9/23/05:
Hurricane Rita's Threat To The Energy & Chemical Sectors
SUSIE GHARIB: Energy prices fell sharply today, as traders
breathed a sigh of relief that hurricane Rita was tracking
further to the east and away from key oil and gas facilities
on the Texas coast. Rita was also downgraded to a category
three storm. In New York, November crude futures tumbled $2.31,
or 3.5%, to $64.19 a barrel. Wholesale gasoline fell 2.5%.
We have two reports tonight looking at how hurricane Rita
could affect the energy and chemical industries. We begin
with Erika Miller in New York.
ERIKA MILLER NIGHTLY BUSINESS REPORT CORRESPONDENT: As hurricane
Rita swirls toward land, residents of Texas coastal cities
continue to flee inland. Many businesses, including all of
the Gulf Coast refineries, have been shut down as a precaution.
But at the New York Mercantile Exchange, many traders were
betting Texas refineries would escape catastrophic damage.
IRA ECKSTEIN, OIL TRADER, AREA INTERNATIONAL TRADING: What
kind of happens a lot of times is you buy the rumor and your
sell the actual event. Traders are discounting the event.
We don't think it's going to be as bad, as devastating, as
you thought the first few days.
MILLER: There's still plenty of uncertainty about exactly
where the storm will hit. Many traders are betting Rita will
skirt the major oil refining region near Houston. Plus, the
Texas refineries are all above sea level, so there's less
potential for flood damage. That helps explain why crude oil
futures for November delivery fell by more than $2 today to
$64.19 a barrel. Many analysts predict prices will continue
to drift lower.
ROBERT MORRIS, OIL ANALYST, BANC OF AMERICA SECURITIES: They'll
probably settle down here between $55 and $65 a barrel. There's
still certainly a really big premium in the price for the
lack of any global spare capacity, for the lack of any refining
capacity, for the geopolitical premium.
MILLER: Still, not everyone is confident Rita's damage to
oil infrastructure will be minimal. A group representing Texas
oil companies warns hurricane Rita could potentially be more
damaging to refining capacity than hurricane Katrina, which
hit less than a month ago. The association says there could
be extreme flooding in key refining centers of Port Arthur
and Beaumont, both in eastern Texas. Even as the Gulf Coast
braces for Rita, experts warn there could still be more ferocious
storms still to come.
MORRIS: Hurricane season, the peak is September, but it officially
extends through November. We're not out of the woods as far
as hurricanes yet here.
MILLER: This year's hurricane season has been unusually active.
And when that happens, experts warn the winters in the northeast
tend to be brutally cold. All of which could mean higher energy
bills this winter. Erika Miller, Nightly Business Report,
New York.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: I'm
Stephanie Dhue. One-hundred-sixty chemical plants lie in Rita's
projected path. Dow chemical, DuPont and Chevron Phillips
are among the companies that have shuttered plants in preparation
for the storm.
BOB SLAUGHTER: PRESIDENT, NATIONAL PETROCHEMICAL & REFINERS
ASSOCIATION: We've shut down basically a third of u.s. refining
capacity and over half of the petrochemical manufacturing
capacity in the united states. That's going to be gone for
several days even if nothing happens, so we're going to have
some impact here.
DHUE: The industry is already trying to come back from hurricane
Katrina. That storm served as a reminder that even without
structural damage, it takes days to shut down chemical plants
and days or weeks after the storm to bring them back online.
KEVIN SWIFT, CHIEF ECONOMIST, AMERICAN CHEMISTRY COUNCIL:
What we found in the wake of Katrina, that some of the biggest
challenge is getting electricity, some of the logistical issues,
getting raw materials in, particularly natural gas.
DHUE: Natural gas not only fuels chemical plants, but it
is used to extract chemical ingredients, especially for plastics.
Natural gas prices, which were already high, soared after
Katrina. They have more than doubled in the last year. The
complications from Rita are expected to boost prices on a
whole range of products from milk containers to computers
to pharmaceuticals.
JACK ALBERTINE, CEO, ALBERTINE ENTERPRISES: Prices of those
products are going to go through the roof, and that amounts
to a tax on business and tax on consumers, which means businesses
and consumers will have less money for other things. So I
think the economy is going to take a major hit.
DHUE: Already, Dow and DuPont have warned they will increase
prices. Economists expect other chemical companies to do the
same. Stephanie Dhue, Nightly Business Report, Washington.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/23/05:
One On One With Ross DeVol, Director of Regional Economics
at the Milken Institute
SUSIE GHARIB: The New Orleans unit of power company Entergy
filed for bankruptcy today in the wake of hurricane Katrina.
That unit is the smallest of Entergy's five utility companies.
And New Orleans is facing new trouble tonight thanks to hurricane
rita. Rains from the storm washed over a freshly patched section
of the city's levee system, flooding areas that had just dried
out from Katrina. Worst hit is the city's ninth ward. Nearly
all the homes in that area were already damaged beyond repair
before today's floodwaters swept in. Our guest tonight has
been studying the regional economic impact of hurricanes Rita
and Katrina and what they could mean for u.s. economic growth.
Joining us now: Ross DeVol, Director of Regional Economics
at the Milken Institute in Los Angeles. Hi, Ross.
ROSS DEVOL, DIRECTOR OF REGIONAL ECONOMICS AT THE MILKEN
INSTITUTE: Good to hear you.
GHARIB: I understand you've been running some numbers and
that you've come up with is that hurricane Katrina could shave
off one percent from GDP growth if the fourth quarter. Given
the Houston economy is much bigger then New Orleans and lots
say that Rita does make a devastating hit on Houston, what
would be the economic impact of that?
DEVOL: Houston is above sea level so there won't be flooding
lasting a long time. If we were to take substantial amount
of refining capacity off-line for any period of time say even
two to three weeks, we could add another half a point to that
number so in other words economic growth about a point and
a half lower in the fourth quarter as a result of Rita on
top of Katrina.
GHARIB: What is the recovery cycle? What about going forward
into 2006? First quarter, second quarter, what's your projection
there?
DEVOL: Once reconstruction begins to take place both the
infrastructure funded principally by the federal government
and homes being rebuilt and repairs and moderations made in
the first quarter it might add a tenth or two but by the second
and third quarters we could see economic growth higher by
a full percentage point.
GHARIB: We've seen in Houston a lot of businesses. You heard
oil refineries and retail outlets like Wal-Mart and ups shut
down. What's the ripple effect of the disruptions of business
and the impact of that on the overall national economy?
DEVOL: It represents 2% of the Houston area. If you basically
shut down the economy for a week, you're going to take two-to-three-tenths
a point off the national growth in the third and potentially
more in the fourth. We're talking about a very large economy
once you shut down retail activity it's going to show up in
the national numbers.
GHARIB: Economists were already worried about spending in
the fall and Christmas spending way before Rita and Katrina
hit. What do you think that impact will have?
DEVOL: I think we'll see consumer spending weaker by a percent
and a half by two percent this Christmas holiday season versus
what you would have thought in the absence of hurricanes,
where basically consumers have to allocate a larger portion
of their income now towards paying higher prices for gas,
clean and natural gas and heating fuel this winter. It will
cause people to pull back on their discretionary spending
this holiday season.
GHARIB: I'd like to follow up on rebuilding: new homes, I
guess, more jobs, more infrastructure. Do you find the increased
economic activity from rebuilding will counterbalance the
economic losses from other things we just talked about?
DEVOL: It depends on how long they’re off-line and
how high prices go and how quickly they come down. Typically
after a hurricane or other natural disasters, during the rebuilding
phase, we tend to see stimulus to the economy overall that
usually more then compensates for the loss of economic activity
in the near term.
GHARIB: Okay. We'll leave it there. Thank you, Ross. We've
been speaking with Ross DeVol, director of regional economics
at the Milken Institute.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/23/05: "Market Monitor"-Elaine Garzarelli, President of Garzarelli Capital Management
PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: My guest this
week is Elaine Garzarelli, President Of Garzarelli Capital
Management. Welcome back, Elaine.
ELAINE GARZARELLI, PRESIDENT OF GARZARELLI CAPITAL MANAGEMENT:
Thank you.
KANGAS: The stock market went well but if hurricane Rita
inflicts as much damage, do you think stocks will take a beating?
GARZARELLI: I don't think so. The hurricanes together probably
will reduce third quarter GDP maybe a percent and a half or
so, but that will be made up with reconstruction in the fourth
quarter and the first quarter of '06. So everything that was
lost will be gained plus.
KANGAS: Speaking of quarters, was the latest quarter-percent
hike really necessary, and if so, why?
GARZARELLI: Well, I think what Greenspan wants to do is get
the fed funds rate to neutral. He had been a little easy for
a very long time. Fear of deflation and other things. Now
he's trying to get to neutral, and I think that could be maybe
4%, 4.25%.
KANGAS: That's what you predicted last time.
GARZARELLI: I don't see reason to change that.
KANGAS: All right. Do you feel oil prices in the range of
60 to 70 degrees a barrel will stay with us for the longer
term, or will slackening demand from fed up consumers bring
down the costs?
GARZARELLI: I think oil prices can fluctuate around here,
but my question would be is that if oil prices got up to about
$85 to $90 a barrel, that would be equivalent in terms to
the last energy crisis, and that could be a possible with
recessionary outcome. We have another 20% up.
KANGAS: Are you bullish on the corporate earnings outlook?
GARZARELLI: Yes, I am. Fourteen to fifteen percent up this
year, next year, I'm looking for a 7% gain. And if you put
an 18.5 multiple that’s where the P/E should be. Stock
market was undervalued by 20%.
KANGAS: Where are your market indicators stand now?
GARZARELLI: At 45%.
KANGAS: Last time they were 54.5%.
GARZARELLI: The Fed's been tightening. I'm sure they'll get
to 30%. That would be a major bear market signal. The worst
you could see now is a 4% or 5% correction.
KANGAS: We had Altria up. Coca-cola up 2%. Are you still
recommending those two?
GARZARELLI: Yes, I am.
KANGAS: And three others recommendations: healthcare sector
SPYDER is up, and the industrial sector SPYDER is down. Are
you still recommending those?
GARZARELLI: Yes.
KANGAS: One other was Home Depot, practically unchanged.
Are you still with it?
GARZARELLI: That will go up too.
KANGAS: Do you have new buys for us?
GARZARELLI: Yes, I have five new ones. First one would be
an exchange traded fund, the SPYDERS for energy.
KANGAS: That's had a run according to that chart we're looking
at now.
GARZARELLI: But I think everybody should have a little energy.
KANGAS: Let's move along.
GARZARELLI: Next one would be technology exchange traded
funds, and that's down 70% from its high. Three would be caterpillar.
KANGAS: We're getting into common stocks now.
GARZARELLI: Right. And that looks great because with reconstruction
going on I think that the stock will benefit.
KANGAS: Okay.
GARZARELLI: Also it's worldwide. Next one is Lorillard [Tobacco].
They make Newport cigarettes.
KANGAS: Look at that yield.
GARZARELLI: Can't go wrong with that.
KANGAS: Time for one more.
GARZARELLI: Eastman Chemical.
KANGAS: Do you own these stocks personally, any or all?
GARZARELLI: I probably own them all.
KANGAS: Fair enough. Thank you very much, Elaine, for your
input. We appreciate it. My guest: Elaine Garzarelli, president
of Garzarelli Capital.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/23/05: Last Word: The Great Gas Giveaway
SUSIE GHARIB: And finally, automaker Mitsubishi has a different
approach to incentives to sell cars: free gas for a year.
Rather than duplicate its competitors' employee discount pricing
plans, the company hopes it'll get more mileage out of giving
away gasoline with its 2005 models. Buyers get prepaid debit
cards worth up to $2,500, depending on the model, fuel efficiency,
and whether the car uses regular or premium fuel. But Paul,
with the price of gas going through the roof these days, $2,500
may not last for a year.
KANGAS: Maybe there should be a bicycle bonus thrown in there.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/23/05: The Week Ahead
SUSIE GHARIB: Here's a look at what's happening next week:
On Friday, we wrap up the third quarter on Wall Street with
Sam Stovall of Standard and Poor's. On the economic calendar:
Monday, August existing home sales come out; Tuesday, September
consumer confidence and August new home sales; Wednesday,
august durable goods; Thursday, a final look at second quarter
GDP; Friday, August personal income and spending.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/23/05:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: Stocks opened on a weak note amid uncertainties
over how serious a blow to the economy hurricane Rita would
deliver. Almost half of the Dow's early 35-point loss was
due to a drop in Alcoa after its earnings warning we told
you about last night. The Nasdaq fell seven points at the
outset. Then, after Rita was downgraded and veered away from
Houston, those oil prices fell and stocks closed narrowly
mixed. The Dow lost 2.5 points at 10,419.59 today. This week,
it rose once and fell four times for a net loss of 222.35
points. The Nasdaq gained six points to 2,116.84 today. For
the week, it rose twice and fell three times for an overall
loss of 43.51 points. The S&P 500 gained 2/3 of a point
to 1,215.29 today. In the bond market, the ten-year note fell
17/32 to 100 even, putting the yield at 4.25%.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/23/05:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10419.59 -2.46 - .0
HIGH 10455.81
LOW 10372.06
NASDAQ COMP. 2116.84 +6.06 +.3
HIGH 2121.05
LOW 2099.95
VOLUME 1,519.2
PREVIOUS 1,866.5
UP VOLUME 846.3
DOWN VOLUME 642.5
DOW TRANSPORTS 3623.06 +12.48 + .4
DOW UTILITIES 419.14 +.76 + .2
CLOSING TICK -206
S&P 500 1215.29 +.67 + .1
S&P 100 562.28 -.57 - .1
MIDCAP 400 700.77 +2.88 + .4
REUTERS/CRB 323.11 -5.18 - 1.6
NYSE COMPOSITE 7518.90 -.96 - .0
VALUE LINE 403.06 +2.06 + .5
RUSSELL 2000 655.46 +4.30 + .7
DJW 5000 12126.92 +20.03 + .2
U.S. TREASURIES
5-YEAR NOTE 3.875%
Sept. 15,2010 99 4/32 -11/32 + 4.07
10-YEAR NOTE 4.25%
Aug. 15,2015 100 -17/32 + 4.25
30-YEAR NOTE 5.375%
Feb. 15, 2031 112 25/32 -28/32 + 4.52
LEHMAN BROS.
LONG BOND INDEX 1798.31 -7.13
DOW CLOSE 10419.59 -2.46 - .0
ADVANCES 1708
DECLINES 1592
NEW HIGHS 59
NEW LOWS 93
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
PFE Pfizer 24.87 -.38 -1.5
AA Alcoa 24.42 -1.48 -5.7
TWX Time Warner 17.98 -.20 -1.1
WMT Wal-Mart Stores 43.20 +.01 +.0
GNW Genworth Finl 30.50 +1.00 +3.4
XOM Exxon Mobil 63.88 -1.10 -1.7
GCA Global Cash 14.96 +.96 +6.9
GE GE 33.40 +.10 +.3
HD Home Depot 38.53 -.22 -.6
TXN Texas Instrument 33.90 +1.17 +3.6
NASDAQ CLOSE 2116.84 + 6.06 + .3
VOLUME 1,641.7
PREVIOUS 1,771.2
ADVANCES 1856
DECLINES 1156
NASDAQ ACTIVES
GOOG Google 315.36 +3.99 +1.3
ORCL Oracle 12.45 -1.07 -7.9
MSFT Microsoft 25.27 -.07 -.3
AAPL Apple Computer 53.20 +1.30 +2.5
INTC Intel 24.38 -.18 -.7
EBAY eBay 38.78 +1.06 +2.8
CSCO Cisco Systems 18.05 -.06 -.3
SHLD Sears Holdings 121.00 -.91 -.8
QCOM Qualcomm 44.76 +.76 +1.7
AMGN Amgen 83.29 -.71 -.9
AMEX CLOSE 1723.46 + 2.96 + .2
INDEX SHARES
DIA DIAMONDS TRUST 104.09 +.04 +.0
QQQ NASDAQ 100 38.75 +.11 +.3
SPY S&P DEP.RECEIPTS 121.44 +.10 +.1
STOCKS IN THE NEWS
ALL Allstate 54.53 +2.59 +5.0
THO Thor Industries 33.41 +1.58 +5.0
CI Cigna 114.49 +1.56 +1.4
AET Aetna 81.24 +.30 +.4
PHS PacfiCare Health 79.01 +2.20 +2.9
UNH UnitedHealth Gp 55.00 +1.37 +2.6
WLP Wellpoint 74.74 +1.55 +2.1
GPN Global Payments 76.03 +8.52 +12.6
DRI Darden Restaurant 29.72 +.65 +2.2
NEW New Century Finl 35.00 -3.95 -10.1
BYD Boyd Gaming 44.15 +2.80 +6.8
LMT Lockheed Martin 61.29 +.87 +1.4
PALM Palm 28.69 -6.28 -18.0
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