Market Loses Early Gains on Housing Worries

Elena
03 Jan, 2007
New York City

U.S. stock averages closed mixed Wednesday, reversing from substantial gains made earlier in the session. Market turned to a heavy sell-off after minutes from the last Federal Reserve policy setting meeting indicated growing concerns over economic growth, with the pullback in the housing sector in particular. Dow ended up 11, Nasdaq gained nearly 8, while S&P 500 fell almost 2 points.

[R]4:00PM Market erased earlier gains on economic concerns.[/R]
U.S. stock averages closed mixed Wednesday, reversing from substantial gains made earlier in the session. Market turned to a heavy sell-off after minutes from the last Federal Reserve policy setting meeting indicated growing concerns over economic growth, with the pullback in the housing sector in particular. The Dow was rose 11.37, or 0.09%, to 12,474.52 after surging more than 100 points early in the session to a new trading high of 12,580.35. The Standard & Poor's 500 index fell 1.70, or 0.12%, to 1,416.60, while the tech-laden Nasdaq rose 7.87, or 0.33%, to 2,423.16. Bonds rose following release of the Fed minutes, with the yield on the benchmark 10-year Treasury note falling to 4.66% from 4.71% late Friday.

Automakers released December sales. Toyota reported advance. General Motors and Ford posted considerable declines. Honda's sales were slightly lower.

General Motors ((GM)) posted a steeper-than-expected drop in December U.S. auto sales. The carmaker sales reported 13% drop to 334,501 light vehicles. The stock fell 4%. Ford ((F)) posted an overall drop of 12.8% to 233,621 vehicles with most of the weakness coming from the truck side, which saw a 14% drop to 163,003 units. Ford's top selling F-Series truck showed a 21.1% decline to 70,580 units. Shares of the company added 0.4%.

Toyota ((TM)) reported a 12.3% advance from last year to 228,322 cars and trucks. Lexus division sales in the month climbed 5.8% to 37,235. December sales of the company's best-selling Camry model rose 18.7% to 39,539 units. Honda ((HMC)) sales fell 0.8% in December. Car sales fell 0.7% to 66,441, while truck sales decreased by 0.8% to 65,337. Total Honda division sales fell 1.3% in December to 112,722 units, while Acura division sales rose 2.3% to 19,056.

Yield on 10-year bond closed at 4.660% and the 30-year bond closed at 4.769%.

Gold declined $8 to close at $630 a troy ounce, silver lost 24 cents to end at $12.625 a troy ounce and copper lost 21.4 cents to close at 265.70 cents per pound.

Oil lost $3.120 to close at $57.930 a barrel and heating oil declined 6.91 cents to finish at 157.91 cents a gallon. Natural gas decreased 13.8 cents to close at $6161 per MMBtu.

Asian markets closed lower led by Thailand with a loss of 3.03%, South Korea with a decline of 1.81% and Australia with a decrease of 0.34%. The advancers were led by Singapore with a gain of 1.74%, Philippines with an increase of 1.47% and India with an advance of 0.52%. Hong Kong and Singapore ended in record highs as investors added to positions in the hope that bull market in 2006 will run into 2007. Thailand plunged as trading resumed for the first time since Bangkok was rocked by a series of bombs on New Year’s Eve.

European markets finished higher led by Switzerland with a gain of 1.53%, Belgium with an increase of 0.29% and Germany with an advance of 0.15%. The decliners were Norway with a decrease of 1.25% and France with a loss of 0.12%.European markets were higher as investors took in an as-expected strong start to trading on Wall Street and better-than-expected manufacturing data from the U.S.

Latin America markets ended lower as oil prices fell, sparking a sell off in energy issues. The decliners were led by Brazil with a loss of 2.07%, Argentina with a decrease of 1.94% and Canada with a decline of 1.79%. There were no advancers.


[R]2:00PM Stocks sustained early gains. Retail and airline stocks gained.[/R]
Stock market averages continued to rally in early afternoon trading Wednesday, driven by stronger-than-expected manufacturing data, a notable decline by the oil price and gains for leading retailer companies. Both Wal-Mart ((WMT)) and Home Depot ((HD)) rose above 3%, pushing the Dow Jones to a new trading high. General Motors ((GM)) was one of the very few losers on the Dow, falling 2.5% after Banc of America downgraded the stock to sell from neutral. Meanwhile, rival Ford Motor Co. ((F)) added 1.2% after reporting that its December sales fell 13%, less than traders had expected.

Crude oil futures dropped below $59 a barrel amid lower heating fuel demand due to warmer winter weather across much of the U.S. The price decrease contributed to particularly strong gains by airline stocks. AMR ((AMR)) jumped 8.3%, JetBlue ((JBLU)) climbed 5.6%, and Continental ((CAL)) rose 6.1%, helping to lead the sector higher. Networking stocks also posted substantial gains. Alcatel-Lucent ((ALU)) turned in one of the sector''s best performances, with the communications equipment giant up 8.1%.

In early afternoon trading, the Dow surged 96.53, or 0.77 percent, to 12,559.68 after jumping earlier to a new trading high of 12,580.35. The Nasdaq composite index especially showing sharp gains. The Standard & Poor''s 500 index was up 7.94, or 0.56%, at 1,426.24, and the tech-laden Nasdaq rose 32.92, or 1.36%, to 2,448.21. Bonds rose but retreated from an earlier big advance; the yield on the benchmark 10-year Treasury note fell to 4.68% from 4.71% late Friday.


[R]1:00PM European markets closed little changed. Steelmakers and miners dropped.[/R]
European stocks closed little changed on Wednesday. Markets drifted near six-year highs, hit in the first trading session yesterday, reflecting robust opening on Wall Street and better-than-expected U.S. manufacturing data. Steelmakers, including ThyssenKrupp and Mittal Steel, showed weakness as Credit Suisse downgraded the steel sector to underweight from market weight. Mining stocks also came under pressure, with copper miners Xstrata and Antofagasta moving down as copper prices steeply fell. On a more positive note, banking stocks posted gains. Royal Bank of Scotland was up 1.9%, lifted by a positive UBS note. Among other movers today, shares of Irish building-materials company CRH retreated from recent gains, falling 1.1%. Dutch media group Wegener rose 4.2% on considerably higher operating profit during the second half of the year. Among regional markets, The German DAX 30 and London FTSE 100 added 0.1% each, while the French CAC 40 lost 0.1%.

Crude oil prices slipped below $59 a barrel as mild winter weather dampened fuels demand. Crude oil February contract tumbled $2.08 to $58.97 a barrel. Heating oil fell 5 cents to $1.6050 a gallon. Natural gas futures slipped 11 cents to $6.187 per 1,000 cubic feet. The U.S. dollar gained ground against its major currency rivals. The euro was quoted at $1.3188, down from $1.3276. The dollar bought 119.44 yen, up from 119.05. The British pound was quoted at $1.9528, down from $1.9586. European gold prices declined. In London, gold traded at $635.25 per troy ounce, down from $640.23. In Zurich, the precious metal traded at $635.90 per ounce, down from $638.85. Silver closed at $12.88, down from $13.08.


[R]11:30AM Market rallied on strong factory data. Wal-Mart, Home Depot boosted Dow.[/R]
U.S. stocks rallied in the first session of 2007 on optimism about the economy, following a stronger-than-expected report on December manufacturing from the Institute for Supply Management. The index came in at 51.4%, stronger than the expected reading of 50%. A decline in oil prices also helped generate positive sentiment. Light, sweet crude dropped to $59.62 a barrel. The Dow surged to a triple-digit advance and a new high, with shares of Wal-Mart and Home Depot leading gainers. Wal-Mart ((WMT)) rose 3.5% after December same-store sales rose more than expected. The world’s biggest retailer said same-store sales rose 1.6%, exceeding the company''s forecast of flat growth up to 1%. Home Depot ((HD)) advanced 3.4% after news that chairman and CEO Bob Nardelli resigned from the world''s largest home improvement chain.

Shares of copper producers fell sharply in early Wednesday trading after a 6% drop in copper prices. Copper for March delivery fell 17.6 cents to $2.695 a pound. Freeport McMoRan Copper & Gold ((FCX)) dropped 6.8%, while Phelps Dodge Corp. ((PD)), which agreed to be taken over by Freeport, fell 2.3%. Southern Copper Corp. ((PCU)) lost 3.4%% and shares of Ivanhoe Mines ((IVN)) slipped 4.8%%.

Among stocks, driven by analyst comments, Amazon.com ((AMZN)) fell 1.5% after Citigroup downgraded its rating on the online retailer to sell from hold, citing concerns about the stock''s valuation. At the same time, shares of Baidu.com ((BIDU)), Chinese internet search engine, climbed 8.3% after CIBC World Markets upgraded its rating on the company''s stock to sector perform from sector underperform, citing strong positions of the company on the Chinese market.

In corporate news, Cytokinetics Inc. ((CYTK)) surged 13.6% on news it would work in cooperation with Amgen Inc. to develop drugs fighting against heart failure. Sirius Satellite Radio Inc. ((SIRI)) climbed 7.6% after the radio service said its subscriber base jumped 82% in 2006. In late morning trading, the Dow surged 108.39, or 0.87%, to 12,571.54 after surging to a new trading high of 12,580.35. The Standard & Poor''s 500 index was up 9.10, or 0.64%, at 1,427.40, and the tech-laden Nasdaq rose 36.37, or 1.51%, to 2,451.66. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.68% from 4.71%late Friday.


[R]ISM index bounced back 51.4% in December.[/R]
The Institute for Supply Management released its report on business activity in the manufacturing sector in the month of December on Wednesday, showing that activity in the sector expanded after contracting in the previous month. The report showed that the purchasing managers'' index rose to 51.4 in December from 49.5 in November, with a reading above 50 indicating growth in the sector. Economists had expected a more modest increase by the index to 50.0. The increase by the index was partly due to an expansion in new orders and production, with the new orders index rising to 52.1 in December from 48.7 in November while the production index rose to 51.8 from 48.5. At the same time, the report showed continued contraction in employment, although the employment index edged up to 49.7 in December from 49.2 in November. The report also showed that the prices index fell to 47.5 in December from 53.5 in November, indicating a reduction in prices.

[R]Construction spending fell 0.2% in November.[/R]
Wednesday morning, the Department of Commerce released its report on construction spending in the month of November. The report showed that construction spending fell less than economists had been expecting. The report showed that construction spending fell 0.2 percent to an annual rate of $1,184.1 billion in November from the revised October estimate of $1,186.7 billion. Economists had been expecting spending to fall 0.6 percent. Despite the modest decrease in November, the Commerce Department noted that construction spending for the month is 0.1 percent above the November 2005 estimate of $1,183.1 billion. The modest decrease in November came as a decrease in spending on private construction more than offset an increase in spending on public construction. The report showed that private construction spending fell 0.6 percent in November, as spending on residential construction fell 1.6 percent. At the same time, public construction rose 1.0 percent in November, reflecting a 2.3 percent increase in spending on educational construction.


[R]10:30AM NY - 9:00PM Mumbai - The Sensex advanced 0.5% to an all-time high on large-cap rally.[/R]
The Sensex on BSE finished 72.68 points, or 0.52% higher at 14,024.49. The market-breadth was strong with 1,695 shares that advanced on BSE, and 933 that declined. Only 64 shares were unchanged. Of the 30 stocks in the Sensex, 20 advanced while the rest declined. The turnover on BSE was Rs 4,286 crore higher than Rs 3,381 crore on Tuesday while the turnover on NSE was Rs 8,154.36 crore, much higher than Rs 5,938.27 crore on Tuesday.

Economic news

India is highly likely to buy 2.5 million tons a year of liquefied natural gas from Australia in a deal of $12.5 billion over the next 25 years in an effort to secure supplies as demand in Asia grows, government and company officials announced on Wednesday.

Hutch Essar may become the target of a third bidder, Verizon Communications from the U.S. joining the list of potential buyers including Vodafone Group of UK and Reliance Communications of India and telecom operators from Egypt, Qatar and Malaysia. Private sources have indicated that the company prefers to buy out its current majority partner. The Essar Group has increased its stake from 18% to 33% in the last two years and is rumored to work on bank loans of between $10 billion and $12 billion. Chinese billionaire Li Ka Shing own 67% of the company and values the company higher than $20 billion.

Real estate developer, DLF has started the procedure for filing an initial public offering after pulling a planned issue last year. The sale of 10.2% of the company could raise more than $2 billion.

In trade today

Unitech was the most-active stock with a turnover of Rs 149 crore followed by Satyam and Development Corporation Bank.

Advancers

Bajaj Auto led the advancers, gaining 3.85% to Rs 2,844. The company had posted 24% increase in sales for December 2006 on Monday. Tata Motors gained 1.22% to Rs 941.25, as its vehicle sales advanced 37% in December 2006.

Ranbaxy Laboratories advanced 3.80% to Rs 413.50 on the its alliance with Ipca Laboratories which received US Food and Drug Administration approval to sell atenolol tablets in the United States.

IT stocks drew a lot of attention, as third-quarter results are expected to be strong. Infosys gained 1.85% to Rs 2,315, TCS was 2.30% higher to Rs 1,277.25 and Wipro added 1.06% to Rs 618. Infosys is the first to announce its earnings report on January 11 2007. Satyam Computers also gained 1.31% to Rs 515.25, as a block deal of 14.30 lakh shares was made on BSE in early trade, at Rs 512.50 per share.

Gujarat Ambuja Cements advanced 0.52% to Rs 144.95. On Tuesday the company announced that cement shipments for the year ending December 2006 advanced 11.3%. Engineering and construction firm L&T also gained 1.10% to Rs 1,475, on order valued at Rs 418 crore from the Abu Dhabi Water & Electricity Authority for the construction of six major electrical substations in Abu Dhabi. Index heavy Reliance Industries edged 0.34% higher to Rs 1,286 on 4.86 lakh shares.

Decliners

Hindustan Lever led the decline, down 1.94% to Rs 212.25, on 9.06 lakh shares. Tata Steel shed 1.55% to Rs 471, Hero Honda was down 1.55% to Rs 772 and ITC lost 0.90% to Rs 175.25.

Cement large-cap ACC shed 1.23% to Rs 1,079, as the company posted a weaker-than-expected 3.1% growth in cement dispatches for the month just gone by. Other decliners included ITC and HDFC nearly 1% lower to Rs 175 and Rs 1,607, respectively.


[R]10:00AM NY – 3:00PM London – FTSE 100 was nearly flat on weak miners and banks.[/R]

The FTSE 100 was trading 5 points, 0.1%, higher at 6,315.9 in the late afternoon trading.

Advancers

In the UK, financials advanced after positive broker comment from UBS. Royal Bank of Scotland advanced 1.8% while Northern Rock and Alliance & Leicester both gained 1.4%. UBS also made a comment over the retail sector, noting that recent reports from non-listed companies have performed better than expected

Tobacco stocks rebounded after their decline on Tuesday by news that the government is considering lifting the legal smoking age from 16 to 18. British American Tobacco added 1.4% and Imperial Tobacco advanced by 0.9%.

Among the mid-cap stocks, Majestic Wine rose 0.4% after it posted a 4.4% rise in UK like-for-like sales over the Christmas period.

Decliners

Profit taking hit miners. Xstrata lost 4.6%, Vedanta Resources fell 4.5% and Antofagasta was down 5.2%. Drax Group, which owns the biggest coal-fired power station in Europe, lost 3.7% on weaker power prices and a mild winter in the UK.

Stocks trading ex-dividend also impacted the market negatively with Topps Tiles losing 2.7%, WH Smith down 1.5% and Dairy Crest Group lower by 2.3%.

Irish building materials group CRH said that it anticipates another record year of growth, despite the impact of the tough US housing market. CRH lost 1.40%.


[R]9:30AM NY – Market futures point a sharply higher opening in New York trading.[/R]
Futures trading indicate higher opening. Nasdaq futures indicate index to open up 8 points, S&P to open up 11 points and Dow to open up 75 points.

Wal-Mart ((WMT)) December same store sales rose 1.6%, higher than forecast of 1%. The company is reported to be planning flexible work assignment for its 1.3 million part time workers to match with store traffic.

Home Depot ((HD)) reported that the company and Bob Nardelli have mutually agreed to terminate his position as CEO, chairman and president of the company effective immediately. Mr. Nardelli will receive $210 million severance pay. Mr. Nardelli’s pay has been a constant source of friction between company and investors.

Lennar ((LEN)) warned that it may take write down between $400 million and $500 million in the forth quarter. The company CEO also said that he does not expect the current softness in the home building market to end soon.

Amazon.com ((AMZN)), Internet based retailer, was trading lower in the pre-market trading on downgrade to ‘sell’ from ‘hold’ from Citigroup.


[R]7:30 AM Asian markets close mixed with HK and Singapore higher.[/R]
Asian markets finished mixed on Wednesday. The Hong Kong Hang Seng Index closed the day 0.5% higher at 20,413. Large-caps which underperformed last year caught up. CKI Holdings, the biggest large-cap decliner last year, advanced 5%, and Cosco Pacific added 4%. Chinese auto manufacturers surged on expectations for M&A in the sector. Brilliance China Auto gained 15%, Dongfeng Group was up 10% and Geely Auto rose 4.9%.

Singapore Straits Times Index gained 1.7% to close at 3,038, a record high. The most active stock for the third consecutive session was Genting International, which advanced 20.7%. South Korean Kospi Index shed 1.8% to 1,409 as some brokerages reduced their fourth-quarter earnings forecasts for Samsung Electronics, which fell 2.2% and Hyundai Engineering & Construction also shed 3.9%.

In Australia, profit-taking brought shares down again, resulting in a swing of early gains as participants await direction from US markets and the London Metal Exchange. Profit-taking affected banks, insurers, property trusts, retailers and miners. Woodside Petroleum dipped 1.6% and Santos shed 1% on news of temporary shutdowns in response to Cyclone Isobel. BHP Billiton retreated 0.2% and Rio Tinto declined 0.3%.

Thailand SET Index plunged 3% to 659. Stocks tumbled 3.8% as a string of bombings over New Year in Bangkok further shook investor confidence.


[R]6:30 AM European markets gain slightly Wednesday on profit-taking.[/R]
European markets were higher on Wednesday. By mid morning, FTSE 100 in London edged 0.1% lower to 6,306.8, Frankfurt Xetra Dax advanced 0.1% higher at 6,685.56, while the CAC 40 in Paris moved fractionally higher to 5,619.35.

Advancers

In Switzerland ABB, an engineering company, added 2.3%, while logistics firm Kuehne & Nagel added 2.7 %, and private bank Julius Baer gained 1.9%.

Another Swiss company, Richemont, luxury goods retailer and watchmaker, and rival Swatch, both gained. Data published shortly before Christmas showed Swiss watch exports had increased by 13% in November, while growth over the 12 months to the end of November was 12.7%. Shares in Richemont, owner of the Cartier brand, advanced 2%, while Swatch, the biggest watchmaker in the world, gained 1.2%.

The financials were buoyed by recent market performances and helped boost many European bourses from early losses. UBS, the Swiss investment bank, gained 2.3%, Alpha Bank in Greece rose 1.6% and Intesa Sanpaolo, the newly-merged Italian bank, rose 1.4%.

Peugeot gained 1.7% after Exane BNP Paribas lifted its price target on the the French carmaker.

Decliners

Miners were among the worst hit by profit taking, while industrial metals groups were also lower. Arcelor Mittal was down 1.1%, while ThyssenKrupp declined 1.8%.

Gold and oil

Crude oil declined below $61 a barrel in New York as mild weather in the U.S. limited heating demand and traders speculated that fuel inventories rose last week. Crude oil for February delivery fell 84 cents, or 1.4%, to $60.21 a barrel on the New York Mercantile Exchange and traded at $60.30 a barrel at 11:46 in early trade in London. Brent crude traded at $60.06 on the London-based ICE Futures exchange.

Gold for February delivery advanced $5.20, or 0.8%, to $643.20 an ounce on the New York Mercantile Exchange.

Currencies

The dollar on Wednesday advanced slightly against the euro which had started 2007 up against the U.S. currency in thin trading. The 13-nation European currency purchased $1.3274, a slight slip from $1.3276 in late trading in New York on Tuesday. The British pound also shed a little to the dollar, trading at $1.9637, down from $1.9729. The dollar gained on the Japanese yen to 119.24 yen from 118.85 yen late Tuesday.