Trade Deficit Soars to$66b

Elena
10 Nov, 2005
New York City

The Commerce Dept report showed that the U.S. trade deficit jumped to a record $66.11 billion in September, compared to a revised $59.35 billion recorded for August. Economists had expected a more moderate widening. Another economic report revealed that for the week ended Nov 5, initial jobless claims advanced 2,000 to 326,000. Economists had expected a level of around 320,000.

U.S. MARKET AVERAGES

U.S. stocks started trading in a lackluster fashion as investors digested a record trade deficit of $66.1 billion in September and a new spike in unemployment filings. Investors were trying to decide whether the surging 11.2% trade deficit was an anomaly caused by higher oil imports after the devastating hurricanes or a sign of increasing trade imbalance.

Following three consecutive sessions of scarce economic data, today’s session will be one of heavy economic news load. The U.S. Commerce Department revealed that the nation''s trade deficit widened to a record $66.11 billion in September, compared to a revised $59.35 billion recorded for August. Economists had expected a more moderate widening.

Another economic report released by the U.S. Department of Labor revealed that initial jobless claims came in at 326,000 for the week ended November 5, an advance of 2,000 from the previous week''s revised total. Economists had expected a level of around 320,000.

The lackluster trading was helped by disappointing revenue included in Cisco''s ((CSCO)) quarterly results, weighing on technology stocks. The Dow was dragged by GM ((GM)), which is likely to decline sharply on news of a restatement of its 2001 results.

Energy stocks have continued their decline on crude oil prices falling below $58. The oil service space is now down about 3.1%. The oil and natural gas sectors are each showing losses of more than 2.8%.

Technology sector stands out as another notable decliner. The disk drive sector is currently down 1.5%, dragged by SanDisk ((SNDK)), down by 3.2%. The networking segment is falling 1.3% as Cisco ((CSCO)) drops 3.3% on its quarterly results.

The airline space has ticked above a recent trading range with a gain of 1.5%, boosted by falling oil.. The sector is now at its highest level since August.

iRobot ((IRBT)) is one of the best performers with a gain of 25%, two days after going a public. Following an IPO priced at $24 per share, the stock advanced immediately after it opened for trading in the mid-morning on Wednesday.

In the first hour of trading, the Dow Jones industrial average rose 0.32, or 0%. The Standard & Poor''s 500 index fell 0.84, or 0.07%, and the Nasdaq composite index fell 2.25, or 0.1%.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.63% from 4.65% late Wednesday.

MOVERS AND SHAKERS

The auto maker General Motors ((GM)) announced it will review its earnings for 2001 due to an accounting error led it to overstate its 2001 profit by up to $400 million. Yesterday the company’s stock was under pressure after Deutsche Bank warned that the company would be negatively impacted if auto parts maker Delphi suffers a strike. General Motors’ stock dropped 3.8%.

Cisco Systems ((CSCO)) said yesterday its first-quarter earnings decreased as the company spent stock options for the first time, but profit excluding those costs rose 8%. The company’s stock lost 2.8%.

ECONOMIC NEWS

The U.S. trade deficit widened to a record high in September, according to a report from the Department of Commerce, with higher oil prices contributing to an increase in the value of imports.

The report showed that the trade deficit widened to a record high of $66.1 billion in September from a revised $59.3 billion in August. Economists had been expecting a more modest increase to $62.0 billion in September from the $59.0 billion originally reported for August.

The increase in the trade deficit came as the value of imports rose while the value of exports fell, with the rise in the value of imports partly due to higher oil prices.

The report showed that imports rose 2.4 percent to $171.3 billion in September from $167.3 billion in August, while exports fell 2.6 percent to $105.2 billion in September from $108.0 billion in August.

The number of people filing for first-time unemployment benefits ticked up in the most recent week and came in a little above economists' expectation.

The U.S. Department of Labor revealed Thursday that initial jobless claims came in at 326,000 for the week ended on November 5, an advance of 2,000 from the previous week's revised total. Economists had expected a level of around 320,000.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed on weaker U.S markets Wednesday and deadly explosions in the Middle East. The Nikkei traded almost unchanged, edging up 0.06% on machinery orders data and ahead of GDP report Friday. China’s Shanghai Composite was the biggest decliner in the region, losing 1.8% on export-related issues. Singapore’s Straits Times index declined 0.5%, while Australia’s all Ordinaries gained 0.4%.

European markets traded higher at mid-day, boosted by solid earnings from companies such as Germany’s Siemens AG and the positive close of U.S. markets overnight. The German SAX 30 gained0.6%, the French CAC 40 added 0.4%%, and London’s FTSE also advanced 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices dropped below $59 a barrel on weekly petroleum report and signs of lower demand due to unusually warm weather for the season. Light sweet crude December delivery lost 41 cents to trade at $58.52 a barrel on the Nymex, the lowest level since July. Heating oil shed nearly a penny to trade at $1.7815 a gallon. Gasoline declined to $1.5420. London Brent fell 48 cents to $56.40.

Gold prices rose in European trading. In London the precious metal was fixed at $467, up from $463.65. In Zurich gold rose to $466.78 from $462.45. In Hong Kong gold gained $4.50 to close at $466.75. Silver traded at $7.66, up from $7.46.

The U.S. dollar was mixed against major currencies. The euro was quoted at $1.1772, up from $1.1763. The dollar bought 117.62 yen, up from 117.47. The British pound traded at $1.7476, down from $1.7426.

EARNINGS NEWS

Siemens AG ((SI)), industrial conglomerate, posted a 88% decline in Q4 profit at 77 million euros, with the units it''s holding onto seeing a 32% profit decline. Siemens sold the loss-making handsets division to BenQ during Q4. Communications profit went down 81% on severance charges and market-driven margin pressures, Siemens Business Services'' loss widened to 427 million euros from 28 million euros on charges, and its VDO Automotive unit saw a 8% profit decline amid a decline in investment and higher R&D expenses.

Rockwell Collins Inc. ((COL)), producer of communications and aviation electronics, announced that Q4 net income rose 29% to 62 cents a share from 48 cents a share in the year-ago period on 15% higher sales, in line with analyst estimate of 62 cents a share. Earnings and revenue in fiscal 2006 should rise by double-digit percentages.

W&T Offshore Inc. ((WTI)), oil and gas company, said that Q3 net income climbed 40% to 80 cents a share from 58 cents a share in the same period last year on 27% higher revenue, missing analysts’ forecasts of 86 cents a share. The company also said that on account of Hurricanes Katrina and Rita, it deferred 5.3 billion cubic feet equivalent of production in Q3 and will defer 11.7 Bcfe in Q4.

Green Mountain Coffee Roasters, Inc. ((GMCR)), roasted coffee distributor, reported that Q4 net income rose to 31 cents a share, up from 27 cents a share in the same period last year on 14.6% sales growth. Total coffee pounds shipped were up 9.3%. The Company''s net income in Q4 includes recognition of non-cash income of $0.01 per share as a result of its equity investment in Keurig, Inc. as compared to a non-cash loss of $0.04 per share in Q4 of fiscal 2004.

Hospira ((HSP)), hospital products maker, reported that Q3 profit dropped 2.3% to 37 cents a share. Adjusted earnings came in at $1.90 and $1.95 a share on sales of $2.6 billion. Termination of an agreement to distribute Berlex imaging agents offset rising volume, mix and pricing of other products. Adjusted for expenses relating to creating an independent infrastructure, it would''ve earned 48 cents a share, topping analysts’ views of earnings of 40 cents a share.

Four Seasons Hotels Inc. ((FS)), hotels operator, reported a Q3 loss of 31 cents a share, down from 24 cents a share in the year-ago period on revenue decline. Adjusted earnings amounted to 22 cents, down from 24 cents a share in the comparable period last year.

Movie Gallery ((MOVI)), video rental company, posted a Q3 loss of 39 cents a share, down vs. a profit of 29 cents a share in the same period a year ago on despite revenue growth, missing analyst estimate of a profit of 6 cents a share. If not for non-recurring items, the loss would have come at 16 cents a share. Revenue rose to $572.4 million from $189.9 million.