Decline in Oil and Gold Drag Markets

123jump.com Staff
07 Feb, 2006
New York City

Gold dropped $20 and oil fell $2 which instead of helping the market dragged the broader averages down. Laskluster earnings from Coca-Cola, Disney and Toll Bros. did not help either. After-the-close Cisco reported 9% rise in sales and earnings of 22 cents vs. 21 cents a year ago. GM cut dividend by 50% to $1 and lowered salaries of executives. GM stock fell 2.2% as market worried that more cuts will be needed. Toyota reported 34% rise in profit and is set to surpass GM in sales.

U.S. MARKET AVERAGES

It seems that February winter is in full session in the market.

Market took bearish tone right at the onset with the lower earnings from Coca-Cola and lower earnings from Disney. Market paid close attention to lowered housing delivery from Toll Bro. in the current quarter. Slowing housing markets prompted traders to worry coming pull back from consumers.

Gold and oil fell for the first time this year. Gold fell $19.50 per ounce or close to 4%, hitting 13-month low. Oil dropped $2.01 per barrel as tensions cooled in the Middle East.

Materials, retails, techs and banking stocks traded lower as morning market chill spread to broader market. Notably in energy, ExxonMobil ((XOM)) dropped 2%, in steel sector, Mittal Steel ((MT)) and U.S. Steel ((X)) fell 4% and in mining sector BHP Billiton ((BHP)) dropped 5%.

Goolge ((GOOG)) fell 4.45% to $367.97, a decline of 18% from the peak of $475 in the month of January 2006.

General Motors ((GM)) reported a day after board meeting that it has decided to lower salaries of its executives and cut annual dividend in half to $1. The lowered dividend will result in annual savings of more than $560 million. Cut in executive salaries and retirement obligations will lower its obligation to retirement cost by at least $4 billion.

MOVERS AND SHAKERS

Apple Computer ((AAPL)) unveiled a 1 gigabyte version of its iPod Nano portable music player priced at $149 and reduced the price of its iPod shuffle player to $69 for the 512 megabyte model, and $99 for the 1 gigabyte model. The company also unveiled a programming agreement with Showtime Networks to sell the shows ‘Sleeper Cell’ and ‘Weeds’ at its iTunes Music Store. The stock gained 1.4%.

Myriad Genetics ((MYGN)) reported narrower Q2 net loss of $8 million or 22 cents a share from a net loss of $10 million or 33 cents a share last year, citing better performance at its predictive medicine division on 39.3%. Quarterly revenue rose to $27.3 million. Analysts expected a net loss of 32 cents a share on revenue of $27 million. The company’s shares jumped 8.5%.

Under Armour Inc ((UARM)), athletic products maker, reported Q4 net income rose $7 million or 8 cents a share, up 14% from $6.2 million, or 15 cents a share a year before, beating estimates of 7 cents a share. The earnings per share declined due to higher number of outstanding stock. Revenue rose to $87.3 million from $69.6 million. The company projected revenue and earnings growth in the 20% to 25% range for 2006. The stock dropped 17%.

Occidental Petroleum Corp ((OXY)) posted Q4 earnings jump of 55% amid record-high prices and the highest production output in a single three-month period. The company earned $1.152 billion, or $2.84 a share vs. $742 million, or $1.86 a share in 2004. Production averaged 589,000 barrels of oil equivalent per day, the highest quarterly production rate in Occidental's history. The company’s shares fell 2.1%.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished mixed, following a slide on Wall Street Monday, despite easing oil prices. The Nikkei slipped 0.2% with Sumitomo Insurance and tech stock TDK among the decliners. South Korea’s Kospi fell 0.7% on weak bank, automobile and brokerage stocks. India’s Stock Exchange’s 30-share Sensex reached an all-time high of 10,066.55 points to close up 1%. Singapore Straits Times advanced 0.3%.

European stocks closed mixed after gains in the telecom sector offset declines in the oil and gas sectors. Markets were also pressured by lower opening on Wall Street. The German DAX 30 added 0.1%, the French CAC 40 ended flat, and London’s FTSE 100 dropped 0.5% as BP earnings failed to meet forecasts.

OIL, METALS, CURRENCIES

Crude oil prices dropped over $1 after the U.S. Department of Energy lowered its global oil demand estimates and concerns about possible disruptions to the oil supply from Iran eased. Light sweet crude for March delivery fell $2.02 to $63.09 a barrel. Heating oil lost 7 cents to $1.6981 a gallon, while gasoline declined 5 cents to $1.5925. Natural gas dropped 14 cents to $7.858 per 1,000 cubic feet.

European gold prices dropped to a year-low after a slide in oil prices eased concerns of accelerating inflation. In London gold fell to $555.90 bid per troy ounce, down from $572.80. In Zurich the precious metal traded at $556.50, down from $573.10. In Hong Kong gold fell 40 cents to close at $569.60. Silver closed at $9.45, down from $9.83. In New York gold dropped $19.50 to $554.80 per ounce.

The U.S. dollar gained strength against most other major currencies. The euro was quoted at $1.1957, down from $1.1964. The dollar bought 118.04 yen, down from $118.97. The British pound stood at $1.7419, down from $1.7474.

EARNINGS NEWS

The Walt Disney Co, ((DIS)), media conglomerate, reported Q1 net income of 37 cents per share, up from 33 cents per share in the same period last year despite a plunge in profits from its studio division. Disney announced that revenue advanced slightly to $8.854 billion from $8.666 billion in the same quarter last year. The current quarter includes a one-time gain of 2 cents per share, related to the sale of assets.

Polo Ralph Lauren Corp, ((RL)), clothing and accessories company, reported that Q3 profit advanced to 84 cents a share, from 72 cents in the year-ago period on revenue growth, topping analyst estimate of 76 cents a share.

Ariad Pharmaceuticals, ((ARIA)), pharmaceutical company, reported a Q4 loss of 23 cents a share, down from the year-ago loss of 20 cents a share on higher research and development expenses, beating analyst expectations of a loss of 25 cents a share.

Fortune Brands, ((FO)), alcohol producer, reported Q4 net income of $1.17 a share, down 30% from $1.68 a share in the year-earlier period. Before charges and gains earnings came to $1.22 a share, topping analyst forecasts of $1.20 a share. Revenue advanced 24%.

Hillenbrand Industries Inc, ((HB)), health care industry manufacturer reported Q1 net income from continuing operations of 79 cents a share, up from 69 cents a share in the year-earlier period, beating analyst forecasts of 65 cents a share. Adjusted net income came to 79 cents a share, up vs. 71 cents a share. Revenue inched up 0.6% to $477.5 million.

Benchmark Electronics Inc, ((BHE)), outsourced manufacturing services to the electronics industry provider, reported that Q4 net income advanced 22% to 57 cents a share, while sales grew 19.3%. Analysts were expecting earnings of 51 cents a share.

Performance Food Group Co, ((PFGC)), food and non-food products producer and distributor, posted earnings of 44 cents a share, nearly three times the year-ago profit of 18 cents a share, beating analyst estimate of 31 cents a share. Consolidated net sales from continuing operations in the fourth quarter advanced 7%, while Q4 inflation was approximately 1%.

MeriStar Hospitality Corp, ((MHX)), real estate investment fund, reported a Q4 loss of $1.30 a share, down from a year-ago loss of 20 cents a share. On an adjusted basis, the company reported funds from operations of 17 cents a share, beating on that basis analyst predictions of 15 cents a share. Revenue grew to $183.4 million from $159.4 million in the same time a year earlier.