Rate-Sensitive Housing Stocks Fall

Elena
11 Jun, 2007
New York City

U.S. stocks turned to choppy trading, as investors restrained from making significant moves before the release of some key economic data later this week, looking for indications of the strength of the economy and the outlook for interest rates. Rate-sensitive housing stocks moved notably lower, with Meritage Homes and Hovnanian Enterprises falling 4.6% and 3.4%, respectively. At the same time, utilities stocks posted considerable strength.

[R]11:30AM U.S. market averages traded in a lackluster fashion.[/R]

U.S. stocks turned to choppy trading, as investors restrained from making significant moves before the release of key economic data later this week, looking for indications of the strength of the economy and the outlook for interest rates.

Rate-sensitive housing stocks moved notably lower, with Meritage Homes ((MTH)) and Hovnanian Enterprises ((HOV)) falling 4.6% and 3.4%, respectively. Airline stocks also moved back to the downside. AirTran ((AAI)) led the sector lower, falling 4% after extending its offer for Midwest Air ((MEH)). Internet, some retail, and real estate investment trusts also declined.

At the same time, utilities stocks posted considerable strength. Along with utilities, pharmaceutical stocks also stood out among gainers. Medivation ((MDVN)) surged 26% on favorable results from its Alzheimer's drug Dimebon. Financial stocks posted gains amid expectations of strong results from brokers Lehman Brothers, Goldman Sachs and Bear Stearns, hue out this week.

Among stocks driven by analyst analysis, Amerigroup ((AGP)) jumped 5.6% after the health care insurer was upgraded at Jefferies to kold from underperform. Shares of H&R Block ((HRB)) climbed 5% after UBS upgraded its rating on the financial services provider to buy from neutral. UBS said the company could become a buyout target after selling its subprime mortgage business.

Among individual stocks, shares of Emcor ((EME)), construction services provider, rose 8% after the company raised its full-year guidance and announced plans for a two-for-one stock split. In late morning trading, the Dow Jones industrial average fell 9.02, or 0.07%, to 13,415.37. The Standard & Poor's 500 index rose 0.44, or 0.03%, to 1,508.11 and the Nasdaq composite index fell 0.59, or 0.02%, to 2,574.13.


[R]9:45AM U.S. stocks opened flat amid rising bond yields.[/R]

Wall Street opened flat, reflecting further advance in bond yields and solid gains in overseas markets. The yield on the Treasury''s 10-year note jumped to 5.16% Monday from 5.11% late Friday.

Among companies in focus, Dow component Johnson & Johnson ((JNJ)) added 0.9% after Credit Suisse upgraded the stock to neutral from underperform, saying that it hah underperformed rival pharmaceuticals by 17% over the last 12 months. International Business Machines ((IBM)) revealed that it is the suitor behind a $746 million offer for Telelogic. IBM''s stock fell 0.5%.

In early trading Monday, the Dow Jones industrial average fell 3.66, or 0.03%, to 13,420.73. The Standard & Poor''s 500 index rose 0.12, or 0.01%, to 1,507.79 and the Nasdaq composite index declined 1.27, or 0.05%to 2,574.81.


[R]9:30AM FTSE 100 is higher at mid-day on Monday on miners, bid speculation.[/R]

The FTSE 100 in London was 0.8% stronger at 6,556.2.

Advancers

Centrica, was in demand, with 2% rise after rumors that Gazprom was poised to make a bid. Other utilities also made gains on hopes for a fresh round of consolidation. Scottish & Southern Energy was 1.7% higher and International Power rose 1.6%.

Barclays rose 2.6% after reports that Atticus Capital, a hedge fund with a 1% stake in Barclays, pressured the UK bank to drop its agreed 64 billion euros offer for ABN.

Miners advanced on stronger metal prices. BHP Billiton was up 1.5%, Lonmin was ahead 1.6%, and Rio Tinto advanced 2.1%.

Decliners

Royal Bank of Scotland, which is leading a rival consortium bidding 71 billion euros for the ABN Amro, eased by 0.2%.

Rexam fell 2.1% after it unveiled the $1.8 billion acquisition of the plastic packaging business of US peer Owens-Illinois.

Vodafone is also lower 1.3%, on reports that the activist group trying to force the mobile company into restructuring its capital structure will fail in its attempt.

Away from the leading shares, office accommodation provider Workspace Group fell sharply 6.7%, after it saw pre-tax profits decline 24%.


[R]8:45AM U.S. stock futures pointed a flat market opening.[/R]

U.S. stock futures pointed to a flat market opening on Monday following a rebound Friday after steep declines on concerns about rising bond yields and global interest rates. Yields on the 10-year Treasury were at 5.12% in early action.

Among companies in focus, Johnson & Johnson ((JNJ)) was upgraded to neutral from underperform by Credit Suisse. General Electric ((GE)) and Microsoft ((MSFT)) failed to reach an agreement over a bid offer for Dow Jones ((DJ)), meant to head off a $5 billion unsolicited bid from News Corp. ((NWS)).

On the deal news front, British packaging company Rexam PLC announced Monday that it agreed to acquire the plastics packaging unit of specialty closure systems maker Owens-Illinois ((OI)) in a cash deal of $1.8 billion. S&P 500 futures edged 2.7 points lower at 1,519.80 and Nasdaq 100 futures declined 3.75 points at 1,930.25. Dow industrial futures fell 18 points.


[R]8:30AM Asia ends higher on Monday with Japanese export stocks leading advance.[/R]

Asian markets finished mostly higher on Monday. The Nikkei Average ended at 17,834, advancing 0.3%. Japanese economy rose 0.8% in the three months ending March 31 compared with the previous quarter, up from an earlier estimate of 0.6% growth.

Nikon Corp. climbed on hopes that corporate spending will remain strong, while Mitsubishi UFJ Financial Group gained 0.7%, tracking gains among Japanese banking shares. Carmakers led the advance. Toyota rose 0.9%, Nissan Motor climbed 2% and Honda Motor gained 2.2%.

Hong Kong Hang Seng Index ended 0.5% higher at 20,615. Property stocks led the advancers ahead of a key land auction Tuesday. In company news, Ericsson signed a $1 billion deal to supply China Mobile with core and networking equipment for expanded GSM services. China Mobile advanced 0.8%, while cellular service providers China Unicom gained 5.8% and China Telecom added 2.4%. Gainers among property stocks included Hang Lung Group, which rose 3.2%.

South Korean Kospi index bucked the uptrend and dipped 0.6% to 1,717. The Shanghai Composite Index closed 2.1% higher at 3,996. Singapore Straits Times Index was up 1.5%, Taiwan Weighted Price Index added 0.5% and Malaysia KLSE Composite rose 0.6%. New Zealand NZX-50 also closed 0.5% higher at 4,205.51. Markets in Australia and Philippines were closed Monday.


[R]7:30AM -6:30PM Mumbai Sensex finishes higher, erases gains on late sell-off.[/R]

The Sensex on BSE finished Monday 19.60 points higher, or 0.14%, at 14,083.41.

The firm market-breadth in the morning session turned negative in late trading. As 1,160 stocks advanced, 1,375 declined and 86 stocks remained unchanged. Of the 30 stocks in the Sensex, 12 advanced, while all the rest declined. The turnover on BSE was Rs 3,484 crore, much lower than Rs 4,618 crore on Friday. On NSE, the turnover was Rs 7670 crore, also lower than Rs 10,577 crore on Monday.

Economic news

New issue, property developer DLF Limited managed to sell its institutional tranche of its IPO for Rs 9,625 crore, in the first hour of distribution. The IPO is 10.27% of the capital of the company.

The rupee gained 0.7% against the euro, today. The euro was at Rs 54.60 today, from Rs 54.99 on Friday. The dollar bought Rs 40.91 today, as compared with Rs 40.98 on Friday.

Trading highlights

Reliance was the most-active stock with a turnover of Rs 114.50 crore followed by Nitin Fire and Reliance Communications.

Advancers

Hero Honda soared over 3% to Rs 703. Cigarette company ITC and metal large-cap Hindalco surged 2% each to Rs 154 and Rs 161, respectively. Hero Honda declined in the past few sessions on worries of slowing sales. Hindalco gained for the fourth time in a row on speculation that the company may become a target for Alcan and Sterlite.

HDFC and Infosys rallied around 1.5% each to Rs 1,779 and Rs 1,980, respectively. Index heavy Reliance Industries advanced 0.5% to Rs 1,668.

Decliners

Reliance Communications and Grasim were the leading decliners, shedding around 2% each to Rs 505 and Rs 2,347, respectively. Other declining large-caps were State Bank of India down 1.3% to Rs 1,340, and Oil & Natural Gas Corporation which lost 0.3% to Rs 862.

ICICI Bank lost 0.4% to Rs 900. ICICI Bank''s follow-on public issue in the range of Rs 10000-Rs 11000 crore, will be open in the third week of June 2007. Dr.Reddy''s and Tata Steel lost around 1% each at Rs 625 and Rs 580, respectively.


[R]6:30AM European markets advance Monday with bid talks about Centrica in focus.[/R]

European markets gained on Monday. By mid-day, the German DAX Xetra 30 index gained 0.9% at 7,657.99, the French CAC-40 index added 0.8% at 5,932.58 and the U.K. FTSE 100 index advanced 0.5% at 6,534.90. National benchmarks advanced in all 17 western European markets that were open.

Advancers

Gas group Centrica surged 4.4% after a report that Gazprom deputy chief executive, Alexander Medvedev, said at a St. Petersburg conference that there will be a deal announced during the Wimbledon tennis tournament to boost Gazprom presence in Britain.

BHP Billiton Ltd. led advancers in the mining sector after UBS AG said mergers and acquisitions in the industry will continue to speed up. BHP Billiton rose 0.6%. UBS raised its price estimate for shares of the world biggest mining company. Rio Tinto Group, the third-biggest mining company, climbed 1.3%.

ThyssenKrupp AG gained 4%. The world biggest stainless steelmaker is interested in either U.S. Steel Corp. or Russian Severstal to expand.

Barclays, the London-based bank striving to acquire ABN Amro in the biggest financial-services takeover, rose 2.5% after reports yesterday that hedge fund Atticus Capital acquired shares of Barclays and met with the London-based bank to discuss withdrawing from the deal.

Decliners

Rexam dropped 3.2%. The maker of packaging for companies including Givenchy and L''Oreal SA announced it will acquire the plastics unit of Owens-Illinois for $1.83 billion.

Telelogic, software design systems company, dropped 0.5%. International Business Machines Corp., the world largest computer-services provider, agreed to acquire the Malmoe, Sweden-based company for $743 million.

Commodities

Crude oil traded little changed, below $65 a barrel in New York, on expectations U.S. gasoline supplies will rise and increasing interest rates will slow demand for commodities. Crude oil for July delivery was trading at $64.92 a barrel, up 16 cents, in after-hours electronic trading on the New York Mercantile Exchange. Gasoline for July delivery rose 1.49 cents, or 0.7%, to $2.142 a gallon in New York. Brent crude for July settlement was at $68.58 a barrel, down 2 cents, on the ICE Futures exchange.

Gold for immediate delivery rose 0.5% to $651.89 an ounce, and traded at $651.85. Silver for immediate delivery climbed 5 cents, or 0.4%, to $13.15 an ounce.

Currencies

The dollar gained on the euro again Monday as doubts that the U.S. Federal Reserve will reduce interest rates continue. The euro bought $1.3347 in morning European trading, down from $1.3373 in New York late Friday. The British pound declined to $1.9666 from $1.9700. The dollar was marginally lower against the Japanese yen, slipping to 121.61 yen from 121.70 yen.


[R]5:30AM – 4:30PM Mumbai Sensex advances 170 points in mid-afternoon trade on Monday.[/R]

The Sensex on BSE is about 170 points higher in mid-afternoon trading.

The market-breadth is strong as 1,509 have advanced, 912 have declined and 100 are unchanged.

Economic news

The rupee advanced again versus the U.S. dollar on Monday on capital inflows. In early trade on Monday the dollar bought 40.9850, up from 41.1150 per dollar on Friday.

Property developer DLF Ltd sold its institutional part of its IPO for $2.4 billion withing an hour on Monday.

Advancers

HDFC has 3.5% to Rs 1,812. ITC and Hero Honda have surged 3% each to Rs 155 and Rs 701, respectively. IT stocks were in demand. Satyam Computers advanced 2.2% to Rs 505, Infosys was up 1.9% to Rs 1,987, Wipro gained 0.9% to Rs 552, and TCS gained 0.5% to Rs 1,226, edged higher. Hindalco and HDFC Bank have rallied 2.3% each to Rs 161 and Rs 1,117, respectively. Index heavy Reliance Industries advanced 1.8% to Rs 1,692.

Decliners

Auto stocks Tata Motors, 0.4% lower to Rs 651, and Maruti Udyog, declining 0.4% to Rs 734, lost after news that most auto companies were reducing production on weaker demand.