Oil Drops 3%

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

Market enjoyed a mild optimistic opening after surging yesterday on strong retail sales. Generally positive comments related to economic health and 3% drop in oil kept buyers in the market for the most of the day. After-the-close HP reported better than expected earnings of 48 cents. Expedia reported earnings of 7 cents, down 43% from a year ago. Las Vegas Sands to sell 55 million shares and raise $3 billion in secondary offering. Mittal Steel posted Q4 earnings of 92 cents per share.

U.S. MARKET AVERAGES

Oil fell 3% and market reacted to the new Fed Chairman’s comments.

For the most of the day market was fixated to the comments from the Fed Chairman Ben Bernanke. Generally optimistic comments from the Chairman suggested that he believes that economic growth is “on track” and suggested that interest rates may have to be raised to keep inflation in check.

Market welcomed 3% drop in oil price. The decline in oil price was triggered by government report of sharp rise in oil, distillate and gasoline inventory. Warm weather in January also helped in lowering output at nation’s utility.

Berkshire Hathway Inc., Warren Buffett controlled holding company, disclosed in the government filings that its stock portfolio of $43 billion has substantially raised its holdings in Wells Fargo ((WFC)) and Anheuser-Bush Co. ((BUD)) since May 2005.

Las Vegas Sands ((LVS)) reported that company founder, his family and certain shareholders will sell 55 million shares in public offering. All proceeds of the sales will be going to the current owners and not to the company. The company operates Venetian casino and hotel property in Las Vegas and sands Macao in Macau, China. Underwrites have an option to sell up to additional 8.5 million shares.

MOVERS AND SHAKERS

Itron Inc ((ITRI)), energy and water delivery technology company, posted Q4 net income was $16.9 million, or 65 cents a share vs. a net loss of $7.01 million or 33 cents a share, beating estimates of 48 cents a share. The company reported quarterly revenue of $160 million, compared with $131.4 million last year, above expectations of $145 million. Looking forward, Itron expects 2006 revenue of $605 million to $615 million, with per-share income of $2.07 to $2.13 on a pro forma basis. The stock rose 14.3%.

BlackRock ((BLK)) agreed to merge with Merrill Lynch’s investment management business in a deal that will create a firm with nearly $1 trillion in assets under management. Merrill will hold a 49.8% stake and a 45% voting interest in the combined company, which will operate under the BlackRock name. Merrill Lynch expects to record a gain of roughly $1.1 billion on the deal. The company’s shares rose 8.7%.

Credit Suisse Group ((CSR)) reported a 15% increase in Q4 net profit and planned to lift its 2005 dividend payment by 33% to SFr2 a share. Credit Suisse's net reached SFr1.1 billion ($843 million), with the company's announcement of a SFr421 million compensation-related charge on Monday weighing on the bottom line. Its institutional securities division reported a 25% profit climb from a year ago but a 45% decline from the third quarter on declining trading revenue. The stock dropped 8.3%.

Abercrombie & Fitch ((ANF)) posted 58% profit jump in Q4 on 40% sales growth. The retailer posted net income of $1.80 per share, beating expectations of $1.78 a share. The casual-wear retailer warned investors that it expects a slowdown in same-store sales. The stock fell 4%.


ECONOMIC NEWS

Crude oil inventories advanced sharply in the latest week, according to government statistics released Wednesday. The rise followed a slight dip in the previous period. Meanwhile, stocks of gasoline recorded yet another advance.

The Department of Energy's Energy Information Administration revealed that crude oil inventories rose by 4.9 million barrels for the week ended February 10, climbing to 325.6 million barrels from the prior week's level of 320.7 million barrels. This followed a decline of 300,000 barrels in the previous week. Oil inventories were 10.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week increase of 2.2 million barrels, the government said, adding to a recent string of gains that included the previous week's build of 4.3 million barrels. Gasoline stocks were 1.8% above their levels of last year. Inventories of distillate fuel oil advanced by 900,000 barrels in the most recent week.

Industrial production unexpectedly fell in the month of January, according to a report from the Federal Reserve, with a sharp drop in output from utilities contributing to the decrease. The report also showed that capacity utilization came in line with economist estimates.

The Federal Reserve said that industrial production fell 0.2 percent in January following an upwardly revised increase of 0.9 percent in December. The drop marked the first decrease since September and came as a surprise to economists, who had expected a 0.3 percent increase.

As mentioned above, the decrease in industrial production was largely due to a sharp drop in output from utilities, which fell 10.1 percent in January after rising by 2.8 percent in December. The Fed said that the drop in output was the result of the unseasonably warm temperatures.

The sharp drop in output from utilities offset increases in mining output and manufacturing production, which rose 1.7 percent and 0.7 percent respectively.

The Fed noted that the decrease in utilities output also contributed to a drop in the capacity utilization rate, which fell to 80.9 percent in January from 81.2 percent in December. Economists had expected the capacity utilization rate to come in at 80.9 percent.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed mostly in the red on cautiousness ahead of the inaugural public address of new U.S. Fed Reserve Chairman Ben Bernanke before the Congress today. South Korea’s Kospi was the sharpest decliner with a loss of 1.8%. The Nikkei dropped 1.6%, Singapore Straits Times fell 0.8%, while Shanghai was the only index in the positive with a gain of 0.5%.

European stocks closed mostly below the flat line, hurt by concerns about climbing costs from banks Credit Suisse and BNP Paribas. The German DAX 30 inched up 0.02%, the French CAC 40 slipped 0.55%, and London’s FTSE 100 declined 0.01%.

OIL, METALS, CURRENCIES

Crude oil prices dropped below $59 a barrel on growing crude and gasoline supplies. Light sweet crude for March delivery slipped $1.92 to $57.65 a barrel. London Brent declined 62 cents to $58.90.

European gold declined Wednesday. In London gold traded at the fixed price of $542.50 bid per troy ounce, down from $543.50. In Zurich the precious metal traded at $544.10, down from $545.20. In Hong Kong gold rose $6.50 to close at $545.30. Silver closed at 9.20, down from $9.23.

The U.S. dollar traded mixed against other major currencies. The euro traded at $1.1895, down from $1.1911. The dollar bought 117.41 yen, down from $117.43. The British pound stood at $1.7421, up from $1.7351.

EARNINGS NEWS

Myers Industries, ((MYE)), automotive repair company, reported Q4 net income of 25 cents a share, up 25% from 20 cents a share in the year-earlier period on 5% revenue growth, topping analyst estimate of 18 cents a share.

Bluelinx Holdings Inc., ((BXC)), building products distributor, reported Q4 net income of 48 cents a shareswinging from a year-earlier loss of 9 cents a share on 10% revenue growth, topping analysts’ forecasts of 46 cents a share.

Ceridian Corp, ((CEN)), provider of information services, reported Q4 earnings of 32 cents a share, up from a profit of 7 cents a share a year-earlier on revenue growth, beating analyst estimate of 25 cents a share. The company said that the strong quarter was due to its penetration into new markets, new products, and heavy demand for its Comdata credit, debt, and stored value payment services.

Jones Apparel Group Inc, ((JNY)), apparel manufacturer, reported net income of 48 cents a share, up from 28 cents a share in the year earlier quarter on revenue growth, beating analyst estimate for a profit of 45 cents a share. Results were given a boost by better than expected results in its licensed businesses and Gloria Vanderbilt moderate apparel business, as well as the Barneys retail stores.

Alfa Corp, ((ALFA), insurance company, reported Q4 earnings of 29 cents a share, a penny up from 28 cents a share in the same period the previous year on 17% revenue growth. If not for investments gains, earnings were 28 cents a share, missing analysts’ expectations for earnings of 31 cents a share.

Caremark Rx Inc, ((CMX)), pharmaceutical company, reported that Q4 net income advanced 41.7% to 64 cents a share on 4.4% revenue growth. If not for integration expenses and adjustments to income tax provisions, adjusted earnings were 55 cents a share, in-line with analysts’ estimates. The company stated its results were helped by strong growth in generic dispensing rates.

RailAmerica Inc, ((RRA)), railroad company, reported Q4 net income of 20 cents a share, up from 11 cents a share in the year-earlier period on 9.1% revenue growth. Earnings from continuing operations were 24 cents a share, beating on that basis analyst estimate of 23 cents a share.

Cimarex Energy Co, ((XEC)), oil and gas company, reported Q4 net income of $1.98 a share, up vs. $1.12 a share in the same period the previous year on revenue growth, topping analyst estimate of $1.52 a share. There were roughly double the average shares outstanding in Q4, following Cimarex''''s 2005 acquisition of Magnum Hunter Resources completed in June. Revenue reached 429.5 million from $142.6 million. Q4 oil and gas production volumes rose 87%, in view of Magnum Hunter contributions and continued positive drilling results, partially offset by hurricane-related disruptions.

Progress Energy, ((PGN)), electric utility company, reported Q4 net income of 62 cents a share, down from 80 cents a share in the year-earlier period. The company added that earnings from continuing operations came in at 71 cents a share, beating analysts’ estimates of 52 cents a share. Operating revenue went up to $2.58 billion from $2.01 billion in the prior-year quarter.