S&P 500 Down 1.8%

123jump.com Staff
05 Jun, 2006
New York City

Inflation fighting talk from Fed did it. Nervous investors sold stocks as Fed Chairman discussed rise of core inflation and loss of job growth momentum and economic momentum. Market averages slid in the last one hour of trading and Mexico and Brazil sold-off in sympathy. European markets declined led by 1.16% fall in Germany. Caterpillar dropped 4.8% but recently listed Mastercard rose 4.6%. Euro rose to a three-month high against the U.S. dollar.

[R]4:30PM Market averages slide in the last one hour of trading.[/R]

-Dow closed down 198.67 points, Nasdaq down 49.79 and S&P 500 down 22.89.
-Yield on 10-year bond closed at 5.01% and 30-year bond at 5.1%.
-Crude oil price rose 27 cents to $72.60 per barrel.
-Gold up $7.70 to close at $648.50 per ounce.

-European markets closed lower led by a decline of 1.16% in Germany.
- Latin American markets closed lower led by 3.2% decline in Brazil and 2.3% loss in Argentina and Mexico.
-Asian markets closed mostly lower led by 0.77% fall in Tokyo. India lost 2.3% and Taiwan lost 3.5%.

Rise in oil price in the morning hours and then Fed Chairman’s comment in the mid-morning rattled market nerves in the last hour of trading. Market gentle decline in the morning turned into a plunge of 2.24% in Nasdaq and 1.8% in Dow and S&P at close. A flood of economic data in the recent days have suggested that employment creation has slowed and core rate of inflation for three months in a row is at higher end of Fed’s comfort level. Fed’s hawkish talk and lack of interest rate guidance to financial markets since May 10th has caused global sell-off. Today was no different. Averages in Europe closed lower and markets in Latin America sold-off between 2% and 3%. Gold gained close to $8 per ounce but oil rose as much as 1% before falling off to a gain of 27 cents. Iran’s religious leader said that it will not hesitate in curtailing oil supply in the event of military strike.

Toronto based Brookfield Properties ((BPO)) and Blackstone has agreed to acquire Trizec Properties ((TRZ)) and its Canadian subsidiary for $8.9 billion. Trizec operates 40 million square feet of real estate space including properties in Los Angeles, New York , Houston and Washington D.C. Trizec properties was launched as a REIT in the U.S. as a public corporation in May 2002 as a part of Canadian company reorganization known as TrizecHahn Corp. The company is founded by Peter Munk, a prominent Canadian real estate investor.

[R]2:45PM Oil and Fed Chairman comments contribute to market slide of 1%.[/R]
Fed Chairman at a presentation commented on threat of higher inflation and price stability. The Chairman said that the core inflation in recent months has stayed at a level, if sustained, may cause broader prices in the economy to rise. The Chairman called such development ‘unwelcome’ and said that the Fed will be ‘vigilant’ in making sure that the recent rise in core inflation rate is not ‘sustained. In a presentation to banking community the Chairman said in prepared remarks that the consumer spending has decelerated and job creation in recent months has slowed. He also added that “the anticipated moderation of economic growth seems now to be underway.”

Iran’s threat to cut-off oil in the event of military strike sent oil prices soaring more than 1%.

[R]12:30PM European markets closed lower on rising oil.[/R]
European markets closed mostly in the negative, dragged down by rising crude oil prices and weakness on Wall Street. Crude oil climbed over $73 after Iran’s supreme leader threatened that the country might stop oil shipments if it is punished or attacked over its nuclear program. Surging oil weighed on many sectors but supported oil stocks. Automakers like Renault and DaimlerChrysler moved to the downside, while shares of oil majors like Royal Dutch Shell and BP advanced. The euro gained 0.2% to $1.2951 sending exporters lower. The German DAX 30 dropped 1.2%, the French CAC 40 lost 0.9%, while London FTS 100 added slightly to 5,767.

Oil prices notably advanced after Iran warned of disruptions to global energy supplies if threatened over its nuclear program. Light crude July delivery rose 52 cents to $72.85 a barrel. London Brent crude gained 66 cents to $71.69. The dollar turned mixed in European trading. The euro traded at $1.2941, up from $1.2917. The dollar bought 111.78 yen, up from 111.62. The British pound stood at $1.8769, down from $1.8828. European gold prices advanced. In London the precious metal traded at $641.30, up from $632.60 per ounce. In Zurich gold rose to $640.25 from $633.75. Silver closed at $12.21, up from $12.

[R]11:30AM Major averages traded below the flat line.[/R]
A sharp increase by the price of oil contributed to weakness in morning trading with the three major averages currently sitting below the flat line, though off their worst levels of the day. Chevron Corp. gained 7 cents to $60.82 and ConocoPhillips ((COP)) rose 17 cents to $64.68, while Dow Jones industrial Exxon Mobil Corp. ((XOM)) slipped 12 cents to $61.53. Drilling services firm Halliburton Co. ((HAL)) rose 14 cents to $76.92. The housing sector was one of the market''s worst performances, led lower by homebuilder Standard Pacific ((SPF)), down 6.4% on warning that the company might cut its full year earnings guidance due to decreased order levels for the first two months of the second quarter. The Philadelphia Housing Sector Index dropped 1.9%. Weakness was visible among health insurance stocks contributing to a 1% loss by the Morgan Stanley Healthcare Payor Index. Cigna ((CI)) stood out as one of the sector''s worst performances, with the insurer currently down 2.4 %. Wireless and semiconductor stocks moved notably to the downside, with some cyclical stocks like U.S. Steel ((X)), Caterpillar ((CAT)), and Deere ((DE)) posting significant losses.

Among other stocks, SanDisk Corp. ((SNDK)) rose 3% after Bear Stearns upgraded the flash memory maker to ‘outperform’. Harrah''s Entertainment Inc. fell 54 cents to $7586 after it lost a bid to build a new casino resort in Singapore to rival Las Vegas Sands Corp. In late morning trading, the Dow Jones industrial average lost 57.88, or 0.51%. The Standard & Poor''s 500 index was down 3.79, or 0.29%, and the Nasdaq composite index dropped 6.35, or 0.29%. Bonds were barely changed after last week''s rally, with the yield on the 10-year Treasury note rising to 5.01% from 5% late Friday.


[R]Indian Sensex loses 238 points in a volatile trade.[/R]
Sensex in India fell 237.85 points, or 2.28%, to finish at 10,451.33. The benchmark had hit a low of 10,186.33, in the final session of trading, as selling grew more intense. Its high was at 10,552.38, reached in opening trade.The turnover on BSE came to $620 million or Rs 2,788 crore, down from $770 million or Rs 3,498 crore on Friday. The trading volume is 50% lower than its peak on May 10th. ACC was among the main decliners, plunged 5.90%, to Rs 740.10 on 620,000 shares. The cement producer announced that its May shipments dropped slightly to 1.522 million ton from 1.524 million tons a year ago. Satyam computers plunged 4%, to Rs 641.90 on 2.2 million shares. HDFC Bank declined 2.60% to Rs 745, Hindalco lost 5.40% to Rs 170 and Tata Steel erased 5% to Rs 491.55. Metal stocks plunged as wave of selling pressed on worries of weak global metal prices. Hindustan Zinc dived 7.30% to Rs 534.50, Sterlite Industries was down 6.50% to Rs 398.30, and Jindal Saw was off 5.80% to Rs 335. Nalco lost 5.43% to Rs 216, Kalyani Steel declined 5.10% to Rs 315.50, and Tata Metalik slumped 8.60% to Rs 164.15.

L&T surged 3.33%, to Rs 2,264.80 on 275,000 shares while HDFC advanced 2.58%, to, Rs 1,207 on 67,563 shares. A block deal of 100,000 shares was reached in the Apollo Tyres at Rs 237 per share in the morning trading. The stock closed 3.5% up, at Rs 244 on a cumulative volume of 133,000 shares. IVRCL Infrastructure rose 2.75%, to Rs 245 on 1.4 million shares following its report of strong quarterly and full-year 2006 results. Its net profit for the fourth quarter soared 74%, to Rs 43.81 crore from Rs 25.17 crore in Q4 March 2005. Steel Authority of India advanced 1.75%, to Rs 81.50 on 3.4 million shares on reports that its raw materials division is likely to hike iron ore production.

[R] 9:45AM Surging oil dragged stocks at opening.[/R]
Surging oil prices hurt market sentiment Monday, sending stocks below the flat line at opening. Crude futures advanced on Iran''s threat to cut its oil exports if Western nations punished or attacked it over its nuclear arms program. The threat added to supply concerns arising from fears of another devastating hurricane season. A barrel of light crude jumped $1 to $73.33 on the Nymex. Selling pressure remained subdued, with gains by energy and metal stocks helping to limit the downside for the broader markets. Investors remained cautious, awaiting clues whether the Fed Reserve will continue increasing the interest rate. Wall Street awaited more clues on the economy''s health from the Institute of Supply Management''s services index later in the session. In the first hour of trading, the Dow Jones industrial average lost 61.06, or 0.54%. The Standard & Poor''s 500 index was down 5.49, or 0.43%, and the Nasdaq composite index dropped 12.23, or 0.55%. Bonds were flat after last week''s rally, with the yield on the 10-year Treasury note unchanged at 5% from late Friday. Selling pressure remained subdued, with gains by energy and metal stocks helping to limit the downside for the broader markets.

[R]Business activity in the service sector slowed down.[/R]
Monday morning, the Institute for Supply Management released its report on business activity in the service sector in the month of May, showing that the pace of growth slowed compared to the previous month. At the same time, the report showed an acceleration in the pace of price growth. The ISM said that its index of business activity in the service sector fell to 60.1 in May from 63.0 in April, with a reading above 50 indicating growth in the sector. The May reading came in roughly in line with economist estimates of 60.0. The slowdown in the pace of growth in the sector was partly due to a slower rate of new orders growth, with the new orders index falling to 59.6 in May from 64.6 in April. New orders still grew for the 38th consecutive month. On the other hand, the report also showed that employment expanded at a faster rate in May, as the employment index rose to 58.0 in May from 56.5 in April. The ISM noted that eleven industries reported increased employment. Additionally, as mentioned above, the ISM said that the prices index rose to 77.5 in May from 70.5 in April. With the increase, the index reached its highest level since September of 2005, when it came in at 78.4.


[R]9:00AM Stock futures indicated a weak start on rising oil.[/R]
U.S. stock futures declined at the start of the new week, following an increase in the price of oil on fears that Iran might jeopardize global supplies if punished by the West over its nuclear program. Crude prices rose $1.22 to $73.55, prompting worries about inflation''s impact on the economy and stock prices. Investors were also awaiting clues about the Fed Reserve’s intentions on interest rates with Chairman Ben Bernanke speaking at a panel discussion with his EU peer Jean-Claude Trichet, and BOJ Deputy Governor Toshiro Muto in Washington.

In pre-market trading, shares of Chesapeake Energy Corp. ((CHK)) rose 1.4% after the natural gas company announced the acquisition of Barnett Shale sites. Shares of chip maker SanDisk ((SNDK)) jumped 3.3% on Inet to $56.95 after Bear Stearns raised its investment rating on the company to ‘outperform’. Boeing Co. ((BA)) is expected to be actively traded on news that the Federal Aviation Administration was close to the completion of flight range rules, expected to benefit the aircraft manufacturer. Standard & Poor''s 500 futures were down 2.5 points, below fair value. Dow Jones industrial average futures were down 25 points, and Nasdaq 100 futures were down 4.5 points. .


Cutera Inc, ((CUTR)), provider of laser and other light-based aesthetic systems, revised its earnings guidance following its settlement of patent litigation with Palomar Medical Technologies Inc. For Q2, Cutera anticipates a net loss of 89 cents a share and adjusted net income of 8 cents, missing analysts’ estimates of Q2 net income of 12 cents a share.

Ansys Inc., ((ANSS)), maker of simulation software, reported it expects earnings of 7 to 15 cents a share on revenue of between $57 million and $60 million for Q2. On an adjusted non-GAAP basis, the company expects earnings of 36 to 37 cents a share on revenue of between $64 million and $65 million for the June quarter. The company announced that the updated outlook reflects its recently completed acquisition of Fluent Inc.

Camden Property Trust, ((CPT)), real estate investment trust, announced it reaffirmed forecasts for funds from operations of 85 to 90 cents a share in Q2 and $3.50 to $3.70 a share for the full year. Analysts’ estimates are for funds from operations of 89 cents a share for the June quarter.

Highwood Properties Inc, ((HIW)), real estate investment trust, reported Q4 net income jumped to $1.9 million, or 3 cents a share, from $144,000 a year earlier. Funds from operations for Q4 declined 16% to 43 cents a share. Highwood announced the funds from operations figure was hit by 14 cents a share of impairments and other charges, including from depreciation and redemption charges.

Beldon CDT Inc, ((BDC)), high-speed electronic cables manufacturer, reported it will take a Q2 impairment charge of $2 million and severance charges of $3.6 million over several quarters as it moves cable production to Mexico and closes two plants with 315 employees in the U.S. The company forecasts Q2 adjusted earnings to be above the top end of its April forecast of 37-42 cents a share. Analysts’ are for earnings of 40 cents a share.

[R]8:00AM Oil prices climbed on a threat by Iran’s supreme leader.[/R]
Crude oil prices jumped Monday, reflecting a threat by Iran''s supreme leader that his nation could put the world''s oil supply in danger if the West punished Tehran over its nuclear program. Iran''s Ayatollah Ali Khamenei addressed Western nations in a speech Sunday, saying: ‘If you make any mistake [punish or attack Iran], definitely shipment of energy from this region will be seriously jeopardized.’ Mr. Khamenei said the U.S. and its allies would be unable to secure oil shipments passing out of the Gulf through the strategic Strait of Hormuz to the Indian Ocean. On Monday OPEC President Edmund Daukoru encouraged the international community to work to solve geopolitical tensions sending oil prices up. Daukoru, who is also Nigeria''s petroleum minister, said his main concern about high oil prices was that they would divert investment away from fossil fuels and into alternative sources of energy.

Light, sweet crude for July delivery rose $1.02 to $73.35 a barrel in mid-afternoon Asian electronic trading on the Nymex in Singapore. The contract rose Friday to $72.33 after eight foreign workers on a drilling rig off the coast of Nigeria were kidnapped and released Sunday. July Brent crude futures on London''s Intercontinental Exchange Futures rose $1.03 to $72.06 a barrel.

[R]7:30AM Japanese stocks finish lower, Singapore and Korea gain.[/R]
The Nikkei 225 closed at 15,668.31, down 0.77%, reversing about half of Friday''s advance. Video-game maker Nintendo fell 1.3% and optics and electronics company Nikon dropped 2.7%. Auto stocks plunged too, as Toyota shed 1.3% and Honda Motor fell 1.20%. In Hong Kong, the Hang Seng Index advanced 0.7% to 16,016.23. The Hang Seng China Enterprises Index of Hong Kong-listed mainland shares rose 1.5%. Shares in Cathay Pacific and companies connected with unlisted Dragonair were suspended from trading Monday morning after the Hong Kong Standard business newspaper said that Cathay Pacific almost finalized a deal to take over Dragonair. In Hong Kong afternoon trading, the Bank of China gained 2.16%, while local subsidiary BOC Hong Kong advanced 1.02% after an upgrade by Merrill Lynch. Elsewhere in the region, Korea''s Kospi index fell 0.6% and Singapore''s Straits Times Index was down 0.4%. Australia''s S&P/ASX 200 advanced 0.8%, while the Shanghai Composite rose 0.9% due to miners on both exchanges profiting from a rebound in metal prices.

[R]6:30AM Europe falls, struck by oil prices and weak dollar.[/R]
Stocks with the greatest exposure to the plunging dollar suffered the worst in early trade. Luxury goods makers, which are closely connected to the US export market, dropped – led by Luxottica, the Italian designer eyewear company, losing 2.4%. LVMH, the French maker of Louis Vuitton fashion accessories, shed 1.4%, while Christian Dior dropped 0.5%. Carmakers were also struck by advancing raw materials costs. Of the German groups, DaimlerChrysler dropped 1.4%, BMW fell 1.1% and Volkswagen shed 1.2%. French Renault declined 1%, and Peugeot lost 1%.

Light, sweet crude oil for July delivery advanced $1.02 to $73.35 a barrel and July Brent crude futures on London''s ICE Futures advanced $1.03 to $72.06 per barrel. In morning trading, the dollar fell against the euro. The European currency advanced to $1.2979 - the highest it has been since May 5 last year. It then pulled back slightly to $1.2957, up from $1.2917 late Friday in New York. The British pound advanced to $1.8856 from $1.8828 on Friday, while the dollar edged up slightly to buy 111.78 Japanese yen, from 111.62 in New York.