U.S. Markets Brave Euro Zone Worries

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
28 Apr, 2010
New York City

U.S. stocks at the opening braved fast spreading contagion worries in Europe. Positive earnings lifted stock indexes in New York however market indexes in Europe and Asia declined. Talks of Greek bond defaults are increasingly viewed with greater certainty as 2-year Greek bonds surge to 23%.

[R]9:450 AM New York – U.S. stocks at the opening braved fast spreading contagion worries in Europe. Positive earnings lifted stock indexes in New York however market indexes in Europe and Asia declined. Talks of Greek bond defaults are increasingly viewed with greater certainty as 2-year Greek bonds surge to 23% and 10-year bond yields rise to 11.1%.[/R]

U.S. stocks traded higher in early hours of trading but world markets fell after euro zone face its first currency crisis since 1997. Positive earnings from Dow Chemical, Tyco and Owens Corning lifted U.S. indexes higher.

The fallout from the downgrading of Greek debt to “junk” status continued to affect market sentiment on fears that a sovereign debt default contagion may not be contained. Stocks and commodities declined in Asia and Europe.

Yields on Greek two-year bonds soared to 23% and on 10-year bonds surged to 11.1%.

Stock indexes across Europe plunged between 2.5 and 6% and the euro declined 1.13% against the dollar. The Athens stock market fell 0.9%, Lisbon lost 4.9% and Madrid declined 3.3%.

Investors are increasingly worried that Greece may need as much as 85 billion euros in emergency loans and Portugal may need additional 40 billion euros.

However, Spain is the biggest worry of investors. Nearly 225 billion euros of Spain’s debt is due this year and the nation relies as much as half of its debt sale to foreigners, who are increasingly unwilling to finance euro zone debt and demand interest rates close to junk debt rates.

The S&P/Case-Shiller Index in 20 metropolitan areas rose 0.6% in February from a year earlier.

Existing home prices advanced 0.4% in March as sales climbed for the first time in four months and the annual pace of existing home sales was a seasonally adjusted 5.35 million in March, according to the National Association of Realtors.

SAP AG, the provider of business software said first quarter sales rose 4.6% to €2.51 billion from €2.4 billion a year ago. Net profit for the quarter rose 97% to €387 million or €0.33 per diluted share compared to net profit of €196 million or €0.16 per share a year ago.

The Dow Chemical Company, the chemical manufacturer reported first quarter sales surged 48% to $13.4 billion from $9.0 billion in the prior-year quarter. Net income in the quarter was $466 million or 41 cents per diluted share compared to net income of $24 million or 3 cents per share a year ago.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.3204 and increased against the Japanese yen to 93.77.

Crude oil decreased $0.44 to $82.00 a barrel for a front month contract, natural gas edged higher $0.01 cent to $4.22 per mBtu and gasoline decreased 0.760 cents to 231.92 cents.

Gold increased $2.50 in New York trading to close at $1,164.70 per ounce, silver closed lower $0.184 to $17.96 per ounce and copper for the front month delivery decreased 3.100 cents to $3.51 per pound.

Yields on 10-year U.S. bonds increased to 3.71% and on 30-year U.S. bonds traded at 4.58%.

Stock Movers

AMAG Pharmaceuticals, Inc. plunged 14.2% after the biopharmaceutical company reported first quarter net loss of $23.1 million or a loss of $1.15 per basic and diluted share.

Broadcom Corporation added 2.1% after the maker of chips for television set-top boxes expects higher sales from its wireless and broadband chip segments while enterprise networking chip sales should be flat with the March quarter.

Buffalo Wild Wings, Inc. plunged 19.6% after the restaurant chain reported first quarter same-store sales at company-owned locations increased 0.1%. Franchise royalties and fees increased 18.0% to $14.3 million versus $12.1 million in the first quarter of 2009.

Conexant Systems, Inc., the maker of chips for smart phones decreased 8.9%.

Robert Half International Inc. plunged 10% after the supplier of temporary workers said net income for first quarter was $8.8 million or 6 cents per share on revenues of $823.3 million.

Earnings Review

Aflac Incorporated ((AFL)), the insurer said first quarter revenues rose 5% to $5.07 billion from $4.82 billion a year ago. Net income in the quarter rose 12% to $636.0 million or $1.35 per diluted share compared to net income of $569.0 million or $1.22 per share a year ago.

SAP AG, the provider of business software said first quarter sales rose 4.6% to €2.51 billion from €2.4 billion a year ago. Net profit for the quarter rose 97% to €387 million or €0.33 per diluted share compared to net profit of €196 million or €0.16 per share a year ago.

Panera Bread Company ((PNRA)), the restaurant company said first quarter revenues rose 13.6% to $364.2 million from $320.7 million a year ago. Net income in the quarter rose 48.3% to $25.8 million or 82 cents per diluted share compared to net income of $17.4 million or 57 cents per share a year ago.

US Airways Group, Inc. ((LCC)), the airline said first quarter sales rose 7.7% to $2.65 billion from $2.46 billion a year ago. Net loss in the quarter was $45 million or 28 cents per diluted share compared to net loss of $103 million or 90 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 287.87 or 2.57% to 10,924.79, Hang Seng index in Hong Kong decreased 312.39 or 1.47% to 20,949.40 and CSI 300 index in China lower 11.06 or 0.36% to 3,097.35. ASX 200 index in Australia decreased 57.20 or 1.17% to 4,822.80. The FTSE Bursa KL Composite index in Malaysia closed lower 6.55 or 0.49% to 1,333.17.

The Kospi Index in South Korea decreased 15.64 or 0.89% to close at 1,733.91. SET index in Thailand closed lower 12.51 or 1.64% to 749.49 and JSE Index in Indonesia decreased 35.98 or 1.22% to 2,903.32. The Sensex index in India decreased 310.54 or 1.76% to 17,380.08.

Europe Markets Review

In London FTSE 100 Index closed lower 19.11 or 0.34% to 5,584.41, in Paris CAC 40 Index decreased 46.68 or 1.21% to close at 3,797.92, in Frankfurt DAX index lower 76.39 or 1.24% to close at 6,083.12. In Zurich trading SMI decreased 63.99 or 0.96% to close at 6,603.48.