S&P 500 Index Declines 1.6%; Lennar Net Falls 31%

Arthi Gupta
19 Sep, 2011
New York City

U.S. and global indexes slumped after European finance ministers failed to approve the Greek bailout portion. President Obama

[R]12:05 PM New York – U.S. and global indexes slumped after European finance ministers failed to approve the Greek bailout portion. President Obama’s proposal is expected to include $3 trillion in spending cuts and $1.5 trillion in taxes on rich. Tyco planned to split itself into three separate public companies. Lennar’s quarterly net slumped 31%.[/R]

U.S. indexes opened sharply lower and quickly dropped more than 1.5% in the first hour of trading. The latest sell off was rooted in the on-going crisis in the euro-zone and the latest deficit proposal from the White House to cut the deficit include tax increase of $1.5 trillion.

President Obama unveiled proposals to cut deficit by $3 trillion over the next decade, as part of the fiscal deficit reduction plan. The president said with the $1 trillion deficit that was enacted in law could cut the deficit by $4 trillion over the next decade.

Obama speaking to the nation in a televised addressed highlighted that deficit will not be reduced by lowering spending alone and added “billionaires and millionaires” should pay taxes at rates at the same rate as the “middle class.”

His measures include $1.5 trillion of new taxes on income earners over $1 million and closing several loop holes on corporations.

The spending cuts are also targeted at entitlements programs and bloated military expenses and contractor payments.

The U.S. and global indexes slumped after the meeting of European finance ministers failed to approve the Greek bailout portion. The lack of agreement among ministers highlighted the differing priorities in the region and raised the prospect of Greek default.

The ministers could not agree on the size and the nature of the collateral for Greek debt and also were concerned on the Greece’s lack of progress in trimming its expenses and balancing the budget. Greece needs the payment to avoid defaulting on its debt by mid-October.

Greece recently lifted its deficit target to 8.3% from 7.4% and the economy is expected to shrink by 5.3% from 3.8%. The IMF original plan to support the bailout required Greece to keep its deficit at 7.4%.

Greek Prime Minister George Papandreou cancelled a planned trip to the U.S. and the Greek cabinet held an emergency meeting on Sunday for assessing the latest developments.

Greek Finance Minister Evangelos Venizelos is scheduled to hold a teleconference today with the officials from the European Union, the European Central Bank and the International Monetary Fund to secure the next aid payment for Greece.

Germany's chancellor Angela Merkel controlled party suffered another regional election defeat in Berlin. The latest defeat is the seventh in a row in the last two years in regional elections and highlights a growing anxiety among German voters on the rising cost of bailing out of peripheral nations in the euro-zone.

UBS raised its estimate of loss from the unauthorized trading last week to $2.3 billion from $2 billion.

Federal Reserve is scheduled to hold two-day policy meeting starting tomorrow and investors are looking for any new monetary policy measures to stimulate the economy.

Hyundai Recalls Vehicles

Hyundai Motor Co. Ltd., the South Korean automaker is voluntarily recalling 205,233 Sports Utility Vehicles of the Veracruz and Santa Fe models for a problem with the driver side air bags.

Tyco to Separate into 3 Companies

Tyco International Ltd.'s board unanimously approved a plan to separate the company into three independent, publicly traded companies, consisting of the ADT North America residential security business; flow control products and services provider and the commercial fire and security business.

Agnico-Eagle to Acquire Grayd

Agnico-Eagle Mines Ltd. agreed to offer to buy all of the outstanding common shares of Grayd at $2.80 a share. The transaction is worth around $275 million on a fully-diluted basis.

The offer price of $2.80 per Grayd share represents a premium of 65.7% to the volume weighted average price of Grayd shares on the TSX Venture Exchange for the 20-day period ended September 16, 2011.

Earnings Review

Host Hotels & Resorts, Inc. ((HST)), the real estate investment trust authorized a regular quarterly cash dividend of 4 cents a share on the company's common stock, an increase of 1 cent from the previous quarter.

Lennar Corporation ((LEN)), the homebuilder reported third quarter revenues dipped 0.6% to $820.2 million from $825 million a year ago. Net profit in the quarter declined 31% to $20.7 million, or 11 cents per diluted share compared to net profit of $30.0 million, or 16 cents per share last year.

MedQuist Holdings Inc. ((MEDH)), the provider of integrated clinical documentation solutions estimated 2011 adjusted net income in the range of $1.29 to $1.31 per share on net revenues of $441 million to $444 million.

In addition, the company's board authorized a stock repurchase plan of up to $25 million of the company's outstanding common stock.