Due to the weakening of the storm threatening the oil rich middle east, the price of oil once again dropped today. The price of crude oil dropped more than $2 on weather reports that the storm has weakened. This is good news for the US as hurricane season and the busy driving season has pushed the price of crude oil up recently. This drop in oil, along with bond yields retreating, left the US Markets on the rise, pushing the Dow to 13424.39 points. The Nasdaq also had a good day, up 32 points and the S&P 500 closed almost up 17 points. As the price of crude oil continues to fluctuate throughout the summer, keep open the possibility of investing, especially if a Hurricane hit on the US looks eminent. A hurricane that hits the Gulf of Mexico could drive the price of crude oil up as high as 80$/barrell +, which could be a huge money maker for those that invest in it.
The family that controls Dow Jones & Co, the parent of the Wall Street Journal, has announced that they will consider an offer from Rupert Murdoch to buy the company. They are also considering options from other potential buyers. Look for the stocks of these two to be mixed tomorrow, depending on if an offer from a buyer is put on the table.
There are several things happening in the economic world that is helping to push the stock markets to new record highs. First off, after a huge sell off of China’s stock market yesterday, it has rebounded tremendously. However, yesterday’s sell off did not hurt the US markets, which instead reached another all time high. The Federal Reserve also gave statistical data this morning saying that the GDP for the period of January to March was the lowest it has been in four years. However, both the Fed and the Bush Administration said that this doesn’t mean the economy is headed into a recession. They reasoned the low GDP as a result of the slumping housing market. As this is cyclical in nature, look for it to go back up in the next quarter. Also, in other news, Wachovia has said that it will buy the A.G. Edwards company for $6.8 billion. This is just another in the long line of company buyouts that consumers have seen this year. Look for their stocks to be big movers today.
The New York based Conference Board Consumer Research Center announced today that despite high oil prices, consumers are confident with the economy. Consumers are seeing optimism about the job market, driven by company buyouts, better wages, and better tax situations, all fueled by the current Government led by the Bush Administration. Lynn Franco, director of The Conference Board Consumer Research Center said: “All in all, confidence levels continue to suggest growth, albeit at a slow pace.” This news is good news to investors, who see a major halt to the economy coming in the form of an interest rate hike by the Federal Reserve. However, if inflation is being kept in check, then both consumers and investors still see the economy as a thriving (slowly though) market where lots of money is still to be made.
Stocks that are expected to post earnings today include several major clothing companies. Gap, Ann Taylor, and Limited Brands of clothing are all expected to announce their earnings today. All are expected to post a profit, but Limited Brands is expected to post half of the profit that it did a year ago. This has led to some restructuring in the company and the way it does business. Watch for more companies to post ahead of the Memorial Day weekend today and tomorrow.
More and more takeovers are helping to drive the US markets to all time highs. This trend, which has been going on mainly in this quarter, seems to have more effect on the markets than high oil prices and the housing market. One of the latest takeovers is by Universal Music Group, which has agreed to buy out BMG Music for a $2.09 Billion deal. This deal, along with the other takeovers that have involved Microsoft, online advertisers, and other major companies, have pushed the Dow to almost record highs everyday. Look for the Dow to calm down a little if the takeovers trend slows. However, if consumers keep on track with their spending habits, the Dow and the other US markets will not suffer as companies start to examine their 2nd quarter profits.
The US stock markets have had another great week, and gas prices are not holding consumers back in their spending. Both the Dow and the S&P 500 had their seventh straight week of gains, which pushed the Dow to another record close. The Nasdaq also saw gains this week, with a gain of 19 points on Friday. Many of the stocks that have had big gains are due to buyouts, such as Microsoft buying online advertiser aQuantive Inc. Crude oil prices also rose again, prompting Exxon to have its stock rise as well. As the summer season approaches, consumers are starting to drive more. The thought of a major hurricane to the east coast is also causing crude oil to rise. However, even with this rise consumers are still spending and companies are still posting profits. If a major hurricane were to hit, the US could see gas go up to around the $5 or $6 price for a gallon.
With the recent news that the Federal Reserve is keeping interest rates the same, one has to wonder, is inflation really in check? The housing market is on a slump, gas is on the rise, but everything else seems to be doing great. So why is all this happening? As it seems to be, the economy is moving along a a very slow pace, but it is still growing. The housing market (often referred to as a bubble), is seeing some of the repercussions of low interest rates that happened when the economy started to grow roughly a year and a half ago. This means that people did not plan ahead, but were instead relying on the present when it came time to buy. Once interest rates went up, these people could no longer afford what they had bought. This led to a lot of foreclosures and all the negative publicity associated with that. However, it is still a great time to buy a house, as the value of property continues to grow. The key here though is to not buy something that is more expensive than what you can afford, and to lock in rates if your financial institution allows you to do that.
The US markets were off to a slow start yesterday, and they waited to find out whether or not the Federal Reserve would hold interest rates steady or make an adjustment. As thought, the Fed held the rates steady, and stocks climbed after that point. The Dow Jones, Nasdaq, and S&P 500 all made decent climbs yesterday after the news was released.
For Thursday, the stocks to watch are American International Group (AIG), which is expected to post 1st quarter earnings around $1.54/share. Consolidated Edison Inc. is also expected to post good first quarter profits, at $.82/share. A big one to watch will be Whole Foods Markets, Inc. which posted an 11% loss due to opening of new stores. While it is good news that new stores are opening for the company, it is bad news that their profit sees such a heavy loss. Keep you eye on these stocks throughout the day, along with others that are just getting ready to post profits.
The Dow finished up another 489 points today, driven by even more good news from companies that are reporting earnings. On Tuesday, Cisco is expected to announce earnings of $.33/share, and Disney is expected to announce $.38/share earnings. Both companies have been doing well with the economy, especially in technical ventures. Disney has seen a rise in visitors to theme parks, and is also awaiting the highly anticipated release of the third installment of “Pirates of the Caribbean.” After this weekend’s monster blowout at the box office by Spiderman 3, look for Disney to hopefully carry this momentum forward to the release date of May 25.