Nasdaq Down 2.4%, Last hour Sell-off, Gold Up

123jump.com Staff
08 Jan, 2008
New York City

U.S. stocks fell sharply in the last hour of trading on the credit market weakness and fear of falling consumer speding. consumer sensitive stocks, financials, and retailers dropped sharply in the final 30 minutes of trading. AT&T chief said more customers are late in paying bills, that comment and rising gold and oil hurt the market averages. Nasdaq dropped 2.4%. Gold jumped $18.30 and raced to a record high.

[R]4:00PM New York, 10:00PM Frankfurt, 8:00AM next day Sydney[/R]

European Markets

In London FTSE 100 Index closed higher 20.80 or 0.33% to 6,356.50, in Paris CAC 40 Index increased 42.84 or 0.79% to close at 5,495.67 and in Frankfurt DAX index higher 32.82 or 0.42% to close at 7,849.99. In Zurich trading SMI closed higher 205.82 or 2.54% to close at 8,316.39.

North American Markets indexes

Dow Jones Industrial Average closed down 238.42 or 1.86% to a close of 12,589.07, S&P 500 closed down 25.99 or 1.84% to 1,390.19, and Nasdaq Composite Index traded down 58.95 or 2.36% to a close of 2,440.51.

In Toronto TSX Composite lost 77.12 or 0.57% to close at 13,541.75.

Of the 30 stocks in Dow Jones Industrial Average, 6 closed higher, 24 closed lower, and none was unchanged.

Alcoa led the decliners in the index for the second day in a row with a loss of 6.4% followed by declines in AT&T of 5.5%, in Hewlett Packard of 5.5%, in JP Morgan Chase of 4%, and in Citigroup of 3.9%.

Citigroup has steadily declined in the last six months and reached a six-year low.

Merck led the gainers in the index with a rise of 3% followed by increases in Altria Group of 1.4%, in Pfizer of 1.03%, in Coca Cola of 0.4%, in Procter & Gamble of 0.3%, and in Johnson & Johnson of 0.12%.

Of the stocks in S&P 500, 70 closed higher, 430 fell, and none were unchanged.

One hundred and sixty eight stocks fell more than 3% and six rose more than 3%.

Countrywide Financial led the decliners in the index with a loss of 29% followed by losses in MBIA Inc of 21%, in E*trade Financial of 20.50%, in Ambac Financial of 17%, and in Supervalu of 16.6%.

KB Home fell 9% after it reported larger than expected loss on a sharply lower revenue and taking a charge of nearly $500 million.

King Pharmaceuticals led the gainers in the index with a rise of 16.4% followed by increases in Starbucks of 8%, in Wyeth of 4.95%, in Schering Plough of 4%, in Cardinal Health of 3.5%, in Merck of 3.00%, and in Amerisource Bergen of 2.9%.

South American Markets Indexes

In Latin Markets Brazil led the gainers in the region with a rise of 2.15% followed by increases in Argentina of 1.77%, in Mexico of 0.41%, and in Peru of 0.17%.

Colombia led the decliners in the region with a fall of 2.2% followed by losses in Chile of 1%.


Asian Markets

In Tokyo Nikkei 225 Index closed higher 28.12 or 0.19% to 14,528.67, in Hong Kong Hang Seng index closed declined 66.59 or 0.25% to 27,112.90, in Australia ASX 200 closed lower 33.50 or 0.54% to close 6,128.10.

In South Korea Kospi Index decreased 4.91 or 0.27% to close at 1,826.23, in Thailand SET index closed higher 3.38 or 0.42% to 811.69, and Indonesia JSE Index edged increased 9.22 or 0.33% to 2,785.63. Sensex index in India closed higher 60.68 or 0.29% to 20,873.33.

Bond Yields decreased on 10-year U.S. bonds to 3.77% and 30-year bonds increased to 4.30%.

[R]Commodities, Metals, and Currencies[/R]

Crude oil rose $1.18 to close at $96.270 per barrel for a front month contract, natural gas increased 6 cents to $7.94 per mBtu, and gasoline futures increased 4.02 cents to close at 247.000 cents per gallon.

Gold increased $18.30 in New York trading to close at $880.30 per ounce, silver closed up 53 cents to $15.815 per ounce, and copper for front month delivery increased 15.75 cents to 329.85 per pound and in London copper futures decreased $3.50 to $6,877.50.

Dollar edged lower against euro to $1.4706 and higher to 108.9050 yen.


[R]2:00PM New York - The founder Howard Schultz returns to Starbucks as chief executive as stock declines 50% and same store sales falter at domestic locations.[/R]

Howard Schultz has bounced back as Starbucks Corp chief executive replacing Jim Donald who has been asked to leave.

Schultz, currently chairman of the leading coffee retailer, immediately pledged to overhaul the business.

Starbucks said Tuesday that this was part of restructuring plan to streamline under-performing domestic stores and cut expenditure on new store openings. Globally, the retailers would continue expanding, however.

Schultz''s return, eight years after his departure (1987 to 2000) was precipitated by a declining domestic sales and the relentless decline in the share price.


In a letter published on the company web site Schultz said, “I am returning to the position of chief executive officer to help our partners build upon our heritage and our special relationship with you, and lead our company into future.”

Not all companies have been turnaround from the return of founders. While Apple has benefited from the return of Steve Jobs but Dell is struggling to regain its footing in a competitive market. Recent appoint of Jerry Yang as a leader of Yahoo is still playing out in a competitive online world.

Starbucks stock has fallen 50% in the last twelve months as its domestic same store sales have been on the decline. During Schultz''s reign as CEO, the stock rose 1,300%.

In the early morning trading on Tuesday, however, Starbucks stock ((SBUX)) gained $1.92 or 10.5% to $20.34. Over the past 52 weeks, Starbucks has traded in the range of $36.61 to $18.

Analysts surveyed by Thomson Financial had targeted a one-year price of $28.69 which may be too high. Since then the economy has been on the skids, consumer spending is likely to fall, and prices of milk and coffee have jumped.

Schultz explained that he''s going to """"fix"""" the internal business at Starbucks, which had become bureaucratic and """"soft"""" under recent leadership. He did not blame the departing CEO for current problems.

Other initiatives will include new products and store designs and improved staff training.

Starbucks also plans to shift some of the money it was going to spend to open new stores in the U.S. to open stores in the international markets.

Starbucks has been struggling in the U.S., as consumers hit by several macro-economic pressures, such as high fuel prices, have reduced spending on small luxuries like expensive coffee.

A cup of Starbucks latte in the U.S. costs more than a gallon of gasoline at pump stations.

Disposable consumer spending is expected to decline as consumers face rising cost of fuel and heating bills, and falling values of homes. December month unemployment rate jumped to 5% after economy created only 1.3 million net new jobs in 2007 sharply lower than 2.3 million in 2006.

Schultz in a letter to partners highlighted that, “Improving the current state of the U.S. business: by giving our store partners better training and tools, launching new products – some of which will have an impact as significant as Frappuccino® products and the Starbucks Card – and introducing new concepts in store design, among other enhancements to the Starbucks Experience. At the same time, we will slow the pace of our U.S. store openings and close a number of underperforming locations, so we can renew our attention on store-level unit economics and be laser-focused on flawless execution.”

Competition also has stiffened for coffee dollars. Dunkin'' Donuts and McDonald''s are ready introducing their own lines of gourmet coffee at cheaper prices than at Starbucks.

Schultz will come face to face with increased competition, and the need to attract new customers and regain old ones.

Schultz will also have to deal with rising prices of coffee, milk and a consumer backlash on rising coffee prices at Starbucks. Starbucks has also suffered from too many stores in less than desirable locations. Starbucks has also come under fire for the lack of cleanliness and rising employee turnover at stores.

A cup of coffee at Starbucks cost at least $1.75 but coffee farmer gets less than 15 cents. When a customer buys a cup of latte, which generally cost $3 a cup, he is also paying for milk that costs nearly $28 a gallon.

Starbucks operates over 15,000 stores worldwide, and has a target to raise that to 40,000 globally.


[R]1:00PM New York, 6:00PM London - U.K home prices rose in December by an annualized 5.2% rate.[/R]

London stock averages gained for the first time in three days led by commodity stocks as metal prices increased.

In London trading FTSE 100 rose 0.33% or 20.80 to 6,356.50.

Of the 102 FTSE Stocks 56 gained, 4 declined, and 5 were unchanged. Smith & Nephew led advancers with a rise of 7.9% followed by BT Group climbing 5.21%.

HBOS’s Halifax House Price Index showed today on the mortgage lender’s Web site that house prices rose after three successive monthly declines by 1.3% in December. The prices were 5.2% higher than a year ago.

Furthermore, fourth quarter prices for 2007 were 0.8% lower compared to those realized in the third quarter.

The average price of a home in the U.K. increased by 11,759 pounds from a year ago to 97,039 pounds.

According to HBOS, the mixed pattern of monthly price rise and falls characterizes a subdued market. Prices are also expected to be flat in 2008.

The British Retail Commission announced today on its Web site that U.K. retail sales rose 0.3% in December 2007 on a same store basis compared to a year ago when sales climbed 2.5%. In addition, the three month trend rate of growth declined 0.8% from 1.8% in November for like-for-like sales, and fell 2.8% from 3.8% for total sales.

Director General of the British Retail Commission Kevin Hawkins said: “This is somewhat worse than we expected and points to a very challenging first half of 2008. Given that full effects of the Bank’s previous increases in interest rates have yet to be felt by many households, retailers and manufacturers alike need a rate cut now-preferably a half point.”

Of the FTSE 100 index shares Smith & Nephew led advancers with a rise of 7.29% followed by gains in BT Group Plc of 5.21%, in Lonmin Plc of 3.72%, in Kazakhmys Plc of 3.4%, and in Rexam Plc of 3.23%.

Commodity stocks also gained as the price of metals soared. BHP Billiton climbed 3.15% and British Energy jumped 2.98%.

Yell Group Plc led a decline of FTSE 100 stocks with a drop of 6.20% followed by losses in Persimmon of 4.89%, in Taylor Wimpey of 4.89%, in First Group Plc of 4.23%, and in BG Group Plc of 3.41%.

Persimmon and Taylor Wimpey and other homebuilders slumped after ABN Amro Holding analyst William Jones cut the earnings forecast for the industry by 19% for 2008 and 30% for 2009. Dresdner Kleinwort also told clients yesterday to dump the homebuilders.

Persimmon is expected to release its earnings and revenue tomorrow.

British Airways fell after EasyJet Plc announced in a statement its loadfactor, or proportion of seats filled, fell 2.2% to 78.9% in December. Other European airlines also declined on the news. British Airways closed down 2.74%.

Bloomberg news reported today Michael Page Incorporated said today that fourth quarter profit rose 38% as a placement of sales and marketing workers and engineers in Europe offset a drop in demand from U.K. banks.

Gross profit climbed 128 million pounds from 93.1 million pounds from a year earlier. In the U.K. profits advanced 16% in the quarter to 45 million pounds.



[R]11:15AM New York – U.S. stocks lost their morning gains as oil and gold climbed. Bear Stearns and Starbucks replace their chiefs.[/R]

Dow Jones Industrial Average gained 34.90 12,861.04, Nasdaq rose 16.50 to 2,516.57, and S&P 500 advanced 8.41 to 1,424.59.

Bear Stearns chief executive James Cayne has stepped down but will hold the position of chairman. The president Alan Schwartz is likely to succeed him as the chief executive.

Bear Stearns stock has declined in the current credit market malaise from the high of $172.61 to the current price just above $76.

Bear Stearns has suffered heavy losses in mortgage securitization and asset management divisions in the last six months.

Starbucks ((SBUX)) stock jumped $2.12 to $20.50 after it said that Jim Dolan the current chief executive will be replaced by the founder Howard Schultz. Schultz will assume the roles of chairman and chief executive.

Circuit City ((CC)) dropped in the morning trading but recovered to trade up 4 cents to $4.25 after it reported same store sales declined 11.4% in December.

KB Home ((KBH)) dropped $1.01 to $17.47 after reporting revenue decline of 31% to $2.07 billion from a year ago and home sold fell 22% to 8,132. The average sale price dropped 12% to $247,800. The company reported a net loss of for the quarter ended November 30 of $772.7 million or $9.99 per share compared to a loss of $49.6 million or 64 cents per share.

KB Home also took a charge of $514.2 million on the loss of deferred tax assets and in a loss of $403.4 million in pre-tax inventories and losses in land options.

National Association of Realtor’s index of pending existing home sales declined at a seasonally adjusted rate of 2.6% in November to 87.6 from the revised level in October of 89.90 and a drop of 19% from a year ago.

Chevron, Exxon Mobil, ConocoPhillips, and Schlumberger jumped higher on elevated crude oil prices.

Oil jumped $1.45 to $96.54 and gold increased $14 to $876.00. Euro traded at $1.4718 near the record level.

[R]9:00AM New York, 7:30PM Mumbai - Sensex kept its upwards charge bucking the regional and global trends.[/R]

Stock markets in India closed flat on Tuesday with the Bombay Stock Market benchmark index Sensex gaining 0.3% or 61 at 20,873.

Of the stocks traded on BSE, 539 shares advanced, 2,404 fell, 23 remained unchanged while.

Among the Sensex index stocks, 16 gained while 14 shares fell.

Turnover on the BSE stood at 11,580 crore rupees while revenue on the National Stock Exchange was at 25,435 crore rupees.

In the broader markets, CNX Nifty index of 50 stocks held up by 0.1% to close at 6,288.

Buying was visible in oil & gas, and information technology shares while selling was visible in metal, healthcare and real estate stocks.

Among the index share, Bharti Airtel, HDFC Bank, Satyam, State Bank of India, Mahindra & Mahindra and Reliance Communication were among the advancers with each gaining more than 1.8%.

Of the CNX 50 index stocks, Suzlon Energy, GlaxosmithKline, ONGC, Infosys Technologies and Wipro Ltd were the leading gainers with each gaining more than 1.4%.

Planning Commission Deputy Chairman Montek Singh Ahluwalia on Tuesday expressed concern that high economic growth over the years had not provided enough benefits to the rural poor.

He expressed a concern that not enough benefits were reaching to a large segment of population. The Planning Commission plans to focus on rural areas in the 11th 5-year plan. He predicted that India can achieve economic growth between 8% and 8.5% in the next five years.

Of the BSE shares Reliance Industries was up 1.05% to 3,047.25 rupees ICICI Bank fell 1.7% to 1,340.05 rupees and Reliance Natural Resources surged 7.2% to 244.15 rupees.

Tata Steel shed 4.2% to 866.95 rupees and Hindalco Industries lost 3.8% to 209 rupees.

Infosys advanced 1.6% to 1,665 rupees and. Wipro rose 1.2% to 489 rupees.

Bharat Heavy Electricals declined 0.6% to 2,494.3 rupees after the company signed a joint venture agreement with NTPC for engineering, procurement and construction business.

Cipla shed 1.3% to 209.15 rupees and Dr. Reddy''s Laboratories lost 1.4% to 702.6 rupees.

Tata Motors slipped 1.6% to 774.2 rupees and Maruti Suzuki India slid 2.4% to 939.65 rupees.


[R]6:00AM New York, 6:00PM Hong Kong – Foreign exchange reserves rose to a record level in Hong Kong.[/R]

Stocks in Hong Kong reversed earlier gains in the session to close lower on lingering worries of a slowdown in the U.S.

In Hong Kong trading Hang Seng index tumbled from a 1.7% rise in the morning session to close down 0.3% or 66.59 at 27,112.90, while the China Enterprises Index of Hong Kong-listed mainland companies gained 0.4% or 68.97 to 15,659.71.

Daily turnover on the main-board was reported at HK$114.9 billion compared to HK$113.5 billion recorded yesterday.

The Hong Kong Monetary Authority announced yesterday that foreign currency reserve assets increased by $2.3 billion from November to record $152.7 billion in December.

The Standard news, an online Hong Kong edition, reported today that Hong Kong Tourism Board chairman James Tien Pei reported today tourist arrivals increased from 25.3 million in 2006 to 28 million in 2007.

Visitors total spending also climbed from HK$119.4 billion in 2006 to a record HK$130 billion in 2007, as visitors spent an average HK$5,100 during each visit compared to HK$4,799 in 2006.

Chinese lenders rallied after China Merchants Bank said it estimated its annual earnings for 2007 will rise 110% to Rmb15 billion based on Chinese accounting.

Industrial and Commercial bank of China rose 0.6% to HK$5.30, Bank of China Communications Company rose 1.2% to HK$10.18.

However, property companies fell on analysts’ assertions that yesterday’s gains in the sector were not warranted. Sun Hung Kai declined 0.6% to HK$168.80, Cheung Kong Holdings Limited plunged 3% to HK$142.60, and Hung Lung Properties fell 2.8% to HK$33.20.

MTR Corp fell 2.4% to HK$34.05, ending a five-session gaining streak.

Exporters also declined on fears of a slowdown in the U.S. Li & Fung fell 3.5% to HK$27.95 and athletic shoemaker Yue Yuen Industrial Holdings Limited tumbled 1.3% to HK$26.50.

China Coal Energy Co Limited soared 2.6% to HK$25.4 after it reported that it planned to issue 1.5 billion shares in a proposed Shanghai listing.

Air China fell 3%t to HK$10.20 after shareholders of China Eastern rejected to sell a 24% stake in the carrier to Singapore Airlines and its holding company controlled by Singapore government Temasek.

Alibaba tumbled 8.1% to HK$23.85 tracking a decline in technology stocks in the U.S.


[R]5:00AM New York, 7:00PM Tokyo – Stocks in Tokyo edged 0.19% higher for the first time in 2008.[/R]

Stocks in Japan gained for the first time this year in volatile trading as investors sought commodity, shipping lines and financial stocks.

In Tokyo trading Nikkei 225 rose 0.19% or 28.12 to 14,528.67, while the broader Topix Index gained 0.74% or 10.35 to 1,403.06.

In the first section of the Tokyo Stock Exchange 9.1 billion shares worth 1.0 trillion yen were traded and in the second section 164.4 million shares valued at 3.0 billion yen changed hands.

Of the Nikkei 225 stocks 133 gained, 81declined, and 11were unchanged. Sumitomo Mitsui Financial Group led advancers with a rise of 6.69% followed by Shimizu Corporation climbing 6.44%.

Other financial stocks rose as well. Mizuho Financial Holdings climbed 5.27%, Mitsubishi UFJ Nicos edged up 5.02% and Resona Holding jumped 3.91%.

The Japan Times online edition reported today that Chairman of the Japan Business Federation Fujio Mitarai said yesterday that Japan economy will pick up in the second quarter buoyed by strong overseas demand.

“The pace of domestic economic expansion will accelerate after spring,” said Mitarai, adding that he believes that Japanese stocks were oversold.

Chairman of the Japan Association of Corporate Executive Masamitsu Sakurai also said at the same conference that the stock market is “overreacting” to uncertainties over the U.S. economy.

Chief economist at JP Morgan Chase & Company Masaaki Kanno said in a report published yesterday that the Bank of Japan will refrain from raising the benchmark interest rate until the fourth quarter. Kanno also revised downward Japan’s projected economic growth for this year from 2.0% to 1.8% for the year starting April 1.

Of the Nikkei 225 index shares Sumitomo Mitsui Financial Group led advancers with a rise of 6.69% followed by gains in Shimizu Corporation of 6.44%, in Nippon Light Metals of 5.98%, in Kawasaki Kisen of 5.52%, and KDDI Corporation of 5.4%.

Shipping lines also gained after Deutsche Bank recommended investors to buy the stocks. Also the Baltic Dry Index, which measures freight charges, rose for the first time in three weeks. Mitsui OSK Lines spiked 3.82% and Mitsui Engineering & Shipbuilding rose 1.01%.

Commodity stocks gained as well. Nippon Light Metal jumped 5.98% and Sumitomo Metal Industries soared 4.67%.

Fanuc Limited led declining Nikkei 225 index shares with a drop of 4.99% followed by losses in NSK Limited of 4.39%, in Okuma Corporation in 4.25%, in Seven I & Holdings of 3.48%, and in Alps Electrical Company Limited of 3.41%.

Exporters slumped after the yen fell from 109.47 to 109.48 against the dollar. Canon Corporation fell 0.20% and Casio Computer dropped 0.85%.

The Nikkei news, online edition, reported today that Hitachi Construction Company might joint venture with a Russian company Techstroycontract Limited to make buckets for excavators. The companies are targeting to produce 3,000 buckets for excavators per year. In addition, the company will start making complete excavators in April 2012.


Asian Markets Roundup

In Tokyo Nikkei 225 Index closed higher 28.12 or 0.19% to 14,528.67, in Hong Kong Hang Seng index closed declined 66.59 or 0.25% to 27,112.90, in Australia ASX 200 closed lower 33.50 or 0.54% to close 6,128.10.

In South Korea Kospi Index decreased 4.91 or 0.27% to close at 1,826.23, in Thailand SET index closed higher 3.38 or 0.42% to 811.69, and Indonesia JSE Index edged increased 9.22 or 0.33% to 2,785.63. Sensex index in India closed higher 60.68 or 0.29% to 20,873.33.


[R]4:00AM New York, 6:00PM Sydney- ASX 200 index declined 0.5% after a fall in commodity prices.[/R]

ASX 200 index lost 0.5% or 33.5 to close at 6,128.10.

The Preliminary market turnover was 1.8 billion worth $4.8 billion, with 509 stocks moving up, 755 moving down, and 347 unchanged.

The most actively traded stock was Gondwana Resources with 229 million shares worth $12.7 million.


Novogen Ltd stock rose 3.7% today after its U.S. unit won approval from the U.S. Food and Drug Administration to proceed with the second round of patient studies on its treatment for burn wounds.

Novogen announced today that its 81 per cent owned US subsidiary company Glycotex, Inc., obtained an active Investigational New Drug Application from the Food and Drug Administration for the start of a phase IIa clinical trial of its lead product candidate GLYC-101, administered topically for the treatment of burn wounds.

The phase IIa human clinical trial to be conducted in the US is randomized double-blind, placebo controlled clinical trial designed to investigate the safety and clinical outcomes of topically applied GLYC-101 compared to placebo in subjects undergoing carbon dioxide laser skin resurfacing.

GLYC-101 has already completed a phase II human clinical trial in Australia for the treatment of chronic venous skin ulcers. Glycotex Inc intends to develop GLYC-101 for a wide range of human wound healing and tissue repair applications including burn wounds, post surgical wounds, diabetic ulcers and chronic venous ulcers.


Xstrata Plc today announced that the 8 million metric tons a year coal production target set by Resource Pacific Holdings Ltd, its target, last week was unattainable and were overly optimistic and lacked technical credibility.

Xstrata cited Resource Pacific''s failure to meet three deadlines for resuming mining at Newpac in New South Wales State.

Resource Pacific last week turned down Xstrata''s $960 million ($846 million) bid for Newpac mine. The same mine is where Resource plans to triple coking coal output.

Xstrata''s offer at $2.85 a share is at 85% premium to last 30-day average price. Resource Pacific last week said the offer was unreasonable and valued its share between $3.56 and $4.09. The coking coal is used in steelmaking. Resource Pacific rose 0.4%.

GrainCorp Ltd''s share rose by 7.5% on the back of expectation of an improvement in crop production following recent rains.

GrainCorp last month indicated that this year''s sorghum crop might be the best in more than five years. GrainCorp controls nearly 50% domestic market in sorghum, used for feeding livestock.

Rival grain companies, AWB Ltd rose 2.7% and ABB Grain Ltd added 2.4%. Australian farmers produced a record harvest of 26.1 million metric tons in fiscal 2004, making the nation the world''s second-largest shipper of the grain.

The Australian dollar closed higher today, buoyed by stronger than expected building approval data.

The Australian dollar traded at $0.8763/70, up from yesterday''s close of $0.8730/35.

Of the ASX 200 index shares, Duet Group led the gainers with a rise of 4.4% followed by increases in Babcock & Brown of 4.3%, in Futuris Corporation limited of 3.8%, in Coca Cola Amatil of 3.3%, and in Queensland Gas of 2.9%.

Of the ASX 200 index stocks Centro Retail Group led the decliners with a fall of 11.2% followed by losses in Sundance Resource of 9.9%, in Perilya Limited of 8%, in Sally Malay Mini of 6.5% and in Emeco Holdings of 4.8%.