U.S. Stocks Decline on Weak Home Sales

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

U.S. stocks rise on optimism that the Federal Reserve will hold a key interest rate at a record low. White House said appeals block on drilling ban. AT&T acquires rural wireless assets from Verizon Wireless. Adobe Systems Inc. said second quarter net rises 18%.

[R]9:55 AM New York – U.S. stocks rise on optimism that the Federal Reserve will hold a key interest rate at a record low. White House said appeals block on drilling ban. AT&T acquires rural wireless assets from Verizon Wireless. Adobe Systems Inc. said second quarter net rises 18%.[/R]

Markets in Asia saw mixed trends impacted by disappointing U.S. housing data and Europe treaded cautiously ahead of the FOMC announcement but quickly reversed the course after the release of new home sales data.

Seasonally adjusted new home sales in May decreased 32.7% to 300,000 but increased above 18.3% from a year ago. The median sale price of new homes sold in the month was $200,900 and average price was $263,400 with five months of inventory, according to the latest data released by the Commerce Department. The sales plunged after the expiry of the tax credit to the fewest since the record keeping began in 1963.

The White House will appeal the ruling by a federal judge in New Orleans that blocked the Obama administration''s six-month moratorium on deep-water drilling after the massive BP oil spill in the Gulf of Mexico.

Robert Gibbs, the White House press secretary, said the administration ""will immediately appeal"" the judge''s ruling to a federal appeals court in New Orleans. He said it would be prudent to suspend exploratory deep-water drilling until the completion of the investigation into the BP oil spill.

Asserting that President Obama strongly believed that continuing to drill at these depths without knowing what happened did not make sense, Gibbs added it would only jeopardize the safety of those on the rigs and of the environment in the gulf.

The order ground 33 exploratory drilling projects and suspended new permits, but does not affect platforms that were already in production.

The Obama administration had failed to justify the need for such ""a blanket, generic, indeed punitive, moratorium"" on deep-water oil and gas drilling, Judge Feldman, a 1983 appointee of President Ronald Reagan, wrote in a 22-page order, citing potential economic harm to businesses and workers on account of the moratorium.

AT&T, Inc. announced on Tuesday that it has completed its acquisition of rural wireless assets from Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone plc.

Under terms of the agreement, AT&T is purchasing the assets for about $2.35 billion in cash. The transaction extends AT&T''s wireless network coverage in mainly rural areas of Alabama, Arizona, California, Colorado, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Tennessee, Utah, Virginia and Wyoming.

Once network transition work is completed, the about 1.6 million subscribers in those service areas will enjoy the benefits of AT&T''s 3G mobile broadband network, AT&T said and added that it expects to roll out its 3G service to all of the acquired properties.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2280 and decreased against the Japanese yen to 90.38.

Crude oil decreased $0.31 to $77.54 a barrel for a front month contract, natural gas edged lower $0.01 cent to $4.75 per mBtu and gasoline decreased 1.010 cents to 212.34 cents.

Gold increased $4.40 in New York trading to close at $1,245.20 per ounce, silver closed lower $0.002 to $18.94 per ounce and copper for the front month delivery decreased 0.900 cents to $3.00 per pound.

Yields on 10-year U.S. bonds increased to 3.16% and on 30-year U.S. bonds traded at 4.10%.

Stock Movers

CarMax, Inc., the used-car dealer added 5.0% and Hatteras Financial Corp., the real estate investment trust fell 0.5%.

International Business Machines Corporation fell 1.0% and Teekay Corporation, the operator of oil tankers dropped 4.4%.

Earnings Review

Adobe Systems Incorporated ((ADBE)), the software company said second quarter revenues rose 34% to $943.0 million from $704.7 million a year ago. Net income in the quarter rose 18% to $148.6 million or 28 cents per diluted share compared to net income of $126.1 million or 24 cents per share a year ago.

H.B. Fuller Company ((FUL)), the maker of adhesives and sealants said second quarter revenues rose 16.3% to $348.0 million from $299.2 million a year ago. Net income in the quarter fell 37.5% to $11.0 million or 22 cents per diluted share compared to net income of $17.6 million or 36 cents per share a year ago.

Jabil Circuit, Inc. ((JBL)), the electronic product solutions company said third quarter revenues rose 32% to $3.46 billion from $2.62 billion a year ago. Net income in the quarter was $52.7 million or 24 cents per diluted share compared to net loss of $29.2 million or 14 cents per share a year ago.

Red Hat, Inc. ((RHT)), the software company said first quarter revenues rose 20% to $209.1 million from $174.4 million a year ago. Net income in the quarter rose 30.3% to $24.1 million or 12 cents per diluted share compared to net income of $18.5 million or 10 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 189.19 or 1.87% to 9,923.70, Hang Seng index in Hong Kong increased 37.53 or 0.18% to 20,856.61 and CSI 300 index in China lower 25.22 or 0.91% to 2,758.50. ASX 200 index in Australia decreased 72.24 or 1.58% to 4,486.10. The FTSE Bursa KL Composite index in Malaysia closed higher 6.26 or 0.47% to 1,329.70.

The Kospi Index in South Korea decreased 5.66 or 0.33% to close at 1,725.82. SET index in Thailand closed higher 2.39 or 0.30% to 806.52 and JSE Index in Indonesia decreased 9.80 or 0.33% to 2,924.79. The Sensex index in India increased 6.25 or 0.04% to 17,755.94.

Europe Markets Review

In London FTSE 100 Index closed lower 20.82 or 0.40% to 5,226.16, in Paris CAC 40 Index decreased 18.89 or 0.51% to 3,686.43 and in Frankfurt DAX index traded lower 8.65 or 0.14% to 6,260.39. In Zurich trading SMI decreased 26.95 or 0.42% to 6,436.51.