Market Updates

Oil Stocks Rise on Inventories Drop

Elena
16 Nov, 2005
New York City

    Homebuilder D.R. Horton reported Q4 net income rise of 61% on 45% increase in revenue, beating analyst estimate. Tyco posted nearly doubled fourth-quarter earnings on lower tax rate,but revenue misses estimates. Teenage fashion retailer Too reported Q3 profit jump of 40% on improved sales. Zale Corp posted Q1 wider-than-expected loss, despite a revenue growth.

U.S. MARKET AVERAGES

Unexpected drop in crude oil and gasoline supplies sent oil prices sharply higher to overshadow the government's report of moderating inflation. Stocks were also helped in their retreat from recent advance by American Express which confirmed that the company will fail to meet Wall Street’s earnings expectations for the fourth quarter.

Earlier in the day, the Labor Department reported that consumer prices edged up just 0.2% in October, the best showing in four months. September consumer prices had soared by 1.2% on record energy prices. That inflation increase was the largest one-month jump in 25 years.

CPI report and better-than-expected net foreign purchases has sent the benchmark 10-year bond up 17 ticks and knocked its yield to 4.49%.

After the Energy Department released its latest report, crude futures rebounded and led to increased interest in energy stocks, sending the Energy sector up, helping the Dow and S&P back to higher ground.

The disk drive sector is pushing further lower on Wednesday, following yesterday’s decline the downgrade of SanDisk (((SNDK)). Adaptec ((ADPT)) is another of Tuesday''s biggest drags on the group, leading the decline with a loss of 3.8%. The networking sector is also weak, falling by 1.1%.

Energy stocks were sitting modestly above the flat line just before the release of the government''s weekly petroleum inventory report, but news that oil inventories dropped, sent crude prices higher, which in turn gave a boost to energy stocks. The oil service space is now up about 2%. Smith International ((SII)) is the best performing oil service stock, climbing by 3.6%. Transocean ((RIG)), Baker Hughes ((BHI)) and BJ Services ((BJS)) are each showing gains of more than 2.5%.

Too, Inc. ((TOO)) has jumped to a new 52-week high on quarterly earnings. Apple ((AAPL)) is extending its high on speculations of possible prices changes in its iTunes music download service. Aetna (AET) and UnitedHealth (UNH) are other noteworthy stocks setting fresh peaks.

GM ((GM)), which has been following the downtrend for a week and a half, is the most prominent stock setting a new 52-week low. Vodafone ((VOD)) and Blockbuster ((BBI)) are also extending their lows.

MOVERS AND SHAKERS

The homebuilder D.R. Horton ((DRI)) raised its 2006 profit outlook after posting fourth-quarter results that beat expectations. The company''s strong performance could help relieve the worries that the sector is suffering a downturn caused by a profit warning from Toll Bros ((TOL)) last week. D.R. Horton’s stock closed 0.3% down on Tuesday, but is expected to gain today.

The fashion retailer Abercrombie & Fitch ((ANF)) boosted its full-year profit outlook after third-quarter results increased 79% to $71.6 million as compared to a year ago values. Sales during the quarter rose 35% to $704.9 million. The company’s shares added 4.3%.

The specialty apparel retailer The Talbots Inc. ((TLB)) reported forecast-beating third-quarter profit and said its store traffic and sales performance made a significant progress in the second half of October. The stock fell 4.3% on Tuesday, but is likely to increase slightly today.

ECONOMIC NEWS

After a recent streak of gains, crude oil inventories dropped in the latest week, according to government data released Wednesday. Stocks of gasoline dipped as well.

The Department of Energy''s Energy Information Administration revealed that crude oil inventories fell by 2.2 million barrels for the week ended November 11, dropping to 321.4 million barrels from the 323.6 million barrels recorded in the previous week. This followed a recent streak of gains, including an advance of 4.5 million barrels for the prior week. Oil inventories are still 11.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week decline of 900,000 barrels, the government said, reversing a portion of the previous week''s advance of 4.2 million barrels. Gasoline stocks are now 2.9% below their levels of last year. Inventories of distillate fuel oil rose by 2.6 million barrels in the most recent week.

The Department of Labor released its closely watched report on consumer prices in the month of October on Wednesday, showing that prices rose modestly after surging higher in the previous month.

The report showed that consumer prices rose by 0.2 percent in October following a 1.2 percent increase in September. Economists had been expecting a slightly more modest increase of about 0.1 percent.

The significant slowdown in the pace of price growth compared to September came as energy prices fell 0.2 percent in October after surging up a record 12 percent in the previous month. Transportation prices also showed a notable decrease.

The report also showed that core consumer prices, which exclude food and energy prices, rose 0.2 percent in October after rising 0.1 percent in each of the five previous months. The increase in core prices came in line with economist estimates.

The modest increase in core prices suggests that the increase in energy prices is not being passed on in the prices of other products. Subsequently, core inflation has remained relatively subdued, rising at an annual rate of 2.1 percent.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks advanced to close higher as the Japanese Nikkei rose 0.6%, rebounding from two-day losses and reaching a four-year record high of 14,170,087 on stronger dollar , exporter issues and financial stocks buy-back. Across the region, South Korea’s Kospi climbed 1.1% on surging Korean Exchange Bank, Hong Kong’s Hang Seng gained 0.2%, and Singapore Straits Times added 0.6%.

European markets finished in the red, pressured by oil, weaker resource stocks and earnings from the German power giant RWE, and Swiss Adecco. The German DAX 30 lost 0.3%, the French CAC 40 shed 0.6%, and London’s FTSE 100 fell 0.3%.

OIL, METALS, CURRENCIES

Crude oil sharply rose after weekly petroleum report showed oil inventories drop. Light sweet crude December delivery gained 52 cents to $57.50 a barrel. Heating oil traded at $1.6831 a gallon. Gasoline rose marginally to $1.48. Natural gas gained 42 cents to $11.98 per 1,000 cubic feet. London Brent rose 32 cents to $55.50.

Gold prices advanced in European trading. In London the precious metal closed at $475.75 per troy ounce, up from $467.90. In Zurich gold advanced to $476.45 from $466.95. In Hong Kong gold rose $4.40 to close at $472.65. Silver traded at $7.78, up from $7.70.

The U.S. dollar traded higher against other major currencies. The euro was quoted at $1.1658, down from $1.1694. The dollar bought 119.38 yen, up from 118.99. The British pound traded at $1.7147, down from $1.7343.

EARNINGS NEWS

Charming Shoppes, Inc. ((CHRS)), apparel retailer, announced that Q3 net profit soared 70% to 9 cents a share, from the comparable period last year, topping the analysts’ forecasts by a penny. Sales rose 22%. The company envisages Q4 earnings between 13 cents and 14 cents a share on same-store sales up 2% to 4%.

Tyco International ((TYC)), industrial conglomerate, reported Q4 net income rose to 44 cents a share, double from 22 cents a share in the year-ago period on lower restructuring and divestiture charges at its fire and security division. Revenue was up 2% on a comparable basis. Earnings from continuing operations totaled 42 cents a share but missed analyst expectations of 46 cents a share.

D.R. Horton ((DHI)), homebuilder, reported that Q4 net income rose 61% to $1.77 compared with last year’s result on 45% increase in revenue, beating analyst estimate of $1.63 cents a share. The company added that fiscal year 2006 earnings should be in a range of $5.22 to $5.32 a share on revenue of more than $15.5 billion, but kept its earnings forecast for the first quarter unchanged at between 90 cents and 95 cents a share.

Big Lots, Inc. ((BLI)), retailer of closeout merchandise, posted Q3 net loss of 17cents per share, up from a net loss of 29 cents per share in the year-ago period. Net sales for Q3, increased 6.2% Comparable store sales increased 1.7% for Q3 consisting of a 5.0% increase in the value of the average basket and a 3.3% decrease in customer transactions. On a year to date basis, net sales rose 6.6%. Comparable store sales increased 1.5% for the year to date period with the value of the average basket increasing 4.4% and the number of customer transactions declining2.9%.

Zale Corp. ((ZLC)), jewelry retailer, posted Q1 loss of 47 cents a share, down from a loss of 21 cents a share in the year-ago period, despite 1.2% revenue growth, missing analysts’ forecasts of a loss of 35 cents a share The latest results include a charge of 10 cents a share, related to the closing of about 30 of the company''s Bailey Banks & Biddle locations. If not for this charge the company lost 36 cents a share. Same-store sales shed 1.2%. The company declared that its performance was hurt by its efforts to reposition the Zales brand.

The Talbots Inc ((TLB)), specialty apparel retailer, posted Q3 earnings of 37 cents a share, down from profit of 49 cents a share in the same period last year, beating analyst estimate by a penny. The year-ago results include a tax benefit of or 8 cents a share. Sales increased 3% in Q3. Same-store sales dropped 2% in the period.

Helmerich & Payne Inc. ((HP)), oil and gas company, posted Q4 earnings of 68 cents a share, up from a loss of 25 cents a share in the same period a year ago on revenue growth, missing analyst estimate of 71 cents a share. The latest results include a gain of a penny a share on the sale of certain securities, while the year-ago performance reflects an asset impairment charge of 63 cents a share, and a gain of 16 cents a share from securities sales.

Too Inc. ((TOO)), specialty retailer of young girls'' apparel, posted Q3 earnings of 48 cents a share, up from 33 cents a share in the year-ago on higher sales and merchandise margin improvement, beating analyst estimate of 43 cents a share. Sales rose 16% in Q3 and same-store sales advanced 8%.

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