U.S. MARKET AVERAGES
Market gyrated for the most of the session in positive trading but with several rotations among sectors. Stocks in technology, industrial and financial sector remained under pressure for the most of the session but reversed the direction in the last hour of trading. The impending news of HP restructuring, weak reaction to GE earnings overshadowed the positive news from Grainger, McDonalds and Cintas. Home builders and mining stocks remained under pressure for the day but staged a late rally and were among the best gainers.
The strength in industrial production was reported for the month of June, in fact it was the best report in the last sixteen months. The industrial production was up 0.9% supported by 5.3% rise in utility output, 0.4% rise in manufacturing and mining sector each. The gain in mining sector which includes the output of oil fields was driven by strength in oil field production. The nation’s mines, factories and utilities are operating near 80% capacity utilization, a 4-year high.
On the earnings front GE, McDonald’s, Cintas, Chiron, W. W. Grainger and Symbol Technology were in the news. While GE met the estimates of 24 cents for the quarter and raised the earnings outlook for the year but investors still sold the stock. McDonald’s same-store sales rose 4.5%, better-than–expected, and stock gained 3%. Cintas added 10% to the prices after reporting 48 cents per share earnings and raised the guidance for the year. Grainger stock rose 7% on 22% jump in earnings and 9% jump in sales and revised outlook for the full year earning to $3.40-$3.60 from $3.20-$3.45.
Vaccine maker Chiron Corp. lost 3% after cutting its expected flu vaccine shipments. Symbol Technology was down 3% as the company warned late Thursday that second quarter revenue will miss forecasts. Citigroup was down $0.20 after saying late Thursday that its president is resigning to run another public company. Shares of Hewlett-Packard Co. rose thanks to reports that the company is set to announce a major restructuring plan next week. Rumors of 5,000 to 25,000 lay-offs circulated in the market.
The Producer Price Index, a measure of wholesale inflation, was unchanged for June. The data, released by the U.S. Labor Department, marked a 0.1% decline in core PPI, which excludes the volatile food and energy sectors. Inventories at U.S. businesses rose 0.1% in May, to $1.3 billion, the Commerce Department reported Friday. That rise outpaced the 0.1% drop in sales, the Commerce Department figures show.
The inventory-to-sales ratio was at 1.30 in May for the second month in a row. Economists were expecting inventories to rise 0.3%. Retail inventories rose 0.2% in May. Excluding motor vehicles, retail inventories climbed 0.6%. Inventories at manufacturing firms were unchanged in May for the second month in a row. Manufacturing sales jumped 1.8% after dropping 5.9% between March and April. Inventories at wholesalers grew 0.1%, while sales climbed 1.6%.
The Federal Reserve Bank's Empire State Manufacturing index rose to 23.9 in July from a revised 10.5 in June.
Manufacturing activity in the New York area continued to rebound in July, according to the New York Federal Reserve Bank. The bank's Empire State Manufacturing index climbed to 23.9 in July versus a revised 10.5 in June. The index continues to advance after hitting a two-year low of -11.1 in May. Readings over zero indicate expansion. Economists forecasted the index to remain flat at about 11.6 in July.
INTERNATIONAL MARKET NEWS
European markets finished mostly lower as oil giants like BP and Total slid as crude-oil dropped to a two-week low and traded below $59 a barrel, but oil-sensitive airlines gained. German’s DAX 30, which doesn’t have oil companies, added 0.3% with Siemens up 1.6% on the back of the strong report of General Electric. The French CAC 40 lost 0.1%, and London’s FTSE 100 fell 0.7%.
Major Asian benchmarks ended lower on falling crude-oil prices as forecasts show that Hurricane Emily won’t have a major impact on oil production in the U.S Gulf, on declining dollar and early gains in the tech sector which markets failed to hold throughout the day. Japan’s Nikkei ended down 0.1% as investors took profit ahead of a three-day holiday. South Korea’s market leader Samsung Electronics led the index downward 0.2% on reporting 46% decline. Crude-oil prices fell $2.21 to close at $57.80 a barrel on the NYME, and in after-hours trading it was $58.16. The dollar was down 0.4% against the yen at 111.86.
European markets turned higher at mid-day after early losses, reflecting gains in airlines shares which were boosted by declining crude-oil prices which sent oil giants such as BP and Total in the negative territory. Oil companies lost as oil tumbled to a two-week low and held below $59 a barrel. Oil-sensitive Air France gained 1.3% and British Airs rose 2.2%. German’s DAX 30 climbed 0.2%, France’s CAC 40 added 0.1%, and London’s FTSE 100 was down 0.1%.
ENERGY, METALS AND CURRENCIES MARKETS
Crude-oil futures climbed on investors’ concerns over possible hurricane dangers in the Caribbean and the Gulf of Mexico. Light sweet crude for August delivery rose 85 cents to $58.65 a barrel in early trading on the NYMEX. Heating oil climbed by more than 2 cents to $1.6789 a gallon. London Brent futures for September rose 67 cents to 57.63.
Oil futures rebounded after recent declines as Hurricane Emily progressed through the Gulf of Mexico while investors were digesting a report showing weaker Chinese energy demand for 2005. Light sweet crude for August delivery in NY added 50 cents to $58.30 a barrel. September contract of London Brent rose 51 cents to $57.47.
Gold was tightly traded in early European trading with the market trying to establish poise after falling to a six-week low as the strong dollar weighed. Gold futures traded from $419.20 to $419.90 bid per troy ounce. Dealers said sentiment was tending weaker with further fall seen probable. Silver was fairly steady at $6.96 to $6.99 per ounce.
The U.S. dollar gained versus the euro and pared a decline against the yen after a Fed. Reserve index of NY state manufacturing suddenly climbed. The dollar advanced against the euro to $1.2032. The greenback bought 112.26 yen.
EARNINGS AND CORPORATE NEWS
General Electric, technology, media and financial services company, reported 2Q profit rise of 44 cents a share vs. 36 cents a year ago on earnings growth in all of its 11 business segments. The company projected 2005 earnings in the range of $1.80 to $1.83 a share.