Nasdaq Plunges 5%, HP Bids $10 Billion for Autonomy

Bikram Pandey
18 Aug, 2011
New York City

The U.S. indexes dropped sharply on the growing economic uncertainties, rising inflation and the euro-zone leaders

[R]4:05 PM New York – The U.S. indexes dropped sharply on the growing economic uncertainties, rising inflation and the euro-zone leaders’ inability to stem the widening debt contagion. The tech heavy Nasdaq declined more than 5%. HP plans to split its PC unit and acquire a UK based Autonomy for $10 billion.[/R]

U.S. indexes plunged more than 4% on the weak U.S. economic data and ongoing debt stress in the euro-zone. The market indexes opened sharply lower and accelerated the decline after first thirty minutes of trading to as low as 4%. By mid-afternoon the indexes traded briefly near the flat line but quickly reversed the course to decline and plunged more than 5%.

The yield on 10-year U.S. bonds dropped to as low as 1.974%, record low after the Philadelphia Federal Reserve’s business index plunged to -30.7 in August. The negative economic outlook in Europe also contributed to the decline in yield.

July consumer prices rose at a faster pace of 0.5% from June and core inflation excluding food and energy rose 0.2% and was in line with the Fed’s range. Weekly jobless claims rose 9,000 to 408,000 and consumer prices rose more than estimated in July. Existing home sales declined 3.5% in the month to annual rate of 4.67 million units compared to upwardly revised 4.84 million unit rate in June.

Hewlett Packard is scheduled for earnings release after the close today and is expected to split its personal computer business. The company is also close to acquiring the UK based software maker Autonomy.

The Autonomy purchase is reported to cost as much as $10 billion, third largest acquisition after the purchase of Electronic Data Systems and Compaq Computer is not cheap. The software company has revenues of less than $970 million and is currently valued at $6 billion based on the London Stock Exchange latest close price.

In other corporate news, Coca-Cola planned to invest $4 billion in China. Asahi Group agreed to acquire New Zealand-based Independent Liquor for N$1.525 billion. Cree agreed to buy Ruud Lighting for $525 million.

Aeroflex reported fourth quarter net loss of $21.6 million. Dollar Tree second quarter net income rose 6% to $95 million. Limited Brands quarter net income rose to $231.2 million. Sears reported second quarter net loss of $146 million. J. M. Smucker first quarter net income rose 8% to $111.5 million.

European indexes slumped on sovereign debt concerns and the weak economic outlook. Ratings agency confirmed France's AAA rating and stable outlook. Holcim plunged 7% after quarterly sales and net declined. SBM Offshore swung to loss in the first-half.

Euro-zone construction output decreased and Spanish banks' bad loan ratio fell in June. German employment climbed in the second quarter. Portuguese producer price inflation eased to 7-month low in July. Dutch consumer confidence dipped in August.

The UK indexes slumped on weak global outlook. The UK retail sales grew less than anticipated, auto production rose, and mortgage lending dipped in July. Irish factory prices fell in July.

Stocks in Japan declined more than 1% on the worries that economic slowdown in Europe and the U.S. will crimp earnings for exporters. The yen closed near record high and exports in July declined 3.3% from a year ago but trade surplus rose in the month. Asahi Group agreed to acquire New Zealand based beverage maker for $1.3 billion.

Commodities, Bonds and Currencies

Yields on 10-year bond decreased to 2.08% and on 30-year bonds declined to 3.46%.

The U.S. dollar increased to $1.4329 to a euro and fell against the Japanese yen to 76.52 yen.

Immediate futures prices of Texas crude oil decreased $6.21 to $81.27 a barrel, for natural gas decreased 0.05 cents to $3.88 per mbtu and gasoline prices decreased 9.15 cents to 277.88 cents a gallon.

In metals trading, copper prices increased 8.20 cents to $3.97 per pound, gold increased $35.30 to $1,829.30 per ounce and silver increased 37 cents to $40.75.