Dow and Nasdaq Fall

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

Market averages came under selling pressures as traders worried of rising interest rates. On light trading volume decliners led gainers by a margin of three to one. Nokia and siemens have agreed to form a joint venture to merge there phone equiment divisions with a total asset value of $30 billion. Oil and gold fell. CarMax and Circuit City reorted better than expected earnings. Home builders association reported decline in confidence among builder community. The index fell to 11-year low.

[R]4:00PM Weak housing market and interest rate worries cooled investors.[/R]

-Dow dropped 72.44 points, Nasdaq 19.53 and S&P 500 11.40.
-Yield on 10-year bonds closed at 5.15% and 30-year at 5.18%.
-Crude oil closed 90 cents lower to $68.98 per barrel.
-Gold dropped $9.30 to close at $572.40 per ounce.

-Asian markets closed lower across the region except India and Taiwan. Japan closed 0.13% lower and Australia led the decliners with 1.3% loss. India rose 1.2%.
-European markets closed higher led by 1.2% rise in Germany. Spain, Switzerland and South Africa gained close to 1%.
-Latin American markets closed lower led by near 2.6% decline in Mexico and 1.6% in Brazil.

Earnings, merger and Fed speak dominated trading sentiment for the day. Dow Jones and broader averages S&P 500 and Nasdaq declined as investors worried that rising rates may impact economic growth. CarMax and Circuit City delivered earnings that outperformed market expectations. A joint venture between Siemens and Nokia to combine their phone equipment operations with total asset values of close to $30 billion accelerated telecom industry consolidation.

The National Association of Home Builders reported that its index of new single family home sales fell to 42 in June from 46 in May. The 11-year low index reflects poor fundamentals for the housing markets as viewed by homebuilders. The association’s chief economist said it expects new home sales in 2006 to decline 13% from a year ago. The single family home starts are expected to be down 9% from a year ago. The decline in confidence was broad based and builders were least confident in Midwest and most in the West. Most home builders stocks fell between 1% and 2%. D. R. Horton ((DHI)) closed 65 cents lower to $24.01.


[R]12:30PM European markets finished higher led by tech stocks.[/R]
European markets closed higher Monday, off earlier highs though, as U.S. markets moved lower in late morning trading. The strongest market drive was the tech sector, which advanced on news that mobile-phone giant Nokia and industrial conglomerate Siemens would merge their phone-equipment units into an equally owned joint venture company. Nokia shares rose 4.1% in Helsinki, while Siemens surged 6.7% in Frankfurt. Industrial and insurance companies also provided a boost to the market sentiment. The German DAX 30 soared 1.2%, the French CAC 40 climbed 0.7%, and London FTSE 100 rose 0.5%.

Oil prices declined, despite lingering concerns over Iran’s nuclear ambitions. Light crude July delivery fell 85 cents to $69.05 a barrel. London Brent crude lost 67 cents to $68.13. The dollar advanced versus major currencies. The euro traded at $1.2556, down from $1.2635. The dollar bought 115.48 yen, up from 115.09. The British pound stood at $1.8382, down from $1.8503. European gold prices moved lower. In London the precious metal traded at $573.40, down from $573.50 per ounce. In Zurich gold traded at $571.35, down from $572.75. Silver closed at $10.02, down from $10.05.


[R]11:30AM Stocks erased early gains due to weakness in the energy sector.[/R]
U.S. stocks reversed from early gains as declines in energy shares outweighed gains for chip maker Intel Corp. INTC and consumer goods producer Procter & Gamble Co. The market opened higher after brokerage upgrades of chip maker Intel ((INTC)), up 1.6%, and consumer goods producer Procter & Gamble ((PG)), up 1.1%. Among commodities stocks, oil service stocks posted significant weakness, with a notable loss posted by Exxon Mobil ((XOM)), taking the Dow into the red. The weakness in the sector followed a notable decrease by the price of oil to $69 a barrel. The Philadelphia Oil Service Index dropped 2.7%.

The Amex Oil Index and the Amex Natural Gas Index fell more than 2%. Gold stocks also moved notably lower, as reflected by the 1.3% loss shown by the Amex Gold Bugs Index. Base metal prices declined along with the price of gold, resulting in weakness throughout the metal sector. Alcoa ((AA)) posted a considerable decline, dragging the Dow. Weakness was visible among the biotechnology, disk drive, and utilities sectors, with Vertex ((VRTX)) and Cephalon ((CEPH)) standing among notable losers. Meanwhile, the airline sector showed some strength in late morning trading as the decrease by the price of oil eased concerns about higher fuel costs. The Amex Airline Index rose 0.8%.


[R]10:30AM Sensex continues to gain for a third straight day.[/R]
The Sensex in India settled 113.33 points higher, or 1.15%, at 9, 997.84. The turnover on BSE was $650 million or Rs 2,693 crore, lower than Friday’s turnover of $920 million or Rs 4,143 crore. The market-breadth remained strong on BSE, as 1,615 shares advanced, 726 declined and 63 were unchanged. Cipla was among the gainers, soaring 6.25% to Rs 223.50 on 0.8 million shares. Tata Motors also advanced 6.12% to Rs 770 on 0.68 million shares, after striking a low of Rs 725. ACCwas up 5.20% to Rs 770.90, BHEL climbed up 3.82% to Rs 1,955 and NTPC advanced 3.47% to Rs 113.25. Reliance Industries advanced 2.06% to Rs 939.75 on 2 million trading volume. The company will sign a deal on Monday with the Haryana State Industrial Development Corporation (HSIDC) to establish a Special Economic Zone.

Hindalco surged 3.21% to Rs 161 on 1.6 million volume while Tata Steel climbed 4.16% to Rs 481.15 on 2.3 million shares. Engineering & construction large-cap L&T declined 1.85% to Rs 2,076 on 0.3 million trading volume. It has rebounded from a low of Rs 2,000. Sugar sector advanced, hoping of firm sugar prices in the near future. Shree Renuka Sugar was up 5% to Rs 773.55, Oudh Sugar Mills notched up 5% to Rs 117.30, Mawana Sugar climbed 4.43% to Rs 73.15, Sakthi Sugars advanced 5% to Rs 153.60, Bajaj Hindusthan soared 14.62% to Rs 385. Other gainers included Hotel Leelaventure surging 5%, to Rs 254, in the wake of its board meeting on June 25, 2006, to consider stock bonus of the company’s shares along with an increase in the shareholding of foreign institutional investors. Precision Electronics jumped 5%, to Rs 101.15 after its board in a meeting held on 17 June 2006, recommended an issue of bonus three shares for every two shares held .

Construction and energy stocks also gained. Nagarjuna Construction Company advanced nearly 10%, to Rs 259 after procuring two new construction orders worth Rs 422 crore. Nava Bharat Ferro Alloys climbed 4.42%, to Rs 87.50 on the agreement from the board to establish a 64-megawatt coal-based power-plant in Orissa. The plant will be set up next to its 30 megawatt project, over the next two years.


[R]9:45AM Stocks opened in the positive.[/R]
Stocks opened higher Monday, with the major averages moving back to the upside after ending Friday's trading in negative territory. The early rise was largely contributable to gains by telecommunications as Nokia ((NOK)) helped to lead the sector higher, moving up on news that the company reached an agreement with Siemens ((SI)) to merge their telecommunications equipment businesses. Nokia jumped 71 cents to $20.68 and Siemens surged $6.02 to $85.82. The semiconductor sector also showed strength, with Intel ((INTC)) posting a notable gain following an upgrade by UBS. Some strength was visible in the retail sector, helped by Circuit City ((CC)) which rose 2% after reporting better-than-expected Q1 results. The market also benefited from strength in the brokerage sector. In the first hour of trading, the Dow added 32.42, or 0.29%.

At the same time, the gold sector declined as the price of the precious metal moved down $8.20 to $573.50 an ounce. A decrease by the price of oil contributed to weakness in the energy sector. The Philadelphia Oil Service Index fell 1.4%. Utilities stocks were also weak, with AES ((AES)), Williams ((WMB)), and TXU ((TXU)) posting notable losses. The Standard & Poor's 500 index was up 2.13, or 0.17%, and the Nasdaq composite index rose 0.98, or 0.05%. Bonds extended last week's decline, with the yield on the 10-year Treasury note rising to 5.14% from 5.13% late Friday.


[R]9:00AM Stock futures indicated a higher opening on brokerage upgrade of Intel.[/R]
Stock futures moved upward, lifted by a brokerage upgrade of Intel Corp. and the announcement of a joint venture between Nokia and Siemens. UBS raised its rating on semiconductor maker Intel Corp. ((INTC)) to ‘buy’ from ‘neutral’. The brokerage raised its price target on the stock to $23 from $21. Intel shares rose 1.2% to $18.52 on Inet in low volume. Tech shares were supported by news that Nokia and Siemens agreed to combine their telecommunications equipment businesses to create one of the biggest players in the industry. U.S.-traded shares of Siemens were up 7.9% to $86.12, while Nokia's stock was up 2.9% to $20.55 on the Inet electronic brokerage system. S&P 500 futures were up 3.9 points, above fair value. Dow Jones industrial average futures rose 30 points, and Nasdaq 100 futures gained 7.25 points.

Circuit City Stores Inc, ((CC)), home electronics retailer, reversed to a Q1 net profit of 4 cents a share, up from a year-ago loss of 7 cents a share and backed its sales and profit forecast for the year. The company said net sales advanced 17.5%, while same-store sales advanced 14.6%. Domestic segment Web-originated sales advanced 85%. Gross profit margin slumped 57 basis points. The company beat analysts’ expectation for earnings of 1 cent a share.

CarMax, ((KMX)), used car retailer, reported Q1 earnings advanced to 53 cents a share, up from 35 cents a share a year-ago. If not for non-recurring items, including costs for stock-based compensation and a benefit for its auto finance unit, earnings would have been 54 cents a share. Revenue grew 19%, while same-store sales advanced 14%. The company topped analyst expectations for earnings of 38 cents a share.

[R]8:00AM Nokia and Siemens plan to combine their mobile-network operations.[/R]
Nokia Corp. and Siemens AG announced Monday plans to combine their mobile-network operations to create a joint venture with annual revenue of about $20 billion. This move will enable them to compete with market leader Ericsson AB which is the top maker and seller of the network equipment used by wireless providers to send phone calls, downloads and data to and from cell phones and other devices. The 50-50 joint venture will be comprised of Nokia's network business group and Siemens' carrier-related operations, creating estimated synergies of 1.5 billion euros ($1.9 billion) by 2010.

The joint venture will be called Nokia Siemens Networks and will have some 60,000 employees. Simon Beresford-Wylie, chief of Nokia's network operations, will head the new company, while its chief financial officer will be Peter Schoenhofer from Siemens. It was expected to be finalized by the end of the year, pending regulatory approval, and both companies said that between 10% and 15% of staff positions, or about 9,000 jobs, would likely be cut over the next four years. Shares of Siemens surged 8.2% in Frankfurt to 67.97 euros ($85.98), while Nokia was up nearly 3% to 16.11 euros ($20.38) in Helsinki.


[R]7:30 AM Asian stocks mostly decline on China’s central bank move.[/R]
Asian shares closed broadly lower. The Nikkei 225 Index fell 0.13% to 14860.35. On Friday, the index jumped 2.82%, ending a volatile week on a positive note. Traders sold electronics stocks, metals, banking and brokerage issues to make profit after their recent gains. Banks and exporters led the decliners in Japan. Mitsubishi UFJ Financial Group lost 2.01%. Sony shed 1.62%, while videogame rival Nintendo declined 1.22%. Sumitomo Metal Mining was off 1.35% and Daiwa Securities Group dropped 2.72%. China's shares finished up for the third session in a row, powered by CAMC Engineering's impressive stock debut. The benchmark Shanghai Composite Index advanced 0.8% to 1586.29 after losing nearly 9% last week on speculation of tightening measures.

Hong Kong’s Hang Seng Index declined 0.47% to 15768.86 and in South Korean, shares settled down on profit-taking after Friday's 3.5% rally, with concerns about a possible missile test by North Korea damaging sentiment. The Kospi Index dropped 0.8% to1251.67. Banks and technology stocks led the decliners. Kookmin Bank shed 2.7% after advancing 3.7% on Friday. Its rival, Shinhan Financial Group, closed down 0.6%. Taiwan shares bucked the trend, led by food companies on hopes a rising Chinese yuan may support their earnings. The Taipei Index advanced 0.1% to 6583.04.

[R]6:30AM European bourses were buoyed by Nokia and Siemens merger deal.[/R]
European stocks were higher in early trade on Monday. The FTSE 100 in London climbed 1.1% to 5,658.1, the Xetra Dax in Frankfurt was up 1.5% to 5,458.39 and the CAC-40 in Paris gained 4,751.03. In other news from the corporate front, Vinci was the worst faller on the Eurofirst 300, losing 2.7%, after Veolia Environnement, the French utility, abandoned its plan for a merger with the French construction and concessions group. Veolia, was up 4.1%, yielded to investors’ worried over a costly bid battle, saying conditions did not exist for a friendly deal.

Oil prices declined Monday, but steadied at the $69 level amid worries over Iran's nuclear ambitions, and how that might impact oil supplies. Light, sweet crude for July delivery dropped 37 cents to $69.51 a barrel. Gold bullion opened Monday at a bid price of $570.60 a troy ounce, down from $573.50 late Friday. The euro slipped against the dollar on Monday on data posted late last week showing the U.S. trade deficit narrowed for the first three months of the year. The euro bought $1.2597, down from $1.2635 in New York on Friday. The British pound also slipped to $1.8445 from $1.8503 at the end of last week. The dollar also rose against the Japanese currency, purchasing 115.56 yen, up from 115.09.