I.
U.S. light crude for October delivery plunged $1.91 to close
at $42.70 a barrel, cutting back Thursday’s gains of nearly
$2 that were triggered by government data showing
stockpiles in the United States, the world’s largest energy
consumer, falling to six-month lows.
"We’re unwinding a bit from yesterday’s run-up," said
Marshall Steeves, an analyst at Refco Group in New York.
"Even though Hurricane Ivan could affect some shipping,
I don't think it’s going to be nearly as severe a problem for
oil operations at it could have been."
By next week Ivan could strike the Gulf of Mexico, home
to about a quarter of U.S. oil and gas production, although
the storms forecast track on Friday was to the east of most
energy facilities.
Crude prices are now roughly $5 below last month’s record
highs but still up around 35% from the start of the year.
Thursday’s price surge followed a report by the U.S. Energy
Information Administration showing commercial crude oil
stocks down more than 6 percent in the past two months,
to the lowest level since March.
1.
World oil prices fell Friday as dealers took profits
from a recent rally.
2. What does Steeves suggest in his remark?
(1) The market shall remain on edge.
(2) The market shall have a rally.
(3) The market shall have a price surge.
(4) The market shall go down.
3. The prices of crude oil are a little away from the
record highs last month, so they are roughly 30
percent up from the star of the year.
4. The government report was followed by the
delivery plunge down to the lowest level since
March.
II.
While stocks such as Google and Overstock.com have
been racing higher after posting strong quarterly earnings,
others such as Amazon.com and Netflix are being
punished by investors who expected better.
cash flows are real, unlike five years ago when Internet
companies preferred to point to fuzzy metrics such as
"eyeballs."
"It's not that things are perfect, and you could argue that
things are still early in the history of the Internet," says
analyst Martin Pyykkonen of Janco Partners, "but the
business models that are built on it are more real and
concrete."
Pyykkonen has a market-perform rating on Google and a
fair-value range of $125 to $140, well below the stock's
current levels. He notes that post-IPO lock-ups will expire
in coming months, giving investors, employees and
executives a chance to dump some shares--and perhaps
dent the stock price.
eBay is at a 52-week high, up more than 79 percent over
the past year. "eBay has become perceived as the safest
stock in the Internet space," says Pyykkonen. That's one
reason it comes with a P/E above 90.
1. It is important to notice that Henry Blodget
slapped on Amazon shares, bringing it down a lot
from its $400 price target.
2. Google’s quarterly earnings announcement
showed that it has lost a lot of money, while its
competitor the Mountain View doubled its
earnings and revenue.
3. At the end of 1990s, Internet companies were not
able to make sure how much they could earn.
4. People are willing to buy eBay’s shares at great
market price.
5. Which is not relevant to Pyykkonen’s attitude
toward dot.coms?
(A) They may not be as good as it is generally
considered, but they are real business now.
(B) They may not be perfect, but they are certainly
shares that people can buy.
(C) As they come with real and concrete business
models, they are great businesses to invest in.
(D) Though not perfect, they are better that they
used to be.
If that's sounds reminiscent of the late 1990s, when
Merrill Lynch analyst Henry Blodget slapped a $400 price
target on Amazon shares, it’s important to note some
significant differences.
6. According to Pyykkonen, what might happen to
Google in coming months?
(A) Investors, employees and executives might sell
some shares if other shareholders dent the
stock price.
(B) Investors, employees and executives might
dump their shares or raise the stock price.
(C) Investors, employees and executives might sell
their shares and bring the stock price down.
(D) Investors, employees and executives might
dump their shares until they find the stock
price lower.
III.
The market is still waiting for a catalyst to get the tech
sector heading substantially higher. A solid third quarter
report from tech conglomerate IBM on Monday could be
such a catalyst.
First, even analysts who are more sanguine about names
such as Google or Yahoo point out that their earnings and
Analysts expect IBM to report earnings of $1.14 a share,
up 12 percent from last year, on sales of $23.4 billion, a 9
In it’s first-ever quarterly earnings announcement, Google
late Thursday said its paid search business is paying off big
time. Third-quarter earnings and revenue at the Mountain
View, Calif., search firm both doubled.
Google's blowout results propelled its shares more than 13
percent higher in Friday morning trading. Prudential
Equity Group analyst Mark Rowen raised his 2004 and
2005 earnings estimates for Google and raised his price
target on the stock from $130 to $200. Analyst John Tinker
of ThinkEquity Partners also raised his target to $200.
percent increase from a year ago. But Wall Street will be
paying even closer attention to what the company says
about the fourth quarter.
"While oil prices are certainly high enough to grab our
attention, the situation is a far cry from what happened
when oil prices shot up in the 1970s," Janet Yellen,
president of the San Francisco Federal Reserve bank, said.
The final three months of the year tend to be big business
for techs thanks to increased consumer demand around the
holidays. There's a boost in tech spending by corporations
looking to flush out their yearly budgets, too.
Despite the U.S. inventory dip last week, global oil stocks
are slowly building due to OPEC's output surge in recent
months.
"I would look for IBM to still have decent growth in the
fourth quarter. It's usually a pretty good quarter as far as
tech spending goes," said Wendy Abramowitz, an analyst
with Argus Research.
"What is clear for now is that supply is running ahead of
demand and stocks are building," the International Energy
Agency said in its monthly Oil Market Report. "While
demand is rising, so too is global supply."
But Wall Street is worried that corporate demand for all of
tech, and not just software, is starting to cool after a very
strong 2003 and a good start to this year. That has been
reflected in IBM's stock.
Total OPEC supply to the 82 million barrels per day (bpd)
world market has risen by 1.5 million bpd over the past
four months, with top producer Saudi Arabia pushing
production to around 9.5 million bpd in August, up more
than 1 million bpd since April.
Shares of Big Blue surged more than 20 percent last year
on hopes of strong fundamentals in 2004. The stock's
momentum continued in the early part of this year, with
IBM tacking on another 8 percent through mid-February
to briefly trade above $100 for the first time since April
2002.
Still, unless earnings estimates for next year head higher, it
might be tough for the company to justify its current price.
IBM trades at about 15 times earnings estimates for 2005.
While Adelman says this is a more attractive valuation
than earlier in the year, he hesitates to call it a bargain given
that IBM's long-term estimated growth rate is just 10
percent.
1.
Analysts expect IBM to report earnings of $1.14 a
share, and sales of $23.4 billion for the last three
months of the year, since the final three months of
the year tend to be big business for techs.
2. Weaker corporate demand has been reflected in
IBM’s stock.
3.
Adelman does not consider IBM a great stock to
buy, since the company is not estimated to have a
good growth rate.
4. What would make the fourth quarter a big time
for techs?
(A) Holidays (B) Demand (C) Spending (D) Budgets
5. How much does the market expect for IBM’s
earnings estimates for 2005?
(A) abut $7 (B) about $5 (C) about $12 (D) about $10
IV.
Worries over the fate of Russian oil company Yukos
reignited Friday after reports that the resources ministry
could revoke the license of its key unit, Yugansk, after it
stopped paying tax. A source told Reuters a decision could
be made in two weeks.
Yukos, which produces 1.7 million barrels per day of oil, or
a fifth of Russian output, has had its accounts frozen over
the government’s demands for $7 billion in back taxes,
though it has managed to keep producing and exporting.
However, despite this year’s soaring oil prices, a U.S
Federal Reserve official said world economic growth had
not been hurt.
1. The market was greatly worried that Yukos might
be forced to close its business when the Russian
resources ministry was reported to have revoked
the license of Yugansk.
2. It is suggested that the overall Russian output of
crude oil can amount to 8.5 million bpd.
3. What had happened in the 1970s as suggested by
Janet Yellen’s remark?
(A) Oil prices had soared to high as to create a lack of
demand in the market.
(B) Oil prices had soared to the extent that supply far
exceeded demand.
(C) Oil prices had soared to high as to create a great
prospect for the economy.
(D)Oil prices had soared to high as to hurt the
economy.
4. What did the International Energy Agency suggest
in its monthly Oil Market Report?
(A) Lack of oil supply has not yet come as a threat to
the world economy.
(B) Demand for oil always exceeds supply of it.
(C) When supply is running ahead of demand, the
prices of oil in the stock market can always gas a
rise.
(D)Even though the U.S. oil prices dip last week,
global oil stock prices are slowly building due to
OPEC's output surge in recent months.
V.
Since hitting lows for the year in mid-August, the Dow has
jumped 5.5 percent, the S&P has gained 6 percent and the
Nasdaq has surged nearly 9 percent. But all three indices
are well below the peaks they hit in late January, when the
trading range began.
All three have bounced up and down this year, but each
subsequent peak—in April and in June—has been lower
than the previous peak. And each bottom—in March, May
and August—has been lower than the previous low.
"This has been a short-term rally in an overall longer-term
bearish environment," said Richard Suttmeier, chief market
strategist at Joseph Stevens & Co. "Conservatively, there is
less than 5 percent upside potential. If we're fortunate
enough to get that, then the average investor should pare
back their holdings."
Suttmeier is fairly bearish about the prospects for
economic growth, so his belief in a bear market is
understandable.
But even some analysts with a more positive view of the
economy expect another downtick, even if it's just
temporary.
"Overall, the market is a positive one, but I still do think
that we're trading-range bound," said Bernadette Murphy,
chief market analyst at Kimelman and Baird.
"The broader indices will go up from here, but there will
be rotation in and out of sectors," said Mark Watson,
president and co-portfolio manager at the Kenwood
Group in Chicago.
If Watson's wrong, then the market could be at home on
the range until at least the presidential election in
November, which is widely seen as a big hurdle for stocks.
1. After spending most of the summer stuck in a
trading range, stocks have been climbing steadily
higher since August.
2. If the pattern holds, then the indices are just about
at the top of the latest bounce.
3. Bernadette Murphy is bearish about the prospects
for economic growth, and he believes that the
market will get stuck for a while.
4. When did the trading range begin?
(A) January (B) February (C) March (D) April
(E) May
(F) June
(G) July
(H) August
5. Richard Suttmeier suggested that the average
investor should
(A) buy in more stocks when they see a 5 percent
gain in the market.
(B) sell the stocks they hold when they see a 5
percent gain in the market.
(C) buy more stocks before the market comes to
a 5 percent gain.
(D) sell their stocks now since they won’t see
anything more than a 5 percent gain in the
market.
6. If Watson is wrong, what might happen in the
days to come?
(A) The market could keep trading within the
range to the time of the presidential election
in November
(B) The market could keep trading within the
range unless there is a big hurdle for stocks
at least after the presidential election in
November.
(C) The market could stop trading within the
range before the presidential election in
November becomes at least a big hurdle.
(D) The market could stop trading within the
range until at least the presidential election
in November
VI.
In late trading Friday, the benchmark 10-year note rose
29/32 to 100-30/32 to yield 4.13 percent, down from 4.22
late Thursday. The 30-year bond jumped 1-12/32 in price
to 106-28/32 to yield 4.91 percent, down from Thursday's
late rate of 4.96 percent. Bond prices and yields move in
opposite directions.
The two-year note added 7/32 of a point to 99-27/32 to
yield 2.58 percent, and the five-year note rose 19/32 to
99-29/32 to yield 3.40.
Non-farm payrolls rose 96,000 in September, well below
forecasts of a 150,000 rise. August's outcome was revised
down but that was matched by an upward revision to July
jobs. The unemployment rate held at 5.4 percent as
expected.
The report will likely be a focal point of the U.S.
presidential debate Friday night at 9 p.m. ET as President
Bush will likely try to convince the public that the recovery
is still underway despite the poor monthly data while
Democratic nominee Senator John Kerry will make an
attempt to tell voters that Bush hasn't done enough to
revive the economy.
A future interest rate hike may also take a cue from the
report, as some economists expect the Federal Reserve
may take a break from its recent interest rate lifting
campaign.
"There is a question of steady increases or taking a pause. I
think this data supports a pause, but we still have two more
employment reports to consider before the December
FOMC meeting, so it's not over yet," Steve Gallagher, an
economist at SG Cowen Securities, told Reuters.
The payroll report also pressured the dollar (
)
the euro and the yen.
The euro rocketed up (
) the dollar, trading at
$1.2413 from $1.2291 on Thursday. The dollar dropped to
a one-week low (
) the yen, trading at about
¥109.48 from about ¥110.55 from ¥111.16 on Thursday.
1. President Bush will acknowledge that the U.S.
economy is not recovered yet, due to the poor
monthly data related to payrolls.
2. Treasury prices jumped Friday after a soft U.S.
jobs report revived speculation the Federal
Reserve may not raise interest rates as far and fast
as the market had feared.
3. Which is right about the U.S. jobs report?
(A) Non-farm payrolls had a rise far exceeding
the market’s expectation of it.
(B) July’s outcome was revised upward and it
was matched by August’s downward revision
of its jobs.
(C) The unemployment rate was expected to be
held at 5.4 percent.
4. What does Steve Gallagher suggest in his remark?
(A) The Fed’s recent interest rate lifting
campaign may have a pause, but a interest
rate hike will still come in the future.
(B) A pause may come to the Fed’s interest rate
hike, but things are quite certain in the
future.
(C) One soft jobs report may bring a pause to the
Fed’s recent interest rate lifting campaign,
but the Fed will not make its final decision
until the other two jobs reports are published.
(D) Everything is not certain yet, and there is no
way to figure it out.
5. Which should be put in the parentheses?
(A) with (B) to (C) compared with (D) against (E) vs.
VII.
"China's macroeconomic management measures have
played an important role in lowering credit and investment
growth, leading to brighter prospects for a soft landing,"
Zhou Xiaochuan told a meeting of top finance officials here.
China’s central bank deputy governor, Li Ruogu, made clear
U.S. efforts to pressure China to drop its policy of holding
the value of its currency, the yuan, fixed against the U.S.
dollar had proven ineffective.
"We have already said time and again we are moving toward
a more market-based, supply-and-demand based, flexible
exchange rate. How long it takes, I don't know," Li told a
group of global bankers.
"Because China has an 8,000 year history, a decade is truly a
short period," he joked. "I've been asked numerous times,
'What is the time frame?' I tell them, 'No time frame."'
Concerns over the fast-growing Chinese economy and
Beijing's yuan peg of about 8.28 to the dollar were hot topics
here this weekend as finance officials from around the globe
gathered for the annual meetings of the International
Monetary Fund and World Bank.
U.S. manufacturing and labor groups have complained
vociferously the peg gives Chinese producers a leg up in
world markets. Since President Bush took office in January
2001, the U.S. factory sector has shed 2.7 million workers,
and some voters point the finger at Beijing.
Li said that if China revalued its currency, U.S. consumers
would end up paying higher prices for products while the
massive U.S. trade deficit and the pace of U.S. job creation
would be little changed.
1. U.S. manufacturing and labor groups are
convinced that China would lose its advantage in
world markets if it removes the peg of its currency.
2. For Li Ruogu, revaluation of China’s currency
would make U.S. suffer from higher prices for
products even if it can greatly reduce U.S. trade
deficit and unemployment rate.
3. China’s attitude, as suggested by Li Ruogu, is that
there is no schedule for China to become a market
on a supply-and-demand basis.
4. What is China’s currency policy, according to the
paragraphs above?
(A) China would never change the value of its
currency.
(B) China would never change the value of its
currency against the dollar.
(C) China would change the value of its currency as
long as its booming economy can achieve a
"soft landing."
(D) China would change the value of its currency
against the dollar someday.
5. Which is among the efforts that China has made to
implement the so-called “soft landing”?
(A) lowering credit for investment
(B) lowering credit growth
(C) increasing investment growth
(D) lowering credit rate
M