Oil, Gas, Copper and Bond Yields on the Rise

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

In the morning market rose on strong durable goods order report but quickly lost ground when the weekly petroleum report was released. Market never recovered in the session. Mining, energy, financials and casino stocks rose while home builders, restaurant and transportation stocks declined in a day of moderate trading volume. RIMM reports Q2 earnings of 56 cents vs 36 cents a year ago.

U.S. MARKET AVERAGES

During the day when prices in the commodity pit ruled volatility in the equity markets in New York, other than two government reports there was very little news that affected the market. Market traded in a narrow range during the session mostly traded on the fears of slowing consumer spending as prices of oil and natural gas had another day of spike. Crude oil up close to 2% natural gas 7% at close after the weekly petroleum report from the Department of Energy sparked fears of crude shortages in the coming months.

At opening on the back of strength in durable orders in the month of August put market rose in the first trading hours. After the release of the weekly petroleum data from the Department of Energy market took a decidedly cautious approach to trading. Stocks in retailing, consumer discretionary, hotels, transportation and tech sector felt selling pressure.

Gold, copper, silver, and platinum registered solid gains moving mining sector to a new high. Shares of Phelps Dodge, BHP Billiton, Newmont Mining registered more than 4% gains. After a seven trading session of losses casino stocks came back to life as Station’s Casino and Las Vegas Sands were recommended by Goldman Sachs.

It was another day of sell-off in the homebuilders stocks as yields in the bond market pit showed a persistent rising bias during the session. Ten-year yield stayed above 4.30% and closed at $4.26 as international central bankers conducted buying near close. Major homebuilders declined for the third day in a row.


MOVERS AND SHAKERS

DaimlerChrysler ((DCX)) rose 2%. The company benefited by a report published in a German newspaper saying that it is cutting 8,000 jobs at its Mercedes unit, more than previously reported 5,000.

General Motors Corp. ((GM)) is expected to be active. The company and the Canadian Auto Workers union agreed to a three-year contract yesterday, in order to avoid a future high-priced strike.

Eastman Kodak ((EK)) also is likely to be in play, because the company said it hopes total digital revenue growth for 2005 will be more than the originally expected 36%, while the year's digital earnings from operations, which were expected to increase by more than 300%, are now projected to be behind the target that company set at the beginning of 2005.

ECONOMIC NEWS

On Wednesday, the Commerce Dept. released August durable goods orders which shows strong order book. However, because the data does not include the impact of Hurricane Katrina, the significance of the report is likely to be relatively limited.

The report showed that durable goods orders rose by 3.3 percent in August following a downwardly revised 5.3 percent decrease in July. Economists had been expecting orders to increase by a more modest 1.0 percent compared to the 4.9 percent drop originally reported for July.

The growth in durable goods orders was partly due to a significant increase in orders for computers and electronics products, which rose 5.5 percent in August after falling 6.5 percent in July. Orders for primary metals, fabricated metal products, machinery, and transportation equipment also had significant increases.

The Commerce Dept. also noted that excluding orders for transportation equipment, orders rose 4.2 percent in August after falling 3.7 percent in July. Orders for transportation equipment rose 1.4 percent in July following an 8.7 percent decrease in July.

Government data released Wednesday showed that crude oil inventories recorded another drop in the latest week, adding to a recent string of declines. However, stocks of gasoline advanced again during the period, adding to the surprise gain they posted in the previous week.

The Department of Energy's Energy Information Administration revealed that crude oil inventories dropped by 2.4 million barrels for the week ended September 23, falling to 305.7 million barrels from the 308.1 million barrels recorded in the previous week. This followed a decline of 300,000 barrels for the prior week. Even with the recent declines, oil inventories remain 11.4% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week advance of 4.4 million barrels, adding to the 3.4-million-barrel gain posted in the prior week. Gasoline stocks are now only 2.9% below their levels of last year. Inventories of distillate fuel oil fell by 500,000 barrels for the most recent week.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed. The Nikkei rose 1% on exporter issues, boosted by the weaker yen with automakers Toyota Motor and Honda Motor sharply up, offsetting losses posted by chipmakers after J. P. Morgan downgraded the semiconductor sector. Across the region South Korea’s Kospi reached another high, rising 1.6% on upbeat earnings expectations. Hong Kong’s Hang Seng gained on property stocks. Markets in Australia, Singapore and Thailand closed down.

European markets closed the session with solid gains, reaching new peaks as stocks were lifted by Daimler Chrysler’s restructuring plan of 8,500 job cuts , better-than-anticipated durable goods data, and a positive economic news, released by the U.S. Fed Reserve Chairman. The German DAX 30 jumped 1,7%, the French CAC 40 rose 1.2%, and London’s FTSE 100 gained 0.9%.

ENERGY, METALS, CURRENCIES

Oil surged over $66 a barrel after the U.S. petroleum inventory report showed a drop of crude and distillate stocks but an increase of gasoline stocks. Light sweet crude November delivery jumped $1.28 to $66.35 a barrel on the Nymex. Heating oil rose by 7 cents to $2.1665 a gallon, while gasoline rose almost 9 cents to $2.1775. Natural gas jumps $1.08 to $14.20 MMBTU.

Gold prices further advanced in European trading. In London the precious metal closed at $463.90 per troy ounce, up from $459.40. In Hong Kong gold dropped $3.90 to close at $462.05. Silver closed at $7.30, up from $7.22. In New York gold closed up $6.90 to $469.80 per ounce.

The U.S. dollar was mixed against the other major currencies in European trading The euro traded unchanged at $1.2010. The dollar changed hands at 113.29 yen, down from 113.32. The British pound was trading at $1.7606, down from $1.7755.

EARNINGS NEWS

The Topps Co., ((TOPP)) maker of trading cards and assorted candy products, posted 2Q earnings of 12 cents a share, up vs. profit of 9 cents a share a year-earlier on 9.4% sales growth, topping the analysts’ forecasts of 7 cents a share. The results incorporate a gain of $1.6 million from a reversal of income tax reserves.

Steel Technologies Inc., ((STTX)) flat steel processor, announced it expects 4Q earnings of 6 cents a share, missing analysts’ forecast of earnings of 8 cents a share. The company stated it expects shipments to be 5% below projections in its July conference call.

Horizon Financial Corp., ((HRZB)) holding company, announced that the company's quarterly cash dividend was 14 cents per share. The dividend will be paid on November 2, 2005, to shareholders of record on October 7, 2005. Horizon has risen its cash dividend twice in the last year.

Greater Bay Bancorp, ((GBBK)) financial services holding company, stated a quarterly cash dividend of 15 cents per share outstanding to shareholders of record as of October 7, 2005. The dividend is payable on October 17, 2005.

McCormick & Co., ((MKC)) spice seller, posted 3Q earnings of 35 cents a share, up from 33 cents a share in the year-ago period on 1.5% sales growth, beating analyst estimate by a penny. The company stated it continues to expect 2005 fiscal year earnings per share of $1.58 to $1.62 a share.

CORPORATE NEWS

Gazprom, the global biggest producer of natural gas, announced that it has agreed to buy a majority stake of 72.663% in Sibneft oil company for $13.01 billion, which will be the biggest purchase in Russian corporate history. Gazprom, which has been under state control since June when the government took over 50% of its stake, is trying to take a firmer position in the energy sector.

NRG Energy Inc. is in advanced talks to buy power generation company Texas Genco Holdings Inc at the minimum price of $5 billion in cash and stock. The deal involves assuming of a more than $2 billion of Genco debt.