Cracks In OPEC?

June 2, 2004
Brice Wightman

Stocks
closed higher after a mid-day pullback. Volume was light due to the
holiday-shortened week, and some traders are waiting for the important
employment number on Friday at 8:30 AM ET.
Oil prices eased after pledges from OPEC members to ramp up production. The
United Arab Emirates called for a 2.5 million barrel per day production boost and
said they will pump an
additional
400K barrels per day over quota this month. This is in addition to the 700K
barrel increase Saudi Arabia pledged.
OPEC meets tomorrow in Beirut; the Saudis want the cartel to increase production
by 11%. Analysts expect a quota increase but differ on the numbers.Â In
Riyadh, shots were fired at American military personnel. Kuwait’s oil minister
said he sees oil prices falling $6-$8 in the next 2-3 weeks. Qatar’s energy
minister said OPEC should pump as much oil as possible to lower prices and
Algeria proposed suspension of quotas altogether. US refineries are operating at
96% of capacity, and the summer driving months are ahead, so even if crude
prices fall, increased demand for gas may keep prices high.

After signs of a sluggish demand for SUVs, GM
(
GM |
Quote |
Chart |
News |
PowerRating) raised cash rebates
for most of its 2003, and 2004 model year vehicles to as much as $5000 for
previous owners. Carmakers posted strong gains for May, with GM’s sales up 6.5%.Â
In a survey by Harris
Interactive and Kelley Blue Book, nearly 50 percent of consumers said the high
price of gasoline was a factor in deciding what vehicle to buy.
Â McDonald’s
(
MCD |
Quote |
Chart |
News |
PowerRating) is lower after
Prudential downgraded the stock to Neutral. Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) was
downgraded by Banc of America Securities to Neutral on traffic concerns.

The Mortgage Bankers
Association said loan applications to buy homes rose last week. Their
purchase index rose 2.2% for the week ended May 29. A survey of U.S. CEOs
indicates 38% of chief execs plan to add jobs over the next six months. The
Business Roundtable also showed that 43% expect no change in employment at
their companies; this is down from 45% three months ago.

In a letter, Greenspan
said that because of slack in the economy and low inflation, the Fed could
likely raise rates at a gradual pace.

Tomorrow, look for Intel’s
mid-quarter update.

Dow	+60.32	10262.97
S&P 500	+3.79	1124.99
Nasdaq	-1.79	1988.98

10-year Notes were -080
at 107 280

The dollar
was -0.04 at 88.87

Gold was -2.90 at 391.30

Crude Oil was -2.48 at
39.85

Volume was 1.25 billion
on the NYSE, and 1.5 billion on the Nasdaq.

Market breadth was mixed.

NYSE	Issues
Advancing	2055	Up Vol 696
Declining	1233	Down Vol 463
Ratio	1.66	1.50
Nasdaq
Advancing	1577	Up Vol 715
Declining	1534	Down Vol 724
Ratio	1.02	1.01

Stocks in the news:

Lockheed Martin
(
LMT |
Quote |
Chart |
News |
PowerRating) was awarded
a $492 million contract for the initial production of 24 F/A-22s fighter jets.

Xilinx
(
XLNX |
Quote |
Chart |
News |
PowerRating) said it expects revenue to rise 5 to
8% and expects gross margins to be about 64% in the first-quarter. An analyst at
Prudential Equity Group lowered his price target to $44 from $46.

NY State AG Eliot Spitzer sued
GlaxoSmithKline
(
GSK |
Quote |
Chart |
News |
PowerRating), claiming fraud over its
anti-depressant drug Paxil. The suit claims the company withheld negative
information, failed to disclose results from all studies and misrepresented
data.

Fairchild Semiconductor
(
FCS |
Quote |
Chart |
News |
PowerRating) reiterated its second-quarter sales forecast but cautioned that there
is great volatility in its backlog which may affect their ability to meet the
forecast. CIBC upgraded the stock on the news.

Brice Wightman

bricew@tradingmarkets.com

Cracks In OPEC?

BUY THE FEAR, SELL THE GREED

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