U.S. MARKET AVERAGES

U.S. stock markets opened lower, despite expectations of flat to higher start. Stocks were dragged down by continuous concerns of Hurricane Rita’s impact on economic growth. Oil prices started retreating on news that Rita was losing power and had weakened to category 4 from top strength of 5, and might not directly hit the key oil refineries around Houston. Oil has recently traded at $66.10 a barrel, while gasoline at $1.9975 a gallon. Still, volatile trading session is expected as investors will be locked in recent gains, awaiting the impact of the storm.

It has been reported that 74% of 819 manned platforms in the Gulf of Mexico and 65% of 134 rigs have been evacuated. About 92% of the daily oil production has been shut down, which is currently approximately 1.5 million BOPD. 66% of the daily gas production in the GOM has been shut down, which is currently approximately 10 BCFPD.

Eight of ten economic sectors are trading in the negative. Energy sector has lost 1.2% as oil prices decline. The tech sector has also declined on Oracle’s disappointing earnings report. Materials sector has lost 0.6% on Alcoa's 3Q warning.
Financials sector has also been weak, as rising bond yields have weighed on brokerage and banks.

The following stocks stand out among the biggest decliners of the day. Valero Energy (VLO: chart) lost 1.86%, Tesoro Corp. (TSO: chart) dropped 3.26%, Murphy Oil (MUR: chart) slid 2.33%, Exxon Mobil (XOM: chart) declined 1.18%, and Rowan Cos. (RDC: chart) fell 1.92%.

Two major companies influenced the stock markets, releasing disappointing reports. Oracles, software supplier, met 1Q earnings expectations but posted 2Q revenue below analysts’ estimates. Alcoa, aluminum maker, projected 3Q profit 39% below expectations.


MOVERS AND SHAKERS

Alcoa Inc. (AA: chart) descended 8% due to the company’s bad forecast about its third-quarter profit. The metal giant explained this forecast with Hurricane Rita, low aluminum prices and higher raw-material costs. The brokers Prudental and Goldman Sachs downgraded the company citing its profit warning.

Software company Oracle Corp (ORCL: chart) announced gloomy sales outlook that confused investors. The company reported a 2% rise in fiscal first-quarter profit, but its shares declined 5.1% due to its sales outlook.

Palm Inc. (PALM: chart) fell 16% before the bell after the computer maker posted discouraging fiscal first-quarter earnings and revenue, and announced a lower-than-expected perspective.

Tire manufacturer Goodyear Tire & Rubber Co. (GT: chart) announced its expectations about burden of $150-$250 million over the next three years connected to its restructuring plans. The company intents to cut down its manufacturing capacity by 8%-12% in that time. Goodyear is expecting to lower expenses by $750 million-$1 billion by 2008. The company’s stock was down 0.2% yesterday.

ECONOMIC NEWS

No major economic news release is due Friday.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mostly down on profit-taking. The Japanese exchanges were closed for a public holiday. Across the region, South Korea’s Kospi dropped 2% with Samsung Electronics, SK Telecom and Hyundai Motor being the leading decliners. Shanghai Composite lost 0.2% after the central bank of China widened the yuan’s trading range against non-U.S. dollar currencies. Australia’s All Ordinaries was one of the few gainers, rising 0.6%.

European markets gained ground at mid-day dealings, boosted by higher U.S. markets close Thursday, following a decline in oil prices after Hurricane Rita weakened to category 4. Support to the stocks was also provided by some deal news, led by the Swedish insurer Skandia which rejected an offer for $6 billion from Old Mutual. The German DAX 30 gained 0.4%, the French CAC 40 added 0.2%, and London’s FTSE 100 rose 0.2%.

ENERGY, METALS, CURRENCIES

Oil prices dropped below $66 a barrel as Hurricane Rita weakened to category 4, but there are still lingering worries that it could hit key oil production facilities in Texas coast. Light sweet crude November delivery slipped 72 cents to $65.78 a barrel on the Nymex. Heating oil lost 5 cents to $2.000 a gallon, while gasoline slid more than 6cents to $2.0750 Natural gas fell to $12.702 per 1,000 cubic feet. London Brent declined 82 cents to trade at $63.78.

Gold declined in European trading. In London the precious metal traded at $464.40 per troy ounce, down from $466.35. In Hong Kong gold lost $7.70 to close at $465.05. Silver traded at $7.32, down from $7.35.