Housing Starts, NYMEX IPO, Drop in Oil

123jump.com Staff
17 Nov, 2006
New York City

Market averages traded listless for the most part of the day. Lower than expected start in new home construction failed to offset the fall in oil prices. Oil prices dropped in New York and European trading. Nymex IPO priced at $59 rose 120% on the first day of trading to close at $132. CSN of Brazil is expected to bid $8 billion for Corus Group in the UK. European markets fell across the region and Asian markets continued to climb during the week.

[R]4:00PM NY and 10:00PM Germany[/R]
Slow down in new home construction worried investors that it may slow economic expansion in the U.S. Oil and metals prices dropped in NY and European trading.

Yield on 10-year bond closed at 4.588% and the 30-year bond closed at 4.670%.

Gold decreased 70 cents to close at $621.80 a troy ounce, silver declined 14.5 cents to end at $12.80 a troy ounce and copper advanced 0.25 cents to close at $3.0950 per pound.

Oil decreased 45 cents to close at $55.81 a barrel and heating oil climbed 0.75 cents to finish at 166.80 cents a gallon. Gasoline gained 0.99 cents to end at 153.95 cents a gallon. Natural gas advanced 42.1 cents to close at $8.176 per mBtu.

Asian markets closed mostly higher led by Philippines with an advance of 0.85%, Singapore with an increase of 0.53% and Australia with a gain of 0.51%. The decliners included India with a decrease of 0.57% and Japan with a loss of 0.45%. Japan fell as concerns over the pace of future interest-rate increases weighed on bank shares.

European markets finished lower led by Norway with a loss of 2.92%, France with a decline of 1.20% and the U.K. with a decrease of 1.01%. There were no advancers. British and French stocks ended lower as oil producers slumped on the decline in crude-oil prices and as American homebuilding sector heightened fears that slowing consumption could hurt exporters to the U.S.

Latin America markets ended lower led by Mexico with a decline of 0.50%, Brazil with a loss of 0.32% and Argentina with a decrease of 0.24%. Canada rose with a gain of 0.17%. The markets closed lower amid falling prices for oil and other commodities.

[R]1:00PM NY – 7:00PM Germany - European stocks closed lower across the region on price weakness in metals, oil and auto stocks.[/R]

A sharp decline in oil prices in European trading lowered stock prices of major oil companies. BP in London trading dropped 1.8%, Total in Paris lost 3.5% and Royal Dutch Shell lowered 1.3% at close in European trading.

The general weakness in metals and oil stocks dragged broader averages across the region led by 1.2% decline in Paris, 1.0% loss in Belgium and the U.K. Germany, Spain, and Switzerland lost 0.5%. Norway lost 2.92% on weakness in oil and gas price.

Weakness in mining stocks was seen across the region. U.K. listed Xstrata lost 4.5% and led the sector. ArcelorMittal, Rio Tinto and BHP lost ground in day’s trading as well. However the deal machine was in full swing with the impending offer from CSN, based in Brazil for UK based Corus Group Plc. CSN is likely to offer 475 pence per share of Corus, 4.4% higher than offered by India based Tata Steel Ltd. The Corus stock rose to 495 pence at close signaling that higher bid from Tata is likely.

Both Brazil and India, rich in iron ore need access to European markets and acquiring mills in the region help companies in both countries to secure market in the European region. The deal between Mittal Steel and Arcelor, earlier this year set of a frenzy of mergers in the steel industry. Mittal ultimately raised its initial offer by 50% and was forced to buy at a significant premium Brazilian unit of Arcelor. Several traders expect a bidding war between Tata and CSN to acquire Corus Group.

Chairman of Deutsche Borse said that it plans to look world-wide for its expansion and will not limit its option to building a pan-European exchange. After failing to convince the Borsa Italiana in Milan and Euronext in Paris the exchange has given up hope of forming an European champion.

[R]11:30AM Earnings news from AnnTaylor, Starbucks, Hewlett Packard and Marvell Technology disappointed traders.[/R]

Starbucks ((SBUX)) lost 6.6% or $2.52 to $36.92 on profit decline. In the most recently completed quarter the company reported net income decline of 5.2% to $117.3 million on revenue of $2 billion. The company profit declined for the first time since 2001 on higher operating and store opening costs.

AnnTaylor Stores ((ANN)) lost 6.5% or $2.64 to $37.04 on lower annual earnings guidance. The company forecasted earnings for the year ending in January 2007 between $2.07 and $2.12 lower than the consensus earnings estimates of $2.16 per share. The company also reported third quarter profit of 54 cents vs 42 cents a year ago.

Marvell Technology Group ((MRVL)) lost 2.5% or 56 cents to $19.06 on 22% rise in third quarter revenue and 9% sequential decline from the second quarter of 2007. Two analysts cut the rating on the company.

[R]10:30AM Sensex slipped 0.5% in volatile trading on profit-taking.[/R]
The Sensex on BSE finished 76.41 points, or 0.50%, lower to 13,429.48. The market-breadth weakened continuously over the course of the trading session today. As 1871 shares declined on BSE, only 657 advanced and 63 stocks were unchanged. From the 30-Sensex stocks, 22 declined while the rest advanced. The turnover on BSE was Rs 4,472 crore, much lower than Rs 6,125.73 crore on Thursday. The turnover on NSE was Rs 8,720.45 crore, lower than Rs 10,321.46 crore on Thursday.

Economic news

The wholesale price index advanced 5.30% in 12 months to Nov. 4, higher than 5.09% the previous week due to a rise in the prices of food articles and manufactured products.

Foreign funds moving into Indian equities have increased more than $7.7 billion this year, compared to a record $10.7 billion in 2005.

India, the largest producer and consumer of pulses in the world, is seen doubling imports due to a shortage of about four million tonnes on account of a poor harvest in 2005/06, industry officials announced.

Most-active stocks

Tech Mahindra was the most-active stock with a turnover of Rs 172.60 crore followed by Mahindra Gesco, State Bank of India, Glenmark and Hindustan Zinc.

Advancers

Oil marketing firms surged as crude oil price fell to one year low on Thursday. BPCL ended at Rs 378.90, Indian Oil Corporation at Rs 511.05 and HPCL at Rs 319.90. All rose between 4.7% 6.3%.

NTPC surged nearly 4% to Rs 140.30. The company announced on Friday it planned to invest Rs 3,425 crore to set up a 520-megawatt hydro power project.

Housing finance large-cap HDFC gained 3.3% to Rs 1,608 on the assumption that the housing loan demand may remain strong. The stock hit a high of Rs 1,616 which is an all-time high.

Other gainers include NTPC rising 2.89% to Rs 138.90, Reliance Communications advancing 1.40% to Rs 402.15; Bharti Airtel edging up 0.83% to Rs 582.20 and ACC advancing 0.61% to 1,094.

Decliners

Dr Reddy’s Lab led the decliners today. It shed nearly 5% to Rs 738 after it raised $200 million in an issue of American Depositary Receipts, below market estimates of up to $260 million. It priced the issue at $16 per ADS.

The latest data showing an increase in inflation impacted shares of private sector banks negatively. ICICI Bank lost 1.2% to Rs 877 and HDFC dropped 1.9% to Rs 1,122. The sharp decline in oil price pulled oil exploration large-cap ONGC lower. The stock lost 2.3% to Rs 850.20.

Reliance Industries shed 0.4% to Rs 1,258.10. Reliance Industries has secured an offshore exploration block in Timor Leste. Reliance Industries will have a majority interest and operator-ship in that block. Infosys declined 0.1% to Rs 2,190. The company had soared over 9% in opening trade to Rs 2401 due to a punching error.

Cement shares also declined. Gujarat Ambuja Cements was off 2.3% to Rs 135.65, Grasim fell 1.3% to Rs 2,680 and UltraTech Cement shed 2.4% to Rs 883. ACC closed flat at Rs 1,087.95. Swiss cement company Holcim on Thursday acquired additional 3.6% stake in Gujarat Ambuja Cements raising its holding to 18.4%, for Rs 685 crore.

Auto shares continued their decline. Hero Honda shed 1.9% to Rs 692.50, Bajaj Auto sank 0.9% to Rs 2,564, Maruti Udyog lost 0.4% to Rs 889.30 and Tata Motors lost 0.6% to Rs 808.40.

Mahindra & Mahindra Ltd lost 0.5% to Rs 812.50 as it informed BSE that the company is in discussion with the promoters of Schoeneweiss & Co GmbH, a forging company based in Germany, to acquire a majority stake in the company.

Other decliners included BHEL and Satyam declining 1% each to Rs 2,426 and Rs 434, respectively. Hindustan Lever ended at Rs 240 and Tata Steel at Rs 476, shedding 1.3% each.


[R]9:45AM Nymex boosted its IPO. It started trading at $120.[/R]
Stocks reversed from solid gains after the Commerce Department reported that housing construction fell to its lowest level in more than six years, driven by fund selling across commodity markets on concern of an economic slowdown in the United States. Nymex Holdings ((NMX)) will be in the spotlight as it priced its IPO above the planned range late Thursday. The IPO of 6.5 million shares priced at $59 each, came in above the expected range of $54 to $57 a share. Nymex had already boosted its IPO price range from $48 to $52 a share earlier this week and increased the size of the offering from 6 million shares. In earnings news, Starbucks Corp. ((SBUX)) posted a 5% drop in Q4 profit, meeting expectations. The stock fell 5.6% as investors grew concerned about issues such as labor costs. Johnson & Johnson ((JNJ)) gained 1% after it agreed to buy Conor Medsystem, a developer of drug-eluting stents, for $33.50 a share, or $1.4 billion.

The semiconductor sector turned in one of the market''s worst performances, with Marvell ((MRVL)), down 3.2%, helping to lead the sector lower after negative analyst comments. Housing stocks came under pressure, as traders took profit after recent strength. A decrease in commodities prices contributed to some weakness among resource stocks. In the first hour of trading, the Dow fell 20.18, or 0.16%, to 12,285.64. The Standard & Poor''s 500 index was down 2.83, or 0.20%, at 1,396.93, and the Nasdaq composite index was down 7.56, or 0.31%, at 2,441.50. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.63% from 4.67% late Thursday.


[R]9:30AM London stocks were lower in early trading Friday on oil stocks.[/R]
The main index FTSE 100 in London was 15.1 points or 0.2% lower at 6,239.8 in mid-morning trade.

Decliners

BP led blue-chip fallers in London, shedding 1.7%, while BG Group was down 1.3% and Royal Dutch Shell B shares lost 0.9% on the lower oil price.

British Energy was down 0.9%, after it said that cracked pipes at two of its nuclear power stations were expected to have a significant impact on output for the financial year.

Copper prices once again hit mining stocks as Shanghai Futures Exchange contracts were lower across the board, increasing supply concerns. Kazakhmys fell 1.4%, BHP Billiton was lower by 1.2% and Anglo American lost 1.1%.

Some mid-cap companies were also dragged down by oil stocks with Dana Petroleum sliding 2.3% and Tullow Oil down 2%.

Advancers

ITV shares gained 1.1% after the Financial Times reported that RTL ias working with private equity backers on a possible 5 billion pounds offer for the commercial broadcaster.

Northern Foods put on 2.5% after ABN Amro upgraded the stock from hold to buy and raised its price target.

Ground preparation group Keller has issued another very bullish trading statement. Trading since the half year has been extremely good, it stated, culminating in an outstanding performance in October with orders up around 15% since the end of June. Keller advanced 6.45%.

Northern Foods made strong gains after ABN Amro turned buyer on the shares following interim figures earlier in the week. The Dutch broker also lifted its price target. Northern Foods gained 5.46%.


[R]9:00AM U.S. stock futures declined after weak housing data.[/R]
U.S. stock futures declined Friday, following weaker-than-expected data on the housing market. Investors turned to profit taking after the Commerce Department said that new U.S. homes construction plunged 14.6% in October to the lowest level in six years, while building permits dropped 6.3%, a nine-year low. Economists had been expecting new home starts to fall 4.5% and building permits to decline 1%. At the same time, oil prices fell to their lowest level in more than a year. Crude oil slipped $1.01 to a 17-month low of $55.25 a barrel.

Disappointing results from Starbucks and the announcement by Hewlett-Packard of a formal SEC investigation also weighed on sentiment. Starbucks ((SBUX)) dropped 6.1% after the coffee retailer reported a 5% decline in Q4 profit on a below-forecast 21% sales rise. Dow component Hewlett-Packard ((HPQ)) lost 0.3% after the company said that the SEC had started a formal investigation into the spying scandal. In other earnings-related news, shares of Gap ((GPS)) slipped 1.5% after the clothing chain reported an 11% profit drop and cut its full- year forecast. In merger-and-acquisition news, Johnson & Johnson ((JNJ)) agreed to buy Conor Medsystems ((CONR)) for $33.50 a share, or $1.4 billion. S&P 500 futures fell 4.10 points to 1,401.00 and Nasdaq 100 futures dropped 8.75 points to 1,801.50. Dow industrial futures shed 23 points to 12,327.

[R]New U.S. homes construction slipped 14.6%.[/R]
The Department of Commerce released its report on housing starts and building permits in the month of October on Friday, showing that housing starts fell much more than economists had been expecting. The report showed that housing starts fell 14.6 percent to a seasonally adjusted annual rate of 1.486 million units in October from the revised September estimate of 1.740 million units. Economists had expected housing starts to fall to a 1.675 million unit rate. The decrease was partly due to a notable drop in housing starts in the South, which fell 26.4 percent to a 705,000 unit rate in October from a 958,000 unit rate in September. Housing starts in the Midwest and West also fell, offsetting a 31 percent increase in the Northeast. Building permits also dropped, falling 6.3 percent to a seasonally adjusted annual rate of 1.535 million units in October from the revised September rate of 1.638 million units. The drop in building permits may raise some concerns about the outlook for the housing market.


[R]8:00AM Hewlett-Packard reported quadrupled q4 profit.[/R]
Hewlett-Packard Co. ((HPQ)) said that Q4 earnings quadrupled but the SEC had ordered a formal probe of its boardroom spying scandal. HP earned $1.7 billion or 60 cents per share, compared with $416 million, or 14 cents per share last year, due to higher sales of laptop computers, printers and servers. Excluding one-time charges, the company’s profit rose 27% to $1.9 billion, or 68 cents per share from the same quarter last year, beating expectations of 64 cents per share on sales of $24.1 billion for the quarter. Fourth-quarter sales increased 7% to $24.6 billion, compared with $22.9 billion last year.

HP''s annual revenue surpassed $90 billion for the first time. For 2006, the company earned $6.2 billion, or $2.18 per share, compared with $2.4 billion, or 82 cents per share. Sales for the year were $91.7 billion, compared with last year''s total of $86.7 billion. The company projected Q1 earnings of 2007 to be between 55 cents and 57 cents per share, or between 60 cents and 62 cents per share excluding one-time charges, on revenue of between $24.1 billion to $24.3 billion. For 2007, earnings are expected to be between $2.28 and $2.33, or between $2.48 and $2.53 excluding one-time charges. Annual revenue is expected to be about $97 billion.

Shares of HP fell 53 cents to $39.60 in after-hours trading Thursday, as HP said in a regulatory filing that the SEC had started a formal investigation into the spying scandal.


[R]7:30AM Asian markets close mostly higher Friday, Japan slips on bank worries.[/R]
Asian markets ended broadly higher on Friday. The benchmark Nikkei 225 index in Tokyo shed 0.45%, to close at 16091.73 points. The market was in positive territory at first, following record highs in New York overnight, but the index fell later as investors took to profit-taking in the scarcity of fresh earnings or new data. Mitsui shed 3.8% and oil company Inpex Holdings lost 3.51%.

In Australia, the benchmark S&P/ASX200 index gained 0.5% to 5419.7. The market bounced back from recent losses on the back of financial stocks, with National Australia Bank up 1.2%. Babcock & Brown soared 6.3% on plans for an offshore funds-management business with joint-venture partner GPT Group, which gained 2.1%.

The Kospi in South Korea finished up 0.1%, at 1412.22. South Korean markets were buoyed by airline and shipping stocks, although gains were mostly erased by losses in technology shares. Korean Air jumped 3% and Asiana Airlines advanced 2.2%. Hyundai Merchant Marine, added 4.2% and Hanjin Shipping moved 1.8% higher.

In Hong Kong, the Hang Seng Index closed 0.15% higher at 19182.71. Taiwan markets moved slightly up as the Weighted Price Index of the Taiwan Stock Exchange advanced 0.03% to 7259.54. mobile phone and display makers were weak and countered advances in automobile, memory chips, and personal-computer stocks.


[R]6:30AM European markets dropped in early trading Friday on weak oil shares.[/R]
European markets were lower in early trading on Friday. By mid morning, the FTSE 100 in London was 0.2% lower to 6,239.8, Frankfurt Xetra Dax gained 0.1% to 6,449.23, and the CAC 40 in Paris lost 0.4% to 5,483.12.

Decliners

Oil stocks led the decliners on Friday. Norsk Hydro fell 4.1%, while domestic rival Statoil shed 4.1%. Finnish refiner Neste Oil was down 2.1%, Repsol of Spain lost 2%, while French Total fell 1.9%.

Advancers

Richemont, the Swiss luxury goods group, gained 2.8% after reporting a better-than-expected 22% rise in first-half net profit, thanks to growth in demand for expensive watches. The company said it was confident that full-year results would be significantly ahead of last year.

French luxury goods maker Hermes International gained 3.7%. German chipmaker Infineon gained 1.8% after ABN Amro raised its rating on the company from hold to buy and lifted its price target. Hypo Real Estate, the German property lender, gained 2.1% after West LB raised its price target on the stock from add to buy.

Oil and gold

Oil declined $56 on Friday to its lowest level in a year. U.S. crude was down 76 cents at $55.50 a barrel. London Brent crude was 48 cents lower at $58.06.

Gold opened Friday at a bid price of $617.80 a troy ounce, down from $624.40 late Thursday.

Currencies

The euro edged slightly down against the dollar Friday on positive economic news from the United States. The euro bought $1.2776 in late morning European trading, compared with $1.2795 in New York late Thursday. The British pound slipped to $1.8848 from $1.8882. The dollar was up against the Japanese yen, buying 118.35 yen from 118.19 yen on Thursday.