Bear Stearns Profit Falls

Elena
14 Jun, 2007
New York City

U.S. market averages extended gains after bond yields eased despite stronger-than-expected data on wholesale inflation. Resource stocks were among the biggest gainers, with oil and oil service stocks moving higher amid a notable increase by the price of oil. Natural gas and gold stocks also continued to post strong gains. Shares of homebuilders traded mixed. Hovnanian advanced 1.4%, while Toll Brothers slipped 1%.

[R]11:30AM U.S. market averages rallied. Resource stocks led gainers.[/R]

U.S. market averages extended gains after bond yields eased despite stronger-than-expected data on wholesale inflation. Resource stocks were among the biggest gainers, with oil and oil service stocks moving higher amid a notable increase by the price of oil. Natural gas and gold stocks also continued to post strong gains. Shares of homebuilders traded mixed. Hovnanian ((HOV)) advanced 1.4%, while Toll Brothers ((TOL)) slipped 1%.

Biotechnology, telecommunications, and computer hardware stocks also showed significant strength, while the health insurance and pharmaceutical sectors declined. Shares of Sanofi-Aventis ((SNY)) fell 2.8% after a FDA advisory panel did not recommend approval of the company's obesity drug Rimonabant due to safety concerns.

Among companies in focus, Goldman Sachs Group ((GS)), the U.S. biggest investment bank, said that its Q2 profit rose to $4.93 per share, up from $4.78 per share a year earlier. Results beat estimates for earnings of $4.79 per share on revenue of $10.16 billion. The stock dropped 2.9%.

However, quarterly results from Bear Stearns ((BSC)) disappointed. The investment bank reported Q2 profit drop of $2.52 per share, down from $3.72 per share a year ago, missing estimates. The fifth-biggest U.S. investment bank attributed its profit drop to a downturn in the U.S. mortgage market. The stock fell 1.1%.

On the deal news front, Chicago Mercantile Exchange ((CME)) sweetened its bid for the parent company of the Chicago Board of Trade, offering to pay a special dividend of $485 million to CBOT Holdings Inc. shareholders in addition to its $10.19 billion takeover offer.

In late morning trading, the Dow Jones industrial average rose 52.19, or 0.39%, to 13,534.54. The Standard & Poor's 500 index advanced 6.53, or 0.43%, to 1,522.20, and the Nasdaq composite index climbed 16.20, or 0.63%, to 2,598.51.


[R]9:45AM U.S. stocks opened slightly higher, helped by strong inflation data.[/R]

Wall Street opened slightly higher on Thursday after a stronger-than-expected inflation reading failed to spook the bond market. The Labor Department said wholesale prices rose 0.9% in May. Energy prices jumped 4.1%, the biggest increase in six months. Excluding food and energy, producer prices rose 0.1%. Investors had expected smaller increases of 0.6% on the headline PPI and a 0.1% increase for the core PPI. The dollar rallied to a new 4 1/2-year high vs. the yen and rose against the euro after the inflation data.

Among stocks in focus, Goldman Sachs and Bear Stearns came under pressure after their quarterly earnings raised concern about their subprime mortgage businesses. Goldman Sachs ((GS)) fell 2.5%, despite reporting better-than-expected increase in quarterly earnings. Bear Stearns ((BSC)) slipped 1.5%.

The Dow Jones Industrial Average was up 27 points at 13,509. The blue-chip average was supported by more than 1.5% advance in the shares of AT&T Inc. ((T)), General Motors Corp. ((GM)) and Alcoa ((AA)). Another gainer on the Dow was United Technology ((UTX)) which gained 0.6% after raising its quarterly dividend by 21% to 32 cents a share.

The S&P 500 index rose 7.1 points to 1,522, while the Nasdaq Composite gained 16.9 points to 2,599. The benchmark 10-year Treasury bond actually rose 1/32 to 94 21/32, while its yield fell to 5.195%.


[R]9:30AM London is higher at mid-day Thursday on renewed buying interests in large-cap stocks.[/R]

At mid-day Thursday, the FTSE 100 in London was 0.8% higher at 6,610, gaining of 50.5 points.

Advancers

Bradford & Bingley was the leading advancer in the FTSE. The mortgage bank gained 5.2% after Credit Suisse upgraded the stock to neutral and added that the bank would return 500 million pounds of excess capital to shareholders.

The mining sector surged in light of positive US economic data which showed a growing demand for metals and manufactured goods. Copper large-cap Rio Tinto advanced 1.7%, supported by the settlement of a decade-long tax dispute in Australia. BHP Billiton added 1.3%.

Centrica, the gas distributing company, a bid target of Russian Gazprom, gained a further 3.8% after Citigroup raised its rating on the shares to buy from hold and hiked its price target on the stock.

Man Group, the largest publically traded hedge fund in the world, gained 1.4% after news that it anticipated assets under management in Asia to grow by 10% to 15% over the next year or 18 months.

Shares in Punch Taverns rose 1.6% after it said it would redeem 460 million pounds worth of outstanding bonds and pay down debt by issuing up to 825 million pounds worth of floating rate notes.

Decliners

CardioMag Imaging was the only decliner at mid-day, plunging 90%. It lost more than 75% of its value this morning after the non-invasive heart disease testing group warned that full year operating losses will top $5 million.


[R]8:30AM Asian markets advance Thursday, led higher by South Korea, China dips.[/R]

Asian markets finished higher on Thursday. In South Korea, strong program buying connected with expiry of futures and options in late session helped shares to end at a record high, with securities, shipbuilders and information-technology stocks in the forefront of advance. Kospi Index rallied 2.7% to 1,769. Gainers included Woori Investment & Securities which advanced 7% and shipbuilders Hyundai Heavy Industries up 5.9% and Samsung Heavy Industries rising 6.5%, supported by higher vessel prices.

In Tokyo, the Nikkei 225 Average ended the session 0.6% higher at 17,842. News that Nippon Steel will increase its stake in Godo Steel supported stocks in the steel sector, while the increase of the dollar to a four-and-a-half-year high versus the yen buoyed exporters. Nissan Motor gained 1.4% and tech stock Toshiba soared 2.2%.

Hong Kong Hang Seng Index advanced 1.4% to close at 20,867. Commodities firms were in focus, led by Chalco, which surged 11%. Among telecom stocks, China Mobile gained 1.8% and China Unicom was up 2.9%. In China, however, the benchmark Shanghai Composite Index bucked the uptrend and fell 1.5% to end at 4115. Among property developers, China Vanke dropped 3.1% and Financial Street fell 3.7%.

Australian S&P/ASX 200 also rose 1.3% to 6,261. Mining company BHP Billiton gained 3.4% and rival Rio Tinto added 4.2% after similarly strong gains offshore. Woodside Petroleum was up 4.3% on discussion of a possible merger with British Gas. Taiwan ended 1.3% higher at 8,451.


[R]8:15AM U.S. stock futures predict flat opening ahead of inflation data.[/R]

U.S. stock futures indicated a flat opening Thursday, with investors eagerly awaiting economic readings on inflation. The Labor Department is due to release its producer price index, which analysts expect to show a 0.5% increase, compared to 0.7% in April. Economists predict the core PPI, which excludes food and energy prices, will advance 0.2% as it did in April. The consumer price index is scheduled to come out on Friday.

Among pre-market highlights, United Technology ((UTX)) lost 0.2% after it lifted its quarterly dividend 21% to 32 cents a share. Computer Sciences ((CSC)) dropped 1% in the pre-open after its fiscal 2008 outlook fell short of analyst expectations. Of companies in focus, Goldman Sachs ((GS)) and Bear Stearns ((BSC)) are expected to report quarterly earnings.

The yield on the benchmark 10-year Treasury note hovered around 5.20% early Thursday, compared with 5.21% late Wednesday. Dow futures expiring in September rose 1, or 0.01%, to 13,606, while Standard & Poor''s 500 index futures rose 0.10, or 0.01%, at 1,530.30. Nasdaq 100 index futures advanced 3.75, or 0.19%, to 1,941.00.


[R]7:30AM NY-6:30PM Mumbai Sensex surges 201 points in a broad-based rally Thursday.[/R]

The Sensex on BSE finished 200.69 points, or 1.43%, higher Thursday, at 14,203.72.

The strong market-breadth was supported by two advancers for every decliner. Of 1,692 stocks which advanced, 781 stocks declined and only 88 stocks were unchanged. Of the 30 stocks in the Sensex, only four declined, while all the rest advanced. The turnover on BSE was Rs 4,402 crore, higher than Rs 4,189 crore on Wednesday.

Economic news

The strike at Indian, a state-run airline, was called off on Thursday after it continued for three-day. An agreement to pay salaries in arrear, career promotion and wage hikes was reached between the union of ground staff and the management. Private carriers SpiceJet, Deccan Aviaton and Jet Air stocks gained more than 4%. Indian, the state controlled domestic carrier has been losing market share since the air travel privatization in 1993. The airline market share has dipped below 20% from its monopoly on domestic travel.

The government is looking for ways to help exporters in the face of rising rupee value in the international market. The government is planning to offer a special relief package including duty exemption pass book credit rates from service rates, a cut in insurance premium and lower export credit rates.

Trading highlights

Time Technoplast was the most-active stock with a turnover of Rs 248 crore followed by ICRA and Unitech.

Advancers

HDFC led the advancers, surging 4.2% to Rs 1,825. The stock advanced as the chairman of the bank hinted at possible increase in interest rates after two to three months. Reportedly, HDFC realty fund has bought 10% equity of Pune based housing and construction company Paranjape Schemes for a total value of Rs 74 crore.

Cement stocks surged on a report that the cement shortage is not likely to be resolved for another two years. Cement large-cap ACC gained 3.4% to Rs 825, while Grasim rose 3% to Rs 2,432.

Tata Steel rallied 3.2% to Rs 614 and BHEL surged 2.9% to Rs 1,349. IT stocks advanced on steady buying. Satyam Computers gained 0.4% to Rs 488, Infosys added 1.9% to Rs 2,020, Wipro rose 0.4% to Rs 532 and TCS advanced 0.1% to Rs 1,204.

Engineering & Construction major L&T advanced 2.8% to Rs 1,923 on news that it intends to unite all its businesses under 15 divisions from the present 6 business divisions. Other gainers included Hindalco which settled up 2.3% at Rs 164. Dr.Reddy''s and SBI gained around 2% each to Rs 640 and Rs 1,314, respectively. Gujarat Ambuja and Ranbaxy added 1.7% each to Rs 111 and Rs 370.

Index heavy Reliance Industries gained 1.4% to Rs 1,696 on 5.79 lakh shares. Reliance announced yesterday, June 13 2007, that its Jamnagar refinery was functioning normally and will meet planned production.

Decliners

Hero Honda led the few decliners, slipping 1.7% to Rs 684. Hero Honda has been on the decline since news that it has reduced production as demand was declining in the face of five-year-high interest rates.

ICICI Bank lost 0.8% to Rs 906. ICICI Bank announced today that it would come up with a share sale next week to subsidize the strong demand for loans in the rapidly expanding economy of India.

The other two decliners were Tata Motors, off 0.5% to Rs 643 and ITC, 0.2% lower to Rs 152.


[R]6:30AM European markets advance Thursday on stronger exporters and miners.[/R]

European markets advanced on Thursday. By mid-day, Germany Xetra DAX added 1.4%. France CAC 40 and the U.K. FTSE 100 both rose 1%. National benchmarks rose in all 17 western European markets that were open.

Advancers

Michelin, the world second-biggest tiremaker, surged 1.9%. The company makes more than a third of its sales in North America.. Siemens, Europe largest engineering company, gained 2.8%. The U.S. accounted for 20% of the revenue of the company last year.

ABB Ltd. added 2.3%. The world biggest maker of power networks generated 24% of its sales in the Americas in 2006.

Miners rallied on a surge in copper prices. Rio Tinto added 2%, BHP Billiton Ltd., the world largest mining company, rose 1.3%

Decliners

Sanofi-Aventis plummeted 7.9%. A U.S. panel rejected the French drugmaker Zimulti weight-loss pill, saying the company did not show that its health benefits outweighed risks such as suicide.

Oil and gold

Crude oil rose after a U.S. government report showed refineries cut their operating rates, raising concern fuel supplies may fall short of demand this summer. Crude oil for July delivery rose as much as 28 cents, or 0.4%, to $66.54 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for August settlement was at $70.38 a barrel, up 43 cents, on the London-based ICE Futures exchange. Gasoline for July delivery rose 0.97 cents to $2.165 a gallon in New York, after gaining 1% to $2.1553 yesterday.

Gold for immediate delivery fell as much as $1.75, or 0.3%, to $650.00 an ounce, and traded at $650.63. Silver for immediate delivery fell 1 cent to $13.10 an ounce. Copper for delivery in three months on the London Metal Exchange gained $32, or 0.4%, to $7,327 a metric ton.

Currencies

The dollar edged higher against the euro in trading Thursday, but European currency was holding steady on a forecast of more growth in Germany. The euro bought $1.3308 in late morning trading in Frankfurt, down from the $1.3310 it bought in New York late Wednesday. The British pound declined to $1.9704 from $1.9734 the night before despite a release showing that May retail sales gained slightly more than expected to 3.9% from a year ago. The dollar rose against the Japanese yen, climbing to 122.96 yen from 122.61 yen


[R]5:30AM Oil prices surge Wednesday on depletion of supplies, gold, silver sink.[/R]

Crude oil for July delivery surged 91 cents to close at $66.26 a barrel on the New York Mercantile Exchange. July gasoline rose 2.03 cents to finish at $2.1553 a gallon. The EIA posted a slight decrease in use of the refineries to 89.2 %, down from 89.6 % in the prior week and 91.1 % three weeks ago.

Gold for August delivery settled lower, shedding 40 cents to $652.70 an ounce. The U.S. dollar gyrated in early trading, then later advanced against most major world currencies, including the euro and yen, which put pressure on gold. Silver for July slipped 3 cents to finish at $13.06 an ounce. Nymex copper prices rose 2.6 cents to end at $3.313 a pound.

July soybeans slipped as low as $8.15 a bushel then recovered somewhat to settle down a fraction of a penny at $8.256 on the Chicago Board of Trade. July corn rose jumped 11 cents to settle at $4.044 a bushel on forecasts for persistently dry weather in the eastern Corn Belt, which badly needs rain. Wheat, which is at the start of harvest season and has suffered rain damage, rallied 24.4 cents to end at $5.894 a bushel.