. Analogic Corporation, health and security systems maker, posted 4Q earnings rise of 31 cents a share vs. 29 cents a year ago, despite a revenue decline. Walgreen, drugstore operator, posted 4Q earnings,missing estimates by 2 cents.

U.S. MARKET AVERAGES

U.S. stock futures have been trading in the positive, pointing to a strong opening of Monday session. Shares are seen to open sharply high, boosted by the relatively light impact of Rita on oil refineries which made oil prices tumble below $64 a barrel. Rita caused an estimated $2.5 billion to $6 billion in insured damage, which is approximately a third of what Katrina had left after subsiding.

Dow Jones futures were recently up 64 points while Nasdaq futures were ahead 10.5 points and S&P futures were up 7.8 points.
Investors are awaiting home-sale figures for August, expected to have declined.

ECONOMIC NEWS

The National Association of Realtors is due to release the existing home sales report at 10 a.m. EDT Monday. Economists look for a moderate 0.8 percent decline in existing home sales in August to an annual rate of 7.1 million.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed the trading session with heavy gains on the back of oil prices which dropped below $64 a barrel as Hurricane Rita’s impact proved to be less than expected. Japan’s Nikkei climbed 1.8% on oil drop, strong U.S. dollar and positive data on domestic economy. South Korea’s Kospi surged 2.6%, boosted by easing oil and active local institutional buying. Hong Kong’s Hang Seng rose 0.9% on oil prices decline and property stocks.

European markets made solid gains at mid-day dealings as oil prices declined after Hurricane Rita caused less damages than expected and automakers advanced as Porsche announced a decision to increase its stake in Volkswagen. The German DAX 30 soared 1.9%, the French CAC 40 climbed 1.5%, boosted by insurance, resources and chemical stocks, and London’s FTSE 100 rose 0.5%.

ENERGY, METALS, CURRENCIES

Oil prices slipped below $64 a barrel as Hurricane Rita failed to hit key oil refineries in Texas region, causing relatively light damage. Light sweet crude November delivery fell 69 cents to $63.50 a barrel in electronic trading on the Nymex. Heating oil slid 4 cents to trade at $1.9065 a gallon, while gasoline dropped 9 cents to $1.9925. London Brent dropped 71 cents to $61.73.

Gold fell in European trading. In London the precious metal traded at $460.05 per troy ounce, down from $462.80. In Hong Kong gold lost $3.50 to close at $461.55. Silver traded at $7.19, down from $7.25.

The U.S. dollar advanced against the other major currencies. The euro was quoted at $1.2046, down from $1.2051. The dollar changed hands at 112.44 yen, up from 112.32. The British pound was trading at $1.7720, down from $1.7771.

EARNINGS NEWS

Walgreen Co. ((WAG)), drugstore operator, posted 4Q earnings of 32 cents a share, up slightly from a year-earlier profit of 32 cents a share, missing the analysts’ forecast of 37 cents per share. The latest results include a charge of $54.7 million, or 3 cents a share, following the impact of Hurricane Katrina. Excluding this item, the company reported a profit of 35 cents a share, in the same period. Sales rose 11.3% in the latest three months to $10.5 billion from $9.43 billion in the same period a year earlier. Same-store sales rose 7% in the quarter.

Analogic Corporation, ((ALOG)) designer and manufacturer of high-precision health and security imaging equipment, reported 4Q net income of 31 cents a share, up from 29 cents per share in the prior year’s period despite a decline in revenue compared to the same period last year. 4Q security systems shipments rose substantially over the year-ago period, and also sales of medical Computed Tomography (CT) and clinical ultrasound systems. Continued growth in the sales of high-performance subsystems for CT and Magnetic Resonance Imaging (MRI) has been recorded. Sales of cardiac information management, Digital Radiography (DR), embedded multicomputing, and patient monitoring systems decreased vs. the same quarter last year.

CORPORATE NEWS

Boeing Co. reached a tentative agreement with its biggest labor union to terminate a month-long strike in its airplane factories, meeting most of the demands and breaking a deadlock.

Verizon Wireless and Alltel are expected to consider the acquisition of rural wireless company Midwest Wireless, the latest in a long line of small carriers in the U.S. to go on the auction block. The deal could fetch upwards of $1 billion.

Alpha Natural Resources ((ANR)) has agreed to acquire coal reserves and operations affiliated with privately-held Nicewonder coal group in southern West Virginia and southwestern Virginia. The acquisition which has a total purchase price of $316.2 million is expected to add about 4.3 million tons to its coal output in 2006. The Appalachian coal producer warned that its third-quarter results will suffer the impact of a shortfall in metallurgical coal exports and lower-than-expected output from contractor-operated mines.