Dow Ends Up 101, Nasdaq Gains 43 on Earnings Report From Goldman Sachs, Drop in Oil Prices to near Five-Month Low; After IEA Lowers Demand Forecast:
The US markets rallied for a third straight session, Yesterday, propelling the Dow Jones Industrials to rise more than 100 points, after Goldman Sachs Group Inc. reported results that beat expectations and investors grew more confident that the continuing drop in crude oil prices would boost consumer spending.
After seven days of oil price declines, investors pushed shares of consumer-oriented stocks higher. Companies such as General Motors Corp., home improvement chain Home Depot Inc. and Best Buy Co. all showed strong gains.
"I think the concerns about September that led the market lower last week are basically waning because oil prices are declining," said Scott Fullman, director of investment strategy at Hapoalim Securities USA.
"The major benchmarks are performing extraordinarily well. What we've been seeing is the movement of assets out of commodities stocks and into more traditional growth stocks such as health care and technology," he said.
Meanwhile, Crude oil yesterday traded near a five-month low after falling for a seventh day as the International Energy Agency (IEA) lowered consumption forecasts citing slowing demand growth in the U.S.
Global oil demand will average 84.7 million barrels a day this year, 100,000 barrels less than was forecast last month, the Paris-based IEA said yesterday. The crude oil stockpiles in the U.S. , the world's biggest consumer, are about 12 percent higher than the seasonal average the past five years. The IEA cut its forecast by 160,000 barrels citing lower demand in North America and in Asia Pacific members of the Organization of Economic Cooperation and Development.
``We're going to see much more crude oil on the market'' in the next couple of months, said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. ``We're going to start seeing builds in crude and draws on gasoline'' as refiners start pre-winter maintenance, he said.
Crude oil for October delivery was at $63.72 a barrel, down 4 cents, in after-hours electronic trading on the New York Mercantile Exchange at 8:45 a.m. in Sydney. Prices today are 1 percent higher than a year ago.
The contract fell $1.85, or 2.8 % , to $63.76 yesterday, the lowest close since March 22. Futures have declined for seven trading days, the longest stretch since October 2003.
``We're in the midst of a tectonic change,'' Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant said yesterday. ``The rally that's lasted almost five years may be over. We keep seeing lower demand estimates which show the impact of very high prices.''
U.S. oil stockpiles held 330.6 million barrels on Sept. 1, 12 percent more than the five-year average for the period, according to the Energy Department.
Supplies probably fell 2 million barrels last week as refiners ran down stocks before shutting units to prepare for winter fuel production, according to a Bloomberg news survey of 14 analysts.
Oil reached a record $78.40 a barrel on July 14. Prices have plunged 19 percent the past two months on signs demand growth is slowing and as the risk of the United Nations Security Council imposing sanctions on Iran have eased.
``I don't see us going much further,'' Excel's Waggoner said. ``It's probably going to consolidate around that $62.50, $62-even level.''
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, is concerned by the pace of the decline in prices, group president Edmund Daukoru said Sept. 11. OPEC agreed that day to keep its output target unchanged at 28 million barrels a day.
Iran, the group's second-largest producer, will lobby for a cut in quotas if prices fall below $60 a barrel, Kazem Vaziri- Hamaneh, the country's oil minister, said yesterday.
Investors also saw momentum from financial services stocks after Goldman Sachs reported better-than-expected third-quarter results, although profits fell as its trading business slowed. Not only did Goldman's earnings bode well for rival investment banks due to report this week, but also signaled that companies have not pulled back from going to the markets with equity deals.
The rally helped lift the Dow to a four-month high, the tech laden Nasdaq composite index and Standard & Poor's 500 index to three-month highs.
The Dow rose 101.25 oiubts, or 0.89 %, to end at 11,498.09, while the S&P 500 was up 13.57 points or 1.04 % , at 1,313.11. The Nasdaq composite index rose 42.57 point, or 1.96 %, to 2,215.82, its highest point gain since Aug. 15, when it rose 45.97 points.
Bonds also advanced, with the yield on the benchmark 10-year Treasury note falling to 4.77 percent from 4.80 percent Monday. The dollar was mixed against other major currencies, while gold prices declined after falling below $600 an ounce Monday for the first time in more than two months.
Here in Asia, Bank of Japan board member Atsushi Mizuno said policy makers remain committed to gradually raising interest rates even after recent signs that economic growth slowed and inflation was lower than economists expected.
``Things are in line with our scenario'' that prices are rising and the economy is expanding, Mizuno said in an interview in Tokyo yesterday. ``I want to emphasize that that means fine adjustments will continue to be made to interest rates.''
Japanese bond yields fell to a six-month low after consumer prices rose less than expected, prompting speculation that the bank would leave rates, the lowest among Group of Seven nations, unchanged this year. The central bank raised rates from near zero in July, the first time in almost six years. Mizuno said next month's Tankan survey of business confidence and spending plans will provide a broader picture of the economy's strength.
``We have been seeing some mixed reports recently with both strong and weak sides,'' Mizuno said. ``We don't necessarily interpret data the same way the market does.''
A report published Aug. 25, in which the government reshuffled the items it examined, showed consumer prices grew 0.2 percent in July from a year earlier, less than half the pace forecast by economists. Industrial production unexpectedly fell in July, the government said on Aug. 31.
Those surveys helped push yields on Japan's benchmark 10- year bonds to a six-month low of 1.6 % on Sept. 1.
``We still believe it is fully possible that the BOJ will make an additional rate hike this year,'' Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan Ltd. in Tokyo., wrote in a report on Sept. 6. ``The impact of the `CPI shock' caused by the consumer price index rebasing is gradually abating.''
Mizuno said the decline in yields partly reflected a drop in yields in the U.S. and Europe. Yields on U.S. Treasury 10-year notes and German bunds dropped to five-month lows on Sept. 1. on concern that growth in the world's largest economies is slowing.
``Financial-market participants seem to have started mentioning the effects of declining long-term interest rates in the U.S. and Europe as well as the difficulty the BOJ will likely have in raising interest rates further because of the change in the CPI standards,'' Mizuno said. ``We will need to continue to watch further moves in long-term yields closely.''
The bank will release its semi-annual forecasts for prices and the economy on Oct. 31. In April, board members projected the economy would expand 2.4 percent in the year ending March 31 and prices would rise 0.6 percent. The inflation forecasts were made under the old method of calculating consumer prices.
``We plan to conduct policy in an appropriate and unprejudiced way by carefully examining economic data,'' Mizuno said.
Six of 15 economists surveyed by a News Agency between Aug. 31 and Sept. 5 expect the bank to raise rates again by December, 2006.
US Markets:
Oil prices declined for the seventh straight day, falling $1.85 per barrel to $63.76 on the New York Mercantile Exchange as mentioned earlier. It marked the lowest close for crude since late March and it occurred despite a foiled attack on the U.S. embassy in Damascus.
Peter Cardillo, chief market analyst at S.W. Bach & Co., said that September, often a sour month for stocks, has so far proven decent, thanks in large part to falling oil prices.
"Oil prices and commodity prices are coming down and if that continues we could be headed for a strong fourth quarter," he said.
Cardillo also said Wall Street's decision not to dwell on a record trade deficit figure released Tuesday helped push stocks higher. The Commerce Department reported that the country's trade deficit ballooned to a record $68 billion in July amid high oil prices, jumping 5 percent from the June imbalance.
An expectation that oil prices will improve consumer confidence helped propel General Motors up $1.39, or 4.37 %, to $33.23, a new 52-week high. Also, Home Depot added $1.60, or 4.56 percent, to $36.66.
Investors rallied behind financial shares after Goldman beat Wall Street projections for the third quarter, although profits fell as its trading business slowed. Goldman rose $7.29, or 4.83 %, to $158.29.
The Russell 2000 index of smaller companies rose 16.91, or 2.39 percent, to 724.48.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where final consolidated volume came to 2.95 billion shares compared with 2.66 billion shares traded Monday.
Japanese Stock Market:
Japanese stocks rose today, after oil prices fell to the lowest in more than five months, reducing costs, and the yen weakened against the dollar, boosting exporters' revenue. Toyota Motor Corp. paced gains.
``The markets are set for a rather large rebound today,'' said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo. ``With oil at a more than five-month low, it's looking like companies will report profits on the higher end of expectations next month.''
The Nikkei 225 Stock Average climbed 209.39, or 1.3 %, to 15,928.73 till this report was being prepared in Tokyo. The broader Topix index added 18.46, or 1.2 percent, to 1604.44. Both indexes rallied from two days of declines. All except one of the 33 industry groups included in the Topix advanced.
Stocks also gained after better-than-expected profit from companies including Goldman Sachs Group Inc. increased confidence earnings will continue to grow in the U.S.
It is to be noted that a weak Yen increases the value of Japanese exporters' dollar denominated sales when converted back into local currency, while their products become more competitive abroad.
The net inference from above, both the Nekkei and Sensex are set to rise today. Nikko's Nishi estimated the Nikkei may rise as high as 16,050 today. Accprding to my estimates, the Sensex will start with green and end in green, it may also touch 12 and till this report is being prepared Crude was trading in MCX at $62 per barrel. It seems the oil prices are heading towards $50-$55 mark. Also the base metals and non-ferrous metals are down till this report is being prepared. Yesterday mid-cap counters rose more than small cap scrips. So continuously explore the possibilities of investing in both the Mid and Small cap space.
Yesterday, E....M....which hit the circuits was EMA India Ltd, which except the shareholding pattern, still looks good and could be taken at around Rs.130 for price taget of Rs.160---Rs.175 in the short term. Y...I..mentioned there was Yuken India Ltd which also rose to Rs.151 before closing a tad below at Rs.144.40. The company is all set to reach Rs.180 in the short term but it was a daily call not delivery like EMA India Ltd.
Hazoor Media came down a bit after some profit booking was advised, the stock is near its resistance level and will some more good news from the company to give its share a push. I have exited the counter yesterday and will again enter on some specific news.
Glass stocks advanced, with Asahi and Alembic Glass( recommended on last Friday) both registering gains.
One thing I would like to mention here: I have seen while chatting that some people do not read all my messages and hence come to dubious conclusions. They look only at Chandra Prabhu International Ltd and Monnet Ispat & Power Ltd [Both of them rose after they were recommended second time at Rs.6 and Rs.149.50] as my only recommendations, while I recommended at least 30-40 stocks in the last 6 months starting from TISCO to Tilaknagar Industries Ltd and the Accuracy Rate or Success Rate as u may call, is stupendously high; near 95% levels. Also, the accuracy rate of rising on the first day of recommendation is also high at around 70-80%. My recent Recommendations lke Shree Ganesh Forging, Alembic Glass [third straight upper freeze], EMA Ltd, Yuken India Ltd.( it was mentioned as Y...I....at Rs.135, yesterday) rose on the first day of Recommendation. So, please read all my postings before arriving at some Solid Conclusion. Besides, even if u do not invest on my recommendation (which many of you do I am sure, because of being badly informed by some guys here and there, and I am not at all worried.. As making money is more important than niggling at such minute details and truth always prevails at the end), U can read the Asian and world market briefings, which I am sure will help you while investing in the bourses.
Today all the Brewerie companies are set to rise on the news that wine will be sold on Super Markets.....look at United Breweries, Shaw Wallace, Champagne Indage Ltd, Tilaknagar Industries Ltd. etc. for some investment opportunities but not for drinking opportunity....lol...I do not Drink Alcohol, neither do I Smoke, so please do not take this otherwise, while I go on mentioning about brewerie companies in postings.
It is because this sphere is expected to take a quantum jump, due to a number of factors, I have already mentioned. I would like to mention again:
1. Huge disposable income in the hands of middle class.
2. Western Culture is being sprayed through various Movie and Music channels
3. The festive season is near
4. Winter season normally is the highest volume and margin period, for brewerie companies
5. Many of the companies are either on an expanions & Acquisition spree (UB group) or restructuring heavily(Champagne Indage Ltd, Tilaknagar Industries Ltd) or going in for some revoulutionany business plans--->Tilaknagar Industries Ltd(their joint venture with the West Indian Brewerie company will kick start either at the end of this year or the beginning of the next year. The new factory has already started production from March, 2006). Yesterday the stock ended flat...while Shaw Wallace hit the buyer freeze.
6. Change in attitute of the urban middle class.
7. Increased spread throughout the nation
8. Many good restraunts and Hotels are now having license to serve alcohol,
9. The most important for Indian Made Foreign Liquor Companies (IMFL) like Tilaknagar Industries Ltd, is that they will benefit immensely from the fall in Molassses Prices, which is a by-products of Sugar Companies. Sugar prices are likely to fall further due to a number of reasons mentioned earlier. Hence keep away from Sugar Companies and enter Liquor Companies instead.....and So on....
More on the following mails.....................I am very busy these days and may not be able to send briefings everyday, so please bear with me. Use ur own discretion while investing and exiting the bouses. Only invest, if you are convinced with the growth story of a particular company. Never invest on Half Coked News / Briefs and on Tips and Rumours, unless u are a Gambler or have Huge Cache of Disposable Cash at your hand, to play on. [With inputs from Internet]
Best wishes,
Suman Mukherjee
India.
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