Crude Oil Surpasses $79

Elena
12 Sep, 2007
New York City

U.S. market averages recovered from earlier weakness although crude oil inventories dropped more than expected and the U.S. dollar hit a record low against the euro. Stocks were also given a boost by continuous optimism that the Fed will cut interest rates at its next monetary policy meeting on Sept. 18th. The price of oil surged after the petroleum report, reaching a record intraday high of $79.29 a barrel. Airline stocks moved sharply lower, while natural gas stocks posted solid advance.

[R]11:30AM U.S. market averages reversed to gains on rate-cut optimism.[/R]

U.S. market averages recovered from earlier weakness although crude oil inventories dropped more than expected and the U.S. dollar hit a record low against the euro. Stocks were also given a boost by continuous optimism that the Fed will cut interest rates at its next monetary policy meeting on Sept. 18th.

The price of oil surged after the petroleum report, reaching a record intraday high of $79.29 a barrel. Airline stocks moved sharply lower on the news, while oil and natural gas stocks posted solid advance. Dow member Exxon Mobil ((XOM)) advanced nearly 1%. In the metals sector, Aluminum Corp. of China ((ACH)) dropped 10% after Alcoa ((AA)) said it sold a stake in the company for HK$15.3 billion ($2.0 billion).

The tech-heavy Nasdaq was pressured by weakness among technology stocks, led by Texas Instruments ((TXN)), as the world's biggest cell-phone chipmaker fell 1% after tightening its Q3 financial targets. Following the news, cell phone maker Nokia ((NOK)) slipped 2.7%.

At the same time, medical device maker Cardica Inc. ((CRDC)) soared 22% after getting a key European approval for one of its devices. Drug maker Merck & Co. Inc. ((MRK)) weighed on the Dow with a decline of 1.3%. Amgen ((AMGN)) provided support to the bioteck sector, moving up 4.2% on broker upgrade.

On the economic news front, Mortgage Bankers Association survey showed that mortgage application volume rose 5.5%, refinance volume jumped 6%, and the purchase index increased 5.2%.

The Dow Jones industrial average rose 29.84, or 0.22%, to 13,338.23 after soaring 180 points on Tuesday. The Standard & Poor's 500 index futures rose 5.01, or 0.34% to 1,476.50, and the Nasdaq composite index rose 12.31, or 0.47%, to 2,609.78. Bond prices slipped. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.40% from 4.37% late Tuesday.

[R]U.S. oil inventories dropped.[/R]

Wednesday morning, the Energy Information Administration released its report on U.S. oil inventories in the week ended September 7, showing that crude oil inventories fell much more than analysts had been expecting. The report showed that crude oil inventories fell by 7.1 million barrels to 322.6 million barrels, although they remain above the upper end of the average range for this time of year. Analysts had been expecting a much more modest decrease of about 2.5 million barrels. The EIA, the statistical arm of the Energy Department, noted that crude oil imports averaged over 9.6 million barrels per day last week, down 674,000 barrels per day from the previous week.

Additionally, the report showed that gasoline inventories fell by 700,000 barrels and are well below the lower end of the average range. The drop in gasoline stockpiles came roughly in line with analyst estimates. On the other hand, the EIA said that inventories of distillate fuels, which include heating oil and diesel, increased by 1.8 million barrels, roughly in line with analyst estimates. Distillate fuel inventories are in the upper half of the average range for this time of year. The report also showed that the refineries operated at 90.5 percent of their operable capacity last week, down sharply from 92.1 percent in the previous week. Analysts had expected a much more modest decrease to a 92.0 percent capacity utilization rate.


[R]09:45AM Wall Street opened lower on profit-taking and TI trimmed sales forecast.[/R]

Wall Street opened in the negative Wednesday, retreating from notable gains posted yesterday as investors turned to profit taking. With little news to affect the broad market, the focus remained on what the Federal Reserve’s move will be at the central bank policy meeting on Sept. 18. What is widely expected is a reduction of the federal funds rate by 0.25%, although a slumping dollar may prevent the Fed from making such a decision.

Weakness in the shares of Texas Instruments ((TXN)) also weighed on the sentiment. The chipmaker fell 2.4% after it cut its sales forecast for Q3. At the same time, Amgen ((AMGN)) led the biotech sector up with a gain of 3% after UBS raised its rating on the biotechnology company to neutral from sell.

Among companies driven by analyst comments, Apache Corp. ((APA)) climbed 1.6% after Goldman Sachs upgraded the oil and gas producer to buy from neutral. Chip-equipment maker ASML Holdings ((ASML)) gained 0.3%, following an upgrade to outperform from underperform by Credit Suisse.

In earnings-related news, Pathmark Stores ((PTMK)) edged down 0.3% after it reported wider Q2 net loss widened. Shares of Dow component Exxon Mobil ((XOM)) gained 0.3% as oil prices reached $78.20 a barrel. The dollar was also weaker vs. the euro and the yen, but higher versus the pound. Gold prices rose.

The Dow Jones industrial average fell 39.01, or 0.29%, to 13,269.38 after rising 180 points on Tuesday. The Standard & Poor''s 500 index futures fell 5.30, or 0.36%, to 1,466.19, while the Nasdaq composite index fell 6.85, or 0.26%, to 2,590.62.


[R]09:00AM U.S. stock futures pointed lower after yesterday’s rally and weak dollar.[/R]

U.S. stock futures indicated a weaker start of Wednesday trading session, reversing from solid gains Tuesday on optimism of interest-rate reduction in the near term, as well as upbeat corporate news from auto maker General Motors ((GM)) and fast-food retailer McDonald''s Corp ((MCD)). Record-low levels of the U.S. dollar exerted further pressure on pre-market sentiment. The greenback traded down 0.4% at 113.85 yen, while the euro traded as high as $1.3880.

Texas Instruments ((TXN)) also weighed with a decline of 2.2%. The chipmaker lifted its Q3 earnings and revenue forecast, meeting the average analyst expectations. Bucking the downward trend, Amgen ((AMGN)) rose 2.3% in pre-open trade after UBS raised its rating on the biotechnology company to neutral from sell. In other corporate news, Google ((GOOG)) said its executive in charge of health-related projects, Adam Bosworth, has resigned. The stock edged down 0.3%.

A day after crude oil hit a record of $78.23 a barrel, the market will keep the commodity in focus. U.S. oil inventories report is due out today and is expected to show a decline in crude supplies last week. S&P 500 futures slipped 6.5 points at 1,466.30 and Nasdaq 100 futures were down 9 points at 1,984.50. Dow industrial futures declined 39 points.


[R]8:30AM New York - 6:30PM Mumbai – Sebi widens the acceptable to collateral to include highly rated debt securities. Steel Authority plans to double its steel capacity in four years. The Supreme Court of India permits Reliance Energy to bid for Mumbai Sea Link project.[/R]

Sensex in Mumbai trading lost 37.41 or 0.24% to close at 15,608.50. CNX Nifty fell 0.8 or 0.02% to close at 4,496.15. Rupee recovered to 40.60 against dollar from 40.65 in Friday trading. Market indexes opened higher at the opening but closed lower in a familiar pattern in the last three months of trading. Political worries dogged traders.

The talks between the ruling coalition government and working committee of left parties agreed to create a framework for negotiations of increasingly controversial nuclear deal between the U.S. and India. External Affairs Minister Pranab Mukherjee is expected to lead the discussion after Sept 19th.

Of the stocks trading on BSE, 1,610 gained, 1,157 declined, and 55 closed unchanged. Daily turnover on the exchange declined to 5,362 crore rupees compared to 4,839 crore rupees in Tuesday’s trading. In trading on National Stock Exchange volume declined to 10,835 crore rupees from 10,856 crore rupees a day ago. Oil price at record level lifted stocks of sugar companies.

Of the 30 stocks in the Sensex, 23 fell and 10 gained. Reliance Energy led the gainers in the index with a rise of 3.6% to 891 rupees. NTPC led the decliners in the index with a loss of 3.1% to 189 rupees.

Securities and Exchange Board of India permitted as collateral securities rated AAA from foreign investors for derivative positions and trading. The move by Sebi is likely to boost foreign investment.

Reliance Energy jumped after the news that Supreme Court of India has permitted the company to bid for 2,600 crore rupees Mumbai Sea Link project.

Steel Authority of India jumped 1.8% to 174 rupees after the company released plan to expand its current capacity to 26 million tons from 13.5 million tons by the year 2010. The company plans to invest 40,000 crore rupees.

Peninsula Land jumped 2.4% to 533 rupees on the news that it has sold 5,75,000 square feet of land to Alok Infrastructure for 1,050 crore rupees.

Buying in sugar companies lifted the sector but pharmaceuticals and banks faced selling. Record oil price lifted local sugar companies stocks to a new high. Bajaj Hindustan led the sector with a rise of 4.3% to 141 rupees followed by gains in Dwarikesh Sugar of 3.6% to 56 rupees, Balrampur Chini Mills of 3.2% to 65 rupees, and in Shree Renuka of 3.1% to 65 rupees.

3i Infotech added 0.9% to 143 rupees after the company agreed to acquire 26% stake in Taxsmile.com. The internet based provides tax filing and advisory services.

Modern Dairies soared 5% for the second day in a row to 158 rupees ahead of expected stock bonus of one share for every share held.

Nitco Tiles added 2.3% after increasing 4% in the previous session to 245 rupees after the news that the company is venturing to distribute cement from Pakistan via MMTC. The government sole import agency Minerals and Materials Trading Company acts as national conduit for import and export for most commodities import in India.


[R]8:00AM Texas Instruments lifted its Q3 earnings forecast.[/R]

Texas Instruments Inc. ((TXN)), the world''s biggest producer of chips for cellular phones, lifted its Q3 earnings forecast to the higher end of a range it had previously projected. The company said after the closing bell Tuesday that earnings would be in the range of 49 cents to 53 cents per share on revenue between $3.56 billion and $3.72 billion.

The upward revision of the forecast included a gain of 2 cents per share from the July sale of a semiconductor product line associated with DSL equipment. When Texas Instruments reported its Q2 earnings in July, it predicted earnings range of 46 cents to 52 cents per share on revenue between $3.49 billion and $3.79 billion. Analysts expected earnings of 49 cents per share on revenue of $3.66 billion for the quarter ending Sept. 30.

The company said that the biggest growth area for the quarter has been in high performance analog chips used in cell phones and various other electronic devices. The revenue of the company''s semiconductor business is expected to be between $3.36 billion and $3.50 billion, compared with the previous range of $3.29 billion to $3.57 billion. The stock fell 0.7% in pre-market trading.


[R]7:00AM New York, 8:00PM Tokyo - Tokyo shares fell after Prime Minister Shinzo Abe resigned. Japan’s current account surplus rose 4.5% in July, as wholesale price gain 1.9% in August.[/R]

Shares in Japan marginally following a surprise resignation by Prime Minister Shinzo Abe. Tokyo closed down 0.5% in mixed trading submerging yesterday’s 2.4% gain. Of the 225 Nikkei stocks 139 shares dropped, 76 gained and 10 traded unchanged. Of the index shares 47 stocks dropped between 2% and 5% while only 11 shares rose above 2%.

In Tokyo trading Nikkei 225 lost 0.5% 0r 80.07 to 15,797.60 in volatile trade. Investors and businesses alike were concerned by the imminent departure of Prime Minister Abe. Mr Abe announced on Japan television Wednesday he was stepping down to pave way for a new leader that would “fight against terrorism.” The Prime Minister assumed office a year ago and at 52, he was Japan''s youngest post-war head of government. His support had dwindled, however, following a row over pensions and a series of financial scandals involving cabinet ministers. On September 19, the ruling Liberal Democrats will meet to elect a new leader who is also likely to be the next leader of the country.

The Finance Ministry said today Japan’s current account surplus increased 4.5% in July to 1.9 trillion yen from a year ago, expanding for the seventh straight month. The balance of trade in goods and services reported a surplus of 458.8 billion yen, down 30% on prior month while the surplus in merchandise trade dropped 18% to 784.3 billion yen. The Ministry said imports climbed at a pace of 17% to 5.9 trillion against exports that rose 11.1% to 6.7 trillion yen.

Japan''s wholesale prices rose 1.9% in August from 12 months back, surging for the 4th successive year in a row, the Bank of Japan reported today. The wholesale inflation numbers were fuelled by increases in crude oil, steel, chemical and metal prices, gaining for the fourth month in a row. Meanwhile, A private research firm, Tokyo Shoko Research said that the number of corporate failures rose 3% to 1,203 in August, leaving over 870 billion yen in debts. The company said the rise was partly attributed to the failure of major real estate firm Azabu Buildings Co, which alone left debts of 564.8 billion yen.

Of the Nikkei 225 stocks Hitachi Zosen led decliners falling 4.7% followed by Daiwa Securities Corp down 4.4% Mitsui Sumitomo fell 4.33%, Chugai Pharmacy lost 3.9% while home decorator Toto Ltd closed lower 3.6%. Financial stocks dropped as well. Mizuho Trust and Banking Co dragged 3.2%, Sumitomo Mitsui down 2.9%. Resona Holdings and Mizuho Financial lost 2.9% and 2.4%.

Of the Nikkei 225 index shares, property stocks continued with their recovery for second day running. Inpex Holdings paced gainers rising 5.6% followed by land developer Tokyu Land Corp rising 5.1%. Mitsubishi Electric Corp gained 3.6%, Daiichi Sankyo rose 3% and Nippon Sheet Glass closed up 2.8%. Real estate shares surged. Mistubishi Estate Co added 2.3%, Mitsui Fudosan up 2.3% and Sumitomo Realty climbed 1.8%. Motor shares, Hino Motors Ltd and Nissan Motor Co gained 2.4% and 2.2% respectively. Nippon Oil Corp rose 1.8% on rising oil prices that touched $78 yesterday.

The Social Insurance Agency said this week about 5.24 million of the 50 million public pension accounts in chaos have had no entries of the names of their holders. The finding resulted from the agency''s checking of the unidentified accounts, begun last month, and was reported to the Internal Affairs and Communications Ministry''s panel overseeing the public pension operations and the agency''s activities over the pension record-keeping mess.