U.S. MARKET AVERAGES

Market averages are trading in split fashion as investors digest the May trade deficit report. The U.S. government report 2.7% decline in trade deficit largely on the decline in prices for oil import. The May trade deficit is though lower than April deficit but the annual deficit is still likely to top $700 billion. If oil prices spike in the 3rd quarter than the annual deficit may be even higher.

The U.S. government panel that reviews mergers of companies that involve foreign companies is expected to not review the proposed merger between Unocal and Chinese company CNOOC until the companies are closed to definitive deal.

Tech sector reversed the early gains and materials and health care sectors are trading lower. The dollar is holding onto the morning gains as lower trade deficit number provides support to the higher dollar. Weaker forecast for the 2005 earnings from Abbott and pre-release from HCA International is dragging the hospital and pharmaceutical stocks.

Apple Computer, YUM Brands and Advanced Micro are some of the few companies to release earnings at the end of the day.


ECONOMIC NEWS

The U.S. government reported that the trade deficit for the month of May declined from the previous month. Total May exports of $106.9 billion and imports of $162.2 billion resulted in a goods and services deficit of $55.3 billion, $1.6 billion less than the $56.9 billion in April, revised. May exports were $0.2 billion more than April exports of $106.7 billion. May imports were $1.4 billion less than April imports of $163.6 billion.

In May, the goods deficit decreased $1.6 billion from April to $60.8 billion, and the services surplus was virtually unchanged at $5.4 billion. Exports of goods decreased $0.1 billion to $74.5 billion, and imports of goods decreased $1.6 billion to $135.3 billion. Exports of services increased $0.2 billion to $32.4 billion, and imports of services increased $0.2 billion to $27.0 billion.

In May, the goods and services deficit was up $6.6 billion from May 2004. Exports were up $10.5 billion, or 10.9 percent, and imports were up $17.1 billion, or 11.8 percent.


INTERNATIONAL MARKET NEWS

Asian benchmarks closed mixed as U.S. blue chips slipped and crude-oil climbed back to $61 a barrel on a new approaching summer storm. Japanese stocks ended down 0.3% as investors locked in profits awaiting corporate earnings reports in the U.S and Japan. South Korea’s Kospi gained 0.6% on strong demand for financial stocks. Hong Kong’s Hang Seng climbed 1.1% on solid gains for select blue chips. In Tokyo the dollar traded at 111.42 yen.

European shares advanced in mid-day dealings boosted by oil companies as crude-oil resumed higher levels of over $61 a barrel under the threat of the oncoming Tropical Storm Emily and gains posted by automakers. The German DAX 30 added 0.3%, the French CAC 40 rose 0.4%, and the U.K.’s FTSE 100 climbed 0.6%. In currency markets the euro and the pound lost ground against the dollar and quoted at $1.2183 and $1.7652 respectively.

ENERGY, METALS AND CURRENCIES MARKETS

OIL futures climbed on fears of supply disruptions at U.S oil facilities caused by approaching summer storm Emily. But prices eased from stronger early gains amid news of weaker-than expected Chinese consumption. U.S. crude delivery for August was up 13 cents at $60.75 after trading as high as $61.30 a barrel. London Brent was up 23 cents at $59. 05.

EARNINGS AND CORPORATE NEWS

Abbot Laboratories, drug maker, posted 2Q earnings of 56 cents a share against 40 cents a year ago. Excluding discontinued operations and one-time tax expenses, earnings would be 58 cents a share beating expectations of 57 cents. The company backed its 2005 profit of $2.47 to $2.53 a share excluding special items.

Datalink Corporation, independent information storage architect, posted 2Q profit of $04 a share compared with a net loss of $10 last year exceeding estimates of $08 loss to a net income of $02 a share.

Harley-Davidson, motorcycle seller, reported 2Q profit of 84 cents a share vs. 83 cents a year ago beating expectations of 79 cents a share. The company raised its 2005 outlook to 10% to 13% from 5% to 8% helped by share repurchases.