Nicholas M Ong

It just won’t stop going up. In the past weeks, Wall Street had a couple of days where the dollar strengthened and traders saw gains on the major indices. On such days, oil prices dipped but only to return higher on the next day. At US$126 per barrel, crude oil is once again at it’s record highest till date. As a result of other economic factors, I do not think will be seeing the last of rising oil prices anytime soon. If by any measure, I’m predicting things will continue through Christmas. Gas is going for as high as USD4.042 per gallon. The verdict? Wall Street had a pretty flat week even though it rallied earlier this week.

So how has this impacted my investments? Positively mostly. Apart from my investments in emerging markets which has gained slightly but have not yet reached break even point after the initial fees, my asian balanced investment is still pretty much going downhill. The upside is my investments in commodities is continuing to negate the effects of both those investments.

In the past week, my investments in commodities has seen an additional 2% gain. Overall, it has resulted in about 1.5% gain in my entire portfolio bring my returns from to negative 15%. As long as the trend continues, I should equalise from the recent loses and begin to see actual profits just before the Beijing Olympics. The First State Global Resource Fund should give you a pretty good idea of how commodities are performing.

Friday, May 16, 2008

Uptick

Wall Street Weathers the Storm, Closes Flat

Matt Egan

FOXBusiness

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A late day rally carried Wall Street to a flat close on Friday even as oil prices closed above $126 for the first time ever and consumer sentiment plunged to a 27-year low. 

Today’s Market

The Dow Jones Industrial Average slid 5.86 points, or 0.05% to 12986.80, the Standard & Poor’s 500 index rose 1.78 points, or 0.13%, to 1425.35 and the Nasdaq Composite Index lost 4.88 points, or 0.19%, to 2528.85. The consumer-friendly Fox 50 fell 1.74 points, or 0.17%, to 1004.97.

The Dow was unable to close in the green for the third day in a row but did hold onto sizable gains for the week, picking up more than 200 points. Even though the Nasdaq Composite failed to bring its win streak to five, the index did end the week at its highest levels of 2008. 

Chevron (CVX: 100.38, +1.89, +1.91%) and ExxonMobil (XOM: 92.72, +1.42, +1.55%) led the blue-chip index on Friday, picking up more than 1% each on the energy prices. On the downside, Citigroup (C: 23.12, -0.61, -2.57%) and General Motors (GM: 20.68, -0.55, -2.59%) pointed the way down on the Dow, falling 2.6% each.

The stock market’s movement on Friday was influenced by three key headlines that reflect the state of the economy and its impact on individuals: New home construction rose at a faster than any other month over the past two years, crude prices set an all-time intraday high of $127.82 a barrel and consumer sentiment plunged to levels unseen since the end of the Carter Administration. 

KB Home (KBH: 25.57, -0.46, -1.76%) and other home builders failed to rally on the Commerce Department’s housing data, which showed housing starts increased 8.2% to a seasonally adjusted 1.032 million annual rate. Wall Street had expected another monthly decline, this time of 1.4%.

While the report beat expectations, the housing market is still mired in a massive slump that could send the economy into a recession. Compared to a year ago, housing starts were off by more than 30%. 

Meanwhile, consumer sentiment took a big hit in May, sliding to 59.5 — the lowest reading since June 1980. The decline was even worse than Wall Street had anticipated, as a 62.6 reading was forecasted. Still, the fact that sentiment has plunged in recent months is no surprise, as consumers hear about triple-digit oil prices and a potential recession.

The lower the number, the lower the general consensus feeling consumers have about the state of the economy. Many economists and traders feel that if the nation is to slide into a recession, it will be led there by consumer spending. If consumer sentiment remains low, so will consumer spending.

Energy stocks like Schlumberger (SLB: 105.31, +1.86, +1.79%) benefited from the latest record oil prices. However, high energy costs have negatively impacted the broader market, especially airlines and retailers. Crude closed up $2.17 at $126.29 a barrel in New York — another all-time record. 

Corporate Movers

General Electric (GE: 32.13, -0.24, -0.74%) confirmed today that it considering selling or spinning of its 120-year-old iconic appliance division. The company said that the appliance unit’s success is “tied to the rise and fall of the U.S. housing market.” While The Wall Street Journal estimated the division’s value at $5 billion, GE said it is a $7.2 billion business.

Abercrombie & Fitch (ANF: 76.19, +0.11, +0.14%) reported mixed results Friday morning, including a 3% increase in earnings to $62.1 million, or 69 cents a share. While the earnings topped estimates from Thomson Reuters for 65 cents per share, Abercrombie’s 8% increase in sales to $800.1 million missed estimates of $810 million. Shareholders will also take note that same-store sales declined 3% during the first quarter. 

Kohl’s (KSS: 49.27, -1.22, -2.41%) fell 2.4% after the retailer late Thursday lowered its 2008 forecast and said its first-quarter profit declined 27%. The company earned 49 cents per share, 5 cents above estimates from Thomson Reuters. Kohl’s now sees full-year earnings of $2.95 to $3.15 per share, compared to mean estimates of $3.11. 

Nordstrom (JWN: 38.44, +1.15, +3.08%) rose 3.1% even after Goldman Sachs (GS: 187.14, -1.48, -0.78%) downgraded the retailer on its 24% slide in first-quarter profit. Still, Nordstrom’s 54 cents per share in earnings beat the Street’s expectation of 49 cents. Nordstrom’s reported a 4% decline in revenue to $1.88 billion. Also, the retailer cut its 2008 forecast to $2.65 to $2.80 a share, compared to estimates for $2.76. Goldman lowered its rating on t

he stock to “neutral” from “buy,” citing high energy costs and others pressure on retailers.

Time Warner (TWX: 16.47, -0.04, -0.24%) Chairman Richard Parsons said on Friday that this will likely be his last year in the top job, according to Dow Jones Newswires. Parsons, who reportedly made the comments at the media company’s annual shareholder meeting, resigned as chief executive in November, paving the way for current CEO Jeffrey Bewkes to take over. A clause in Bewkes’ contract allowed him to resign as CEO if he wasn’t given the chairman post within a year, according to Dow Jones. 

Ameriprise Financial (AMP: 49.83, -0.82, -1.61%) declined 1.6% as billionaire investor Warren Buffett’s Berkshire Hathaway (BRK) revealed it had sold its shares of the financial services company. Buffett also cut his stake in Iron Mountain (IRM: 29.76, -0.16, -0.53%). On the other hand, the “Oracle of Omaha” increased his holdings of Kraft Foods (KFT: 32.51, +0.58, +1.81%) and Burlington Northern Santa Fe (BNI: 108.56, +0.63, +0.58%).  

Amylin Pharmaceuticals (AMLN: 32.15, +1.52, +4.96%) jumped 5.1% on news that billionaire activist investor Carl Icahn held a stake in the company. According to SEC filings, Icahn owned 6.3 million shares of Amylin as of March 31 but sold his stakes in Macy’s (M: 25.22, -0.10, -0.39%) and railroader CSX (CSX: 65.54, -0.11, -0.16%). Icahn also sold his position in Take-Two Interactive (TTWO: 27.10, -0.23, -0.84%), the publisher of the profitable Grand Theft Auto game. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, rose 8.05 points, or 0.21%, to 3862.91. The FTSE 100, London’s benchmark index, gained 52.50 points, or 0.84%, to 6304.30. 

On the continent, Paris’s CAC 40 Index picked up 20.53 points, or 0.41%, to 5078.04 while Germany’s DAX gained 75.50 points, or 1.07%, to 7156.55. 

In Asia, Tokyo’s Nikkei 225 Index fell 32.26 points to 14219.48. Hong Kong’s Hang Seng Index rose 105.15 points to 25618.86.