Chart of the day --- Tom (fast)
>> emulex is down in after hours’ trading, the maker of data storage switches lowering its profit forecast, shares off by 3%. emulex sees profits of 20 to 21 cents versus prior estimates of 20 to 27 cents a share, wall street was expecting 27 cents a share. on wall street, conventional wisdom is that stocks follow interest rates but one market researcher says it’s the other way around. jim bianco argues the federal reserve is actually following stocks, not the other way around. he explains it this way. as stocks rally, the wealth effect helps the economy grow, yet as stocks sell off, the reverse wealth effect depresses the economy.
>> as the fed keeps raising rates, what you could wind wind up having by the fall is an inverted yield curve again and this time it could be significantly inverted with short-term interest rates at 50 basis points or 75 basis points above long-term interest rates, not just a few like we saw last month.
>> if that happens, bianco says financial stocks will be hurt the most and the s&p 500 will not be higher than 1300 by the end of the year. bianco says he does not see much potential in the stock market right now except for the materials sector and possibly energy stocks. deutsche bank analysts have increased forecasts for oil for 2007 and for 2008. will rising prices slow the u.s. economy? well, to answer that question, let’s look at the “chart of the day” with bloomberg news editor-at-large tom keene. welcome.
>> good to see you.
>> how much do they boost estimates?
>> they boost estimates $5, which doesn’t sound like a lot. when you’re at $45 and you go to $50, so what, oil’s at $69, i don’t get it.
>> a no-brainer.
>> it’s the base price that the analysts work off of when they use their spreadsheets. and at every firm, they brought these base prices, the foundation prices up slowly and the news today is deutsche bank looks out to next year and 2008 and bring it up to a requirified level―rarefied level of near $50. this is oil since 1959 and it is adjusted for inflation, lori, and also income. our rising wealth. so you see the oil crisis in the 1970’s and 80’s.
>> can i guess the circle.
>> take a guess.
>> gulf war, correct, you’re way ahead of me. the average is $119 a barrel.
>> inflation adjusted in.
>> in.
>> naention adjusted and -- inflation adjusted and income adjusted. we’re at $63 now, back then it felt like $119 in today’s wealth and we’re still below inflation, djusted and income, djusted, which is $80 a barrel in today’s dollars so it shows the emotion and distance we have to go but it’s a great oil summary by deutsche bank and signals higher prices.
>> and perhaps that maybe some of the concern is overdone. when you look at where we are now, it’s nowhere near where we’ve been.
>> it’s not where we’ve been and the question is when will the pain click in. i spoke with david cotech today and he sees the pain today somewhere around $80 a barrel in today’s prices. surprisingly in the chart, back to the persian gulf surge and that’s where it will affect driving habits, gasoline at, say, $4, and most importantly where it really will begin to slow the u.s. economy. we’re just simply not there yet.
>> if we look at supply versus demand with the oil story, where are economists more concerned?
>> economists and strategists -- deutsche bank does a terrific job in a one-page spread sheet summary of breaking all that down and within a nutshell, the u.s. and china have terrific demand, out to 2010, 21% -- 41% of the growth in demand comes from china and the u.s. and on the supply side, the concerns are more opec and more that russia could disappoint and the canadian tar sands are not coming on as people thought. it’s an interesting mix of stuff as we see near-record highs in the u.s.
>> tom, thanks a lot. bloomberg news editor-at-large tom keene with the “chart of the day.” spised politics and markets don’t mix, especially when investors have agendas. peru is a case in point. details on the “world’s biggest mover” as well as world and national news.
>> i’m mark crumpton with a world news upindicate. • update. iran is making more disclosures about its nuclear capability. president mahmoud ahmadinejad says his country completed its first enrichment of uranium two days ago. the remarks were in definance of the united nations surk which gave iran until the end of this month to shut down its nuclear program over concern it will produce weapons. ahmadinejad told a gathering in the holy city of masshad that his country’s nuclear program is peaceful, intended only to produce nuclear power. responding to reports of iran’s successful uranium enrichment process, white house press secretary scott mcclellan said that iran is moving in the wrong direction. at least 44 have been killed in a bombing in pakistan. authorities say the blast in the southern city of karachi wounded another
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Listen Money & Politics --- Peter (slow)
NYSE --- Deb (fast)
>> i’m peter cook. welcome back to “money & politics.” the worries about iran’s nuclear program once again impacting the energy markets today. crude ending the day at $69 a barrel, $69.98, actually -- $68.98, i should say. that’s up 24 cents. it did reach $69.45 during new york trading. closing near a seven-month high. checking the rest of the energy complex, unleaded gasoline ended the day higher, as well, more than 2%. heating oil also higher and natural gas futures higher, as well, on the day. the price of gasoline at the pump in the u.s. headed even higher this summer according to the government’s latest forecast. in its annual summer fuels outlook, the energy department forecast that americans will pay an average of $2.62 per gallon this summer, 25 cents higher than last summer. the energy department says the peak in gas prices will likely be in may. the head of the energy information administration says higher gas prices can be blamed on higher crude oil prices, greater demand and tighter supply. officials don’t anticipate prices to beat the record set last year in the aftermath of hurricanes katrina and rita. that’s a forecast coming from the department of energy. stocks in the u.s. tumbled to a four-week low. the dow jones industrial average, s&p 500, and the nasdaq all lower on the day. bausch & lomb, one of the biggest stories impacting the market today. deborah kostroun at big board with more on the day’s trading action.
>> thanks a lot, peter. yes, bausch & lomb casting a pall over the markets today, the biggest drag in the s&p 500. of course, shares falling by the most in five years. that after the company announced they would stop shipping their renu moisture loc cleansing solution after it was linked to a rare fungal infection. average daily volume on bausch & lomb generally a million shares and today, 26 million shares so a very busy day trading in that stock. one stock we’ll be watching tomorrow, as well, is genen genentech because the company released earnings after the close of trading today saying first-quarter profit climbing 48% as more doctors prescribing avastin and herceptin, both cancer drugs. genentech saying stronger-than-expected drug sales led the company to boost their forecast for profit growth this year by as much as 55% compared with 2005. so a pretty good outlook for genentech. in today’s session, stocks falling to the lowest in almost a month, mainly because of the surge in commodity prices. we have copper and zinc once again at records. in fact, copper above $6,000 a metric ton for the first time ever, however, not helping out many of the copper stocks which were generally lower. gold falling just below $600 an ounce on speculation the 11% rally we have seen in gold in the past month may be overdone. gold stocks lower in the session along with the rest of the market . we saw a decline in bond yields which typically helps out stocks but that was not the case today with the yield on the 10-year note at 4.92% after hitting 4.99% monday. that, of course, that yield yesterday, was the highest since june of 2002. really what that did, it sparked a lot of interest in bonds. laggards in today’s session, all 24 industries in the s&p 500 were lower. autos, telecom equipment and healthcare and equipment lower, and healthcare and equipment related to bausch & lomb.
>> thank you very much, deborah kostroun at the big board. yesterday’s pro immigration marchs were the biggest rally in the u.s. since vietnam. what is america’s neighbor to the south think? i’ll ask mexico’s ambassador to the united states when “money & politics” returns.
