Market Falls on Stronger GDP

123jump.com Staff
30 Nov, 2005
New York City

Third quarter economic growth estimates were revised to 4.3%. Consumers and businesses both contributed to the economic growth in the quarter. The economy showed its vigor despite the hurricanes in the gulf region. Weekly petroleum report showed that crude and gasoline inventories fell driving the oil prices higher. Copper reached a new high. Tiffany reported earnings of 16 cents vs. 12 cents. Maker of BlackBerry lost its case in Federal Court.

U.S. MARKET AVERAGES

Better-than-expected read on GDP weekly petroleum report failed to convince traders.

Latest revision on third quarter real gross domestic product from 3.8% to 4.3% indicated that economy is on healthier despite several hurricanes in the gulf coast. The economic strength was reflecting the consumer’s desire to spend and businesses readiness to invest.

Weekly petroleum report indicated that inventories for crude and gasoline declined, but lower than expected, and as a result oil rebounded. Only oil drillers and refiners rebounded with the rising oil prices. Oil at close rose 82 cents.

Dollar was mixed as gold retreated and copper rose to a new high. Yield on 10-year bond rose to 4.49% from 4.48% as traders worried that Fed will not stop raising interest rates.

Recently spun-off Genworth Financial ((GNW)) was added to the S&P 500 index to replace energy trader and generator Calpine Corp. Stock rose 42 cents at close. Shares of Yahoo ((YHOO)) were downgraded by UBS on concerns that company key initiatives are still at an early stage and earnings revision may have to wait. A Federal judge invalidated settlement of $450 million between Research in Motion ((RIMM)), maker of popular BlackBerry wireless device, and NTP Inc holder of several key patents. Research in Motion’s stock fell $3.79 to $61.28 on volume of 16 million shares.


ECONOMIC NEWS

Crude oil inventories dropped sharply in the most recent week, according to government data released Wednesday. Stocks of gasoline edged lower as well.

The Department of Energy''s Energy Information Administration revealed that crude oil inventories fell by 4.2 million barrels for the week ended November 25, falling to 317.6 million barrels from the prior week''s level of 321.8 million barrels. This followed an advance of 400,000 barrels in the previous week. Oil inventories were 10.3% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week decline of 500,000 barrels, the government said, more than reversing the previous week''s advance of 200,000 barrels. Gasoline stocks were 4.8% below their levels of last year. Inventories of distillate fuel oil rose by 3.4 million barrels in the most recent week.

The U.S. economy grew at a faster than expected pace in the third quarter, according to a report from the Department of Commerce that is likely to generate some optimism about the strength of the economy.

The report showed that GDP rose at an annual rate of 4.3 percent in the third quarter compared to the 3.3 percent growth seen in the second quarter. Economists had been expecting third quarter GDP growth to be revised up to 4.1 percent from an advance reading of 3.8 percent.

The GDP growth was partly due to growth in consumer spending, which rose by 4.2 percent in the third quarter after rising by 3.4 percent in the second quarter. The growth also reflected increased equipment and software spending, federal government spending, and residential fixed investment.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed with the Nikkei crossing 15,000 for the first time in 5 years, but eventually finished lower 0.4% as investors locked in recent profits from technology, banking and steel stocks. Across the region, South Korea’s Kospi surged 1.4%, while Australia’s All Ordinaries lost 0.9%, followed by Hong Kong’s Hang Seng, down 0.6%.

European markets finished in the red, dragged by banking and mining stocks with losses cushioned by positive corporate news from Anglo-Dutch steelmaker Corus Group and Danish telecommunications carrier TDC. The German DAX 30 lost 0.1%, the French CAC 40 slipped 0.5%, and London’s FTSE 100 dropped 1.2%.

OIL, METALS, CURRENCIES

Crude oil prices climbed on sharp drop in oil and gasoline inventories in the previous week. Light sweet crude for January delivery rose 82 cents to $57.32 a barrel on the Nymex. Heating oil rose 2.55 cents to $1.6975 a gallon, while gasoline gained 4 cents to $1.4970. Natural gas rose 33 cents to $12.07 per 1,000 cubic feet. London Brent jumped 36 cents to $54.68.

European gold retreated from its decade-high of $500 per ounce and traded mixed. In London the precious metal closed at $494.50 per troy ounce, down from $497.20. In Zurich gold traded at $494.85, up from $494.75. In Hong Kong gold fell $4.25 to close at $493.25. Silver traded unchanged at $8.13. In New York gold dropped $4.50 to $494.60 per ounce and copper reached a new high of $2.0750 up 3.45 cents.

The U.S. dollar lost ground against its major counterparts. The euro was quoted at $1.1795, up from $1.1786. The dollar bought 119.46 yen, down from 119.52. The British pound traded at $1.7333, up from $1.7193.

EARNINGS NEWS

Rex Stores Corp. ((RSC)), consumer electronics company, reported that Q3 profit more than doubled to 58 cents a share, from 27 cents a share in the year-ago period on 4.2% revenue growth with same-store sales up 4.6%.

The Dress Barn Inc. ((DBRN)), apparel company, reported Q1 net income rose to 64 cents a share, from 24 cents a share in the year-ago period on better-than-forecast results for both its dress barn and murices brands, beating analyst estimate of 40 cents a share. Sales rose 62% and comparable sales rose 9%. The company upped its guidance for the year and expects earnings from $1.90 to $1.95 a share, vs. an earlier view of $1.60 to $1.65 a share.

Tiffany & Core ((TIF)), jewelry and specialty retail store chain, posted Q3 earnings of 16 cents a share, up from 12 cents a share in the same period last year on 8% revenue growth, matching analyst estimate. The company reaffirmed its 2005 earnings estimate of $1.55 to $1.65 a share and its revenue growth forecast of 8% to 10%.

Smithfield Foods Inc. ((SFD)), meat processor, reported Q2 net income of 46 cents a share, down from 52 cents in the same period last year. If not for charges of 9 cents a share, the company would have gained 55 cents a share in Q2, missing on that basis the analyst estimate by a penny.