Falling Oil Powers Market Rally

Elena
14 Feb, 2006
New York City

Stocks recovered at mid-day from a sluggish start as falling oil prices provided a boost and the Dow rose 120 points. A barrel of light crude slipped 89 cents to $60.35 a barrel on the Nymex. Citigroup upgraded Circuit City to buy from hold, saying the retailer is expected to post another two or three years of dramatic earnings growth. Deere posted Q1 profit rise of 6% or 99 cents a share on 7% sales growth, beating estimates of 83 cents a share.

U.S. MARKET AVERAGES

A sudden change in the market mood sent stocks higher at mid-day, abandoning cautiousness ahead of testimony from new Fed Reserve Chairman Ben Bernanke. Stocks opened flat on uncertainty about the course of interest rates but later gathered momentum on falling oil and strong retail sales data to send the Dow Jones up more than 120 points.

Crude oil futures fell on expectations that inventories will continue to rise. A barrel of light crude slipped 89 cents to $60.35 a barrel on the Nymex.

The Commerce Department said that retail sales rose 2.3% in January, much more than the expected 0.9% rise with the sales growth reflecting strong demand in most major retail categories.

The airline sector advanced steadily through the morning, showing an advance of 2.4%. The chemical sector was another notable mover to the upside, rising by 1.7%. The HMO group showed strength with an advance of 1.5%.

Energy stocks were notable decliners Tuesday as oil prices retreated. The oil service sector dropped 2.4%, while the natural gas and oil sectors posted losses of about 1.3%. Utility stocks also posted weakness, reflecting higher treasury yields.

Honeywell ((HON)) was the most notable mover to a new 52-week high. Wachovia ((WB)) also ticked to a fresh peak. Continental ((CAT)) and BellSouth ((BLS)) also pushed to fresh peaks.

Cendant ((CD)) dropped to a new 52-week low, falling more than 6.5%on earnings news. Movie Gallery ((MOVI)) added to recent weakness to set another low.

In midday trading, the Dow rose 124.31, or 1.14%. The Standard & Poor''s 500 index rose 9.95, or 0.79%, and the Nasdaq composite index rose 16.74, or 0.75%.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.60% from 4.58% late Monday.

MOVERS AND SHAKERS

Coca-Cola Co. ((KO)) said billionaire investor Warren Buffett, who has been on the board of Coke since 1989, will not stand for re-election to Coke's board of directors. Buffett, the chairman and chief executive of Berkshire Hathaway, said he was leaving Coke to focus on Berkshire's acquisitions. He added that Berkshire Hathaway will maintain its equity stake in Coke. The company’s shares gained 1.5%.

CBIZ Inc ((CBIZ)), provider of professional business services, reported Q4 earnings rise from continuing operations of $3.7 million, or 5 cents a share from a year-ago equivalent profit of $3.2 million, or 4 cents a share. Revenue rose to $132.1 million from $119.9 million a year earlier. The company forecast revenue growth of 8% to 10% in 2006 with earnings per share from continuing operations projected to increase 20% to 25% from its profit of 28 cents a share in 2005. The stock rose 8.5%.

Cendant Corp ((CD)) posted Q4 income of 50% to $537 million, or 53 cents a share, up from $357 million, or 33 cents a share, in the year-ago period. Revenue rose to $4.32 billion from $4.03 billion a year ago. Cendant reduced its Q1 outlook for its real estate services and vehicle services divisions, projecting revenue growth from core operations of 6% to 8%. The company sees a decline in earnings before interest, taxes, depreciation and amortization from core operations of 14% to 16%. Cendant reaffirmed its plan to break up the company into four units. The stock dropped 6.5%.

Cutera Inc ((CUTR)), laser technology company, reported Q4 net earnings of $5.81 million, or 41 cents a share, compared with $2.07 million, or 16 cents a share a year ago on revenue growth of $24 million vs. $16.1 million. The quarterly results exceeded estimates of earnings of 30 cents a share on revenue of $22 million. The company’s shares slipped 11%.

ECONOMIC NEWS

Retail sales rose much more than anticipated in the month of January, according to a report from the Department of Commerce, with sales rising at their fastest pace since March of 2004. The growth reflected strong demand in most major retail categories

The report said that retail sales rose 2.3 percent in January following a downwardly revised increase of 0.4 percent in December. Economists had been expecting a much more modest increase of about 0.9 percent compared to the 0.7 percent sales growth originally reported for December.

The better than expected sales growth reflected notable growth in a variety of areas, with gas stations, clothing and clothing accessories stores, and furniture and home furnishings stores showing particularly strong growth.

An increase in sales by motor vehicle and parts dealers also contributed to the strong growth in January, with sales rising by 2.9 percent. The growth in the sector came on the heels of 1.2 percent growth in December.

Excluding the auto sector, total sales rose by 2.2 percent following an unrevised increase of 0.2 percent in December. The growth came in well above economist estimates of ex-autos sales growth of about 0.7 percent.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks rebounded from steep morning losses to finish the session mostly higher. The Nikkei reversed from 15,690.00 points drop to climb 1.9%, supported by strong industrial consumer stocks, gaining on higher-than-expected trade surplus data. Across the region, Australia’s All Ordinaries rose 0.9%, Taiwan’s Weighted index surged 0.8%, and South Korea’s Kospi gained 0.6% reversing from 0.7% loss.

European stocks closed mixed on weakness in energy and auto stocks limited by France Telecom which announced s profit rise and a job-cuts plan. The German DAX 30 added 0.1%, the French CAC 40 inched up 0.08%, and London’s FTSE 100 lost 0.02%.

OIL, METALS, CURRENCIES

Crude oil prices dropped to a month-and-a-half low on expectations petroleum stocks will continue to increase. Light sweet crude for March delivery dropped 46 cents to $60.78 a barrel. London Brent fell 8 cents to $60.54.

European gold further declined. In London gold fell to $540.50 bid per troy ounce from $544.60. In Zurich the precious metal traded at $539.70, down from $545.20. In Hong Kong gold dropped $6.50 to close at $538.80. Silver opened at 9.13, down from $9.28.

The U.S. dollar traded mixed against other major currencies. The euro was quoted at $1.1899, down from $1.1909. The dollar bought 117.45 yen, down from $117.66. The British pound stood at $1.7368, down from $1.7428.

EARNINGS NEWS

Natural Resource Partners L.P, ((NRP)), owner and manager of coal properties in the USA, reported Q4 earnings of 91 cents per unit, up from a profit of 50 cents per unit a year-ago on 35% revenue growth. Coal production rose 21% in Q4 to 2.4 million tons.

Transocean Inc, ((RIG)), offshore and inland marine contract drilling services company, reported Q4 earnings of 45 cents a share, swinging from a loss of 23 cents a share a year-ago on revenue growth, missing the analyst mark for a profit of 48 cents a share. The year-ago results incorporate a loss of 9 cents a share, from the company''s TODCO disposition and a loss of 15 cents a share, related to early debt retirement.

Playboy Enterprises Inc, ((PLA)), media firm, reported Q4 net income of 14 cents a share, down 68% from 43 cents a share in the year-earlier period, which included a $5.6 million insurance recovery, missing analyst estimate for earnings of 18 cents a share. Revenue advanced 2% to $91 million and licensing segment income advanced nearly 90%, but, as anticipated, was more than offset by a $4.1 million decline in publishing group results.

Jarden Corp., ((JAH)), maker of camping gear, reported Q4 income of 4 cents a share, reversing from a loss of 8 cents a share. On a non-GAAP basis, adjusted net income came to 50 cents a share for Q4 of 2005, missing analysts’ forecasts of 52 cents a share.

Waste Management Inc, ((WMI)), hauler, reported Q4 net income of 52 cents a share, up 8% from 47 cents a share in the year-earlier quarter on revenue growth. Adjusted net income came to 46 cents a share, up from 39 cents a share, topping analyst view of 40 cents a share.

Qwest Communications, ((Q)), communications services provider, reported a Q4 loss of 28 cents a share, down from a year-ago loss of 8 cents a share, missing analyst estimate for a loss of 5 cents a share. If not for special items, such as restructuring charges and a loss related to debt extinguishment, the company posted a loss of $8 million for Q4, breaking even on a per share basis. Revenue slipped 0.7% in Q4.

Omnicom Group Inc, ((OMC)), advertising company, reported that Q4 net income increased 7% to $1.41 a share on 5% revenue growth, in line with forecasts from analysts. The company announced that growth was particularly strong in the domestic market, where revenue climbed 9% to $1.58 billion. International revenue grew 1%.

Macerich Co, ((MAC)), real estate investment trust, reported that Q4 funds from operations advanced 17.8% to $1.32 a share. Quarterly net income available to common stock holders dropped 21.3% to 39 cents a share, with revenue before impairments from the disposal of long-lived assets climbing 36%. The company attributed the FFO growth to high occupancy levels and leasing activity.

Jakks Pacific Inc, ((JAKK)), designer of toys, writing instruments and other consumer products, reported that Q4 net income declined 14% to 30 cents a share, from 35 cents a share in the year-ago period on 10% lower sales. If not for the repatriation of $175 million of profit from its overseas subsidiaries, Jakks earned 53 cents a share. Sales declined to $166.3 million from $184.8 million.

Inco Ltd, ((N)), miner of nickel and copper, reported that Q4 earnings advanced 4% to $1.06 a share, up from $1.08 in the year-ago quarter despite 3.4% lower sales net.. Excluding special items, Q4 earnings were 76 cents against $1.21, beating analyst estimate of 62 cents a share.

Masco Corp, ((MAS)), home improvement and building products manufacturer, reported that Q4 net income soared 64.8% to 41 cents a share. Income from continuing operations gained 2.2% to 34 cents a share as sales from continuing operations climbed 6%. Excluding impairment charges earnings were 50 cents a share, compared to 54 cents a share in the same quarter the prior year, in line with analyst estimate. The company announced that its results benefited from a strong construction market, which more than offset rising costs.