Market Updates

Drop in Oil Powers Rally

Elena
23 Nov, 2005
New York City

    Wednesday morning session saw a continuation of November rally, boosted by upbeat economic data. The University of Michigan said consumer confidence index came in at 81.6, slightly higher than 81 reading Wall Street expected. In addition, the Energy Dept reported 400,000 barrels increase in oil inventories which sent oil prices down. Only the Labor Dept. reported bad news, saying that initial jobless claims in the week ended November 19 rose to 335,000.

U.S. MARKET AVERAGES

Wednesday session started at the unchanged mark with light trading volume expected before holiday, but stocks rebounded to extend November rally on better-than-expected consumer confidence and a drop in oil prices.

Investors were encouraged by the University of Michigan's consumer confidence index, which came in at 81.6, slightly higher than the 81 reading Wall Street expected. In addition, oil priced dropped after the Energy Department reported substantial increases in the nation's fuel stockpiles. A barrel of light crude was quoted at $58.10, down 74 cents, on the Nymex.

Yet not all economic news was positive. A larger-than-expected increase in first-time jobless claims, which rose by 30,000 to 335,000 last week, caused concerns among investors that the labor market was still struggling to recover from disruptions caused by the Gulf Coast hurricanes.

Stocks have recently slowed down their upward march. After moving steadily higher throughout the morning, the major averages are showing gains of 0.4%, holding near intraday highs.

In mid day trading, the Dow Jones industrial average rose 44.50, or 0.41%. The Standard & Poor's 500 index added 4.38, or 0.35% and the Nasdaq composite index rose 8.60, or 0.38%.

Bonds edged lower, with the yield on the 10-year Treasury note rising to 4.46% from 4.43% late Tuesday.

Technology stocks have driven the market to the morning's rally, with the segment getting even stronger. The computer hardware sector is now up about 1.3%. The networking space is also a notable advancer, rising by 1.2%.

The broker/dealer space is a significant mover to the upside. The sector is up about 1.2%, extending its high.

Retreating from 18-year highs, gold stocks dropped sharply in the first hour of Wednesday's trading, though rebounding from intraday lows. The sector is 2.2% below the unchanged mark.

Energy stocks have drifted back toward the downside lately, but they generally remain off lows for the day set before the release of the government's weekly inventory report. The natural gas sector has pushed to a new intraday low lately and is now the worst performer in the group with a loss of 1.5%.

Apple ((AAPL)) and Motorola ((MOT)) are among the many major tech stocks reaching 52-week highs. Google ((GOOG)) has continuously advanced, adding to its peak and moving near $425. Yahoo! ((YHOO)) has also set a fresh high.

EPIX Pharmaceuticals ((EPIX)) has broken to a new 52-week low after it revealed that the FDA has demanded an additional trial in order to approve Vasovist. Calpine ((CPN)) is adding to its losses after a sharp decline Tuesday, extending its 52-week low and approaching $1.

MOVERS AND SHAKERS

Sitel Corp. ((SWW)) ,provider of outsourced customer-support services, retained Citigroup Global Markets to help the board evaluate strategies to boost value for shareholders. In a statement, the company didn't provide specific possible alternatives. The stock jumped 11.3%.

Hormel Foods Corporation ((HRL)), manufacturer of food products, posted Q4 better-than-expected earnings of 59 cents a share, up from 50 cents in the same period last year, beating analysts’ expectations of 57 cents a share. The company projected 2006 earnings below expectations and the stock fell 6.6%.

Michaels Stores Inc. ((MIK)), retailer, reported third-quarter net earnings of $55.4 million, or 40 cents a share, compared with $42.5 million, or 31 cents a share, in the year-earlier quarter., exceeding estimates of 37 cents a share on revenue of $846 million. Same-store sales rose 0.8%. Company’s shares rose 7% on the favorable news.

Alexion Pharmaceuticals ((ALXN)) reported disappointing results for a late-stage clinical trial of a drug to reduce the incidence of heart attacks and deaths following coronary artery bypass graft surgery. Consequently the stock dropped 26%.

ECONOMIC NEWS

Coming back from a drop in the previous period, crude oil inventories ticked slightly higher in the latest week, according to government data released Wednesday. Stocks of gasoline also edged slightly higher.

The Department of Energy's Energy Information Administration revealed that crude oil inventories rose by 400,000 barrels for the week ended November 18, climbing to 321.8 million barrels from the prior week's level of 321.4 million barrels. This followed a decline of 2.2 million barrels in the previous week. Oil inventories remained 11.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week advance of 200,000 barrels, the government said, compared to the previous week's decline of 900,000 barrels. Gasoline stocks were 3.7% below their levels of last year. Inventories of distillate fuel oil rose by 1.1 million barrels in the most recent week.

The Department of Labor released its report on initial jobless claims in the week ended November 19 on Wednesday, a day earlier than usual due to the Thanksgiving Day holiday. The report showed a bigger than expected increase in jobless claims.

The Labor Dept. said that initial jobless claims in the week ended November 19 rose to 335,000 from the previous week's upwardly revised figure of 305,000. Economists had expected jobless claims to increase to 315,000 from the 303,000 originally reported for the previous week.

The increase was partly due to 21,000 new jobless claims related to Hurricanes Katrina, Rita, and Wilma. With the increase, the total number of hurricane-related job losses over the last 12 weeks rose to 582,400.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks advanced across the region on strong exporter-related issues, boosted by U.S. interest rate speculations. The Nikkei was closed for a national holiday. Among other regional markets, the biggest gainer was South Korea’s Kospi, surging 3% after yesterday’s 2% decline, followed by Hong Kong’s Hang Seng, up 1.2% and Singapore Straits Times, rising 0.8%. The only decliner was Australia’s All Ordinaries, down 0.2%.

European markets closed in the positive territory, supported by Wall Street gains, earnings reports and merger-and-acquisition activity. The German DAX 30 gained 0.4%, the French CAC 40 advanced 0.6%, and London’s FTSE 100 added 0.3%.

OIL, METALS, CURRENCIES

Crude oil prices eased down but remained above $58 a barrel on cold weather in the northern hemisphere and expectations of higher heating oil demand. Light sweet crude for January delivery lost 33 cents to $58.51 a barrel. London Brent fell 16 cents to $56.25.

European gold prices retreated from 18-year highs on subsiding trading activity before Thanksgiving. In London gold closed at $499.90 per troy ounce, down from $491.20. In Zurich gold fell to $489.35 from $490.90. In Hong Kong gold dropped $3.30 to close at $489.95. Silver traded unchanged at $8.13.

The U.S. dollar traded mixed against other major currencies. The euro was quoted at $1.1790, down from $1.1814. The dollar bought 118.52 yen, down from 118.78. The British pound traded at $1.7210, down from $1.7222.

EARNINGS NEWS

Air France-KLM ((AKH)), air transport company, announced that Q2 profit more than tripled to 2.73 euro a share, up from 76 euro cents a share in the year-ago period. Sales rose 10%. Fuel costs increased 29%, reflecting a 3% rise in volumes, a 49% surge in jet fuel prices and a hedging impact of 23%.

Patterson Cos ((PDCO)), equipment distribution company, reported that Q2 net income advanced to 32 cents a share, a penny up from 31 cents share in the same period last year, missing analyst estimate by a penny. The company added that sales advanced 11% in Q2. The company stated that Patterson Dental, its largest business, reported sales growth of 9%. Patterson expects Q3 earnings between 38 cents and 40 cents a share.

Nexus Telocation Systems Ltd ((NXUS)), provider of stolen-vehicle-retrieval and roadside-assistance services in Israel, posted a narrow Q3 loss of 14 cents a share, from 37 cents a share in the year-ago period as revenue more than doubled. The company reversed to Q4 operating earnings of $870,000 from an operating loss of $313,000.

Hormel Foods Corp ((HRL)), manufacturer and marketer of consumer-branded meats and food products, posted Q4 net earnings of 59 cents a share, up from 50 cents in the same period last year, beating analysts’ expectations of 57 cents a share. Sales rose 9.9%. The company projected earnings in a range of 44 cents to 50 cents a share for the fiscal 2006, including a charge of 4 cents for adoption of FAS 123R, the accounting rule for share-based payments. And for the year, Hormel''s pegged its profit range at $1.86 to $1.96 a share, also including the 4-cent charge.

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