Oil Rise on Falling inventory

Elena
05 Oct, 2005
New York City

The Mortgage Bankers Association revealed that its market composite index of mortgage loan application volume decreased by a seasonally-adjusted 1.1% for the week ended September 30, dropping to 713.5 from 721.2 in the previous week. Yum Brands, fast food restaurants operator, posted Q3 earnings rise of 72 cents a share vs. 61 cents a year ago on higher revenue, beating estimates. The company raised its full-year profit outlook to $2.64 a share.

U.S. MARKET AVERAGES

U.S. stock markets opened in the red and for the past hour have been trading down, awaiting the ISM Services read, expected to show a decline to 60.0 from 65.0 last month. Oil inventory report, which has a significant impact on the oil market, is expected to show declines in crude, gasoline and distillate stocks for the previous week. Oil steadied near $64 on Wednesday after losing more than $2 a barrel this week, but prices are expected to start rising after the data release.

The biotech sector is a notable mover to the downside, falling by 1.8% with the decline being attributable to Human Genome Sciences ((HGSI)). The networking sector, which is down 1.6%, is experiencing weakness on earnings warning from ADC Telecom ((ADCT)).

There are very few sectors posting solid gains. The drug space is modestly higher. HMO, semiconductor and computer hardware stocks also post modest gains.

Dow Jones futures were recently up 4 points, S&P 500 futures were ahead 1 point and Nasdaq 100 futures were up 1.50 points.

Treasury yields are slightly lower in the first hour of trading on the fixed income market. The 10-year yield is lower by 1.9 basis points to 4.357%.

MOVERS AND SHAKERS

The auto sector will be in focus today.

The carmaker General Motors Corp. ((GM)) said it was selling its entire interest in Fuji Heavy Industries Ltd, which owns the Subaru car brand, because it intents to concentrate its Asia-Pacific strategy toward high-growth markets. The company said cash proceeds received and any potential gain on the Fuji Heavy sale will be recorded in the fourth quarter. At the same time, the Detroit news posted that General Motors and the United Auto Workers are close to an agreement that would save the company $1 billion in annual health care costs. General Motors dropped 3.1% yesterday.

The auto-parts maker Delphi Corp. ((DPH)) declined 16.6% after New York Times reported the company will only keep from Chapter 11 bankruptcy protection if it can bring forth concessions from General Motors, its former parent, and from the United Auto Workers' union.

Viacom ((VIA)) could gain because of the preliminary prospectus with the Securities and Exchange Commission filed for the separation of the company into two divisions. Viacom first planned this move in June and said its purpose is to unlock the value in its cable networks and filmed entertainment businesses. Viacom fell 1.1% yesterday.

Yum Brands Inc ((YUM)) is also likely to gain because the company moved up its profit prospectus for 2005 due to achieved third-quarter results that were over analyst forecasts. The operator of Taco Bell, KFC and Pizza Hut fast-food restaurants added 1.8% yesterday.

The fast-food giant Wendy's International ((WEN)) was down 2.4% after it announced a 5% lower third-quarter same-store sales and warned Hurricanes Katrina and Rita brought together with higher beef prices would narrow earnings for the period by 4 cents.

Bank of America cut Harley-Davidson ((HDI)) to sell from neutral due to worries over rising retail inventory and slowing demand. Analysts also believe the lackluster customer response to the motorcycle maker's 2006 models will lead to decline in wholesale unit shipments.

Maytag ((MYG)) was downgraded at Prudental to underweight from equal-weight, pointing breakable earnings, a more delicate macro environment and weakening consumer spending.

ECONOMIC NEWS

Mortgage application volume fell in the most recent week, according to industry data released Wednesday, continuing the decline it recorded in the previous period. A drop in purchase activity led the recent slide.

The Mortgage Bankers Association revealed that its market composite index of mortgage loan application volume decreased by a seasonally-adjusted 1.1% for the week ended September 30, dropping to 713.5 from the 721.2 recorded in the previous week. This added to a 6.6% decline recorded in the previous week. The 4-week moving average for the market index, which flattens out the week-to-week volatility, dipped by 1.9%.

The MBA's purchase index fell by 1.9% for the week of September 30, adding to declines in the prior 2 weeks of 3.4% and 2.6%. The organization said its refinance index was basically flat in the most recent week, ticking up by just 0.1%. The share of mortgage activity made up by refinancing rose to 44.5% from the prior week's level of 43.9%, the MBA reported, but did not return to the 45.6% of two weeks before.

The Mortgage Bankers Association stated that the average contract interest rate for a 30-year fixed-rate mortgage climbed to 5.94% from the previous week's level of 5.85%. The organization reported that the share of mortgage activity made up by adjustable-rate mortgages, or ARMs, ticked up to 29.8% from the level of 28.8% recorded in the previous week.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished broadly down, reflecting declines of U.S. markets after three Fed Reserve officials gave indications of a further interest-rate hike, used as a means to fight rising inflation. The Japanese Nikkei lost 0.4%, Hong Kong’s Hang Seng declined by 1.2%, South Korea’s Kospi also fell 1.2% as investors locked in recent gains. Australian shares slipped 2.1% on heavy losses in mining stocks.

European markets lost ground at mid-day trading on heavy losses, posted by U.S. equity markets after three Fed Reserve officials gave a signal of future interest-rate increases to combat inflation. Merger and acquisition deals of the day could not raise the sentiment. he German DAX 30 lost 1%, the French CAC 40 fell 0.9%, and London’s FTSE 100 slipped 1%.

ENERGY, METALS, CURRENCIES

Oil prices kept trading below $64 a barrel, but are expected to rise later in the day after the weekly petroleum report. Light sweet crude for November delivery inched up to $63.92 a barrel in electronic trading on the Nymex. Heating oil fell slightly to $2.045 a gallon, gasoline inched down to $2.0110 a gallon. Natural gas rose by nearly 5 cents to $14.270 per 1,000 cubic feet. London Brent lost 3 cents to $61.19.

Gold prices declined in European trading. In London the precious metal traded at $465.25 per troy ounce, down from $465.60. In Hong Kong gold fell $1.80 to close at $465.65. Silver opened at $7.36, down from $7.43.

In European trading the U.S. dollar lost ground against its major counterparts. The euro was quoted at $1.1963, up from $1.1918.The dollar changed hands at 113.64 yen, down from 114.30. The British pound was trading at $1.7648, up from $1.7587.

EARNINGS NEWS

Yum Brands ((YUM)), operator of fast food restaurants, posted Q3 earnings of 72 cents a share, up from a year-earlier profit of 61 cents a share on strong revenue growth. Excluding items, the company gained 71 cents a share, beating the analysts’ estimate for a profit of 70 cents a share. The company raised its full-year outlook to earnings of $2.64 a share, excluding items, slightly above the analysts’ forecasts for earnings of $2.63 a share.

Wolverine World Wide Inc.((WWW)) , footwear maker, posted a Q3 profit rise of12 % on strong sales for all three of its major brands. Quarterly profit advanced to 42 cents per share, up from 37 cents per share in the same period last year, topping analysts’ expectations of earnings of 41 cents per share. Sales increased 7 %.

Wolverine World Wide Inc. ((WWW)) footwear maker, posted a Q3 profit rise of12 % on strong sales for all three of its major brands. Quarterly profit advanced to 42 cents per share, up from 37 cents per share in the same period last year, topping analysts’ expectations of earnings of 41 cents per share. Sales increased 7 %.

Vail Resorts, Inc ((MTN)), mountain resorts operator, reported a Q4 net loss of $1.00 per share, up from a net loss of $1.03 per share for the same period a year ago. Excluding the previously announced charges for early extinguishment of debt in fiscal 2004 and the net loss from sale of businesses in fiscal 2005, the Company's net loss for Q4 of fiscal 2005 would have been 76 cents per share, using a normalized tax rate, up from a net loss which would have been 90 cents per share in the previous fiscal year. The company reported record fiscal year Resort revenue, up 8.2% over last fiscal year, net income of $23.1 million compared to a net loss of $6.0 million last year, record fiscal year Resort Reported EBITDA of $167.5 million, 15.8% higher than last year's $144.6 million.

CORPORATE NEWS

The Dow Jones industrial component General Motors announced a decision to sell its 20 % stake in Subaru maker Fuji Heavy Industries, with 8.7% being sold to Toyota Motor for $315 million and the remaining 11.4% sold into Fuji Heavy's buyback plan.. GM will file an 8-K with the Securities and Exchange Commission to cut its FHI value by $700 million to $800 million.

Delphi Corp. is preparing to make a bankruptcy filing as early as this week, but may not carry it out depending on the concessions it can win from its former parent General Motors and the United Automobile Workers union.