Huge Block Sale of Exxon Mobil

[HenryTo]

My guess is that oil stocks will continue their decline in the next few months - along with most other "hard commodity" stocks.
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Huge Block Sale
Of Exxon Mobil
Weighs on Stocks

By E.S. BROWNING
Staff Reporter of THE WALL STREET JOURNAL
October 19, 2005; Page C1

Stocks resumed their pullback as a huge sale of Exxon Mobil shares, together with fresh inflation worries, weighed on the market.

The Dow Jones Industrial Average fell 62.84 points, or 0.61%, to 10285.26, off 4.6% this year. Exxon, a Dow component, fell 4.4% yesterday.

Investors took fright and sold oil stocks following the sale of block of 24.5 million Exxon shares, an extremely large sale, at about 1 p.m. EDT. Falling oil prices have depressed oil shares in general and Exxon began the day down more than 9% since late September. The block trade was handled by Goldman Sachs, which also is an adviser to troubled commodities broker Refco; Goldman denied the sale was Refco-related.

"After that trade, the broader market sold off," said Bear Stearns stock trader Michael Driscoll. "There are some very nervous people out there," and they sold for fear that oil stocks are headed still lower, he said.

General Motors, another Dow industrials component, fell more than 3% as analysts had second thoughts about the cost-cutting program that sent the car maker higher on Monday.

Just as the market was settling down after the Exxon sale came comments from San Francisco Federal Reserve Bank President Janet Yellen that, to prevent inflation, the Fed's target rate for overnight bank lending "will need to be raised further." Inflation worries already had been troubling investors, following a government report before the opening bell that wholesale prices rose more than expected in September.

News of strong quarterly profits at International Business Machines, 3M, Merrill Lynch and Johnson & Johnson, together with further declines in oil prices, didn't quiet the jitters.

The Standard & Poor's 500-stock index fell 1.00%, or 11.96 points, to 1178.14, down 2.8% for 2005. The Nasdaq Composite Index fell 0.69%, or 14.30 points, to 2056.00, down 5.5% this year.

After regular trading, investors got more bad news. Intel's quarterly profit disappointed investors and the shares fell 3.2% in after-hours trading.

Outside the U.S., stocks declined in dollar terms. The Dow Jones World Stock Index, excluding U.S. stocks, fell 1.00%, or 1.82 points, to 180.24.

In major U.S. market action:

Stocks retreated. On the New York Stock Exchange, where 1.62 billion shares traded, 918 stocks rose and 2,337 fell.

Bond prices gained. The 10-year Treasury note rose 4/32, or $1.25 for each $1,000 invested, pushing the yield down to 4.479%. The 30-year bond was up 8/32 to yield 4.699%.

The dollar strengthened. Late in New York, the currency traded at 115.62 yen, up from 114.92, while the euro fell against the dollar to $1.1962 from $1.2026.

Write to E.S. Browning at jim.browning@wsj.com

[Goodfella]

OIL: Analysts very bearish for next week.
Contrarian trade
Reckon we have found a short term floor here. Same for Gold

[HenryTo]

I think the Fed will be okay with a rising copper price - as long as it is not reflected too much in the CPI. There is a genuine shortage in copper - and the market is transparent enough such that the Feds know that the market does have a genuine shortage.

Same with natural gas as well.

Henry

[Goodfella]

Bit off topic for XOM thread. But i wouild be interested to know if you have a veiw on the inflationary effects of hard commodities vs energy/oil.

If the oil comes down but copper keeps hitting new highs will the fed be happy with that?

[Goodfella]

I'm not one for number crunching. leave that to the brains on wall street. There are a few things i am not sure about.

Sure they will make alot of money from refining.
In the medium term they are going to have to go out and buy up more reserves.....at a high price. Refineries will be built to cope with demand. Where is the long term bussiness model for these stocks?

In 30 years time where will they be? or will they make so much money in the mean time that noone cares.
Are they putting away loads of cash? because the dividends are mediocre.

[HenryTo]

Goodfella,

Thanks for your comments. FWIW, I was actually bearish before the top - but oh well.

The main reason for using the Dow Industrials is that most of the public around the world still uses the Dow Industrials as a proxy for the U.S. stock market, not the S&P 500. Moreover, there is a tremendous amount of history for the Dow Industrials (going back to 1896), whereas the S&P 500 only started out as index in the late 1950s.

For now, we're only timing the Dow Industrials - but will most likely expand to other indices over time. Trying to get one correct is difficult enough.

Best of luck,

Henry

P.S. I think if there is any capitulation, it will happen over weeks, and not days.

[Goodfella]

Henry you have been bearish on oil stocks since pretty much the top. Well done.

Why did you short the DOW rather than the ASX, FTSE or even the SPX.

A good call but given the sectors you were bearish on these would have been more appropriate.


Do you still think the DOW will capititulate?