Early Rise on Lower Oil

Elena
16 Dec, 2005
New York City

An oil prices decline below $60 a barrel and news from the CEO of General Motors that the company will raise its 2006 revenue sent averages higher at the start of Friday session, but the expiration of key options and futures are likely to cause volatility to the market. Natural gas distributor Southern Union agreed to buy Sid Richardson Energy Services Co. along with a related energy marketing business, for $1.6 billion in cash.

U.S. MARKET AVERAGES

U.S. market averages started Friday session higher on oil prices below $60 a barrel, robust earnings from Adobe Systems Inc, healthy U.S. economic data, and news that General Motors Corp. will raise 2006 revenue. A lift to the sentiment was also provided by an upgrade on semiconductors which generated optimism about the technology sector. Friday marks the expiration of key options and futures which is likely to cause volatility of the market.

In economic news, the U.S. Commerce Department reported that the current account deficit narrowed in the third quarter to $195.8 billion, compared to the second-quarter revised $197.8 billion. Economists had expected the deficit to widen to more than $200 billion.

On the earnings front, Oracle ((ORCL)), software firm, reported a 16% increase in Q2 non-GAAP earnings of 19 cents per share compared with the year-ago period. The quarterly results met analysts’ estimate. The company said that total revenue advanced to $3.29 billion, up from $2.76 billion last year.

The airline sector climbed sharply, extending gains. The sector climbed 1.2%, challenging the top end of a 5-week trading range. The housing sector moved to the upside, helped by an earnings-related rise in KB Home ((KBH)).

Energy stocks posted lossee in the early going, adding to Thursday''s slide. The oil, oil service and natural gas sectors posted declines of about 0.5%.

The Dow Jones industrial average was up 15.85 points, or 0.15% The Standard & Poor 500 Index was up 0.22 points, or 0.02%. The technology-laced Nasdaq Composite Index was up 1.45 points, or 0.06%.

MOVERS AND SHAKERS

SMSC Corp ((SNSC)) posted Q3 earnings of $5.4 million, or 24 cents a share, up from $600,000, or 3 cents a share, the year earlier. Excluding special charges, the company would have earned 38 cents a share against 4 cents a year ago. Revenue climbed to $86.6 million from $50.8 million. The average estimates of analysts were 33 cents a share on revenue of $83 million. The stock dropped 11%.

Oracle Corp ((ORCL)), database software company, posted quarterly earnings decline of 2% as the company reported an increase in sales but felt the effects of adverse currency-exchange rages and higher expenses following a number of acquisitions. The stock dropped 4%.

Scholastic Corp ((SCHL)) forecast fiscal 2005 earnings at the bottom end of its $2.30 to $2.50 a share range after reporting an 8% decline in Q2 profit. Scholastic''s net income in the Q2 fell to $66.9 million, or $1.59 a share, with revenue up 2% at $696 million mainly due to a decline on its international operations. It sees full-year revenue between $2.3 billion and $2.4 billion. Analysts were expecting earnings of $1.80 a share for the Nov. 30-ending quarter and $2.43 for the fiscal year. Company’s shares fell 2.1%.

Quiksilver Inc ((ZQK)), sports apparel and accessories company, reported Q4 profit rise of $33.6 million, or 27 cents a share, from $24.9 million, or 20 cents, a year ago, matching analyst estimates. Revenue for the quarter advanced to $637.4 million from $350.3 million. The stock rose 3%.

ECONOMIC NEWS

Friday morning, the Department of Commerce released its report on the current account deficit in the third quarter, showing that the deficit unexpectedly narrowed from the second quarter.

The report showed that the current account deficit narrowed to $195.8 billion in the third quarter from an upwardly revised $197.8 billion in the second quarter. Economists had expected the deficit to widen to about $206 billion.

The Commerce Dept. said that the narrower deficit reflected a decrease in net outflows for unilateral current transfers, a shift to a surplus on income from a deficit, and an increase in the surplus on services.

With the decrease, the current account deficit ran at 6.2 percent of gross domestic product in the third quarter compared with 6.4 percent in the second quarter.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks ended mixed with the Nikkei falling for a third straight day. The 0.5% decline of the Japanese bellwether reflected a decline in U.S. markets, weaker dollar against the yen and profit-taking. Across the region, South Korea’s Kospi dropped 1.2%, Hong Kong’s Hang Seng fell 0.2%, while Taipei’s Weighted index climbed by 1.5%, followed by Australia’s All Ordinaries, up 0.3%.

European stocks advanced at mid-day dealings, boosted by utility stocks and the expiration of key futures and options contracts. Averages were also supported by positive German economic data which sent the euro higher by 0.2% to $1.1988. The German DAX 30 rose 0.7%, the French CAC 40 gained 0.7%, and London’s FTSE 100 climbed 0.9%.

OIL, METALS, CURRENCIES

Crude oil prices declined on warm weather forecasts after Christmas. Light sweet crude for January delivery fell 48 cents to $59.51 a barrel in electronic trading on the Nymex. Heating oil fell to $1.77. Natural gas dropped to $13.466 per 1,000 cubic feet. London Brent declined 66 cents to $58.74.

Gold prices in Europe declined still keeping above $500. In London gold slipped to $502.50 per troy ounce from $507.60. In Zurich the precious metal was fixed at $503.15, down from $507.20. In Hong Kong gold dropped $2.45 to $499.65. Silver fell to $8.43 from $8.51.

The U.S. dollar fell against its major counterparts. In European trading the euro was quoted at $1.2000, up from $1.1968. The dollar bought 116.24 yen, down from 116.29. The British pound stood at $1.7702, up from $1.7647.

EARNINGS NEWS

Scholastic Corp ((SCHL)), children’s book publisher, reported that Q2 net income fell to $1.59 a share, 8% down from the comparable period last year despite 2% revenue growth, missing analyst estimate of $1.80 a share. The company stated that the profit decline was due to its international operations and modestly lower results in children''s book publishing and distribution.

Oracle ((ORCL)), software firm, reported a 16% increase in Q2 non-GAAP earnings of 19 cents per share compared with the year-ago period. The quarterly results met analysts’ estimate. The company said that total revenue advanced to $3.29 billion, up from $2.76 billion last year.

Steelcase Inc. ((SCS)), office furniture manufacturer, reported Q3 net income of 13 cents a share, up from or 7 cents a share in the year-earlier period, missing analyst expectations by a penny. Last year net income included the benefit of a $6.5 million tax reserve reduction. The company expects Q4 earnings of 7-12 cents a share, ahead of analyst target of 10 cents a share.

Gtech Holdings Corporation ((GTK)), gaming technology company, announced that Q3 net income advanced 4.1% to 37 cents a share, compared with the same period last despite 4.9% revenue decline, a penny less than expected by analysts.