Nasdaq Down 16, Dow Declines 36

123jump.com Staff
21 Aug, 2006
New York City

Rising oil prices, profit warning from Lowes and profit taking sentiment drove major averages lower at close. Lowes reported 60 cents earnings vs. 52 cents a year ago but lowered forecast for the year. Pilgrim Pride launched unsolicited offer at $1 billion for Gold Kist. Gold gained $13 and oil rose $1.20 on refusal from Iran to stop uranium enrichment process. SanDisk launched MP3 player at $249 with 8GB of storage. European markets closed lower. Russia repaid $23.8 billion ahead of schedule.

[R]4:00PM Nasdaq declined 0.8% on profit taking.[/R]

-Yield on 10-year bond closed at 4.829% and 30-year bond at 4.963%.
-Crude oil rose $1.20 to close at $73.30 per barrel.
-Gold gained $13.40 to close at $629.20 per ounce.

-Asian Markets closed lower with a decline of 3.2% in Taiwan, 1.8% in Hong Kong and 0.9% in Japan.

-European Markets closed mixed with rising oil price. Norway gained 1.9% and France dropped 0.6%.

-Latin American markets Closed loser led by 0.96% decline in Mexico and 0.84% loss in Brazil. Argentina gained 1.6%.

Market averages traded lower from the opening and closed with a loss. Nasdaq declined 16.19 points, Dow lost 36.31 points and S&P 500 declined 4.77 points. Profit taking, rise in oil price and weak European markets kept traders away from buying. In the absence of any economic news, earnings revision, product launches and oil price dominated trading.

Discount store operator Dollar General ((DG)) dropped 10% on the earnings revision and SanDisk rose 22 cents on the launch of new MP3 Player with 8 GB of memory storage. Oil gained $1.20 on the news that Iran has refused to suspend uranium enrichment. Gold, silver and copper rose. Mining stocks gained in the trading in New York, Sao Paolo and London.

Typical of Monday, two one billion dollar deals were announced. Glenborough Realty Trust agreed to be sold for $26 and Pilgrim’s Pride launched unsolicited offer at $20 per share for Gold Kist.

[R]3:45PM Russia repays debt to Paris Club donors ahead of the schedule.[/R]
Oil rich Russia has repaid $23.7 billion in debt ahead of schedule to its lenders informally called as Paris Club of creditor nations. “The $23,737,038,657.61 was transferred to Paris Club of creditors”, said the Russia’s foreign trade bank, Vneshekonombank said in a press release in Moscow.

This is the largest sum ever to be repaid to in the fifty years of the history of Paris Club.

Russia repaid the debt of $22.5 billion in debt and $1.3 billion pre-payment premium totaling $23.8 billion. Russian Finance Ministry estimates that the pre-payment saves $12 billion to Russian treasury. German government had estimated that Russia will take till 2015 to repay the debt. After the collapse of Soviet Union, Russia inherited foreign debt of $70 billion and continued to borrow in the international markets leading to financial collapse of the Russian empire. In 1999 the country had debt level of 96% of GDP which now stand after the repayment at 9%.

[R]3:00PM SanDisk cuts prices for music players and releases 8GB player.[/R]
The flash memory maker SanDisk has released $249 music player with 8GB memory. The MP3 device named Sansa e280 is positioned to compete in the marketplace where Apple’s iPod has a leading and dominating market share.

Several companies are in the MP3 device market; however, iPod has retained its dominant market position since its release. Among others, Creative Technologies, Sony, Nokia and SanDisk are competing in the market for MP3 players.

Sansa e280 is expandable to 10 GB by adding a 2GB MicroSD card. The current retail price for the iPod with 4GB of storage is $249 and 30 GB model using hard drive sells for $299. There are no models of 8GB or 10 GB from Apple.

SanDisk, one of the largest flash memory makers has price advantage and retail presence in more than 20,000 retail stores across the country. The retail shelf-space gives an advantage that other smaller makers may not enjoy. Sony and Nokia are expected to release better versions of players before Christmas. Sony Ericsson has several models that are popular in Europe but lacks similar products in the North American market.

SanDisk ((SNDK)) traded up 40 cents to $51.57 on trading volume of seven million shares with less than 90 minutes of trading.

[R]2:00PM Gold rises after five days of decline.[/R]
Gold rose $13 as trading in metals market neared close in New York. Gold, oil and copper managed to climb on news on Iran, continued violence in Middle-East and copper miners’ rejection of wage hike in Chile.

Iran is reported to have rejected the EU request to suspend uranium enrichment program. Gold futures for the October delivery gained $13.70 to $629.50 per ounce. Silver futures for the September delivery rose 32 cents to $12.35 per ounce and copper futures for the month 8.50 cents to $3.5150.

Metals stocks rallied on rising metals prices. Newmont Mining ((NEM)) gained $1.80 or 3.5% to $52.51. Phelps Dodge ((PD)) gained $1.20 or 1.3% to $91.20.

BHP Billiton ((BHP)) gained $1.08 or 2.5% to $43.90 on the news that miners in Chile have rejected the company offer of wage hikes of 4.5%.

[R]1:00PM European stocks closed lower on rising oil prices.[/R]
European stock exchanges closed lower with the 1% rise in oil price, weak bank stocks and weakness in the trading in New York. CAC-40 in Paris led the decliners in Europe with 0.6% decline followed by 0.4% decline in Germany and 0.3% decline in Switzerland. Norway surged 1.9% higher and the U.K. closed up 0.2%. South Africa gained 2.2% as gold gained $10 in New York trading.

Oil and energy stocks led advancers in the region. In Oslo trading, Norsk Hydro gained 3% and StatOil rose 3% on 1% rise in oil price. Neste Oil in Finland advanced 1.6%. Total SA in France and BP in the UK trading rose as well. British Petroleum was upgraded by Goldman Sachs.

Automakers fell with the rising oil price. Renault and BMW fell close to 1%, Daimler Chrysler fell 0.9% on the news that German court ordered the company to pay additional money to a select former shareholders of Chrysler at the time of merger in 1998.

Chemical companies stocks fell at close. BASF fell 0.6%, Akzo Nobel declined 1.6% and Bayer lost 1%. Three Chinese companies, Texas based Huntsman and German BASF opened a giant chemical plant to make plastic foam and insulation in Shanghai. The joint venture owned company with a total of $1 billion in investment is designed to supply industrial and housing market needs for insulation.

Tech stocks in the region declined. SAP, Philips, STMicroelectronics and Infineon fell near 1% at close.

[R]12:00PM Merger Monday shows two major deals worth $1 billion.[/R]
Glenborough Realty Trust Inc. ((GLB)) agreed to be acquired for $26 per unit, 8.2% premium from the Friday’s close price, by funds managed by Morgan Stanley Real Estate for approximate value of $1.89 billion. The deal is expected to be closed in the fourth quarter. The offer included either cash of $26 per unit or common unit in the new entity or preferred unit in the surviving operating partnership. The company with properties in the coastal market has been selling properties to reduce debt.

The Pilgrim’s Pride ((PPC)) made an unsolicited offer for Gold Kist ((GKIS)) share of $20 a share or valuing the company at $1 billion. Gold Kist shares rose 50% at the opening to $19.46 on the news. Pilgrim’s stock rose as much as 10% and at mid-day trading settled at 6.5% gain.

The direct offer to shareholders of Gold Kist represents a Pilgrim management frustration at the slow pace of negotiation. The two companies have been in negotiations for the last three months but have not been able to agree on terms of the deal.

[R]11:30AM Dollar General declined 8% on earnings revision.[/R]
Deep discount retailer Dollar General revised its earnings forecast lower. The company lowered the second quarter earnings between 14 and 15 cents from 18 and 22 cents. The company cited lower margins on recently introduced national brands, sales mix and lower than expected back-to-school sales. The stock has traded in the last one year between $22.70 and $12.60. The company stock has lost close to 40% its value in the last one year of trading.

Family Dollar Stores ((FDO)) said that it has appointed R. James Kelly, its CFO, to the post of President and CEO. The company will initiate a search for a new CFO.

Hastings Entertainment ((HAST)) reported second quarter earnings of 2 cents vs. 6 cents a year ago. The Company reported that the revenue rose 0.3% to $123.1 million on same-store sales growth of 0.5%. The company also affirmed its full-year guidance of 58 to 63 cents. The stock lost $1.30 or 18% on the earnings news.

[R]10:30AM Sensex reversed the course to rise at close.[/R]
Early morning trading in Mumbai reflected negative trend in Asia markets but market averages managed to climb back on sustained buying from local and foreign investors. Sensex-30 dropped 115 points but managed to close up 45.96 points to 11,511.98. The trading volume on BSE remained near the low range of Rs 2,520 crores, a decline from Rs 3,238 crores on Friday. Refinery and large cap stocks led the advancers in the second-half trading.

Recent fall in crude oil price attracted demand for refining company stocks. HPCL gained 5.3% to Rs 287, Indian Oil Corporation advanced 1.05% to Rs. 472 and Kochi Refinery jumped 4.3% to Rs. 161. Refining stocks have traded lower as world oil price has jumped to a record high. Prices at the pump station are controlled by the Central Government making it difficult for refining companies to predict earnings.

HCL technologies jumped 1.6% to Rs. 584.50 on earnings news. The company reported second quarter earnings of Rs 233 crore, 44% rise from a year ago on revenue growth of 25% to Rs 1,254 crore.

Initial Public Offering of GMR Infrastructure was priced at Rs. 210 and retail investors were allotted stocks at Rs. 199.50. The stock closed above the offer price at Rs 210.30 on heavy trading volume of 7.8 million shares.

[R]10:00AM Dow and Nasdaq are nearing 1% loss in the morning trading.[/R]
Most Asian markets closed lower after China raised interest rates to slow fast growing economy led by an investment boom. Hong Kong, Taiwan and Japan led the decliners in Asia. Taiwan lost 3.2%, Hong Kong dropped 1.8% and Japan fell 0.9%.

Banking stocks in Hong Kong led the broad decline in the market. Bank of China lost 0.8% and depressing other property and telecom stocks. Hang Lung Properties fell 5.5% on the 35% lower earnings. China Overseas Land & Development fell 5% on the rising rates. China Mobile, largest mobile operator in China, fell 3.6% on profit taking.

In Japan trading market average Nikkei 225 fell 0.85% on the worries of slowing U.S. economy, uncertainty in the oil market and rising rates in China. Broad decline in the market was led by earnings disappointment from online-mall operator Rakuten, the stock fell 6.5%. The telecom company Nippon Telegraph and Telephone dropped 2.2%. The company reported it plans to launch this fall social networking service. Daiwa Securities Group fell 3.7%.

Trading in other Asian markets was quiet but had a negative tone. Stocks in Taiwan came under heavy selling pressure as opposition parties expect to lead nationwide campaign to oust President Chen Shui-bian.

[R]9:00AM Market averages are expected to open lower in New York trading.[/R]
Market appears to be ready to open on a downward note after gaining every day of the last week. In the pre-market activity, weakness in European trading, fall in oil price and weak earnings guidance from Lowe’s is affecting trading sentiment.

Lowe’s Cos. ((LOW)) reported second quarter profit of 60 cents vs. 52 cents a year ago and missed the estimates of 61 cents. The company reported 11% rise in profit to $935 million in the quarter compared to $839 million a year ago on revenue growth of 12% to $13.39 billion from $11.93 billion. The same-store sales in the quarter were reported at 3.3%.

The company also cut its full year earnings per share guidance to $2.00 and $2.07 from $2.07 and $2.11. The company also said that same-store sales are likely to be between 2% and 3% lower than the earlier projection of between 4% and 5%.

In the European trading mining and energy stocks are dominating the news. France, Germany and Spain are trading fractionally lower at mid-day trading. However, the indexes in London are slightly ahead.

Newspaper report of possible bid to break up a mining conglomerate Anglo American for $80 billion has lifted mining stocks in the UK trading. Rio Tinto jumped 0.6% and Xstrata added 0.5%. BHP Billiton jumped 1.6% on the news that Chilean miners have rejected company’s offer of 4% pay increase.