U.S., Global Markets in Correction Phase

Arthi Gupta, Mayank Mehta and Sanjay Barot
21 May, 2010
New York City

U.S. and global markets continue to trend lower. The U.S. Senate passed the financial overhaul bill and German lawmakers approved their contribution to the euro-zone $1 trillion rescue package. Spanish Government approves

[R]10:20 AM New York – U.S. and global markets continue to trend lower. The U.S. Senate passed the financial overhaul bill and German lawmakers approved their contribution to the euro-zone $1 trillion rescue package. Spanish Government approves €15 billion austerity plan. Dell and Aeropostale first quarter profits soar.][/R]

Global and U.S. stocks declined amid fear that Europe''s debt crisis may slowdown the global economic recovery. The U.S. Senate passed the financial overhaul bill two years after the crisis. Dell first quarter profit jumps 52% and Aeropostale net rises 43%.

Germany''s lower house today approved the nation''s share of the euro rescue package. Spanish Government approves €15 billion austerity plan.

Meanwhile, the euro extended its gains against the U.S. dollar. The euro pared the gains it made in Asian deals against other major currencies.

The recent selloff has pushed major U.S. and European averages below their 200-day moving average. While the dollar fell to a 3-day low against the pound, it recovered from multi-day lows against the euro and the franc. Against the yen, the dollar pared some of its Asian session''s gain.

The lower house of German parliament, the Bundestag, voted Friday to approve the €750 billion rescue package that was proposed by the European Union and the International Monetary Fund last week.

The vote was 319 for to 73 against, with 195 abstaining, and the rescue package will now be submitted for a vote in Germany’s upper house.

Spanish government on Thursday approved a €15 billion or $19 billion austerity plan aimed at reducing the country''s large fiscal deficit and easing concerns that Spain could follow Greece into a debt crisis.

The tough austerity package, which was announced by Prime Minister Jose Luis Rodriguez Zapatero last week, was approved during a Cabinet meeting on Thursday. The cost cutting measures are expected to save the Spanish government €15 billion in 2010 and 2011.

The plan is expected to reduce Spain''s deficit from its current level of more than 11% of gross domestic product to 6% of GDP by 2011 and to 3% by 2013. The plan calls for slashing salaries of Cabinet ministers and other senior officials by 15%.

It also includes an average 5% pay cut for public sector workers from June, and a pay freeze from 2011. The latest austerity plan is over and above a €50-billion austerity package announced in January to reduce Spain''s budget deficit from the 11.2% of GDP posted last year to the euro-zone limit of 3% by 2013.

The U.S. Senate approved the banking reform bill by a 59-39 margin. The bill is intended to usher in sweeping changes in the banking system and will establish checks and balances to prevent another plunge in the financial sector.

The Senate approved bill has to be reconciled with the one that was passed by the House before it goes to the President Barrack Obama to be signed into a law.

Abbott Announces Agreement with Piramal

Abbott Laboratories announced an agreement with Piramal Healthcare Ltd. to acquire full ownership of Piramal''s Healthcare Solutions business for an up-front payment of $2.12 billion, plus $400 million annually for the next 4 years.
""With this deal, the combined Healthcare Solutions and Abbott businesses will become the clear market leader in India, with a market share of approximately 7%,"" stated Ajay Piramal, chairman, Piramal Group.

Abbott agreed to acquire the assets of Piramal''s Healthcare Solutions business for a $2.12 billion up-front payment with payments of $400 million annually for the next 4 years, beginning in 2011. The company added that the transaction would not impact Abbott''s ongoing earnings per share guidance in 2010.

Abbott intends to fund the transaction with cash on the balance sheet. This transaction is subject to shareholder approval of Piramal Healthcare Limited and other customary closing conditions, and is anticipated to close in the second half of 2010.

PC maker Dell Inc. said that its first quarter profit jumped 52% from last year, as revenue increased 21% amid strong demand from commercial customers.

Teen apparel discount retailer Aeropostale Inc. said its first-quarter profit increased 43%, driven essentially by strong sales.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2528 and increased against the Japanese yen to 89.68.

Crude oil decreased $0.73 to $70.07 a barrel for a front month contract, natural gas edged lower $0.00 cent to $4.10 per mBtu and gasoline decreased 0.770 cents to 195.68 cents.

Gold decreased $6.40 in New York trading to close at $1,182.20 per ounce, silver closed higher $0.010 to $17.72 per ounce and copper for the front month delivery increased 8.550 cents to $3.03 per pound.

Yields on 10-year U.S. bonds increased to 3.18% and on 30-year U.S. bonds traded at 4.06 %.

Stock Movers

AvalonBay Communities, Inc., the real estate investment trust decreased 6.2%.

Brocade Communications Systems, Inc. declined 9.7% after the maker of switches for data-storage networks recorded quarterly revenues of $501 million or a decrease of 1% year-over-year, resulting in diluted earnings per share of 5 cents on a GAAP basis and 13 cents on a non-GAAP basis.

CenturyTel, Inc., the phone company rose 0.9%.

ConocoPhillips, the oil company fell 0.6%.

Earnings Review

Aeropostale, Inc. ((ARO)), the teen clothing retailer said first quarter sales rose 13.6% to $463.6 million from $408.0 million a year ago. Net income in the quarter rose 43% to $45.4 million or 48 cents per diluted share compared to net income of $31.7 million or 31 cents per share a year ago.

Dell Inc. ((DELL)), the computer maker said first quarter sales rose 21% to $14.9 billion from $12.3 billion a year ago. Net income in the quarter rose 52% to $441 million or 22 cents per diluted share compared to net income of $290 million or 15 cents per share a year ago.

Intuit Inc. ((INTU)), the provider of business and financial management solutions said third quarter revenues rose 13.4% to $1.61 billion from $1.42 billion a year ago. Net income in the quarter rose 19% to $576 million or $1.78 per diluted share compared to net income of $485 million or $1.47 per share a year ago.

Salesforce.com, Inc. ((CRM)), the online business software maker said first quarter revenues rose 23.6% to $376.8 million from $304.9 million a year ago. Net income in the quarter fell 4% to $17.7 million or 13 cents per diluted share compared to net income of $18.4 million or 15 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 245.77 or 2.45% to 9,784.54 and CSI 300 index in China higher 42.77 or 1.57% to 2,768.79. ASX 200 index in Australia decreased 11.10 or 0.26% to 4,305.40. The FTSE Bursa KL Composite index in Malaysia closed lower 18.43 or 1.41% to 1,285.73. The markets in Hong Kong were closed today.

JSE Index in Indonesia decreased 71.03 or 2.64% to 2,623.22. The Sensex index in India decreased 74.07 or 0.45% to 16,445.61. The markets in South Korea and Thailand were closed today.

Europe Markets Review

In London FTSE 100 Index closed lower 101.50 or 2.00% to 4,971.63, in Paris CAC 40 Index decreased 71.68 or 2.09% to 3,360.84 and in Frankfurt DAX index traded lower 132.75 or 2.26% to 5,735.13. In Zurich trading SMI decreased 113.95 or 1.82% to 6,148.47.