Natural Gas Rally Lifts Stocks

Elena
08 Dec, 2005
New York City

U.S. stock markets opened weak Thursday, with homebuilder Toll Brothers issuing a cautious outlook and with the semiconductor sector in focus after Texas Instruments sharpened its quarterly outlook and before Intel Corp. issues its mid-quarter update. Later stocks rebounded as crude oil prices boosted shares of energy companies and tech company Qualcomm Inc released improved revenue forecast.

U.S. MARKET AVERAGES

U.S. stocks opened weak and kept trading near the flat line throughout most of morning session, dragged by concerns over interest-rate hikes on signs of better-than-expected economic growth, and consumer spending on continuously rising oil prices. Homebuilders also weighed on sentiment after luxury home builder Toll Brothers Inc. cut its fiscal 2006 forecast. However at mid-day trading stocks bounced back from earlier losses, supported by energy stocks.

Investors also digested sharpened forecast at Texas Instruments Inc. and a raised sales target at rival chipmaker Xilinx Inc. These reports made Wall Street anxious for Intel Corp.'s mid-quarter update after the closing bell.

The only economic piece of news of the day was the Labor Department report which said unemployment claims grew by 6,000 to 327,000 last week against expectations that claims will drop to 318,000.

Energy stocks moved higher in morning trading, led by the oil service sector, rising more than 2.3%. The disk drive sector also extended gains to rise as far as 2%. Utility, HMO and biotech stocks were higher as well.

The housing sector ticked down early in the session, adding to Wednesday''s slide on earnings and guidance from Toll Brothers ((TOL)). In later trading the sector rebounded from early losses with the group rising about 1.2%.

Nokia] ((NOK)) reached a new 52-week high, adding to recent gains and moving above a peak set in July. AMR ((AMR)) further extended recent gains. Oil service stocks Schlumberger ((SLB)) and Transocean ((RIG)) moved to fresh peaks as well.

International Speedway ((ISCA)) dropped to a new 52-week low on a disappointing NASCAR TV contract. Lions Gate Entertainment ((LGF))extended recent losses to set a new low.

In late morning trading, the Dow Jones industrial average gained 20.25, or 0.19%. The Standard & Poor''s 500 index was up 4.21, or 0.33%, and the Nasdaq composite index added 6.67, or 0.3%.

Bonds reversed Wednesday''s losses, with the yield on the 10-year Treasury note falling to 4.47% from 4.52% late Wednesday

MOVERS AND SHAKERS

British biotech Protherics PLC surged more than 50% in London after AstraZeneca PLC agreed to pay up to $338 million for the rights to a drug to treat a potentially lethal blood infection.

Merrill Lynch cut British Airways PLC ((BAB)) to neutral from buy, citing valuation. The broker said shares have appreciated 49% in the last 12 months, outperforming the FTSE 100 by 26% and the European airline sector by 32%. Merrill also said the airline is in good shape, with favorable traffic growth and mix trends. The stock rose 1.8%.

Credit Suisse First Boston upgraded railroad operator RailAmerica, Inc. ((BRA)) to outperform from neutral to buy, citing valuation. The broker said there''s more potential upside than downside risk. Company’s shares climbed 7.3%.

Costco Wholesale Corp., discount retailer, reported that Q3 earnings and sales rose 12% to $215.8 million, or 45 cents a share, from $193.2 million, or 40 cents last year, meeting estimates. Sales climbed to $12.66 billion from $11.34 billion with comparable-store sales 9% higher. The stock dropped 2%.

Luxury home builder Toll Brothers Inc. reported a 72% Q4 increase in net profit on a 40% revenue rise, but lowered its fiscal 2006 earnings outlook, and said fiscal 2007 earnings may beat or miss a previous estimate of 20 percent growth. Shares of the company gained 2%.

ECONOMIC NEWS

Before the start of trading on Thursday, the Department of Labor released its report on initial jobless claims in the week ended December 3. The report showed that jobless claims rose unexpectedly.

The report said jobless claims rose to 327,000 from the previous week''s revised figure of 321,000. Economists had been expecting jobless claims to fall to about 315,000 from the 320,000 originally reported for the previous week.

At the same time, the 4-week moving average fell to 322,500 from the previous week''s revised average of 322,750. This marks the second consecutive weekly decline by the less volatile moving average.

The report also showed that continuing claims for the ended November 26 came in a 2.603 million, down from the preceding week''s revised level of 2.740 million.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks lost ground Thursday on profit taking, mangled IPO of J-Com, and cautiousness ahead of Japanese revised GDP figures. Regional markets also saw two interest-rate hikes. The Nikkei dropped 1.95% and Hong Kong’s Hang Seng slid 1.7%.

European markets erased earlier losses to close in the positive territory as strong retail and energy stocks offset weakness in the insurance sector. The German DAX 30 advanced 0.3%, the French CAC 40 gained 0.2%, while London’s FTSE 100 finished flat.

OIL, METALS, CURRENCIES

Crude oil rallied as cold weather raised worries about increased heating fuels demand. Light sweet crude for January delivery climbed 54 cents to $59.75 a barrel on the Nymex. Heating oil rose 4 cents to $1.775 a gallon, while gasoline climbed 3 cents to #1.598. Natural gas surged 83 cents to $14.53 per 1,000 cubic feet. London Brent advanced 55 cents to $57.53.

European gold rose, reaching 24-year highs. In London the precious metal closed at $517.05 per troy ounce, up from $514.20. In Zurich gold traded at $516.75, up from $515.25. In Hong Kong gold rose $2.70 to close at $515.95. Silver traded at $8.82, up from $8.79.

The U.S. dollar fell against other major counterparts. The euro was quoted at $1.1823, up from $1.1720. The dollar bought 120.48 yen, down from 120.93. The British pound traded at $1.7501, up from $1.7344.

EARNINGS NEWS

Costco Wholesale Corp. ((COST)), discount retailer, announced that Q1 earnings advanced 12% to 45 cents a share, from 40 cents in the year-ago period, in line with the analyst expectations of 45 cents a share. Both periods included 1-cent charges due to damage from Florida hurricanes. Sales went up and comparable-store sales increased 9%.

Ciena Corporation ((CIEN)), optical networking technology company, reported narrower fiscal Q4 loss to 44 cents a share, down from 87 cents a share in the same quarter last year on 44% revenue growth. Adjusted loss came to 2 cents a share, a penny more than analysts’ estimates.

Hovnanian Enterprises Inc ((HOV)), homebuilder, reported Q4 net earnings of $2.53 a share, up 26% from $2.06 a share in the year-earlier period on revenue growth, beating analyst estimate of $2.42 a share.

Net2Phone ((NTOP)), provider of Internet protocol-based telecommunications products and services, reported a Q1 net loss of 9 cents a share, down vs. a net loss of 11 cents a share in the same period last year.