Focus: Pegging the yuan to the dollar
>> a new report out by the treasury department released at 2:30 p.m. new york time said that china did not manipulate its currency in order to gain an export advantage last year. the report says that china’s policy of pegging the yuan to the dollar comes close to doing so and it must be changed now.
>> the report calls on china to move to greater flexibility in its exchange rate regime and do so now. we think they’ve made such strides that they’re capable of doing it now.
>> no major trading partner with the u.s. met the criteria for manipulation during the period of june 30 to december 31 that the study covered. lawmakers on capitol hill quick to respond.
>> if it quacks like a duck and walks like a duck and swims like a duck, it’s a duck. they are manipulating their currency and for the report not to find that is strange.
>> some lawmakers and manufacturers have pressed the bush administration to take action. they say china’s decade-old policy of pegging the yuan to the dollar has contributed to the record trade deficit and loss of manufacturing jobs. turning our attention to this afternoon’s stock market rally, kicked off around 2:30. here’s a report from deborah kostroun at the big board.
>> the dow jones industrial average closing near its best level of the day and after monday’s 112-point move higher, the market was looking for followthrough and didn’t see that followthrough until the last hour and a half of trading. the dow jones industrial average rally of 2.19% is the largest this year and the largest since early november. united technologies, caterpillar and home depot. home depot beat earnings by two cents a share and united technologies putting in a strong performance after their c.e.o. reaffirmed their 2005 e.p.s. and saying no way on the honeywell purchase. u.t.x. saying the buy of honeywell not going to happen. honeywell, one of the biggest drags on the dow jones industrial average. however, that stock did rise about 4.8% on may 6 on that u.t.x. takeover speculation. gainers in the s&p 500, retail at the top of the list with earnings, not only home depot helping to lead the way. also materials and also utilities. big lots, their first-quarter earnings beat estimates by two cents a share. federated and nordstrom closing at record highs on the day. j.c. penney, first-quarter profit more than quadrupled on higher sales of private brand apparel and furniture and shares rose after the company raised their annual profit forecast for the second time this month. industrials also on the plus side in general. deere and company, second-quarter profit rising 27% on lower costs, increased prices and more sales of construction machinery. in addition to the gains in industrials, energy also putting in a very strong performance and in fact you really saw the energy taking off as crude oil closed. however, just shy of $49 a barrel. i’m deborah kostroun at the new york stock exchange.
>> retail stocks powered the nasdaq rally. robert gray files this report.
>> the nasdaq composite closing at the highs of the session and above the key psychological level of 2000 for the first time since april 12, also closing above the 200-day moving average, now above both its 50-day and 200-day moving averages. staples rising after beating the average analysts’ estimates on earnings and revenue, coming in at 21 cents per share ahead of the 20-cent estimate. saying sales to businesses increasing by the most in two years and more customers buying the staples brands. costco was rising, hot topic, reporting earnings tomorrow, ross stores which also reports earnings tomorrow and children’s place which reports earnings on thursday. google shares moving to a new record high in today’s session, now up more than 170% i.p.o. to date, rising on news that it plans to spend a significant amount of cash on acquisitions and investments in 2005. following the key technical trade in the philadelphia semiconductor index, the s.o.x. moving higher than its 200-day moving average. michael mccarty saying it’s notable that the s.o.x. breaking its downtrend line and powering through the moving averages. looking at the video games, southwest securities upgrading video game makers such as activision, electronic arts, take-two and t.h.q., up to a strong buy. the electronic entertainment expo ongoing in los angeles as microsoft and sony introducing their brand new consoles for the next cycle of games. at the nasdaq, i’m robert gray.
>> crude oil rebounded from a three-month low today. the gains came on concern that increased supplies of crude will not ease shortages of oil products during the second half of the year. additional production by opec countries has lowered prices by now almost $10 from april’s record high. here are the other energy movers today with gains across the board for gas futures, heating oil futures and natural gas futures. toyota motor moving up mans to build a gas and electric hybrid version of the camry. we’ll hear from the chief operating officer of toyota u.s.a. about the carmaker’s success.
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Listen Market briefing --- Ellen (slow)
Conversation with Energy Secretary --- Peter (slow)
H.P. --- Bob (fast)
speaking with samuel bodman, the u.s. energy secretary. peter, we look forward to your conversation.%
>> thank you very much, ellen. thanks, as well, to energy secretary samuel bodman for joining us.
>> i’m happy to be here.
>> you heard your saudi arabian counterpart, ali al-naimi, say the kingdom has no plans to reduce oil production. is the administration pleased with that news or would you prefer saudi arabia boost output at this point?
>> i talked to the minister yesterday. we had a lunch meeting yesterday here in the energy department and then i joined him on the symposium this morning. during our lunch, he was, i thought, quite forthcoming with what they were capable of doing. they are capable of producing more oil today and making it available to the marketplace. their indications are that they lack absence of refining capacity to match up with the kind of oil they could produce, really means that they’re not finding sufficient customers. and they haven’t pursued it so i have to tell you i was satisfied with that discussion.
>> let me ask you about the future in terms of output from saudi arabia. minister al-naimi wanted to assure people that saudi arabia will be able to boost production over time to meet global oil demand. do you have doubts about the kingdom’s ability in the future to produce 15 million barrels a day that he talked about today?
>> that’s further afield than i think he was being explicit about. what he said to me yesterday at lunch was first that they’re prepared to undertake a $50 billion investment program, which i was very pleased with. and they are looking to stage increases in production over the next four years, 2006, 2007, 2008 and 2009, to produce a net increase of production availability of 2.5 million barrels per day increase. that will, in part, offset some decline they would naturally see in their normal production, meaning a net increase of about a million and a half barrels a day, which would take it from the available production today of about 11 up to 12.5 million barrels a day and i do believe that they can achieve that.
>> let me ask you about the u.s. situation right now. what are your thoughts about the inventory levels right now? what is your sense about where inventories are headed. i know you don’t want to talk about prices but what about the overall inventory levels, are you satisfied?
>> the inventory levels are moving ahead and seem to be poised to provide the backup we’ll need for the summer driving season so that in my view they’re adequate today. they seem to be creeping up a little bit with time and that’s what the saudis are seeing, as well. we also discussed that during our meeting yesterday.
>> one thing that did come up in the conversation today at that symposium was the talk about refining capacity constraints not only in the u.s. but elsewhere in the world. the saudis have talked about the possibility of investing in u.s. refineries. did that come up in your conversations with the minister?
>> he said that hementioned a year ago when he was here that they were prepared to help fund two new refineries in this country. he went on to say that he didn’t get a lot of takers for that. there are a lot of regulatory problems with getting refineries built today. one of the positive things he reported yesterday was that they’re prepared to fund and build three new refineries over the next two or three years in saudi arabia so that they would refine oil there and then export it not just to the united states but to other markets around the world and that should help, as well as the improvement in total oil production, which i mentioned before.
>> i want to switch gears quickly to the energy bill. the house passed its version in april. the senate energy committee starting its work today. in the last congress, the two chambers couldn’t agree on several issue, including whether to give liability protection to the makers of fuel additive mtbe. does the administration feel that waiver should be included in a final energy bill?
>> we have said that the mtbe issue is something that came up in congress. the president and the administration have not been active on the issue. the president has asked me as his representative to become active if it’s required in order to strike a reasonable balance in conference so we are not active at this point in time. we’re hopeful and encouraging the congress to find a reasonable compromise on this issue by themselves. if the administration is required to be active on the issue, i can assure you, we’ll be there.
>> how confident are you right now that the congress will meet the president’s deadline and give him a bill to sign by august?
>> i feel quite good about it. we do have the bill. it’s been passed by the house. senator dominici is showing great leadership in working the system in the senate, which, as you know, is a very different situation than exists in the house. he is working on a bipartisan approach to a bill for the senate. he seems very encouraged, when i talked to him yesterday, i got a message back from him today, we sort of passed in the night today and i didn’t really see him physically but the message was that he felt quite good about it so we were encouraged. we are just going to be vigilant. this is not something that is going to be easily done, we don’t think. but i do believe we’ll eventually get there.
>> we’re short on time, samuel bodman, secretary of energy in the united states. thank you very much for your time. we’ll send it back to ellen braitman in new york.
>> thanks so much. our other top stories, earnings report from hewlett-packard announced just over an hour ago. bob bowden is breaking down the numbers and joins us with details.
>> the big story after the bell today, no question about that. the headline number, h.p. exceeds analysts’ estimates by a penny a share on a per-share basis, h.p. reporting 37 cents a share, compared to 34 cents from the same period a year ago and a penny better than the 36 cents analysts expected. that bottom line of the blue part of the screen. the revenue increased 7% from a year ago to $21.57 billion and exceeded the $21.63 billion analyst estimate by 1%. the p.c. group called personal systems grew revenue 6% last quarter, imaging up 5%, storage and servers revenue up 6%. services represents 19% of h.p. revenues. that growth was 14% and software, the star grower, you see up 23% from the year-ago quarter but this is only 1% into h.p.’s overall sales. turning to the future. the earnings and revenues forecasts seemed contradictory. the profit forecasts reads like a disappointment with a range of only 29 to 31 cents for the current quarter, missing analysts’ estimates for the fiscal third-quarter earnings but many analysts expected h.p. to reduce its forecast as new c.e.o. mark hurd is known to prefer conservative forecasts after carly fiorina tended towards more bullish forecasts only to report earnings that fell short of estimates three times in eight quarters. on the other hand, we have the revenue forecast, h.p. forecasting current quarter revenue at $20.3 to $20.7 billion, making the midpoint up $20.5 and analysts were only expecting $20.35 billion. the midpoint of the revenue forecast clearly better than what analysts anticipated. we have a quote from mark hurd in the press release -- people not really taking much from the h.p. story, ellen, and assuming that means much for the other competition.
>> h.p. planning to cut jobs in the third quarter across multiple businesses. it said may 17 it determined to cut jobs, seeing costs of three cents per share on the job cuts so that conference call just knot underway just about nine minutes ago and we’ll monitor the headlines coming out ahead of that. you have the dow up 80 points, the s&p eight points and nasdaq 10, the indexes closing near their highs of the day. we will take a quick break and go to the new york stock exchange and the nasdaq to get more details on what fueled the rally that kicked off around 2:30 new york time.
