Oil, Earnings and Sell-Off

123jump.com Staff
20 Jan, 2006
New York City

Market was under pressure at the opening and averages declined sharply near close. Dow closed down 1.96%, Nasdaq down 2.35% and S&P down 1.84%. Google dropped 8.5% and closed below $400 for the first time in two months. Key Corp, Johnson Controls and Schlumberger beat earnings forecasts. Semiconductors, techs and banking stocks faced widespread selling, however casinos rose during the day. BlackRock surged 7% on rumoured merger with Morgan Stanley. Dow erased its gain for the year 2006.

U.S. MARKET AVERAGES

Inverted bond yields, rising crude oil price, sell-off in semiconductor stocks and disappointing earnings and forecasts from General Electric and Citigroup all conspired a broad sell-off in the market. Major averages traded lower with Nasdaq down 2.35%, S&P down 1.84% and Dow down 1.96% for the day.

Every component in Dow Jones Industrial Average traded lower except McDonald’s ((MCD)). Dow erased all of its gain for the year 2006 and turned negative for the first time in the year. Google lost 8.5% of its value and plunged $37 closing the stock below $400 for the first time in last two months.

Semiconductor stocks fell as Xilinx ((XLNX)) forecasted anemic growth rate in the current quarter. The company stock fell 8%. The semiconductor index SOX, which had risen 11% for the year so far, declined 3.4% for the day. Shares of Intel ((INTC)) , Advanced Micro Devices ((AMD)), Marvel ((MRVL)), Sandisk ((SNDK)) and Texas Instrument ((TI)) fell.

Oil continued its march toward $70 per barrel. Iran apparently is working to move its $30 billion of foreign holdings in Europe to Iran. Despite higher oil price, stocks of energy companies traded lower. Schlumberger, oil drilling equipment provider, reported better than expected earnings of $1.08 vs. expectations of 96 cents. The stock jumped $7.01 to close at $122.25.

Inverted bond yield persisted in the bond market today. Interest on 2-year note at 4.369% and on 10-year bond was at 4.365%.

General Electric and Citigroup earnings forecast created earnings jitters in the market. Citigroup group reported earnings of 98 cents and missed forecast of $1. General Electric met earnings guidance but missed revenue projection of $42.39 billion by $1.7 billion. Stocks of General Electric ((GE)) and Citigroup ((C)) fell 4%.

MOVERS AND SHAKERS

AMCOL International Corp ((ACO)) said that Q4 net income rose to $8.6 million, or 28 cents a share, from $6.3 million, or 20 cents a share, a year ago on a revenue growth of $134.6 million, from $113.2 million a year ago, after strong performances, especially from the company''s environmental segment. The stock climbed 11.1%.

Genesis Microchip ((GNSS)), maker of image processing systems, reported Q3 earnings of $7.37 million, or 20 cents a share vs. a net loss of $1 million, or 3 cents a share a year ago. On a pro forma basis, earnings came in at 27 cents a share compared with 9 cents a share last year. Revenue rose 59%, to $74 million from $48.3 million, and gross margin was 48.9% vs. 44.9%. Analysts had forecast earnings of 24 cents a share on revenue of $75 million. The stock dropped 10.3%.

Ford Motor Co ((F)) may cut 25,000 or more jobs over 4 years as part of a restructuring plan to stem North American losses. The company is expected to announce the jobs cuts on Monday. The company’s shares fell 2.4%.

Cree Inc ((CREE)), semiconductor maker, reported Q2 29% earnings drop of $17.7 million, or 23 cents a share from $25 million, or 32 cents a share last year, with 3 cents a share in stock option expense included. Revenue rose 10%, to $105.6 million from $96.1 million. Analysts had expected earnings of 26 cents a share on revenue of $108 million. The stock declined 5.7%.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed in the positive Friday, despite the rising oil prices. Stocks were boosted by gains on Wall Street on the back of strong quarterly results, released by major companies. The Nikkei rose 0.8% to 15,820.96, lifted by broad-buying of bank, tech and mining stocks. Across the region, South Korea’s Kospi gained 0.8%, Taiwan’s Weighted index added 0.3%, and Singapore’s Straits Times climbed 0.55%.

European stocks lost ground, failing to keep early gains as automakers declined on higher oil prices, Infineon posted a wider-than-expected loss and U.S. markets dropped in morning trading. The German DAX 30 tumbled 1.5%, the French CAC 40 slipped 0.7%, and London’s FTSE 100 fell 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices neared $68 a barrel on supply concerns, raised by continuous tensions in Nigeria and Iran and renewed threats of attacks on the U.S. by al Qaida. Light sweet crude for February delivery gained $1.46 to $68.65 a barrel. Heating oil rose 3 cents to $1.8300 a gallon. Gasoline gained over 3 cents to $1.81. Natural gas climbed 45 cents to $9.360 per 1,000 cubic feet. London Brent climbed 87 cents to $66.10.

European gold prices hit fresh 25-year highs on instability of currency markets, firm oil and geo-political concerns. In London gold traded at $559.80, up from $552.20. In Zurich the precious metal traded at $561.35, up from $547.05. In Hong Kong gold rose $7.20 to close at $557. Silver closed at $9.06, up from $8.95. In New York gold fell $5 to $554 per ounce and silver fell 17 cents to $8.93.

The U.S. dollar traded mixed against the major currencies. The euro was quoted at $1.2075, down from $1.2094. The dollar bought 115.40 yen, down from 115.44. The British pound was quoted at $1.7638, up from $1.7583.

EARNINGS NEWS

Schlumberger Ltd, ((SLB)), provider of oilfield services, reported that Q4 net income doubled to $1.08 a share, up from 55 cents a share in the same period a year ago, topping analysts’ forecasts for earnings of 96 cents a share. Operating revenue jumped 31% to $4.02 billion.

Citigroup, ((C)), banking firm, reported Q4 earnings advanced 30% to $1.37 a share on a $2.1 billion after-tax gain on the sale of its asset-management lines. Profit from continuing operations dropped 3% to 98 cents a share. Analysts’ estimates for $1 a share for the quarter. Revenue came in at $20.78 billion.

General Electric Co, ((GE)), conglomerate, reported Q4 net income of 29 cents a share, compared with 53 cents a share in the year-ago period. After adjustments, the company’s profit came to 55 cents a share, matching the average analyst estimate. GE stated revenue in Q4 advanced 3%. GE also lifted the bottom end of its 2006 earnings outlook, based partly on strong growth in Asia and developing markets, to $1.94 to $2.02 a share from $1.92 to $2.02 a share.

KeyCorp, ((KEY)), multi-line financial services provider, reported Q4 net income of 72 cents a share, up from 51 cents in the year-ago period on 11.2%, revenue growth, beating analyst estimate of 67 cents a share. The company expects earnings to be in ranges of 67 cents to 71 cents a share for the first quarter and $2.80 to $2.90 a share for all of 2006, as opposed to analysts'' averages of 66 cents and $2.80 a share, respectively.

Alltel Inc ((AT)), telecommunications carrier, reported Q4 net income of 66 cents a share, down from 89 cents earned in the same period the previous year despite 21% revenue growth. On an adjusted basis, the company earned 77 cents a share in Q4, missing analyst estimate of 83 cents a share.

Regions Financial Corp, ((RF)), banking services, posted Q4 earnings of 55 cents a share, including after-tax merger-related and other costs of 7 cents a share, up from 50 cents a share in the year ago period. If not for items, the company posted Q4 earnings of 62 cents a share, in line with analyst estimate.

Johnson Controls, ((JCI)), provider of automotive interiors, reported Q1 earnings of 85 cents a share, down slightly from 87 cents a share a year-ago, beating analyst estimate of 83 cents a share. On a continuing operations basis, the company earned 86 cents a share in Q1, up from last year''s 81 cents a share. Sales advanced to $7.53 billion from $6.62 billion in the same period a year earlier.