New York Closed Lower on Global Decline

123jump.com Staff
05 Mar, 2007
New York City

stocks fell in New York trading, extending their worst weekly slump in four years, led by financial companies on concern that a surge in mortgage-loan defaults is spreading beyond the riskiest creditors. Losses in U.S. stocks were less steep than in Asia and Europe. New Century Financial declined 70% and Fremont General fell 33%. AvalonBay Communities declined 4.1% and Barnes & Noble fell 10%. A measure of U.S. service industry growth in February showed a slowest growth in the last four years.

[R]4:00PM NY; 10:00PM Frankfurt; 2:30AM Mumbai - GLOBAL MARKETS[/R]
Global markets continued its downward decline. Asian markets led the world markets with a steep decline. European markets lost ground and Latin American markets declined as well. Major averages in the U.S. traded lower on worries on housing markets, slow down in economy and corporate earnings.

Yield on 10-year bond closed at 4.481% and the 30-year bond closed at 4.654%.

Gold decreased $4.900 to close at $639.200 a troy ounce, silver lost 19 cents to end at $12.770 a troy ounce and copper declined $87.000 to close at $6013.000 per metric ton.

Oil lost $1.670 to close at $59.970 a barrel and heating oil decreased 4.520 cents to finish at 172.300 cents a gallon. Natural gas advanced 2.3 cents to close at $7.266 per MMBtu. Gasoline went down 5.710 cents to end at 184.470 cents a gallon.

Asian markets closed sharply down with Japanese shares declining for the fifth session in a row, while Hong Kong retreated 4%. The decliners were led by Malaysia with a decrease of 4.72%, Philippines with a loss of 4.54% and Hong Kong with a decline of 4%. There were no advancers. Australia lost 2.30% and India lost 3.7%. The Sensex index in India has lost nearly 15% in the last three weeks of trading.

European markets finished lower for the fifth session in a row, with investors worried about a host of concerns including mortgage lending in the U.S., the strength of the Japanese yen and Chinese stock valuations. The decliners were led by Norway with a decline of 1.89%, Spain with a loss of 1.53% and Switzerland with a decrease of 1.38%. There were no advancers.

Latin America markets finished lower on worries about equity valuations and the pace of global growth. The decliners were led by Argentina with a decrease of 2.68%, Brazil with a decline of 2.60% and Mexico with a loss of 1.60%. There were no advancers. Canada lost 1.29% as investors fled equities for safer havens. Resource stocks led the fall as concerns about Chinese growth hammered commodities, but the bearishness was widespread.

[R]2:30PM NY, U.S. Market Movers[/R]

Altair Nanotechnologies Inc. ((ALTI)), manufacturer of safe, high-performance battery pack systems used in electric and hybrid-electric automobiles and stationary power systems, announced today that global power leader AES Corporation has made a $3 million strategic investment in Altair. Shares went up 12.5%.

Myriad Genetics ((MYGN)) shot 7.4% higher after the company said its Flurizan drug showed the capability of slowing the progression of Alzheimer''s disease during a phase II clinical trial.

Pathmark Stores ((PTMK)) said that Great Atlantic & Pacific Tea planned to buy it for $678.6 million, creating a larger company to compete in the U.S. Northeast. Shares climbed 12.9%.

Barnes & Noble ((BKS)), bookseller, forecast profit and sales for this fiscal year that were well below analysts'' estimates, sent its shares down nearly 10%. The company said that for the current fiscal year, it expected earnings per share in the range of $1.65 per share to $1.80 per share. Including charges for the distribution center closing and legal fees, full-year earnings are expected to be in the range of $1.49 to $1.67 per share. The muted outlook comes even in a year that includes the expected release of J.K. Rowling''s ""Harry Potter & the Deathly Hallows,"" which will go on sale July 21. The company noted that while the release of this book will produce a large sales spike in the second quarter, it will be sold at a deep discount producing very little gross margin.

British Airways ((BAB)) tumbled 5.4%, construction materials firm Kingspan, which dropped 7.2%, and miners including Antofagasta, which eased 2.7%.Shares of British Airways PLC fell on worries that its profit could suffer as a result of a deal designed to open up the lucrative trans-Atlantic aviation market.

Fremont General Corp. ((FMT)) shares fell 31.2% amid worries it might go bankrupt, leading a broad decline among subprime mortgage lenders as the crisis in the sector escalates. The slide came after the largest independent U.S. subprime lender said late Friday that federal prosecutors and securities regulators are examining accounting errors and stock trading.

Home Solutions of America ((HSOA)), provider of recovery and rebuilding services, lowered its yearly guidance, weighed by a sagging home sector, and said its chief operating officer will resign. Shares of Home Solutions plummeted 19.8%. The company said it expects yearly earnings of between 43 cents and 46 cents. Previously, the company said it expected earnings between 56 cents and 60 cents. The company said it expects fourth-quarter earnings of 5 cents to 7 cents per share.

Memory Pharmaceuticals ((MEMY)) shares fell 31.6% after the biotech drug maker said results of a clinical study for one of its drugs to treat bipolar mania failed to show significant effectiveness. Memory Pharmaceuticals shares fell 97 cents, or 31%, to $2.16 in afternoon trading on the Nasdaq at more than double their average volume.

Milacron ((MZ)) shares slumped 7.9% after the New York Stock Exchange halted trading of its subpenny eligible securities, including its common stock, because the trading system doesn''t accommodate transactions in fractions of a cent. Shares of the Cincinnati plastics processing company continue to trade on the Nasdaq and NYSE Arca exchanges, Milacron said.

OM Group Inc. ((OMG)), producer of metal-based specialty chemicals, said that its fourth-quarter net income increased to $56.8 million, or $1.93 per share, compared with $11.6 million, or 40 cents per share a year ago. On a continuing operations basis posted a loss of 58 cents per share. Net sales climbed to $172.1 million versus $151.5 million in the same period a year earlier. Shares fell 7.4%.

Palm Inc. ((PALM)) went lower amid rumors that Nokia will purchase it. Palm was off 8.8%, and Nokia was down 0.1%.

[R]1:00PM European markets finished lower for a fifth consecutive session.[/R]
European stocks finished a volatile trading session in the red for a fifth day in a row. Monday losses came on the back of U.S. mortgage lending concerns, rallying Japanese yen and Chinese stock valuations. The yen climbed 0.6% on the U.S. dollar, 1.2% on the euro and 1.7% on the British pound. The most notable losers included British Airways which slipped 6.6%, construction materials firm Kingspan, down 7.2%, and miner Antofagast, falling 2.7%. However, there were stocks moving to the upside. Countrywide rose 3.5% after Apollo Management agreed to buy the real estate chain''s shares for 1 billion pounds. Shares in the world''s third-largest bank, HSBC Holdings added 1.1% after posting a 5% profit rise in 2006 and lifting its dividend by 11%. The German DAX 30 dropped 1% at 6,534.57, the French CAC 40 fell 0.7% at 5,385.03 and the U.K. FTSE 100 lost 0.9% at 6,058.70.


[R]11:30AM Stock markets recovered from sharp declines. The Dow bounced into the positive.[/R]
U.S. market averages gained some ground after the initial sharp decline. The Dow bounced into the positive territory, helped by technology socks. Blue-chip stocks were led higher by Hewlett-Packard ((HPQ)) and IBM ((IBM)), each rising over 1%. Coca-Cola ((KO)) was another notable gainer on the Dow with its shares moving up 1.4%. However, the broader market remained below the flat line amid concerns in the subprime mortgage market and global markets jitters. Fremont General ((FMT)) plunged 20.4% after the company said it plans to sell its sub-prime residential real estate lending operations. Housing stocks were under pressure throughout the morning session amid continuous concerns about the outlook for the housing market. Meritage Homes ((MTH)) and Beazer Homes ((BZH)) were notable decliners, falling 5% and 4%, respectively. The disk drive, computer hardware, and brokerage sectors also traded in the red.

On the economic news front, the Institute for Supply Management said that the nation''s service sector expanded at a slower pace than analysts expected. The ISM index gained only 54.3% in February, compared to expectations of 57% increase. In late morning trading, the Dow Jones industrial average was up 56.56, or 0.47%, at 12,170.55, having fallen 75 in earlier trading. The Standard & Poor''s 500 index was up 2.79, or 0.20%, at 1,389.96, and the Nasdaq composite index rose 2.12, or 0.09%, to 2,370.12. Bonds were little changed, with the yield on the benchmark 10-year Treasury note at 4.50%, the same as late Friday.

[R]U.S. service sector growth slowed more than expected in February.[/R]
Monday morning, the Institute for Supply Management released its report on business activity in the services sector in the month of February, showing that the pace of growth in the sector slowed more than economists had been expecting. The ISM said that its index of activity in the sector fell to 54.3 in February from 59.0 in January, although a reading of 50 or above still indicates growth in the sector. Economists had expected a more modest decline to a reading of 57.5. The bigger than expected slowdown in the pace of growth in the sector was partly due to slower new orders growth, as the new orders index fell to 54.8 in February from 55.4 in January. At the same time, the report also showed a faster pace of employment expansion, with the employment index rising to 52.2 from 51.7 in the previous month. Additionally, the report showed a slowdown in the pace of price growth, as the prices index slipped to 53.8 in February from 55.2 in January.


[R]9:45AM U.S. stock markets opened sharply lower amid concerns about the sub-prime mortgage market.[/R]
Wall Street started trading sharply lower, reflecting rally in the Japanese yen, weakness across Asian and European markets, and growing concerns in the subprime mortgage market. Sub-prime lender New Century Financial ((NEW)) slipped 57% after announcing that it is under investigation by federal regulators. Rival Fremont General ((FMT)) slid 19% after the company said it will sell its subprime lending business after a proposed cease-and-desist order from the Federal Deposit Insurance Corp. HSBC Holdings plc ((HBC)) erased earlier losses to gain nearly 1%. The world’s third-biggest bank said it will take a charge of $10.57 billion, mostly on the bad loans in the subprime sector. It also reported a 5% annual profit increase on emerging markets growth and lifted its dividend.

The Dow was led to the downside, by aluminum producer Alcoa ((AA)), down 2.78% and broker J.P.Morgan Chase ((JPM)), down 1.8%. In merger-and-acquisition news, Aeroflex ((ARXX)) agreed to be acquired by private-equity firms General Atlantic and Francisco Partners in a deal worth $1 billion, or $13.50 in cash. The bid represents a 23% premium to Friday''s closing price of $11.01. Aeroflex’s shares surged over 19%. In another deal, Supermarket operator Great Atlantic & Pacific Tea agreed to buy smaller rival Pathmark Stores Inc. ((PTMK)) for $1.3 billion in cash, stock and debt. Shares of Pathmark rose 10.2%.

Among the most notable market movers, Palm Inc. ((PALM)) fell 7.4% in early trading after it rallied 11% Friday on bid speculation. Cirrus Logic Inc. ((CRUS)) gained 1%, recovering from pre-market weakness. The company said it expects to restate results for 2001 through 2006. In the first hour of trading, the Dow Jones industrial average was down 42.86, or 0.35%, at 12,071.24. The Standard & Poor''s 500 index was off 9.00, or 0.65%, at 1,378.17, and the Nasdaq composite index fell 18.51, or 0.78%, to 2,349.49. Bonds were little changed, with the yield on the benchmark 10-year Treasury note at 4.50%, the same as late Friday.


[R]9:30AM London equities tumbled heavily Monday tracking weak global markets.[/R]
The UK market was lower on Monday. By midday the FTSE 100 was 1.5% lower at 6,027.7, a loss of 89 points.

Advancers

There was some upside despite the carnage. HSBC, London largest-listed bank, reported a 5% rise in pre-tax profit of $22.1 billion. Shares in the company traded 0.9% higher. News that Royal & Sun Alliance completed its exit of the US insurance market on time went down well, sending its shares up 1.2%. Countrywide is also strong, up 3.8%, on reports that a bidding war is possible for the largest estate agent in the UK, as private equity group 3i mulls a counter bid.

Decliners

Resource stocks declined sharply in line with entrenched concerns that the sell-off would undermine demand for metals in emerging economies. Copper prices fell by about 4% on commodities exchanges. Vedanta Resources was 3.5 % weaker with Kazakhmys down 3.3% and Xstrata 4% lower.

Weaker crude prices pressured oil large-caps. BP lost 1.5%, Royal Dutch Shell was 0.6% lower. Cairn Energy lost 4.6%, lifting the prospect of its relegation from the large-cap index as tomorrow’s deadline nears.

Man Group, the largest listed hedge fund in the world, saw its shares track global equities markets lower with a 3.6% fall. British Airways, usually a beneficiary of lower crude prices, fell 8% after it told investors the disposal of its BA Connect regional jet business would cost an extra 20 million pounds.


[R]9:15AM Strong yen and heavy losses for New Century Financial weighed on pre-market sentiment.[/R]
U.S. stock futures pointed Monday to a lower opening for another straight session, with the yen posting strength and thus hurting hedge funds. Worries over the health of the U.S. second-biggest subprime lender, New Century Financial ((NEW)), also generated negative sentiment. Company''s stock tumbled 57% in the pre-open after it said it is a target of a federal criminal probe and is likely to breach a major lending covenant with its financial backers. In corporate news, Research in Motion ((RIMM))said its chairman and co-CEO is stepping aside as the BlackBerry maker plans to restate results, cutting earnings by up to $250 million dating to fiscal 2004 because of incorrect dates over stock option grants. S&P 500 futures dropped 10.5 points at 1,375.30 and Nasdaq 100 futures dropped 16.75 points at 1,709.50. Dow industrial futures dropped 90 points.


[R]9:00AM Asian markets ended sharply lower Monday with Japan leading decliners.[/R]
Asian markets finished lower on Monday. Japanese Nikkei 225 Index fell 3.34% to 16,642.25. Exporters fell amid a surge in the yen, which erodes overseas earnings when repatriated to Japan. The dollar fell to 115.70 yen from 116.75 yen late Friday in New York. Canon shed 2.08%, Toyota Motor fell 3.24% and Sony was down 2.92%.

Hong Kong declined 4% to 18,664.88. Investors are worried about the possibility of further falls to come. Shares of HSBC fell 2.5% ahead of its earnings results, which the company issued after the market closed. Among other large-caps, China Mobile dropped 6%, Hutchison Whampoa fell 3% and China Construction Bank sank 4.9%. The Shanghai Composite Index fell 1.6% at 2,783.31.

In South Korea shares also shed 2.71% to 1,376.15. Australian index S&P/ASX 200 index fell 2.3% on heavy volume to close at a seven-week low of 5,642.40. The index is down 6.6% from the last month record high of 6,052.1. BHP Billiton led the decliners, with commodity-price weakness giving an added reason to sell resources. BHP shed 2.9%, Rio Tinto lost 2.5% and Woodside Petroleum closed down 4.2%.

Other major markets also declined. Singapore Straits Times Index finished 3.1% lower, at 2,982.29, the Weighted Price Index of the Taiwan Stock Exchange closed 3.7% lower to 7,344.56 and the Kuala Lumpur Composite Index, ended down 4.6%, at 1,110.69.


[R]8:00AM NY-7:00PM Mumbai Sensex plummets following global sell-off.[/R]
The Sensex on BSE finished 471.09, or 3.66%, lower at 12,415.04. The market-breadth was appalling as there were more than ten decliners for every advancer. For 2,363 stocks that declined, only 220 advanced and 28 were unchanged. Of the 30 stocks in the Sensex, only two advanced, while the rest declined. On NSE, the turnover was Rs 8,550.91 crore, lower than Rs 8,960.58.

Economic news

The rupee declined the most in almost four months as a collapse in global stocks extended to a second week, raising speculation that foreign funds will sell riskier assets including emerging-market shares. The rupee fell 0.6% to Rs 44.5725 against the dollar, the biggest drop since November 13.

Overnight cash rates plunged to 18-month lows on Monday and bond yields advanced after the RBI limited the amount of cash it would absorb in daily market operations and added it would issue market stabilization bonds. From Monday, RBI will absorb a maximum of Rs 30 billion, or $675 million per day at its reverse repurchase auction window.

Trading highlights

Reliance Industries was the most-active stock with a turnover of Rs 234.80 crore followed by Reliance Communications and Apollo Hospitals.

Advancers

Gujarat Ambuja Cements and Grasim Industries were the only two large-cap advancers. Gujarat Ambuja finished 2% higher at Rs 111.9, while Grasim edged 0.2% higher at Rs 2,102.1.

Decliners

Pharmaceutical large-cap Ranbaxy laboratories led the decliners, down 7.6% to Rs 321.1, while cap maker Maruti Udyog declined 6.6% to Rs 779.3, having dipped to a low of Rs 781 earlier.

Other prominent decliners included Dr Reddy’s, down 6.4% to Rs 618.7, Tata Steel declining 5.1% to Rs 420.3, Wipro off 6.3% to Rs 537.2 and L&T shedding 5.5% to Rs 1,383.8.

Index heavy Reliance Industries declined 5.03% to Rs 1,251.15 on a huge 18.50 lakh shares traded on BSE. R Systems International plummeted 17.93% to Rs 133, after the company posted a poor fiscal performance for Q4 ended December 31 2006. Shares of Infosys dropped 4.6% to Rs 2,006.6 and Tata Consultancy slipped 3.8% to Rs 1,162.20.


[R]7:00AM European markets declined Monday on global market weakness.[/R]
European markets were sharply lower on Monday. The German DAX Xetra 30 dropped 2% to 6,472.81, the French CAC 40 fell 1.8% to 5,328.70 and the U.K. FTSE 100 lost 1.4% to 6,031.40.

Advancers

One of the few advancers was HSBC Holdings edging 0.2% higher after reporting a 5% profit rise in 2006 and lifting its dividend by 11%. It took $10.57 billion in charges, mostly on a poor performance out of the U.S.

Countrywide gained 3.5% after Apollo Management late Friday agreed to buy the real estate chain shares for 1 billion pounds. Getaz Romang shares rose 21% after Ireland CRH agreed to buy it for $442 million.

Decliners

Fears that sharp strengthening for the Swiss franc could hurt exports drove Swatch 3.9% lower. Richemont, which owns the Cartier brand, announced a joint venture to design, manufacture and distribute watches under the Ralph Lauren brand. The venture, which aims to launch products in Autumn 2008, will operate at a loss for a few years. Richemont shares fell 2.6%.

Mining and metals stocks were lower as commodity prices fell. Xstrata, the London-listed miner, was down 4%, while steelmaker Arcelor-Mittal shed 4.1%.

Oil and gold

Gold fell to a five-week low on selling by investors holding the precious metal in exchange-traded funds after a slump in Asian and European stocks. Gold for immediate delivery dropped $5.70, or 0.9%, to $636.75 an ounce in early trade in London.

Crude oil fell for a second day on concern global economic growth will slow, reducing fuel consumption. Crude oil for April delivery fell as much as $1.18, or 1.9%, to $60.46 a barrel on the New York Mercantile Exchange. Brent crude dropped as much as $1.29, or 2.1%, to $60.79 a barrel on the ICE Futures exchange in early trade in London.

Currencies

The euro dropped against the dollar on Monday, while the U.S. currency hit a three-month low against the Japanese yen as global stock markets remained nervous following last week sell-off. In morning European trading the euro bought $1.3129, down from $1.3191 late Friday in New York. The British pound fell to $1.9225 from $1.9433 in New York, while the dollar slipped to purchase 115.36 Japanese yen, down from 116.75 on Friday.