Oil Retreats

Elena
09 Dec, 2005
New York City

U.S. stocks were flat on Friday on a disappointing sales outlook by Intel Corp, rating downgrade on International Business Machines Corp, and news that Merck withheld information about the cardiac side effects of its arthritis drug Vioxx. However, an upbeat profit forecast from Eli Lilly and Co, fueled by strong sales growth of newer drugs and a lower- than-expected tax rate, provided support.

U.S. MARKET AVERAGES

U.S. stocks traded near the flat line as Intel Corp. released a disappointing sales outlook, sending technology shares down and International Business Machines was downgraded from buy to neutral. The downtrend was offset by an upbeat profit forecast from drug maker Eli Lilly and Co. which advanced on strong sales growth of newer drugs and a lower-than-expected tax rate. In addition, oil and gas prices retreated after a week of sharp gains on forecasts for a snowstorm in U.S. Northeast. A report from the University of Michigan that showed consumer sentiment improved in early December more than economists expected provided little support.

Intel ((INTC)) shares dropped after the company released mid-quarter lower-than-expected sales outlook.

International Business Machines Corp. ((IBM)) declined after UBS cut its rating on the stock to neutral from buy.

Merck ((MRK)), another blue chip, dropped after The New England Journal of Medicine said Merck withheld information about the cardiac side effects of its arthritis drug Vioxx.

The Dow Jones industrial average was up 2.88 points, or 0.03%. The Standard & Poor''s 500 Index was up 1.89 points, or 0.15%. The technology-laced Nasdaq Composite Index was up 3.12 points, or 0.14%.

Bond prices fell, with the yield on the 10-year Treasury note climbing to 4.52%from 4.46% late Thursday.

The airline sector fell at the start of Friday session, then bounced back to the flat line. SkyWest ((SKYW)) was the worst performer in the group, falling by 3.1%, while AirTran ((AAI)) and AMR ((AMR)) fell by more than 2%. Energy and housing stocks weighed on the major averages, too.

The gold sector steadily advanced over the past few days, following surging gold prices. The sector posted a gain of about 1.4% in morning trading. Semiconductor, computer hardware and Internet stocks also posted gains. The bank sector moved slightly to the upside as well.

Cephalon ((CEPH)) jumped to a new 52-week high, helped by news of a settlement with Teva ((TEVA)) regarding PROVIGIL patent litigation. Qwest ((Q)) extended Thursday’s sharp advance.

Fresh Del Monte ((FDP)) broke to a fresh 52-week low after cutting its 2005 earnings guidance. Dendrite International''s ((DRTE)) set a new low, falling 24% on outlook.

MOVERS AND SHAKERS

Intel Corp. ((INTC)) released a disappointing mid-quarter sales forecast, as the company reaffirmed its revenue guidance, versus expectations that it would lift it. The stock fell 1.5%.

The New England Journal of Medicine said Merck ((MRK)) withheld information about the cardiac side effects of its arthritis drug Vioxx. The medical journal said that the Merck study failed to mention three heart attacks suffered by participants using Vioxx, which has since been taken off the market because of safety concerns. Company’s shares fell 2.4%.

Eli Lilly ((LLY)) announced it sees its fourth-quarter and full-year earnings at the top of its guidance, or in the range of 73 to 79 cents and $2.80 to $2.86 respectively. The company forecast 2006 earnings to be from 8% to 12% higher compared with the previous year. Shares of the company gained 4.5%.

JAMDAT Mobile ((JMDT)) surged on news that it agreed to be acquired by Electronic Arts ((ERTS)) for $680 million, or $27 per share. The stock climbed 17%.

Dendrite International ((DRTE)) sharply moved to the downside, after it revised its fourth-quarter earnings forecast and named a new CFO. The stock dropped 22%.

ECONOMIC NEWS

The Department of Commerce released its report on wholesale trade in the month of October on Friday, showing a notable increase in wholesale sales as well as a modest increase in wholesale inventories.

The report showed that wholesale sales rose 1.2 percent in October following a 2.4 percent increase in September. The increase was partly due to a 1.9 percent increase in wholesale sales of durable goods, which benefited from higher sales of metals and minerals and furniture.

At the same time, the report showed that wholesale inventories rose 0.2 percent in October after rising 0.6 percent in September. The increase came as an increase in wholesale inventories of durable goods more than offset a decrease in wholesale inventories of non-durable goods.

Subsequently, the Commerce Dept. said that the inventories/sales ratio fell to 1.13 in October from 1.15 in September.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished Friday session higher. The Nikkei recovered from yesterday’s sharp decline and advanced 1.5% to 15,404.05, ignoring disappointing revised GDP report. Regional markets gained with Singapore Straits Times in the lead, up 0.7%, followed by Hong Kong’s Hang Seng, up 0.2%, and Taipei’s Weighted Index rising 0.2%.

European markets closed under the flat line as oil companies declined and chip stocks were pressured by Intel’s lowered fourth-quarter sales outlook. The German DAX 30 fell 0.1%, the French CAC 40 dropped 0.2%, and London’s FTSE 100 lost 0.3%.

OIL, METALS, CURRENCIES

Crude oil and natural gas prices retreated. Light sweet crude for January delivery dropped 66 cents to $59.95 a barrel on the Nymex. Natural gas futures fell 34 cents to $14.65 per 1,000 cubic feet, following a 10% rise on Thursday.

Gold hit a 25-year high, rising over $533 per ounce on robust world demand, inflation concerns and central-bank buying. Gold for February delivery rose $10.30, or 2% to $533 per troy ounce. Since November 7, the precious metal has gained $75, or 16.4%. Silver rose to $9.105.

The U.S. dollar lost ground against the euro and the pound, rose against the yen. In New York trading the euro was quoted at $1.1819, up from $1.1813. The dollar bought 120.57 yen, up from 120.26. The British pound stood at $1.7548, upfrom $1.7530.