U.S. MARKET AVERAGES

Other than economic data, the day’s trading was driven events in the Gulf of Mexico, trading in oil and gas markets, and widespread fears of gasoline shortage in southern states.

Stock market is making a brave attempt to look beyond the effects of hurricane Katrina but oil and gas markets are not able to shake-off the day-to-day events in the region.

Energy sector, few retailers, miners, and financial stocks and asset managers advanced during the day, while stocks in transportation, automobiles, and semiconductors fell during the day.

The decline in manufacturing as reported by ISM showed a decline in manufacturing activity and rise in prices related to energy. The report before the market open put traders on the defensive and led the initial market sell-off in the morning hours. The decline was quickly reversed as oil prices did not increase as high as market had anticipated.

Market did not pay much attention to weekly unemployment claims and personal savings and spending reports.

The same store sales as reported by several retailers for the month of August led to selective buying in retail stocks. However, analysts look for decline in store and retail sales in the coming weeks due the hurricane Katrina and significantly higher energy prices.

Retailers, led by Wal-Mart, Target Corp. and Costco Corp. posted better-than-expected sales for August. Costco Wholesale posted a 9% growth in comparable August sales. Other stores, including Nordstrom, PaylessShoe Stores and Kohl’s, delivered better-than-anticipated store sales growth. The consistent laggards in same store sales growth, Limited, Gap, and Gymboree reported yet another decline in same-store sales.

Novartis, Swiss pharmaceutical company, offered $4.5 billion to gain full control of U.S. vaccines maker Chiron. Novartis already owns over 42% of Chiron. Haggar Corp. said it has agreed to be purchased by Infinity Associates, Perseus and Symphony Holdings for $212 million.

Towards the close oil, gasoline and natural prices advanced impacting the averages mild sell-off. In the face of rising energy prices this market remained optimistic. Gasoline prices have advanced 30% in the last five trading sessions.

Katrina Aftermath

The category 4 hurricane is exposing serious weakness in the readiness of the nation’s emergency response systems. For years Army Corp of Engineers have asked for additional funding from Congress and Bush administration which have been denied by administration. In fact, just a few years ago, in 2002, Bush administration fired the Chief of Army Corp for working with Congress for demanding $188 million for dredging pump system for the Louisiana port, LOOP system.


With 27% of nation’s oil and 8% gas flowing through the Louisiana and Mississippi region, and 10% of oil refineries located in the area, these states have contributed more than $5 billion in federal taxation with no federal investment in the oil and gas transportation infrastructure in the last ten years. Nine of the fourteen refineries in the region are closed for at least a week or more.

ECONOMIC NEWS

The Institute for Supply Management released a report, according to which the Purchasing Managers Index fell to 53.6 in August compared with 56.6 in July. It also showed that the Price Index rose to 62.5 in August from 48.5 in July on higher energy prices. The report indicated that the New Orders Index decreased to 56.9 in August from 60.6 in July. The Production Index fell to 55.9 this month vs. 61.2 in the previous. The employment Index declined to 52.6 in August against 53.2 in July.

The Department of Commerce released the report which indicates that personal spending in July has significantly increased to 1% compared with 0.8% in June matching economists’ expectations. The report also showed 0.3% increase in personal income for July after an unrevised increase of 0.5% in June. Economists had expected growth of 0.6%.

In addition, the Commerce Dept. said that personal saving was a negative $58.8 billion in July compared to a positive $0.9 billion in June. The Commerce Dept. also said that prices rose 0.3 percent in July after coming in unchanged in the two previous months. Excluding food and energy, prices rose by a more modest 0.1 percent in July after coming in unchanged in June.

The U.S. Department of Labor revealed Thursday that initial jobless claims came in at 320,000 for the week ended on August 27, an advance of 3,000 from the previous week's revised total. The 4-week moving average for initial claims, which flattens out the week-to-week volatility, rose 1,250 to 316,750. Continuing claims for the week ended on August 20, the most recent week for which the government has data, rose 36,000 to 2.607 million.

Truck and auto sales for August are forecasted to drop vs. the previous month. Economists expect car and light truck sales dropping to an annual rate of about 14.1 million from July's 17 million, fueled by automakers' offer of employee discounts.