U.S. MARKET AVERAGES

The U.S. market averages have slightly recovered from the lower levels of trading in early morning. The Nasdaq and the S&P 500 have climbed back near the unchanged line while the Dow continues to post a modest loss which is largely attributable to aluminum giant Alcoa which is currently down 5.8%.
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. Traders are cautious on continuous concerns about the impact of the storm. They still hope that Rita’s impact will be less than Katrina’s as Texas refineries are on higher ground than those in Louisiana.

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. Approximately 66% of the daily gas production in the GOM has been shut down, which is currently approximately 10 BCFPD.

Among the gaining stocks American International Group (AIG: chart) is posting a notable gain of 1.67%, boosting the whole insurance sector. Honeywell (HON: chart) has risen by 2.13%, United Technologies (UTX: chart) has gained 1.10%, and Caterpillar (CAT: chart) has added 0.90%.

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% in pre-market dealings 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 closed in the positive territory on the back of declining oil prices as 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 0.7%, the French CAC 40 added 0.7%, and London’s FTSE 100 rose 0.6%.

ENERGY, METALS, CURRENCIES

Oil prices further declined as Hurricane Rita weakened to category 4, suggesting that the damage to the refinery capacity will be less than feared. Light sweet crude November delivery slipped $1.30 to $65.20 a barrel in late morning trading on the Nymex. Heating oil lost 8 cents to $1.96 a gallon, while gasoline slid 9 cents to $2.05. London Brent declined $1.28 to trade at $63.32.

Gold declined in European trading. In London the precious metal closed at $462.80 per troy ounce, down from $466.35. In Hong Kong gold lost $7.70 to close at $465.05. Silver closed at $7.25, down from $7.35.

The U.S. dollar advanced against the other major currencies in European trading. The euro was quoted at $1.2076, down from $1.2146. The dollar changed hands at 112.05 yen, up from 111.65. The British pound was trading at $1.7784, down from $1.7891.

EARNINGS NEWS