Option Investor
Market Updates

Gold and Oil Service rise ahead of Powell address

HAVING TROUBLE PRINTING?
Printer friendly version

The major indexes have shown some stability and slight rebound from their morning lows, but continue to exhibit a more defensive posture from the market as the Gold/Silver Index (XAU.X) 79.02 +3.91% along with the Oil Service Index (OSX.X) 85.07 +2.06% are the two sectors bucking broader-market declines ahead of tomorrow's address to the United Nations Security Council by Secretary of State Colin Powell.

Today's economic data showed a jump in defense spending, and that has the PHLX Defense Index (DFX.X) 147.45 +0.04% just edging into positive territory. As noted in this morning's 11:00 AM EST update at OptionInvestor.com, the Commerce Department reported that total factory orders in December rose 0.4%, with bulk of gains coming from a 16.6% jump in defense-related products and a 22% rise in orders for civilian airplanes.

Shares of Dow Component Boeing (NYSE:BA) $31.11 trade unchanged and buck broader negativity in the Dow, while defense contractor Lockheed Martin (NYSE:LMT) $51.04 +3% recoups all of yesterday's losses after this weekend's Space Shuttle Challenger breakup upon reentry to the earth's atmosphere. Meanwhile, shares of Alliant Tech. (NYSE:ATK) $48.80 +1.62%, which is perhaps more reliant on NASA's space program recoups some of yesterday's losses, but not nearly to the extent that Boeing and Lockheed Martin have been able to do.

Shares of Cisco Systems (NASDAQ:CSCO) $13.06 -3% are today's most actively traded stock, turning volume of 65.6 million shares. After two consecutive session closes below its longer-term 200- day SMA, investors may be defensive with the stock ahead of tonight's earnings.

Based on market capitalization, insurance giant American Intl. Group (NYSE:AIG) $50.48 -8.81% has challenged, but not achieved a 52-week low set on July 24, 2002 of $47.61, after the insurer said it was taking a $1.8 billion after-tax charge related to an increase of general insurance net loss and loss adjustment reserves after the completion of an annual loss reserve study. The company said "Virtually all of the reserve additions related to 2002 developments pertain to accident years 1997-2001. Since 2000, rates have risen in these classes of business after more than a decade of erosion, and are continuing in 2003." Legg Mason analysts said they were surprised by the size of the charge because none of it was related to asbestos-related charges. Legg Mason said its firm finds it hard, if not concerning, to believe that AIG's survival ratio (in the single digits) will pass the scrutiny of rating agencies and with more to come on the asbestos front, the stock may not be attractive on a fundamental basis until it reaches the mid-$40's.

The news from American Intl. Group (AIG) has the S&P Insurance Index (IUX.X) 233.89 -5.29% leading today's sector loser list, and dragging broader financials lower. The negative impact on financial sectors also weighs more heavily on the S&P 500 Index (SPX.X) 847 -1.53% and S&P 100 Index (OEX.X) 428 -1.68% .

Jeff Bailey

Intraday Update Archives