Dow and Nasdaq Plunge

Elena
27 Nov, 2006
New York City

U.S. market averages sharply dropped, as a disappointing sales forecast from Wal-Mart along with a rise in crude oil prices raised concerns about consumers'' holiday spending. Further downward pressure came from the continuously falling dollar, as it weakened demand for U.S. investments. The Nasdaq was pressured by 2% decline in Google shares, while a drop of 2% for Dow component Ford Motor weighed on the blue-chip index.

[R]11:30AM The Nasdaq tumbled 1.6%. The Dow dropped 1%.[/R]
U.S. market averages sharply dropped, as a disappointing sales forecast from Wal-Mart ((WMT)) along with a rise in crude oil prices raised concerns about consumers' holiday spending. Higher crude oil prices contributed to substantial weakness in the oil-sensitive airline sector. Significant weakness also emerged in the technology sector, with some networking, disk drive, and internet stocks posting steep losses. Of the disk drive stocks, Iomega ((IOM)) and Adaptec ((ADPT)) dropped 5% and 3.1% respectively. Brokerage, housing, and defense stocks also came under pressure. Lehman Brothers ((LEH)), Morgan Stanley ((MS)), and Raymond James ((RJF)) turned in some of the brokerage sector's worst performances, each falling about 3%.

Further downward pressure came from the continuously falling dollar, as it weakened demand for U.S. investments. The Nasdaq was pressured by 2% decline in Google ((GOOG)) shares, while a drop of 2% for Dow component Ford Motor ((F)) weighed on the blue-chip index. Among other stocks in focus, Lowe's ((LOW)), home improvement retailer, jumped 1.7% after some positive analyst comments from Banc of America, which raised its rating on the company's stock to Buy from Neutral. On the other hand, shares of J. Crew ((JCG)), apparel retailer, slipped 6.1% after CIBC World Markets downgraded the stock, citing valuation. Meanwhile, gold stocks limited the downtrend by the broader market, with the precious metal price rising $9.80 to $638.80 an ounce. In late morning trading, the Dow Jones industrial average fell 118.65, or 0.97%, to 12,161.52. Recently, 26 of the 30 components that make up the Dow were trading lower. The Standard & Poor's 500 index was down 12.57, or 0.90%, at 1,388.38, and the Nasdaq composite index fell 40.31, or 1.64%, or 2,419.95. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.57% from 4.55% late Friday.


[R]10:30AM The Sensex finished higher on Monday in a broad-based rally.[/R]
The Sensex on BSE ended 70.26 points, or 0.5%, higher at 13,773.59. The market-breadth was positive. As 1,425 shares advanced on BSE, 1,129 shares declined and 64 shares were unchanged. For every 6 advancers, there were 5 decliners. From the 30-share Sensex stocks, 20 advanced while the rest declined. The turnover on BSE was Rs 4,450.93 crore, lower than Rs 5,213 crore on Friday. The turnover on NSE was Rs 7,973.17 crore.

Economic news

India stated on Monday 3.2 million tonnes of imported wheat had so far arrived at its ports against the 5.5 million tonnes contracted after a poor crop sent prices spiralling. Despite agreeing the first imports in six years, India has also allowed the private sector to buy in wheat at zero duty.

Advancers

Cement shares advanced on firm cement prices. ACC surged 3.8% to Rs 1,114, Gujarat Ambuja Cements gained 3.6% to Rs 143.50, Grasim rose 0.6% to Rs 2,690.30 and UltraTech Cement added 0.5% to Rs 886.

Tata Power rose 2.3% to Rs 590 after the company today posted 61% growth in net profit for second quarter September 2006 to Rs 202.32 crore (Rs 125.67 crore). Total revenue advanced 16.5% to Rs 1,279.17 crore from Rs 1,097.21 crore.

NTPC rose 2.3% to Rs 153.60 on its plans to set up a power plant in Sri Lanka. The stock canceled out gains, though, after rising as much as 5.1% to a high of Rs 157.80. Bharti Airtel advanced 2% to Rs 629.45 after group company Bharti Enterprises agreed to form a joint venture with US retailer Wal-Mart Stores to enter the Indian retail sector.

IT shares rose. Wipro rose 1.9% to Rs 602, HCL Tech gained 1.7% to Rs 640.25, and TCS rose 0.8% to Rs 1,157.80. Software large-cap Infosys shed 0.3% to Rs 2,226. TCS Chief Executive S. Ramadorai said on Friday TCS was getting new contracts at 5-10% higher billing rates. He said the existing contracts were being negotiated for renewal at 3-55 higher rates.

Bank shares drew attention after bond price hit 7-month high. State Bank of India gained 2% to Rs 1,282. ICICI Bank was 0.8% to Rs 882. Oil exploration company ONGC added 1.7% to Rs 871.90 on market expectations of new gas finds.


Hindustan Zinc jumped 5.6% to Rs 970.65 after the top zinc producer raised zinc prices by 3.5% to Rs 2,28,800 a tonne. The firm simultaneously cut lead prices by 3.045 to Rs 82,800 a tonne.

Decliners

Dr Reddy led the decliners, down 2.22%. Tata Steel lost the 0.5% to Rs 480.50 in volatile trade. Corus Group PLC said on Monday it is to give Brazilian steel company Companhia Siderurgica Nacional SA (CSN) more time to weigh up a formal offer for the Anglo-Dutch steel group.

Reliance Industries lost 0.8% to Rs 1,251. Reliance Industries is finding more and more gas in the Krishna Godavari basin off southern India, a top official announced. BHEL shed 1.1% to Rs 2,500. The company said on Monday it had won a Rs 129 crore order from Hindustan Zinc to build a power plant in Rajasthan. UTI Bank lost 0.3% to Rs 495. Three block deals of 23.11 lakh shares each were executed in the UTI Bank stock on BSE at average price of about Rs 501.30.

Other news

Cairn Energy Plc, an Edinburgh-based company that drills for oil and gas in South Asia, set a price range of 160 rupees to 190 rupees ($3.58 to $4.25) for each share of its Indian unit, which is making an initial sale. The company will issue about 538.5 million Cairn India Ltd. shares in the sale, which may be the second-largest IPO in India.


[R]9:45AM Stocks opened in the negative. Retailers in the spotlight[/R]
U.S. stocks reopened lower after the Thanksgiving holiday, dragged down by concerns about the strength of the retail sector, following a same-store sales decline at Wal-Mart Stores Inc. The 0.1% drop also raised worries about the strength of consumer spending during the holiday season. At the same time, early reports showed 6% higher retail sales on Black Friday, almost $9 billion more than last year. Among retailers, Wal-Mart ((WMT)) dropped 2.1% following its report, while a number of specialty electronics retailers advanced on reports of strong traffic in stores over the weekend. Best Buy Co. ((BBY)) rose 1.4%, while Apple Computer Inc. was up 0.3%.

Google ((GOOG)) shares were also in the spotlight, falling 2% after a Barron''s article over the weekend said the stock had an ''exceedingly rich valuation''. In the first hour of trading, the Dow Jones industrial average fell 45.99, or 0.37%, to 12,234.18. The Standard & Poor''s 500 index was down 3.37, or 0.24%, at 1,397.58, and the Nasdaq composite index fell 12.34, or 0.50%, or 2,447.92. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.59% from 4.55% late Friday.


[R]9:30AM FTSE 100 down in early trading as BAE plunge weighs on stocks.[/R]
By mid-day, the FTSE 100 was down 26.9 points, or 0.5%, to 6,095.6, its lowest level since early October.

Decliners

BAE Systems group lost 3.9% following reports that Saudi Arabia could pull out of a 7,6 billion pounds contract to buy 72 Eurofighter aircraft.

In bid news, MyTravel confirmed an approach for First Choice Holidays about the possible acquisition of its tour operating business. MyTravel added that any offer would be funded in cash, through a mixture of new debt and equity, with the deal possibly funded through issuing shares to First Choice shareholders. Large dollar earners also fell. Rolls Royce slipped 1.8% and Hanson eased 1.8%.

Advancers

Wilson Bowden rose 13.1% as it confirmed discussions with a number of parties about a possible offer for the company. THis helped rivals Persimmon gain 1.2 %, George Wimpey advance 1.5% and Bovis Homes firm 1.2%. First Choice shares jumped 14.4% while MyTravel Group gained 8.1%.

Plumbing and heating company BSS added 3.3%. Mitie Group firmed 2.8% as the cleaning and maintenance specialist reported a 28% increase in interim pre-tax profit.

Civil engineering consultant Hyder lifted its half year dividend by over 70% as it reported strong growth in all parts of the business. Hyder rose 4.20%.

[R]9:00AM Stock futures declined on lower Wal-Mart same-store sales and higher oil.[/R]
U.S. stock market futures declined on Monday on concerns about a weak retail environment after a disappointing sales forecast from Wal-Mart Stores Inc ((WMT)). Shares of the world''s biggest retailer dropped 0.7% before the bell, as November same-store sales fell 0.1%. Consequently, shares of discount retailer Target ((TGT)) fell 2.5%, while department stores J.C. Penney ((JCP)) and Sears Holdings ((SHLD)) slipped about 1.5%. Retailers will be in the spotlight as early reports show 6% higher retail sales on Black Friday, almost $9 billion more than last year.

An increase in crude oil prices also generated negative mood. Crude oil gained 1% crossing $60 a barrel before retreating to $59.65. Commodity prices rose as the dollar continued to suffer considerable weakness against the euro. However, the greenback gained some ground against the yen. The U.S. currency slipped amid comments from China that it sees risks for its dollar holdings as well as slowing U.S. economic growth. Standard & Poor''s 500 futures were down 2 points, slightly below fair value. Dow Jones industrial average futures were down 15 points, and Nasdaq 100 futures were down 4.75 points.


[R]8:30AM Wal-Mart is planning to open stores in India.[/R]
U.S. retail giant Wal-Mart ((WMT)) is planning to open stores in India. Although India does not allow foreign companies to open multi-product retail stores, they can still make wholesale purchases to support their global supply chains. It would take several months before the first of the stores opened their doors.

Wal-Mart tied up with India''s business conglomerate Bharti Enterprises Ltd. to set up hundreds of stores across the country, the CEO of the Indian company said Monday. However, he refused to reveal the financial terms of the deal, except for telling reporters that a memorandum of understanding for a joint venture and a franchise agreement had been signed.

India''s booming retail market, estimated at more than US$200 billion (euro160 billion), is currently dominated by more than 12 million mom-and-pop shops. Sales through company-owned network stores currently totals about US$8 billion (euro6.4 billion), or less than 5 percent of the market. An increase in demand for branded products, however, makes India a compelling destination for global retail companies. The company is expected to source products worth nearly US$2 billion (euro1.6 billion) from India for Wal-Mart stores worldwide this year.

On Saturday Wal-Mart Stores said that U.S. same-store sales in November fell 0.1% from a year ago, the first monthly same-store sales drop since 1996.


[R]7:30AM Asia ends mostly higher on Monday, Japans leads the way.[/R]
Asian markets ended mostly higher on Monday. Japanese stocks closed higher, led by banks, retailers and other shares sensitive to domestic demand. The Nikkei index rose 150.78 points, or about 1%, to finish at 15885.38 points. Mizuho Financial Group rose 1.9%, Mitsubishi Motors increased 1% and supermarket operator Aeon ended up 2.5%.Tosoh Corp. jumped 5.6% after reporting it had developed an alternative low-cost material used in the production of liquid crystal display panels. In the energy sector, Inpex rose 1.8%.

In Hong Kong, shares slipped as traders sold bank stocks. Property issues rose on expectation of strong results from land auctions. The Hang Seng Index fell 56.29 points, or 0.3%, to 19204.01. Cheung Kong, property company, rose 1.3% while its rival Sun Hung Kai rose 1.6% ahead of a Hong Kong government land auction Tuesday that is expected to fetch high prices. Bank of China fell 3.3% while ICBC fell 2.9%. Bank of East Asia dropped 1.6% and airline Cathay Pacific declined 1.5%.

Taiwan shares hit a six-year high as chip stocks gained on news of the likely buyout of the island''s largest chip-packaging firm, Advanced Semiconductor Engineering. The Weighted Price Index of the Taiwan Stock Exchange rose 70.79 points, or 1%, to close at 7498.15.

Australian shares inched down in slow trading, as investors waited for direction from offshore markets after the U.S. Thanksgiving holiday. The benchmark S&P/ASX 200 index declined 1.4 points to 5452.20.

South Korean shares advanced, led by Kookmin Bank, which rebounded from last week losses, while exporters dropped on the South Korean won continued rise. The Korea Composite Stock Price Index, or Kospi, climbed 3.4 points, or 0.2%, to 1425.13.

[R]6:30AM European markets were lower in early trading on Monday on weak dollar.[/R]
European markets were lower in early trading on Monday. The U.K. FTSE 100 index lost 0.04% at 6,119.80, while the German Xetra Dax traded 19 points or 0.2% lower at 6,392.96 and the French CAC 40 lost 15 points or 0.3% at 5,374.4.

Advancers

Pharmaceutical and chemical firm Bayer rose 2.2% after it produced a third-quarter net profit that exceeded analyst forecasts and also raised its fiscal-year guidance for its healthcare operations.

Miners Rio Tinto and BHP Billiton saw their shares rise more than 0.7%, while shares in oil companies BP tacked on around 0.3% each. U.K. home builders were also in the news as consolidation hopes surged in the sector. Shares in Wilson Bowden rose 13.1% in early trading after the company confirmed that its in talks with a number of potential bidders. Dassault shares rose 0.8%, albeit with just 48 shares traded.

Decliners

Automakers were hit as the US dollar plunged against the euro. DaimlerChrysler fell 1.5% while BMW fell 1.7% to and Fiat fell 1%. BAE Systems dropped 2.5% in London after the Telegraph newspaper reported that the Saudi Arabia government may transfer a fighter jet deal from BAE Systems to Dassault Aviation of France. Oil services company Technip was down 3% after Eni of Italy said late Friday that it was not planning to bid for the company.

Oil and gold

Oil prices advanced Monday as the market opened after the long Thanksgiving weekend, but stayed within the range of the last eight weeks with little geopolitical or weather news to drive prices. Light sweet crude oil for January delivery rose 31 cents to $59.55 a barrel in electronic trading on the NYME.

Gold opened higher on Monday at $638.00 an ounce, up $4.20 an ounce from the close of $633.80 on Friday.

Currencies

The euro edged lower against the dollar on Monday following a steep climb last week, but remained above $1.31. The euro bought $1.3112 in morning European trading, down from the $1.3167 it bought over the weekend. The British pound declined to $1.9355 from $1.9463, while the dollar rose to 116.12 Japanese yen from 115.55 yen.