U.S. Home Sales Fall; Walgreen Net Falls

Arthi Gupta, Mayank Mehta and Sanjay Barot
22 Jun, 2010
New York City

U.S. stocks trade lower after May home sales declined. Existing home sales in the month fell 2.2% to 5.66 million and increased 19.2% from a year ago month. Fitch downgrades its debt rating on BNP Paribas SA. Walgreen third quarter profit declines.

[R]9:55 AM New York – U.S. stocks trade lower after May home sales declined. Existing home sales in the month fell 2.2% to 5.66 million and increased 19.2% from a year ago month. Fitch downgrades its debt rating on BNP Paribas SA. Walgreen third quarter profit declines.[/R]

U.S. stocks declined as investors worried that China''s currency move may lead to increased costs for U.S. corporations and consumers. Global markets fell after enthusiasm on China''s move to let its yuan trade freely against the dollar dampened.

Seasonally adjusted annual rate existing home sales in May fell 2.2% to 5.66 million from revised 5.79 million units in April. May sales increased 19.2% from 4.75 million units in the month a year ago.

The Federal Open Market Committee two-day meeting begins today and an announcement regarding its near-term direction of monetary policy is slated for Wednesday.

UK’s Chancellor of Exchequer George Osborne unveils the toughest set of tax increases and spending cuts when he delivers his emergency budget to Parliament today.

Osborne told the BBC over the weekend that the coalition government had inherited ""a truly awful financial situation"" and that the country is ""on the road to ruin"" unless immediate action is taken.

Fitch Ratings downgraded BNP Paribas SA''s credit rating by a notch to AA citing ""structural issues"" linked to the French banking giant''s business mix. This move has revived worries that Europe''s sovereign debt mountain will slow growth and undermine the financial system. Fitch slashed BNP''s long-term rating to AA-minus from AA on deteriorating asset quality.

Ralcorp Holdings, Inc., the cereals maker announced on Monday that it agreed to acquire dry pasta producer American Italian Pasta Co. for $53 per share in cash, totaling about $1.2 billion, net of cash acquired. The deal is expected to close during Ralcorp''s fourth quarter ending September 30.

Ralcorp said the deal would be funded through a combination of cash on hand, borrowings under existing credit facilities, a bridge facility for which it has received a commitment letter or other debt or equity arrangements.

Ralcorp expects third-quarter earnings per share to be around $1.00 per share.

Following the deal closure, AIPC will become a unit of Ralcorp and will operate as an independent division. AIPC will report to Kevin Hunt, co-chief executive officer and president of Ralcorp, who oversees the company''s existing Snacks, Sauces and Spreads and Frozen Bakery Products businesses.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2284 and decreased against the Japanese yen to 90.66.

Crude oil decreased $1.02 to $76.80 a barrel for a front month contract, natural gas edged lower $0.05 cent to $4.82 per mBtu and gasoline decreased 2.050 cents to 212.23 cents.

Gold decreased $5.10 in New York trading to close at $1,235.60 per ounce, silver closed lower $0.109 to $18.74 per ounce and copper for the front month delivery increased 0.050 cents to $2.96 per pound.

Yields on 10-year U.S. bonds increased to 3.23% and on 30-year U.S. bonds traded at 4.15%.

Stock Movers

Caterpillar Inc., the maker of construction equipment rose 1.0%.

Lincare Holdings Inc. added 1.3% after the provider of oxygen services for patients announced today that its board of directors has approved quarterly cash dividend payable at an annual rate of $0.80 per share of common stock outstanding.

Lockheed Marin Corporation advanced 0.8% after the defense contractor announced today that it has successfully completed a key requirements review for the Global Positioning System IIIB satellite series under the U.S. Air Force''s next generation GPS III Space Segment program.

PetSmart, Inc. rose 0.5% after the pet-store chain announced the Board of Directors'' approval to increase its quarterly dividend by 25% from $0.10 to $0.125 per share beginning in the second quarter of fiscal 2010.

Earnings Review

Sonic Corp. ((SONC)), the fast food restaurant chain said third quarter revenues fell 19.4% to $146.0 million from $181.1 million a year ago. Net income in the quarter fell 34.5% to $11.0 million or 18 cents per diluted share compared to net income of $16.8 million or 27 cents per share a year ago.

Steelcase Inc. ((SCS)), the office furniture maker said first quarter revenues fell 0.7% to $541.8 million from $545.6 million a year ago. Net loss in the quarter was $11.1 million or 8 cents per diluted share compared to net loss of $0.0 million or break even per share a year ago.

Walgreen Co. ((WAG)), the drugstore chain operator said third quarter net sales rose 6.1% to $17.20 billion from $16.21 billion a year ago. Net income in the quarter fell 11.3% to $463 million or $0.47 per share compared to net income of $522 million or $0.53 per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 125.12 or 1.22% to 10,112.89, Hang Seng index in Hong Kong decreased 93.10 or 0.45% to 20,819.08 and CSI 300 index in China higher 3.06 or 0.11% to 2,783.72. ASX 200 index in Australia decreased 54.30 or 1.18% to 4,558.30. The FTSE Bursa KL Composite index in Malaysia closed lower 11.85 or 0.89% to 1,323.44.

The Kospi Index in South Korea decreased 8.20 or 0.47% to close at 1,731.48. SET index in Thailand closed lower 1.94 or 0.24% to 804.13 and JSE Index in Indonesia decreased 7.31 or 0.25% to 2,934.59. The Sensex index in India decreased 126.86 or 0.71% to 17,749.69.

Europe Markets Review

In London FTSE 100 Index closed lower 71.63 or 1.35% to 5,227.48, in Paris CAC 40 Index decreased 47.61 or 1.27% to 3,688.54 and in Frankfurt DAX index traded lower 55.67 or 0.88% to 6,237.30. In Zurich trading SMI decreased 61.46 or 0.94% to 6,458.11.