Record Trade Deficit

Elena
10 Nov, 2005
New York City

Crude oil prices dropped below $58 a barrel on rising inventories and unusually warm weather. Falling crude sent shares of oil majors like Exxon Mobil, BP, and ConocoPhillips lower. On the economic news front, the Commerce Dept revealed 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.

U.S. MARKET AVERAGES

Mixed economic data, weak energy sector on falling oil and drop in General Motors exerted strong pressure on stocks which started trading in a lackluster fashion, keeping the trend throughout the whole morning session. They have recently come off their intraday lows and keep steady with the Nasdaq down about 0.4%, while the Dow is posting only a slight loss.

In a heavily loaded day with economic news, investors had a lot of data to digest. Economic news was mixed. The University of Michigan's mid-month report on consumer sentiment for November increased from October's levels, according to news accounts. But the Commerce Department said September's trade deficit soared 11.4% to $66.1 billion, pushed higher by increased oil imports following the Gulf Coast hurricanes and a record deficit with China. Investors were trying to decide whether the surging trade deficit was an anomaly caused by higher oil imports after the devastating hurricanes or a sign of increasing trade imbalance.

Wall Street is also considering a continuing stream of unemployment filings from the hurricanes. The number of Americans who lost their jobs in the hurricanes'' aftermath rose by 2,000 to 542,000 last week.

Another drop in crude oil , recently traded at $58.10 a barrel, sent oil companies like Exxon Mobil Corp., BP PLC, ConocoPhillips sharply lower.

Energy stocks are posting losses of more than 3.3% in the oil, oil service and natural gas sectors. The utility space is also weak, as the Dow Jones Utilities Index has fallen steadily through the morning and is now showing a loss of 1.8%. The gold sector reversed a course to the downside and is now lower by 1.6%.

After a considerable climb the airline sector has been holding steady lately, with a gain of about 2.3%. HMO, insurance and bank stocks are posting modest gains.

General Motors ((GM)) is the worst performing Dow component for a third straight session. The stock is down by more than 6%, extending its multi-year low on news that it will restate its 2001 financial results. Shares of Exxon Mobil (XOM)) are falling nearly 2.3%, hurt by weaker energy sector.

Intel ((INTC)) announced a 25% increase in its dividend and a $25 billion stock repurchase plan, and now is the best performing blue chip, climbing by 1.1%. Citigroup (©), Boeing ((BA)), Merck ((MRK)) and Wal-Mart ((WMT)) are each showing gains of just under 1%.

AMR ((AMR)) is extending an uptrend that began in early October, moving to a new 52-week high. Hospira ((HSP)) is breaking to a fresh peak on quarterly results. Netflix ((NFLX)) has climbed on merger speculations.

Movie Gallery ((MOVI)) has dropped to a new 52-week low after reporting a third-quarter loss. GM ((GM)) has extended its low on a planned restatement, news that has also dragged competitor Ford ((F)) to a fresh nadir. Auto parts maker Lear ((LEA)) has set a new low as well.

In morning trading, the Dow Jones industrial average fell 9.82, or 0.09%. The Standard & Poor''s 500 index fell 3.15, or 0.26%, and the Nasdaq composite index fell 7.46, or 0.34%.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.61% 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 closed Thursday session flat amid solid earnings from companies such as the German Siemens AG, Dutch insurers Aegon and ING, as well as the drinks segment. Pressure over U.S. markets also weighed on sentiment. The German SAX 30 gained 0.08%, the French CAC 40 lost 0.02% on GDP data, and London’s FTSE fell 0.3%.

OIL, METALS, CURRENCIES

Crude oil slid below $58 a barrel on weekly petroleum report, easing supply concerns, and signs of lower-than-expected global demand in 2005. Light sweet crude December delivery lost $1.23 to trade at $57.70 a barrel on the Nymex, the lowest level in about three months and a half. Heating oil shed 5 cents to trade at $1.74 a gallon. Gasoline declined 4 cents to $1.5075. Natural gas dropped 44 cents to $11.23 per 1,000 cubic feet.

Gold prices further advanced in European trading. In London the precious metal closed at $466.60, up from $463.65. In Zurich gold rose to $467.55 from $462.45. In Hong Kong gold gained $4.50 to close at $466.75. Silver traded unchanged at $7.46.

The U.S. dollar traded mixed against major currencies. The euro was quoted at $1.1738, down from $1.1763. The dollar bought 118.03 yen, up from 117.47. The British pound traded at $1.7461, up 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.