U.S. Indexes Rebound From Losses; Deeper Housing Recession

Bikram Pandey
21 Dec, 2011
New York City

Tech stocks led the decliners on the worries that spending may be weaker in the enterprise segment. Nasdaq index rebounded from the decline of more than 2%. Existing home sales increased 4% in November but sales between 2007 and 2010 were revised down 14%, indicating deeper than estimated downturn.

[R]4:00 PM New York – Tech stocks led the decliners on the worries that tech spending may be weaker in the enterprise segment. Nasdaq index rebounded from the decline of more than 2%. Existing home sales increased 4% in November but sales between 2007 and 2010 were revised down 14%, indicating deeper than estimated downturn in the housing market.[/R]

The U.S. indexes turned lower and tech stocks led the decliners after Oracle made cautious statement on large sales. In addition, the sales of existing homes were also revised lower 14% between the period 2007 and 2010 and raised serious questions about the reliability of the data from the industry association.

Oracle reported rising sales and earnings but sales were lower than expected by many analysts and the company also confirmed the signing up big sales contracts with large companies is taking longer and is getting difficult.

The news dented the stocks of companies providing technology to enterprises. IBM, SAP AG, EMC and NetApp declined between 4 and 8% and Oracle dropped as much as 14% in intraday trading.

National Association of Realtors, the industry association of real estate agents lowered its estimate of existing home sales between 2007 and 2010 by 14%. Sales estimates for 2010 were lowered to 4.19 million homes, down 15% from the previous estimate of 4.91 million. Home sales were revised lower 16% in 2009 and 11% in 2007.

The housing market was weaker than previously estimated and for the period between 2007 and 2010, total revised home sales are estimated at 17.7 million, down 14% from 20.6 million.

In addition, NAR said November existing home sales increased 4% to a 10-onth high of 4.42 million annual rate and October home sales were revised lower to 4.25 million rate from the previous estimate of 4.97 million.

In corporate news, Tokio Marine Holdings agreed to acquire Delphi Financial for $2.7 billion. Expedia Inc increased 3% after it completed the spinoff of travel message board operator TripAdvisor Inc. Nike jumped after it reported better than expected earnings.

European indexes edged higher after the European Central Bank allocated €489 billion to 523 euro area banks and extended maturities to three years. The Italian economy contracted 0.2% in the third quarter and Old Mutual agreed to sell the Finnish branch of Skandia Life Assurance.

The leading economic index in the euro zone was unchanged in November and import price inflation slowed in Germany and Swiss broad money supply growth eased in the month. Norwegian unemployment held at 3.3% in October.

The UK indexes climbed on positive developments in Europe. Public sector borrowing in the UK declined in November and consumer confidence fell in December. The Bank of England policy makers were unanimous in holding key rates and quantitative easing limits.

Stocks in Tokyo trading rebounded and exporters, banks and resources linked stocks led the gainers. Japanese ocean freight companies formed alliances to stabilize prices as freight rate hover near three-year low.

Japan’s Ministry of Finance said November exports fell 4.5% from a year ago to 5.2 trillion yen and imports rose 11.4% to 5.882 trillion yen and trade deficit widened to 684.7 billion yen from 273.8 billion yen in October.

According to the press release, exports to China declined 7.9%, to U.S. rose 2% and Western Europe dropped 7%.

Australian stocks soared tracking the gains in international markets. The dollar advanced. BHP agreed to sell its 51% stake in the diamond project on Baffin Island in Canada for $9 million to Peregrine Ltd. Fortescue agreed to pay $330 million to expand its railroad network to new iron ore mines.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond increased to 1.97% and 30-year bond inched up to 3%.

The U.S. dollar edged up 0.3% to $1.305 to one euro and traded higher against the Japanese yen to 78.06.

Immediate delivery futures of Texas crude oil increased $1.46 to $98.70 a barrel and futures of natural gas rose 2 cents to $3.15 per mbtu and gasoline price added 4.1 cents to 262.05 cents a gallon.

In metals trading, copper increased 1.8 cents to $3.38 per pound, gold decreased $2.10 to $1,615.50 per ounce and silver decreased $0.29 to $29.24.