Wednesday’s session brought much unease to investors, as dire economic reports and dismal company earnings forced traders to consider the overall impact of data released today. The overall sentiment in the marketplace remains extremely cautious, as a bleak outlook from Intel could have added to the skepticism.
In a day filled with numerous economic reports, leading the way this morning was the Labor Department’s release of the CPI index, which showed a drop in consumer prices for March. For the month, prices fell 0.1% led by a drop in energy prices, as economists were predicting an increase in prices of 0.1%. During the past year, consumer prices have dropped 0.4%, marking the first yearly decline in prices since August 1955.
As for the Core CPI reading, which excludes the price of food and energy, increased 0.2% during March, totaling the overall gains over the past three months, and slightly higher than the 0.1% increase economists were expecting. Over the past year, core inflation has increased 1.8%.
Looking further into the consumer price reading, energy prices declined 3% in March, following a 3.3% surge in February. Gasoline prices slipped 4%, while heating oil costs dropped more than 8%. Food costs during March decreased as well, sliding 0.1% with dairy products receding nearly 2.5%.
In a report released by the Federal Reserve early Wednesday morning, the nation’s industrial production for March contracted, marking the fifth consecutive month in which that has occurred. In efforts for companies to reduce their inventories, production at the country’s mines, factories, and utilities retracted 1.5%, matching February’s decline, while coming in higher than the 1% drop economists were anticipating.
Mines and factories are appearing to remain relatively stagnant during the recession, as the total capacity utilization rate declined to 69.3%, down from February’s 70.3%. Wednesday’s reading marks the lowest such reading on record dating back to 1967.
In more economic news, the manufacturing index in New York State, released this morning, showed that a contraction occurred in April, however, by the least amount since last September. For the month, the index showed a reading of -14.7, well below the previous month’s reading of -38.2. “Although the pace of contraction is moderating, manufacturing remains in a deep downturn,” Ryan Sweet, a senior economist at Moody’s responding to the report. “The severity of the downturn in manufacturing will depend in large part on the effectiveness of the government stimulus package to improve the flow of credit, repair confidence, and stabilize demand.”
In corporate news, Lufkin Industries Inc. (LUFK), which designs, manufactures, sells, and services various types of oil field pumping units, power transmission products, foundry castings and highway trailers, announced before the opening bell on Wednesday that the company’s profits during the 1Q plummeted as commodity prices dropped. For the recent period, LUFK recorded net income of $9M, or $0.60 per share, compared to the previous year’s earnings of $15.6M, or $1.05 per share, a decline in profits of more than 42%. Despite lower earnings, Lufkin posted higher year-over-year sales totals, climbing from $141.1M to $153.1M, an increase of 8.5%. Analysts, in the meantime, were looking for Lufkin to post quarterly earnings of $1.42 per share. In order to maintain sustainable margins, the company eliminated nearly 10% of their positions, while placing other workers on shorter workweeks. By the close of the markets, shares of LUFK were down more than 21%, losing $7.99, to end the session at $29.84 per share. Over the past year, shares of Lufkin have traded in a range between $26.96 and $95.23 per share.
In other news, Peabody Energy Corp. (BTU), the largest private sector coal company in the world, made it known early Wednesday morning that the company’s 1Q earnings and revenues increased over last year’s results, but fell short of market expectations. During the quarter, Peabody posted net earnings of $170M, or $0.63 per share, versus profits of $57M, or $0.21 per share, an increase in income of nearly 200%. Meanwhile, revenues during the period advanced as well, climbing from $1.27B to $1.46B, an increase in sales of nearly 15%. On average, analysts were looking for the coal company to post quarterly results of $0.94 per share on total revenues of $1.62B. Even with a solid quarter, Peabody is lowering their coal production estimates to 225 to 245 million tons worldwide. With that, investors looked away from the stock today, as shares of BTU slipped by the close, falling $3.38, or 11.5%, to close out at $25.96 per share.
Lastly, Piper Jaffray Companies (PJC), a focused securities firm dedicated to delivering superior financial advice, investment products and transaction execution within selected sectors of the financial services marketplace, confirmed that the company posted a 1Q loss greater than last year’s 1Q loss, due to lower revenues from numerous business segments. For the period, PJC booked a loss of $2.7M, or $0.17 per share, in contrast to last year’s loss of $1.4M, or $0.09 per share. Within the continual recession, Piper saw revenues decline as well, falling from $95.7M last year to $83.9M this year, a decrease in sales of more than 12%. Analysts, in the meantime, were looking for the investment bank to record a quarterly loss of $0.23 per share on total revenues of $81.45M. Coming in ahead of expectations, shares of PJC benefited greatly throughout Wednesday’s session, adding nearly 19%, or $5.07, to end the day at $32.15 per share. Since the start of 2009, Piper Jaffray has lost more than 28% of their market value so far this year.
In their weekly release, the Energy Department’s Energy Information Administration (EIA), revealed that crude supplies for the week ending April 10 was mixed as demand for gas and other crude products continue to decline. Crude supplies for the week jumped by 5.6 million barrels to 366.7 million barrels, nearly 17% above last year’s totals and the highest level since 1990. Analysts were looking for a much smaller increase, 2.5 million barrels.
Meanwhile, gasoline supplies decreased by 900,000 barrels to 216.5 million barrels, 0.6% below last year’s totals. Analysts were anticipating gas supplies to fall by 960,000 barrels. Inventories of distillates, those used for heating oil and diesel fuel, declined by 1.2 million barrels to 139.6 million barrels, while analysts looked for a decrease in supplies of 1.1 million barrels.
Furthermore, U.S. refineries operated at 80.4% of total capacity during the last week, a decrease of 1.4% from the previous week.
On the heels of dire economic news and an increase in crude supplies, oil prices remained relatively unchanged throughout Wednesday’s trading session. By the sound of the closing bell, the price for a barrel of light, sweet crude for May delivery lost $0.16 to settle at $49.25 a barrel.
In additional NYMEX trading, gasoline for May delivery slipped $0.007 at $1.4509 a gallon and heating oil remained unchanged at $1.40 a gallon. Natural gas for May delivery slipped by $0.008 to $3.681 per 1,000 cubic feet.
Treasuries were mixed by the close of Wednesday’s trade, as bonds were little affected by economic reports, as more investors were uncertain to place their capital in the security of government-backed bonds or in the more volatile equity markets. By the close, the benchmark 10-year note was higher by 4/32 to 99 25/32 as its yield slipped to 2.77%, down from yesterday’s 2.78%. Meanwhile, the 30-year note slipped 5/32 to 97 as its yield advanced to 3.67% from the previous session’s 3.66%. Finally, the 2-year note was relatively unchanged at 100 1/32 with a yield of 0.85%.
Within the Forex markets, the U.S. Dollar traded mixed against the major world currencies today, as the 16-nation Euro traded lower versus the greenback, buying $1.3223, down from last night’s price of $1.3293. Meanwhile, the British pound was higher against the Dollar, buying $1.4991, up from Tuesday’s price of $1.4940. However, the greenback increased in value against the Japanese yen, climbing from 98.85 to 99.43.
At the sound of the closing bell, after teetering in and out of negative territory, the Dow Jones Industrial average advanced modestly, adding 109.44 points, or 1.38%, to close the session at 8.029.62, while the broader market indicators concluded the day in the green as well.
The S&P 500 index was higher on the day, adding 10.55 points, or 1.25%, to finish the session at 852.05, while the tech-heavy NASDAQ composite index was up 1.08 points, or 0.07%, to end the day at 1,626.80, clinging above the all-important 1,600 threshold.
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Wednesday, April 15, 2009
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