Schaeffer's Midday Options Update Features General Motors, Ford Motor, DaimlerChrysler, Delphi, and VERITAS Software

Business Wire, March 16, 2005

CINCINNATI -- Today's Schaeffer's Midday Options Update Features General Motors (NYSE:GM), Ford Motor (NYSE:F), DaimlerChrysler (NYSE:DCX), Delphi (NYSE:DPH), and VERITAS Software (NASDAQ:VRTS). The Midday Options Update contains a brief commentary on the day's most notable activity and a table listing the most-active calls and puts for the day.

The Midday Options Update is published every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1 .

A daily feature available on SchaeffersResearch.com is "Options Update." Every day, we'll give a brief recap of some of the hottest news topics and focus on one stock that is the center of some heavy option activity. We hope that this will effectively offer stock information, particularly on equities that are currently popular among those in the investing community.

It's all about oil and cars today. The market is sharply lower this afternoon due to a spike in oil prices and a rather harsh earnings warning. To get the ball rolling this morning, OPEC announced plans to raise its production quota by 500,000 barrels per day starting on April 1. Furthermore, the group left open the possibility for another 500,000-barrel-a-day boost in the second quarter should prices remain high. The group is scheduled to meet again on June 7.

While black gold backtracked on this report, it was quick to rebound with the release of weekly oil stockpiles. According to the Department of Energy (DOE), crude supplies rose by 2.6 million barrels during the week of March 11. On the other hand, gasoline levels plunged by 2.9 million barrels and distillate stocks slumped by 1.9 million barrels. The American Petroleum Institute didn't paint a much better picture. The agency stated that crude levels rose 3.5 million barrels in the latest week, but gasoline inventories tumbled by 4.5 million barrels, and distillate stocks dropped by 2.2 million barrels.

The DOE went on to report that refineries ran at 90.7 percent of capacity last week, up from 89.5 percent the week before. In fact, according to Phil Flynn, senior market analyst at Alaron.com, refineries ran at 91.6 percent of capacity in February, the highest rate for that month since 1977 and up from 88.8 percent in the year-ago period.

Crude oil for April delivery tagged an intraday, all-time high of $56.35. The contract is currently up 90 cents at $55.95 a barrel.

A Multi-Car Pile-Up

General Motors (NYSE:GM) trimmed its earnings outlook this morning for the first quarter and full year due to weak sales and production volumes in North America, a tougher pricing environment, and a more car-based sales mix. The auto maker now expects to suffer a loss (excluding items) of $1.50 per share in the first quarter, well below its prior target of break-even results or better. For the full year, GM expects earnings of $1 to $2 per share, versus its previous view for a profit of $4 to $5 per share. To make matters worse, the company also forecast negative operating cash flow of about $2 billion in 2005, before the effects of the Fiat settlement and GM Europe's restructuring. Its previous target was positive cash flow of $2 billion for the year.

In an attempt to stem the damage, Ford Motor (NYSE:F) reaffirmed its first-quarter and 2005 earnings outlook today. The firm expects a first-quarter profit (excluding items) of 25 - 35 cents per share and 2005 earnings of $1.75 to $1.95 per share. Furthermore, F reaffirmed its 2005 cash-flow positive estimate of $1.2 billion to $1.5 billion. The shares are still down more than three percent in afternoon trading, with DaimlerChrysler (NYSE:DCX) shedding roughly 1.5 percent.

Car makers aren't the only one suffering under the weight of GM's warning. Auto parts makers have dropped sharply as well. Delphi (NYSE:DPH), which derives roughly about half of its revenue from GM, had relinquished more than four percent this afternoon. American Axle & Manufacturing (AXL) has stumbled roughly three percent lower. According to MarketWatch, the firm received approximately 80 of its business from GM.

Economic Front

Economic news appears to have been quickly overlooked as traders remain focused on GM and oil. However, the Commerce Department did offer up some interesting tidbits this morning. First off, the U.S. current account deficit increased by 13 percent to a record $187.9 billion in fourth quarter of 2004, rolling over the Street's expectations for the current account deficit to reach $181.7 billion.

Meanwhile, U.S. industrial production rose 0.3 percent in February, according to the Fed. Capacity utilization rose to 79.4 percent from January's revised 79.2 percent. Economists were expecting a 0.3-percent rise and capacity utilization to increase to 79.2 percent.

In the housing sector, starts in the month of February rose 0.5 percent to an annualized rate of 2.195 million -- its highest rate in 21 years. Economists had forecast a drop to 2.08 million. Building permits dipped by 2.7 percent to 2.074 million. Furthermore, January's rate was revised higher to 2.183 million from the original reading of 2.159 million.