U.S. MARKET AVERAGES

Inflation driven morning gloom was replaced by a widespread relief in afternoon. Morning trading was reflecting on going inflation worries in the market, second thoughts on GM and UAW agreement and Intel’s less than rosy outlook for the current quarter. All these added to weak start and weaker trading during early hours of trading. Fall in oil helped but not much.

By mid-afternoon oil fell by 1.5% and energy stocks fell with it. Shares of refiners, explorers and drilling and service providers were hit hard. Shares of largest oil refiner Valero (VLO) at one stage were trading as low as 5% but managed to gain ground in the last hour of trading.

Fed’s release of “Beige Book” put market in a different mood. The national survey indicated economic growth in September was ‘moderate but gradual’ across the country. The survey also noted that regions in Louisiana, Texas and Mississippi showed mixed economic performance. Several districts across the country reported rising costs of shipping, transportation, building materials and energy. Several regions across the country managed to pass some of these increases to customers, the survey also noted.

Housing stocks were in overdrive during the session. Housing starts in September were 2,108,000, up 3.4% from August and up 10.3% from September 2004. Permits were 2,189,000, up 2.4% from last month and up 7.4% from one year ago. The rising mortgage rates have not affected the housing market’s pace. Shares of Toll Bros. (TOL) and Beazer Homes (BZH) were up 5%.

Cheesecake Factory (CAKE) shares jumped 12% in the session on strong earnings and upgrade from two analysts. On Tuesday, company reported earnings of 27 cents vs. 16 cents a year ago on revenue growth of 18% and same-store sales up 0.9% at namesake stores and 3.8% at Grand Lux Cafes.

MOVERS AND SHAKERS

Dow component Intel Corp (INTC) reported solid third-quarter earnings, but provided an outlook for fourth-quarter revenue where the mid-point of the range was slightly below analyst expectations. The company said net income for the period ended October 1 rose to $2 billion, or 32 cents a share, up from $1.9 billion, or 30 cents, a year ago. Intel is expected to be under pressure today.

Another Dow component, J.P. Morgan (JPM), reported an increase of 79% in adjusted earnings. The company also said that Jamie Dimon will take over as the company’s chief executive officer six months earlier. The investment bank’s shares added 2%.

Honeywell International Inc. (HON) posted quarterly revenue that fell slightly below Wall Street forecast. The company’s stock lost 6.5% during the session.

Yahoo Inc. (YHOO) reported a growth in revenue from online advertising and Internet services that helped the company to compensate a quarterly profit that was nearly unchanged from a year ago. Yahoo posted earnings of $254 million, or 17 cents a share, for the period ended September 30. The company’s stock gained 1.7%.

Motorola Inc. (MOT) posted earnings that went ahead of expectations, boosted by higher handset sales, a one-time tax benefit and the sale of stock in Nextel Communications. The company reported a net profit of $1.75 billion, or 69 cents a share, up from $479 million, or 20 cents, a year ago. Motorola’s shares gain 2%.

ECONOMIC NEWS

Crude oil inventories advanced sharply in the latest week, according to government data released Wednesday, adding to the more moderate gain recorded during the previous period. Stocks of gasoline advanced as well.

The Department of Energy's Energy Information Administration revealed that crude oil inventories climbed by 5.6 million barrels for the week ended October 14, rising to 312.0 million barrels from the 306.4 million barrels recorded in the previous week. This followed an advance of 1 million barrels for the prior week. Oil inventories are now 11.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week advance of 2.9 million barrels, the government said, more than reversing the previous week's decline of 2.7 million barrels. Gasoline stocks are now 4.2% below their levels of last year. Inventories of distillate fuel oil fell by 1.9 million barrels in the most recent week.

Wednesday morning, the Department of Commerce released its report on housing starts and building permits in the month of September. The report showed that housing starts and building permits both rose unexpectedly.

The report showed that housing starts rose 3.4 percent to a seasonally adjusted annual rate of 2.108 million units in September from a revised 2.038 million unit rate in August. Economists had expected housing starts to fall to a 1.950 million unit rate from the 2.009 million unit rate originally reported for August.

The unexpected increase in housing starts reflected strong growth in the South, where housing starts rose by 6.9 percent. Housing starts rose by 1.9 percent in the Midwest while coming in unchanged in the Northeast and West.

The Commerce Dept. also said that building permits rose 2.4 percent to a seasonally adjusted annual rate of 2.189 million units in September from a 2.138 million unit rate in August. The increase came as a surprise to economists, who had expected building permits to fall to a 2.075 million unit rate.

INTERNATIONAL MARKET NEWS