Averages Battle Declining Markets

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

It seems like there is always bull market in the oil pit. Oil, gasoline, and heating oil advanced by 2%, 4%, and 5% for the day. Despite the receding fears of Hurricane Rita related damage to refineries in Texas, traders managed to stage a rally in the energy market. Bond yields on 10-year rose 4 basis points to $4.29% at close.

U.S. MARKET AVERAGES

The falling oil price and less than expected damage to the oil refineries in Texas led bulls in charge. The opening rally of more than seventy points in Dow and fifteen points in Nasdaq met resistance in the afternoon. The yields on ten-year note rose from 4.25% to 4.29% and oil kept the advancing pace. At close oil managed 4% come back from the day’s low, gold declined from seventeen year high and dollar rose against Euro. Gasoline and heating oil also 4% and 5% respectively.

Early losses in energy and refining stocks were reversed at the close of the day as oil rebounded. The shares of Valero, Tessoro, Nabor Industries, and National Oilwell rose better than 2%.

Retailers of all kinds, department stores, specialty retailers, luxury retailers and other bounced as traders believed that oil prices will decline in the coming days giving consumers more cash to spend.


MOVERS AND SHAKERS

Boeing ((BA)) rose 3.7% after the company agreed on a contract with striking mechanists.

Wal-Mart ((WMT)) jumped 0.7%% after a report said that the company is going to acquire Tommy Hilfiger Corp. ((TOM)). Wal-Mart also expects same-store sales to grow to 2%- 4% on September. Tommy Hilfiger closed six cents lower at $16.65.

Palm Inc. ((PALM)) added 2.6% ahead of an expected new version of its Treo product to be announced.

Advanced Micro Devices ((AMD)) was up 3.2% due to a report about the chipmaker in the latest edition of the financial weekly Barron's, saying that the company's stock could reach $50 in two years.

Walgreen ((WAG)) lost 2.5% due to the retailer's flat quarterly results, totaling $324.4 million, or 32 cents a share, well below analysts’ forecasts of 37 cents a share.

ECONOMIC NEWS

Existing home sales unexpectedly rose in the month of August, according to a report from the National Association of Realtors (NAR). The increase in sales came in spite of some disruption from Hurricane Katrina at the end of the month.

The report showed that existing home sales rose 2 percent to a seasonally adjusted annual rate of 7.29 million units in August from a revised 7.15 million unit rate in July. The increase surprised economists, who had expected sales to fall to a 7.11 million unit rate from the 7.16 million unit rate originally reported for July.

David Lereah, NAR's chief economist said, “With a general background of growing population and favorable affordability conditions, home sales are staying at very healthy levels.”

The increase in existing home sales was partly due to notable growth in the West, where sales rose 5.6 percent. Sales in the Midwest and Northeast rose 1.9 percent and 1.7 percent respectively, while sales in the South slipped 0.4 percent.

The report also showed that total housing inventory levels rose 3.5 percent to 2.86 million existing homes available for sale at the end of August. NAR said that this represents a 4.7-month supply at the current sales pace Lereah said, “Housing inventory improved in August but remains tight, and we have some way to go before we get into a range of balance between home buyers and sellers. As a result, we'll continue to see above-normal home price appreciation for the foreseeable future.”
In August, the national median existing-home price was up 15.8 percent year-over-year at $220,000. The represents the strongest rate of appreciation since July 1979, when annual price growth was 17.2 percent.

Commenting on the impact of Hurricane Katrina, NAR President Al Mansell said, “There will be a mixed impact in figures over the next couple months with total disruption in the hurricane disaster zone, offset by spiking sales from displaced residents in nearby regions which escaped heavy damage.”


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 rallied to close the session with solid gains 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 2.4%, the French CAC 40 climbed 2%, and London’s FTSE 100 rose 0.7%.

ENERGY, METALS, CURRENCIES

Oil prices hover over $64 a barrel after Rita’s strike which caused less damage than expected but still 4 million barrels per day of refining capacity are down. Light sweet crude November delivery traded as low as 70 cents before jumping $1.63 to $65.82 a barrel. Heating oil was up 10.6 cents to trade at $2.0888 a gallon, while gasoline jumped up 8.4 cents to $2.079. London Brent rose 18 cents to $62.62.

Gold advanced in European trading. In London the precious metal closed at $463.30 per troy ounce, up from $462.80. In Hong Kong gold lost $3.50 to close at $461.55. Silver closed at $7.27, up from $7.25.

The U.S. dollar advanced against the other major currencies. The euro was quoted at $1.2032, down from $1.2051. The dollar changed hands at 112.39 yen, up from 112.32. The British pound was trading at $1.7742, down from $1.7771.

EARNINGS NEWS

Nordic American Tanker Shipping Ltd. ((NAT)) announced that based on current rates, it expects 3Q earnings within the range of 25 cents to 29 cents a share, missing the analyst estimate of 47 cents a share. Nordic also said it obtained a double-hulled suezmax vessel for use in the spot market.

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.