Trader Talk

Exxon's Problem And Builders' Losses...Keep Building

The first of May is a day when a lot of people (including traders) are off all over the world (It's also the title of a very fine Bee Gees song, c. 1969).

Futures dropped a bit as jobless claims were a bit stronger than expected; nonfarm payroll report is tomorrow.


1) Exxoncame in light on top and bottom line. Production decreased 5.6 percent from a year ago, even taking out the Venezuela expropriation it was down 3 percent.

The problem is downstream--refining. Exxon does not own all the oil it refines; they have to buy it on the open market like everyone else. And the dramatic increase in oil (up about 50 percent since just October) has made it nearly impossible to raise gasoline prices sufficiently; ergo, margins are squeezed. Down 3 percent.

2) How much can you lose? The builders and the airlines are neck and neck to see who can log the biggest losses. Builder Centexreported a LOSS of $7.34 from continuing operations (loss of $2.43 was expected). What happened? Charges are killing these guys: $362 million of impairment charges, and a $395 million loss related to a large land sale. Orders down 15 percent.

By the way, the House Financial Services Committee is expected to vote on the $300 b housing aid package today.

3) What happened to Las Vegas Sands   ? Their earnings were well below expectations. They blamed the shortfall on "an intensely competitive operating environment in Macao as well as a weaker economic environment here in the United States." You're not kidding: first quarter casino revenues at the Sands Macao dropped 23.6 percent. Wow. Down 9 percent.

Questions?  Comments?