Oil hits another 11-month high above $76 Add to Clippings (Reuters)

LONDON: Oil hit another 11-month high above $76 on Tuesday, the 10th straight day of gains that have lifted crude by $6 to within striking distance of its record. The rally coincided with more tension between the United States and Iran and a big rise in speculative investment flows.

At 1534 GMT London Brent crude, currently seen as the best indicator of the global market, was up 59 cents at $76.37 a barrel. It earlier hit $76.46, the highest since Aug 10, 2006. US crude was up 60 cents at $72.79. An Iranian newspaper, quoting a senior adviser to Supreme Leader Ayatollah Ali Khamenei, said Iran was producing centrifuges for refining uranium domestically, limiting the impact of United Nations sanctions.

The US Navy said it had sent a third aircraft carrier to the area where its Fifth Fleet is operating, including waters close to Iran.

"It's the Iran story that it is producing its centrifuges for refining uranium," said Nauman Barakat, senior vice president at Macquarie Futures USA, explaining the price spike. Some investors and analysts said a wave of speculative investment was the main driver.

Speculators boosted their long positions in the New York Mercantile Exchange crude oil market to a record in the week to July 3, data showed. Olivier Jakob, an analyst at Swiss-based Petromatrix, noted the continued rise in prices and open interest - the number of contracts that have not been closed -- pointed to more investment money flowing into oil in recent days. Citigroup analysts calculated the influx accounted for over $10 of the move higher since the start of 2007, when Brent crude oil was below $60 a barrel.

"Financial players have now firmly moved ahead as the main near-term driver of oil prices," Citigroup said. The rally in oil and other commodities at the start of the third quarter has lifted the 19-contract Reuters-Jefferies CRB Index to its highest this year. It has also had a knock-on effect on the share prices of energy companies. The FTSE Global Energy index has risen 18 percent since the start of the year and over 25 percent in the last four months. "There is a steady flow of fund money coming in," said Markus Mezger, partner at Tiberius Services AG, a Swiss-based asset manager in commodities futures.

RALLY YET TO RUN ITS COURSE?

Predictions that consistently high oil prices would act as a brake on economic growth have yet to be borne out. "The world has demonstrated it can live with $70 oil," said analyst Geoff Pyne of EnerpyLtd.com.

"There are no huge inflationary risks from oil and economic growth is picking up outside the United States." Barclays Capital technical analysts, who study charts of past price movements, forecast a period of consolidation for Brent crude above $72 ahead of a run at $78.65, the record touched in August 2006.

"Retracement levels of the 2006/07 fall have been swept aside on both sides of the Atlantic," they said. Societe Generale concluded the signals were clearly bullish. "Last year's highs are the next targets," the bank wrote. Mark Mathias of hedge fund Dawnay Day Quantum said he was looking for oil to test $80 this year. Supply worries have spurred the rally - and OPEC shows no signs of easing output restraint.

Top exporter Saudi Arabia will keep its crude supplies to European refiners steady in August, industry sources told Reuters on Tuesday. European oil stocks data showed gasoline inventories fell 2.1 percent last month as exports to the United States bolstered lower-than-usual stocks of the motor fuel there. Industry monitors Euroilstock also reported a 1.2 percent drop in Europe's crude oil stocks in June. On Wednesday, the US Energy Information Administration will publish its latest snapshot of oil supplies in the world's top consumer. Analysts expect a decline in crude stocks from a nine-year high and a rise in gasoline and distillates.

U.S. Stocks Fall on Earnings Outlooks; D.R. Horton, Sears Drop

By Eric Martin (Bloomberg)

U.S. stocks fell for the first time in six days on concern the housing slump will hurt earnings after D.R. Horton Inc. said it will report a loss and Sears Holdings Corp. forecast its profit will decline.

D.R. Horton, the second-largest U.S. homebuilder, slid after saying it sees no sign of a housing rebound. Sears, the biggest U.S. department-store company, plunged the most since 2005 after it reported earnings will trail analysts' estimates.

Consumer spending has been restrained by the housing recession as pending home sales dropped in May to the lowest level since 2001. Earnings growth at Standard & Poor's 500 Index companies may have slowed to 4.8 percent in the April-to- June period, the first quarter below 10 percent since 2002, according to Bloomberg data.

``There were a couple of relatively high-profile preannouncements that may be contributing to concern with regard to earnings,'' said Michael Malone, a trading analyst at Cowen & Co. in New York. ``If housing were to significantly worsen, it would be a problem.''

The S&P 500 lost 8.04, or 0.5 percent, to 1523.81 as of 10:14 a.m. in New York. The Dow Jones Industrial Average fell 49.67, or 0.4 percent, to 13,600.3. The Nasdaq Composite Index slid 9.37, or 0.4 percent, to 2660.65.

D.R. Horton, Sears

D.R. Horton slipped 39 cents to $19.40. The company said it will report a third-quarter loss after orders plunged 40 percent. ``We expect the housing environment to remain challenging,'' Chairman Donald Horton said in a statement.

Sears dropped $10.91, or 6.4 percent, to $160.50. The company said second-quarter profit will fall to between $160 million and $200 million as sales decline. Earnings per share will be $1.06 to $1.32, Sears said. Six analysts surveyed by Bloomberg estimated profit of $2.07 a share.

Home Depot Inc. said earnings per share will drop between 15 percent and 18 percent in the fiscal year through Feb. 3. Previously, Home Depot had forecast a 9 percent decline. The shares increased 27 cents to $40.50.

Financial shares fell 1.4 percent as a group, the steepest decline among 24 industries in the S&P 500. Standard & Poor's may cut credit ratings on $12 billion of bonds backed by subprime mortgages because losses will rise beyond its previous expectations. Ratings on collateralized debt obligations that contain the mortgage bonds are also under review, S&P said.

Bear Stearns Cos., the securities firm forced to put up $1.6 billion to bail out two hedge funds that nearly collapsed because of investments containing subprime bonds, slid $3 to $140.89. Moody's Corp., whose founder created credit ratings, dropped $1.30 to $60.20.

Automakers Upgraded

General Motors Corp. added 57 cents to $37.34, while Ford Motor Co. rose 13 cents to $9.21 after JPMorgan raised its recommendation for both stocks to ``overweight.'' GM was also added to the broker's ``Focus List'' with a price estimate of $50. JPMorgan had recommended GM as ``neutral'' previously and Ford as ``underweight.''

Analysts including Himanshu Patel wrote in a note to clients that there may be potential for ``upside'' to their earnings estimates for both companies.

Inflation Watch

Investors were also awaiting a speech by Federal Reserve Chairman Ben Bernanke for clues on the outlook for inflation and interest rates. Bernanke will speak at a National Bureau of Economic Research event in Cambridge, Massachusetts, at 1 p.m. New York time.

Alcoa Inc. retreated 8 cents to $42.28. Alcoa's sales were $8.07 billion in the second quarter, missing the $8.36 billion average analyst estimate in a Bloomberg News survey. Alcoa's profit excluding some items was 81 cents a share, beating the average estimate of analysts by 1 cent. The world's second- largest aluminum maker was the first member of the Dow average to report second-quarter results.

Oracle Corp., the world's third-biggest software company, dropped 13 cents to $20.03. Oracle's plans to introduce an improved version of its database-management software package for the first time in four years is getting a lukewarm reception, the Wall Street Journal reported, citing customers.

Gemstar-TV Guide International Inc. gained 66 cents to $6. The biggest supplier of television programming guides said it is exploring options including a sale of the company. UBS Investment Bank is acting as financial adviser to the company, and Wachtell, Lipton, Rosen & Katz is providing legal advice, Gemstar said yesterday.

Akamai Technologies Inc. added $2.55 to $50.08. The Cambridge, Massachusetts-based company, whose software speeds the delivery of Internet data, will replace Biomet Inc. in the S&P 500 index, S&P said.

Pepsi Bottling Group Inc. climbed $1.10, or 3.2 percent, to $35.53. The world's second-largest soft-drink bottler reported second-quarter net income of 70 cents per share, beating the 63 cent mean estimate of 13 analysts surveyed by Bloomberg.

Chicago Exchange Merger May Bring More Deals (New York TImes)

The Chicago Mercantile Exchange won shareholder approval to acquire CBOT Holdings, the parent of the Chicago Board of Trade, for $11.9 billion.

The vote appeared to end a bidding war with the IntercontinentalExchange and left industry experts speculating about future deals in the rapidly consolidating financial exchange industry.

The combined Chicago company, to be called the CME Group, could try to acquire exchanges in New York, London or elsewhere, analysts told The Associated Press. Judging from the Chicago exchanges’ focus on becoming global, one analyst said the London Stock Exchange was a logical candidate. Another suggested a deal with the New York Mercantile Exchange made sense.

The Chicago Tribune considers the next move for The New York Stock Exchange, which has also been rumored to be interested in the New York Merc. It noted that NYSE’s chief executive, John Thain, has made it clear he does not plan to cede the futures arena to the pit traders of Chicago.

“It’s very difficult to compete head to head in existing contracts, so I think if we’re going to develop a bigger presence in the U.S. in the areas that are currently in existence, I think it has to be by acquisition,” Mr. Thain said at an analyst briefing last month, according to the paper.

Bloomberg News cites Atlanta-based IntercontinentalExchange, the losing bidder for CBOT, as a potential takeover target for the New York exchange’s parent company, NYSE Euronext.

Home Depot sees deeper profit drop on housing woes

ATLANTA, July 10 (Reuters) - Home Depot Inc. (HD.N: Quote, Profile, Research) on Tuesday forecast a deeper profit drop for 2007, citing weakness in the U.S. housing market.

The home improvement industry leader said it expected per-share profit for the full year to fall 15 percent to 18 percent to a range of $2.30 to $2.36 per share. In May, Home Depot had said earnings per share would fall 9 percent this year.

The company earned $2.79 per share in fiscal 2006.

Home Depot's revised outlook reflects the recognition of its supply business, which provides building materials to contractors, as a discontinued operation. That unit is set to be sold later this year for $10.3 billion to private equity firms.

"Housing turnover continues to slow and prices continue to come down," said Keith Davis, an analyst with Farr Miller Washington, which owns Home Depot stock. "People aren't spending the way they had been on home improvements."

Home Depot said it expected 2007 total retail sales to decline by 1 percent to 2 percent and same-store sales to fall by mid-single digits. Previously, Home Depot had forecast full-year sales growth of 0 percent to 2 percent.

Stripping out a contribution by the HD Supply business, the company's earlier forecast had estimated a 15 percent decline in full-year profit to $2.36 per share.

Home Depot Chief Financial Officer Carol Tome said in a statement that although the chain expects the U.S. housing market to stay challenging into 2008, "we plan to continue our reinvestment plans for the long-term health of our business, understanding that it will put short-term pressure on earnings."

LOWER HOME SALES

Results at Home Depot and rival Lowe's Cos. (LOW.N: Quote, Profile, Research) have weakened over the past year as the U.S. housing market slowed. Sales of new and existing U.S. homes fell in May and the number of unsold homes on the market rose, according to government and industry reports.

"The guidance is lower than anticipated, but I think that really shows how deep this housing downturn is," said Bill Schultz, chief investment officer for McQueen, Ball & Associates.

Home Depot said it was launching a tender offer for 250 million shares for between $39 and $44 per share, or up to $11 billion. The tender offer is set to expire on Aug. 16.

In June, the retailer's board authorized a $22.5 billion increase in its stock repurchase program.

"They're doing this tender offer to support the stock because if you do get a turnaround in housing, it's a relatively inexpensive stock to own," Schultz added.

Davis, the Farr Miller analyst, said smart investors want to see Home Depot keep investing in store improvements. The retailer is boosting capital spending by 29 percent this year to maintain stores and recruit skilled trades staff.

Home Depot has "lost share to Lowe's and its due to the fact that it hasnt been investing back in the existing store base," Davis said. "They view their best opportunity right now as improving their competitiveness."

Home Depot said it plans to open about 108 new stores this fiscal year but added that operating margin would decline by 1.5 percentage points because of the negative same-store sales and investments in its operations.

Home Depot, a component of the Dow Jones industrial average (.DJI: Quote, Profile, Research), was up slightly to $40.66 in electronic trading before the bell from its Monday close of $40.23 on the New York Stock Exchange.
((Reporting by Karen Jacobs and Nick Zieminski, editing by Dave Zimmerman))

Canada Stocks May Fall on Home Depot, Higher Interest Rates

By John Kipphof (Bloomberg)

Canadian stocks may fall for the first time in four days, after Home Depot Inc. said profit will fall and the Bank of Canada raised borrowing costs, signs that a slowing housing market, higher interest rates and a soaring Canadian dollar may hurt earnings.

Exporters of raw-materials including First Quantum Minerals Ltd. may decline after U.S. based Home Depot, the world's largest home improvement retailer, said earnings will drop between 15 percent and 18 percent in the fiscal year through Feb. 3, more than a previous forecast of a 9 percent decline.

Canada's central bank lifted its benchmark rate by one quarter point to 4.5 percent and signaled further action may be needed to slow inflation. That may weigh on interest-rate sensitive shares of such financial companies as Bank of Nova Scotia. The Standard & Poor's/TSX Composite Index rose 58.82, or 0.4 percent, to a record 14,177.52 yesterday in Toronto on optimism higher commodity prices will boost earnings and trigger more takeovers.

``Home Depot gave a negative outlook. People will be watching that,'' said Pierre Bernard, vice president of Canadian equities at Montreal-based Industrial Alliance Fund Management Inc., which manages about $13.6 billion. ``The economy is still strong and I'm still positive on the market. In the short term, Home Depot will be seen as a negative. There's also a perception that stocks won't do well with higher interest rates.''

Shares of First Quantum, a miner of copper in Africa, may slide from a record, losing C$1.56 to C$106, based on bids already submitted on the Toronto Stock Exchange.

Nickel Drops

Other metals producers, which have been leading the S&P/TSX higher recently on takeover such as Alcoa Inc.'s $27.7 billion hostile bid for Alcan Inc., may decline today as prices for some metals drop. Nickel declined in London to the lowest in almost six months as rising stockpiles of the metal indicated a slowdown in demand growth. Copper fell from a two-month high and zinc also dropped.

Metals and other commodities account for more than half of Canada's exports, of which 87 percent went to the U.S. last year.

Economists expect the central bank to raise borrowing costs again in September, according to the median of 18 estimates in a separate survey taken July 3. The Canadian dollar fell from a thirty-year high against its U.S. counterpart after the bank's decision.

``Some modest further increase in the overnight rate may be required to bring inflation back to the target over the medium term,'' the Ottawa-based central bank said today in a statement. The phrase differs from the last statement in May, when the central bank didn't use the word ``modest,'' and said an increase may be needed ``in the near term.''

Bank of Nova Scotia, Canada's second-largest lender by assets, may fall 5 cents to C$51.35, based on bids already submitted on the Toronto Stock Exchange. Manulife Financial Corp., the country's biggest insurer, may slip 4 cents to C$39.18, bids indicated.

U.S. Stock-Index Futures

U.S. stock-index futures fell after Home Depot Inc. lowered its profit forecast because of the slumping real-estate market and sale of a unit.

S&P 500 futures expiring in September dropped 7.60 to 1534.90 as of 9:16 a.m. in New York. Dow Jones Industrial Average futures decreased 42 to 13,698. Nasdaq-100 Index futures slid 11.50 to 1997.

The following shares may have unusual price changes. Prices are from the last close.

Alcan Inc. (AL CN): Rival aluminum producer Alcoa Inc. yesterday reported that second-quarter sales climbed 3.5 percent to $8.07 billion. That missed the $8.36 billion average estimate of analysts surveyed by Bloomberg. Alcoa said profit excluding some items was 81 cents a share, topping analysts' estimates by 1 cent. Alcoa, the world's second-biggest aluminum producer, extended its $27.7 billion hostile takeover bid for Alcan, the No. 3 producer, by one month to Aug. 10.

Separately, BHP Billiton Ltd., the world's largest mining company, declined to confirm or deny a report in the Times that it was in talks with private equity firms for a $40 billion bid for Alcoa.

Alcan shares added 15 cents, or 0.2 percent, to C$91.05.

Bank of Montreal (BMO CN): Canada's fourth-biggest bank, agreed to buy two Wisconsin banks to expand its U.S.-based Harris Bank unit into a third U.S. Midwestern state. Bank of Montreal, based in Toronto, said in a statement it agreed to buy Ozaukee Bank in a stock transaction worth $190 million and Merchants and Manufacturers Bancorporation for $137.2 million in cash. Ozaukee has eight branches and Merchants has 45 locations. Bank of Montreal shares added 37 cents, or 0.5 percent, to C$69.74

Canadian Apartment Properties Real Estate Investment Trust (CAR-U CN): The company, which manages apartments and townhouses, will buy two ``adult lifestyle'' communities near Bowmanville and in Grand Bend, Ontario for C$75 million ($71.5 million). The shares fell 24 cents to C$19.50.

Fort Chicago Energy Partners LP (FCE-U CN): The owner of interests in the natural-gas industry boosted its forecast of distributable cash to a range of C$1.05 to $1.15 per Class A unit. The company had previously forecast a range of 98 Canadian cents to C$1.10. The shares were unchanged at C$10.70.