U.S. Indexes in Weekly Loss of 5%; HP Plunges 20%

Bikram Pandey
19 Aug, 2011
New York City

Global markets continued to slide for the third day in a row and tech stocks led the decline. The U.S. and European indexes extended losses with banks facing another round of sovereign bonds losses as the euro-zone debt contagion spreads to Italy and France. Hewlett-Packard plunged 20%.

[R]4:25 PM New York – Global markets continued to slide for the third day in a row and tech stocks led the decline. The U.S. and European indexes extended losses with banks facing another round of sovereign bonds losses as the euro-zone debt contagion spreads to Italy and France. Hewlett-Packard plunged 20% on expensive acquisition and weak outlook.[/R]

U.S. indexes declined for the third day in a row as global economic worries intensify and tech heavy Nasdaq led the losses.

Tech stocks were on the defensive after Hewlett Packard issued a cautious earnings outlook, pursued an expensive software developer acquisition and decided to exit its personal computer and mobile devices business. The flood of HP news was greeted with sell orders by investors and the moves were widely perceived as signs of desperation.

HP stock dropped 20% today and declined 49% in the year and traded at a six-year low.

In corporate news, AIG reduced U.S. Treasury stake in its subsidiary by repaying $2 billion. Bank of America plans to cut 3,500 jobs this quarter and 4,000 more before the year end. Norilsk Nickel proposed to buy back 15% of its stake held by UC Rusal for $8.75 billion.

On the earnings front, Autodesk second quarter net income increased to $71.2 million. Hewlett-Packard third quarter net income rose 9% to $1.9 billion. Intuit reported fourth quarter net loss in the quarter widened 19% to $57 million. Gap second quarter net income decreased 19% to $189 million.

European indexes extended losses tracking the Asian and U.S. markets. The indexes in France, Germany and UK dropped between 3% and 5% dragged by a steep sell-off in the banking sector.

German producer price inflation rose in July. The monthly earnings index for Hungary increased 4.7% from a year ago in June. French leading index increased in June. Swiss current account surplus improved in 2010.

The UK indexes traded lower on escalating economic worries in the U.S. and the rising tensions in the euro area. The UK budget deficit was less than estimated in July. Autonomy surged 75% on a takeover proposal of £6 billion from Hewlett-Packard.

The Nikkei index in Tokyo dropped 2.5% after markets in Asia declined sharply on the renewed economic worries in the U.S. and Europe. The yen traded near its record high as speculators seek safety. The chipmakers extended losses for the second day.

The Australian benchmark index extended losses for the second day and declined 1.7% in the week. The index is down 13.6% in the year as commodities prices weaken as the U.S. and European economies struggle. Billabong profit declined and ANZ earnings net expectations.

Commodities, Bonds and Currencies

Yields on 10-year bond decreased to 2.06% and on 30-year bonds declined to 3.39%.

The U.S. dollar increased to $1.4395 to a euro and fell against the Japanese yen to 76.50 yen.

Immediate futures prices of Texas crude oil increased 19 cents to $82.57 a barrel, for natural gas increased 0.05 cents to $3.94 per mbtu and gasoline prices increased 7.80 cents to 291.95 cents a gallon.

In metals trading, copper prices decreased 0.75 cents to $3.99 per pound, gold increased $27.30 to $1,849.30 per ounce and silver increased $2.08 to $42.80.