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Oil Decline a Boost for Bulls - Money Matters for 10/19/05 Don Bravo | 10/19/05
The Dow, Nasdaq and NYSE Composite all recorded spectacular gains as oil prices dropped to fresh lows based on an assessment by the Energy Department of higher reserves of oil, gasoline and home heating oil.
While the price for a barrel of light, sweet crude dropped to a low of $61.30 and closed at $62.41, the markets went on a magnificent tear to the upside from noon until the close of the trading day.
The Dow Jones Industrials added 128.87 points to close above 10,400 for the first time since October 4th, though the index is still 300 points below late summer highs and down more than 3% for 2005.
The big story was on the Nasdaq where stocks gained 35.24, or 1.71%
The mid-day turnabout was dramatic as the indices were treading water in the red after opening the day with a negative bias.
Not too much should be read into just one day of trading, especially in the midst of so much turmoil. The major indices are still down for the month and the quarter and most of the 3rd quarter reporting from corporations is still ahead.
On the earnings front, Dow component Altria Group (MO) bounded ahead 1.37 points after beating street estimates by five cents, posting EPS of of 1.38. Drug giant Amgen (AMGN) topped estimates by three cents, coming in with earnings of .85 per share.
Financial superstars JP Morgan (JPM) and Bank of America (BAC) both reported excellent gains in revenue and EPS and fueled gains in the financial sector.
Shortly after the close, internet trading platform eBay (EBAY) posted EPS of 20 cents, in line with estimates, on a revenue gain of 40% over last year's third quarter.
eBay's news was good for tech in general, especially after Yahoo's (YHOO) strong results, reported yesterday after the close. Yahoo was up 2.21 points today, following the release.
The big downer for the day was Eastman Kodak Co. (EK) which posted its third consecutive quarterly loss - this one of over $1 billion - amounting to a loss of $3.58 per share.
Still, the photographic firm's troubles did little to curb investor enthusiasm across all sectors. Thus far, earnings have been as good or better than expected for the previous quarter, allaying fears of a slowdown due to hurricanes in the south, slowing home sales and inflation.
As suggested here yesterday, the markets were poised on a decision day. If today's trade is any indication, traders are willing to shake off poor economic data and focus on corporate earnings, which appear to be rosy.
It's what makes predicting anything in the world of investing such a challenge. Otherwise, our analysis of GM appears - after just two days - to have been spot on. GM dropped another .74 to close at 28.38 today.
Despite the massive forward moves, the gap between new lows and new highs widened again today, urging at least a modicum of caution looking ahead.
In addition to lower oil prices, gold and silver were traded lower, especially gold, which dropped by more than $8 per ounce.
Dow Jones: +128.87; 10,414.13 close
NYSE Advancers: 2115
Nasdaq Advancers: 1969
NYSE New Highs: 36
Nasdaq New Highs: 46
Gold: -8.80; 465.80 close
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