Energy, Materials Shares Give Wall Street a Boost

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Published May 25, 2011

| FOXBusiness

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Big gains in energy and materials stocks, fueled by rallying silver, copper and oil, helped push the markets solidly into the green. 

Today's Markets

The Dow Jones Industrial Average gained 38.5 points, or 0.31%, to 12,395, the S&P 500 was up 4.2 points, or 0.32%, to 1,320 and the Nasdaq Composite was up 15.2 points, or 0.55%, to 2,761. The FOX 50 traded higher by 1.2 points to 922.  

Oil turned sharply positive after the weekly inventory report from the Energy Department showed a surprise decrease in distillate stocks.  Energy shares like ExxonMobil (XOM) and Chevron (CVX) benefited from gains in the energy complex. 

Distillate inventories dropped 2 million barrels, compared with an expectation of a 100,000 barrel build. 

However, on the bearish side, oil stocks jumped 616,000 barrels, as compared with expectations of a 1.3 million barrel draw.  Gasoline stocks were up 3.8 million barrels, a far bigger build that the 300,000 analysts were expecting. 

Light, sweet crude jumped $1.73 , or 1.7%, to $101.32 a barrel.  Wholesale RBOB gasoline was up 2 cents, or 0.78%, $3.02 a gallon. 

Consumer gasoline prices continue falling.  A gallon of regular gas cost $3.81 on average nationwide, down from $3.86 last month, but considerably higher than $2.78 last year.  

In metals, gold was higher by $3.40, or 0.22%, to $1,527 a troy ounce.  Silver surged $1.52, or 4.2%, to $37.64 a troy ounce. Copper jumped $9.40, or 2.3%, to $411 a pound. 

Materials names like Silver Wheaton (SLW) and Potash (POT) soared on the day as a result. 

Market participants had been concerned several German banks would sustain downgrades as a result of their exposure to Greece, which is currently struggling to repay its sovereign debt.  However, Fitch said Wednesday it currently doesn't plan on taking any ratings action as a result to their exposure to Greek debt.

The company did, however, say it "sees high potential contagion risks if there were any restructuring of Greek sovereign debt," meaning if Greece did default on its debt, it would likely send shockwaves through financial markets.  

Orders for long-lasting goods slid 3.6% in April, a bigger drop than the 2.2% economists were estimating. The drop was the largest since October 2010. However, the March reading was revised higher by 1.1 percentage points, which exacerbated the decline. 

Excluding transportation, orders were down 1.5%, also short of the 0.5% decline Wall Street forecast. Indeed, orders for non-defense aircraft and parts plummeted 30%, and transportation equipment orders tumbled 9.5%. 

Orders for goods are an important gauge of domestic manufacturing activity. Recent data from the various regional Federal Reserve manufacturing survey's have been disappointing, potentially pointing to a slowdown in manufacturing activity. 

Also on the economic front, the OECD said Wednesday the worldwide economic recovery is on track, with global economic expansion hitting a pace of 4.2% this year and 4.6% next year.  However, the organization noted several downside risks to growth, including: high energy prices, weak housing markets, and "financial vulnerabilities" in the euro area. 

"This is a delicate moment for the global economy, and the crisis is not over until our economies are creating enough jobs again," said OECD Secretary General Angel Gurria.

American International Group (AIG) raised $8.7 billion in a public share offering. The U.S. Treasury, which is working to exit its stake in the bailed-out insurer, made a small profit on the offering.  The government rescued the company in 2008 when it was on the brink of bankruptcy in a bid to stave off a broader financial collapse. 

In earnings news, Costco Wholesale (COST) unveiled fiscal third-quarter earnings of $324 million, or 73 cents a share, compared with $306 million, or 68 cents, last year.  The wholesale club also saw its net sales jumping 16%, with same store sales rising 12%. 

The euro was down 0.02% against the dollar, and the greenback index gained 0.07% against a basket of world currencies. 

Corporate News

General Motors (GM) is adding two shifts and 2,500 hourly and salaried jobs at its Detroit-Hamtramck plant. 

California Pizza Kitchen (CPKI) agreed to be acquired by private equity firm Golden Gate Capital for $470 million, or $18.50 a share. 

Infosys (INFY) is being investigated for repeatedly breaking American visa laws, according to a report by The Wall Street Journal.

Vivus (VVUS) said its erectile-dysfunction drug avanafil met its goals in a late-stage trial. The California-based biopharmaceutical company plans on filing for regulatory approval to market the drug in the second quarter of 2011. 

Foreign Markets

The English FTSE 100 was up 0.56% to 5,870, the French CAC 40 climbed 0.31% to 3,929 and the German DAX gained 0.28% to 7,171. 

In Asia, the Japanese Nikkei 225 dropped 0.57% to 9,423 and the Chinese Hang Seng was up 0.07% to 22,747. 

 

URL

http://www.foxbusiness.com/markets/2011/05/25/stock-futures-tick-lower/