U.S. Market Attempts Recovery

Elena
30 May, 2007
New York City

U.S. market averages recovered from earlier weakness to trade mixed. Investors shrugged off a heavy sell-off in China, sparked by a tripling of taxes on stock trades. The Dow traded lower, pressured by Merck & Co., down 2%, Intel, down 1.5%, and Pfizer, falling 1%. Caterpillar helped limit losses, posting a gain of 2.9% after rival Joy Global issued an upbeat guidance. In the tech sector, IBM advanced 0.6% and Microsoft added 0.3%.

[R]11:30AM Market averages turned narrowly mixed.[/R]

U.S. market averages recovered from earlier weakness to trade mixed. Investors shrugged off a heavy sell-off in China, sparked by a tripling of taxes on stock trades. The Dow traded lower, pressured by Merck & Co. ((MRK)), down 2%, Intel ((INTC)), down 1.5%, and Pfizer ((PFE)), falling 1%. Caterpillar ((CAT)) helped limit losses, posting a gain of 2.9% after rival Joy Global issued an upbeat guidance. In the tech sector, IBM ((IBM)) advanced 0.6% and Microsoft ((MSFT)) added 0.3%.

By sector, metals miners traded mixed. Eldorado Gold Corp ((EGO)) lost 1.8%, while Freeport McMoRan Copper and Gold ((FCX)) advanced 2%.Oil services, real estate investment trusts and financials moved to the upside, while semiconductors, telecoms and transportation stocks declined. Energy stocks benefited from an increase by the price of oil. Crude for July delivery added 35 cents to $63.50 a barrel on bargain hunting. Among semiconductor stocks, Marvell Technology ((MRVL)) dropped 2.5% and Teradyne ((TER)) lost 1.7% .

Among the most notable gainers, Coldwater Creek ((CWTR)), women's apparel and accessories retailer, climbed 15.7% on better-than-expected Q1 earnings. At midday, the Dow Jones industrial average was down 3.17, or 0.02%, at 13,518.17, after falling about 60 points after the open. The Standard & Poor's 500 index rose 0.28, or 0.02%, to 1,518.39, and the Nasdaq composite index dropped 2.46, or 0.10%, to 2,569.60. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.86% from 4.88% late Tuesday.


[R]9:45AM U.S. stocks opened notably down amid Chinese weakness and ahead of Fed’s minutes.[/R]

Wall Street saw a weak opening on Wednesday, pressured by steep declines in the Chinese stock market sparked by a tripling of taxes on stock trades. Investors were also awaiting the Fed Reserve''s minutes, expected to indicate a rate cut in the near term, rather than a rate hike. In corporate news, ESpeed Inc. ((ESPD)), a publicly owned electronic trading house, said it is buying BGC Partners in a $1.3 billion deal. Shares of ESpeed added 1.6%.

On the earnings news front, women''s clothing and accessories retailer Coldwater Creek ((CTWR)) climbed 14% after reporting 4% increase in Q1 profit, lifted by strong demand for spring clothing. Coldwater Creek earned $12 million, or 13 cents per share, compared with $11.6 million, or 12 cents per share a year ago, beating estimates of 8 cents a share. Revenue surged 31% to $281.3 million. Bookseller Borders Group dropped 4.3% after it reported a wider Q1 loss, citing weaker sales.

AT&T ((T)) led the telecom sector higher, posting a gain of 0.7%. At the same time, Qualcomm ((QCOM)) fell 2% and Alcatel-Lucent ((ALU)) dropped 1.4% as shares of most equipment vendors moved lower. In the first hour of trading, the Dow Jones industrial average fell 38.93, or 0.29%, to 13,482.41. The Standard & Poor''s 500 index was down 4.06, or 0.27%, at 1,514.05, and the Nasdaq composite index dropped 12.30, or 0.48%, to 2,559.76. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.85% from 4.88% late Tuesday.


[R]9:30AM FTSE 100 trades lower in mid-day trading Wednesday on concerns relating to China.[/R]

In London, in mid-day trading, the benchmark index FTSE 100 was down by 1% at 6,543.8.

Advancers

There are very few advancers in mid-day trading on Wednesday. Shares in the tobacco sector and real estate are in demand. Imperial Tobacco advanced 1.8%, Land Securities is up 1.6% and British Land is 0.9% higher.

Decliners

Stocks trading without the latest dividend rights lead the decliners. Resolution fell 3.1%, while Associated British Foods gave up 1.6% and Marks & Spencer was down 1.4%.

British Energy shares lost 2.5 % after the British government said it planned to sell a 25% stake in the group, reducing its holding in the nuclear power company to around 39%.

Pharmaceutical company GlaxoSmithKline shed 2.5% after Merrill Lynch cut its recommendation on the stock from neutral to sell.

Shares in Investec were down 2.4% after the investment bank agreed to buy specialist mortgage lender Kensington, which slipped 0.2%.


[R]9:00AM U.S. stock futures dropped, reflecting plunge in Chinese market.[/R]

U.S. stock futures moved sharply lower on Wednesday, reflecting a plunge in Chinese stocks and cautiousness ahead of the Fed Reserve''s release of minutes from its latest meeting. The main Shanghai Composite Index dropped 6.5% after Beijing tripled a tax on stock trading. FOMC minutes are expected to indicate a rate cut by the end of the year rather than a rate hike.

In corporate news, International Business Machines ((IBM)) said it repurchased $12.5 billion of common stock through accelerated share-buyback agreements. IBM said it bought 118.8 million, or 8%, of its shares for an initial price of $105.18 each, under its $15 billion buyback authorization. IBM also said it expects 2007 earnings per share to increase 13% to 14%, up from its previous estimate of 11%. The stock fell 0.5% in pre-market trading. Among other pre-market highlights, Pulte Homes ((PHM)) said late Tuesday it will cut about 16% of its work force, or about 1,900 jobs.

Coca-Cola ((KO)) was upgraded to buy from hold at Citigroup. The broker lifted its price target by $9 to $59. In deal news, technology accessory distributor CDW Corp. ((CDWC)) agreed be bought by a private equity company for $7.3 billion. eSpeed Inc., a publicly owned electronic trading house, said it is buying BGC Partners in a $1.3 billion deal. Dow Jones industrial futures expiring in June fell 63, or 0.47%, to 13,495. Standard & Poor''s 500 index futures fell 7.70, or 0.51%, to 1,514.80. Nasdaq 100 index futures dropped 11.25, or 0.59%, to 1,895.25.


[R]8:30AM Asian markets end lower Wednesday after China’s decision to triple duties on stock trades.[/R]

Asian markets finished lower Wednesday. The Shanghai Composite Index finished down 6.5% at 4,053.09. Premier Wen Jiabao cabinet ordered China''s Ministry of Finance early Wednesday to triple a trading transaction charge, called the stamp tax, to 0.3% from 0.1%. In response, Chinese stocks marked a broad-based decline in heavy trading. Investors fear that the current measures may to lead to a broad decline, as the measures may hurt the newly emergent middle-class in China. Foreigners are largely barred from trading in the country as the quota for foreign investment has only recently been raised to $30 billion from $ 10 billion. That leads to worries that a big setback in prices could hurt consumer spending and weaken economic growth.

Elsewhere in the region, Japanese Nikkei 225 Average closed 0.5% lower, losing 84.30 points to 17,631.56. Hong Kong Hang Seng Index pared sharper losses in early session to end 0.9% lower, losing 175.83 points to 20,253.17. South Korean Kospi Index advanced 0.1% to a record 1,662.72, Australian S&P/ASX 200 lost 1.2% to 6,243.4 and New Zealand NZX-50 shed 0.7% to 4,279.62. Taiwan Weighted Price Index retreated 0.4% and Singapore Straits Times Index recovered from sharp losses mid-session to end 0.5% lower. Thailand SET Index added 0.9%.


[R]8:15AM CDW announced after the Bell Tuesday that it agreed to be bought by Madison Dearborn Partners for $7.3 B.[/R]

CDW ((CDWC)) announced after the closing bell on Tuesday that it agreed to be acquired by private-equity firm Madison Dearborn Partners in a cash deal worth $7.3 billion. Under terms of the deal, Madison Dearborn will pay $87.75 a share for the technology products reseller. The transaction is 16.1% premium over CDW''s May 25 closing price of $75.56 a share. Morgan Stanley will represent CDW and will solicit other proposals during the next 30 days. Reports that CDW was in talks with Madison Dearborn sent CDW''s shares up 10% to their Tuesday close of $83.11. The stock traded up 3.35 in pre-opening hours.


[R]7:30AM NY-6:30PM Mumbai Sensex ends lower on late-hour drop in IT stocks.[/R]

The Sensex on BSE finished Wednesday 96.83 points, or 0.67%, lower at 14,411.38.

The market-breadth was negative with three decliners for every two advancers. As there were 991 stocks which advanced, 1,594 stocks declined and 67 stocks remained unchanged. Of the 30 stocks in the Sensex, only seven advanced, while the rest declined. The turnover on BSE was Rs 4,737 crore, compared with Rs 4,605.18 crore on Tuesday. On NSE, the turnover was Rs 11,123.09 crore, much higher than Rs 9,340.58 crore on Tuesday.

Economic news

The oldest stock exchange in India has joined the ranks of eighteen stocks markets around the world with more than $1 trillion in valuations. After China and Russia, India has joined the ranks of trillion dollar market valuation on steady flow of new companies listed on the exchange, flow of more than $40 billion of foreign portfolio investing and sustained high economic growth never since 1947. Corporate earnings listed in BSE 500 Index have gained more than 30% annually for the last five years.

The rupee ended yesterday at its highest level in nine years on speculation that the size of capital inflows will offset the Reserve Bank of India’s efforts to curb the surge of the rupee.

India will buy only 300,000 tons of wheat, less than one million tons expected in the earlier tenders in the international markets. Higher than expected quoted wheat prices led government to revise the purchase to a lower level.

Trading highlights

New issue MIC Electronics was the most active stock with a turnover of Rs 492.60 crore followed by Larsen & Toubro and Orbit Corp. MIC Electronics ended at Rs 335.65 on BSE, a nearly 124% over its IPO price of Rs 150 per share.

Advancers

Larsen & Toubro rallied over 7% to Rs 1,994. L&T hit a record high of Rs 2,009, in intra-day trade. It posted 50% increase in net profit to Rs 701 crore in fourth-quarter of fiscal 2007 from Rs 467 crore in the comparable period a year earlier. Sales advanced 35.01% to Rs 6,248.24 crore against Rs 4,627.87 crore in previous period.

Hero Honda surged 1.7% to Rs 697, and HDFC spurted over 1% to Rs 1,833. Bajaj Auto settled 0.4% higher at Rs 2,201, while Gujarat Ambuja added 0.3% to Rs 115.

Decliners

Reliance Communications led the decline, down 3.8% to Rs 501 while Reliance Energy tumbled 3.7% Rs 535. HDFC Bank shed 3.5% to Rs 1,105.

Engineering large-cap BHEL reached intra-day record of Rs 2,922.50, dipped on profit taking and lost 3% to Rs 2,768. The company reported 33% increase in net profit in fourth-quarter of fiscal 2007 to Rs 1,150.37 crore from Rs 867.95 crore in the comparable period a year earlier. Sales rose to Rs 6,919.68 crore, from Rs 5,515.69 crore a year earlier.

Hindalco dropped 2.7% to Rs 141. Infosys slipped 2.4% to Rs 1,904. Maruti and Hindustan Lever shed around 2% each to Rs 803 and Rs 199, respectively. TCS and Satyam lost 1.5% each to Rs 1,214 and Rs 465, respectively, while ICICI Bank dropped 1% to Rs 911. Index heavy Reliance Industries declined 0.1% to Rs 1,755 on 8.54 lakh shares.


[R]6:30AM European markets decline Wednesday, reacting to Chinese economic measures.[/R]

European markets were lower on Wednesday. By mid-day trading, Frankfurt Xetra Dax shed 0.8% to 7,721.72, the CAC 40 in Paris lost 0.8% to 6,010.57 and London FTSE 100 slipped 0.7% to 6,558.2. National benchmarks fell in all 17 western European markets that were open.

Advancers

British Energy Group, the U.K. biggest electricity generator, gained 1.5%. The company posted an 8.1% rise in full-year profit to 465 million pounds, or $921 million.

LogicaCMG rallied 4.3%. Permira Advisers LLP, Europe largest leveraged buyout fund, is examining a potential takeover bid for the U.K. company following news that Martin Read will step down as chief executive officer.

Unibail Holding, largest real estate investment trust in France, added 1.7%. Air France-KLM, the biggest European airline, climbed 1.5%. The companies are due to join the CAC 40 Index on June 18.

Decliners

Decliners with the greatest exposure to China included luxury goods groups. Richemont, the Swiss watch maker whose strong first-quarter profit growth was partly thanks to consumer strength in China, fell 1.4%. Christian Dior shed 1.5%, while LVMH, which is also targeting growth in China, fell 1.8%.

Spanish construction group FCC fell 2.4% over disappointment that its Realia property joint venture prices its initial public offering at 8.80 euros, only midway between the indicative range of 7.90euros to 9.70 euros.

Shares of Statoil lost 1.5%. Norway largest oil and gas producer said first-quarter profit fell 28 % to $1.27 billion on lower energy prices. GlaxoSmithKline declined 2.1%, its lowest in two years, after Merrill Lynch reduced its recommendation for the world second-largest drugmaker, to sell from neutral.

Commodities

Crude oil rose in New York before a report that may show U.S. refinery production will pick up too late to satisfy peak demand. An attack on a Nigerian pipeline helped push prices higher. Crude oil for July delivery was at $63.55 a barrel, up 40 cents, in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for July settlement was at $68.39 a barrel, up 29 cents, today on the London-based ICE Futures exchange.

Gold for immediate delivery in London gained 60 cents, or 0.1%, to $657.45 an ounce, while silver dropped 2.5 cents to $13.16 an ounce.

Currencies

The euro was down slightly against the U.S. dollar Wednesday following an unexpected rise in U.S. consumer confidence. The euro bought $1.3434 in morning European trading, down from $1.3453 in New York late Tuesday. The British pound slipped to $1.9783 from $1.9800, while the dollar edged up to 121.59 Japanese yen from 121.55 yen.