Merrill Lynch, Bear Stearns Lead Financials Down

Elena
22 Jun, 2007
New York City

U.S. market averages traded down in a volatile session, with credit markets and crude oil drawing attention. Continuous worries about rising interest rates, along with hedge-fund woes related to subprime mortgages, and rising crude oil prices, generated negative sentiment. The main focus Friday was the IPO of private-equity firm the Blackstone Group., whose shares jumped 15%. The offering raised $4.13 billion early, ranking as the sixth richest IPO in U.S.

[R]11:30AM Market averages traded lower. Financial stocks weighed.[/R]

U.S. market averages traded down in a volatile session, with credit markets and crude oil drawing attention. Continuous worries about rising interest rates, along with hedge-fund woes related to subprime mortgages, and rising crude oil prices, generated negative sentiment.

The heavily weighted financial sector declined on concerns that two hedge funds' losses on risky mortgage securities might not be contained. Among financial stocks, Merrill Lynch ((MER)) declined 2.4%, Barclays ((BCS)) lost 1.3%, and Citigroup ((C)) dropped 1.1%. Bear Stearns ((BSC)) lost 0.6%.

The main focus Friday was the IPO of private-equity firm the Blackstone Group. ((BX)), whose shares jumped 15%. The offering raised $4.13 billion early, ranking as the sixth richest IPO in U.S. In other corporate news, shares of contract electronics manufacturer Jabil Circuit ((JBL)), rose 11.8% after the company posted strong earnings late Thursday. Credit Suisse upgraded Jabil Circuit to outperform from neutral.

The Dow Jones industrial average was down 79.09 points, or 0.58%, at 13,466.75. The Standard & Poor's 500 was down 8.90 points, or 0.58 %, at 1,513.29. The Nasdaq Composite Index was down 14.32 points, or 0.55%, at 2,602.64.


[R]9:45AM Wall Street opened lower amid rising oil prices and interest rate worries.[/R]

Wall Street opened in the negative on Friday, pressured by rising crude oil prices and renewed concerns about rising global interest rates. Light, sweet crude rose 48 cents to $69.13 per barrel on the Nymex. Rate-sensitive housing stocks posted weakness, with Champion Enterprises ((CHB)) and Meritage Homes ((MTH)) falling about 2%.

Blackstone Group ((BX)) was in the spotlight after its IPO raised $4.13 billion, pricing at the top of its estimated range as the sixth richest IPO in U.S. history. Company’s stock tumbled 18%.

Among tech stocks, eBay ((EBAY)) gained 3.7% amid reports that it is planning to return to the Chinese auction market this summer. In corporate news, Jabil Circuit ((JBL)) climbed 10.3% after its Q3 profit exceeded analyst estimate. Cognos ((COGN)), a software maker and technology consultant, forecast a Q2 profit that fell short of expectations. The stock fell 4.7%.

In the retail sector, Abercrombie & Fitch ((ANF)) declined 2.7% after Lehman Brothers downgraded its rating on the stock to equal weight from overweight. In the first hour of trading, the Dow Jones industrial average fell 56.09, or 0.41%, to 13,489.75. The Standard & Poor''s 500 index fell 7.14, or 0.47%, to 1,515.05, and the Nasdaq composite index fell 7.48, or 0.29%, to 2,609.48. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 5.21% from 5.20% late Thursday.


[R]9:30AM The FTSE 100 is lower Friday on weaker banking stocks.[/R]

By mid-day, the FTSE 100 was trading 20 points lower at 6,576.0, a decline of 0.3%.

Advancers

The retail sector was upbeat after a week of selling tracking poor trading updates from Tesco and J Sainsbury. Tesco led the gainers by midday, recovering 2.9%. William Morrison gianed 2.3%. Home Retail Group, the owner of Argos, gained 1.4% and Kingfisher, the company responsible for the B&Q home improvement chain, gained 1.2%.

Pearson, the media company, gained 2.3%, as investors cheered the company’s decision not to join GE to counter New Corp’s bid for Dow Jones.

BAE Systems, defence contractor, advanced 2.4% after a review of its planned acquisition of Armor Holdings of the US was approved by the US Treasury Department.

Decliners

Banks with exposure to the U.S. market dampened the overall market sentiment. Barclays declined 1% after it admitted it had some exposure to the two Bear Stearns funds though it added losses were immaterial. Fund manager Schrader’s was the worst hit, down 1.7%, on its large US exposure.

Royal Bank of Scotland dipped 1.25% as it announced it, and partners Santander and Fortis, expected to come up with offer documents in relation to their bid for ABN AMRO by mid-July.
[R]9:00AM Market to open lower on higher bond yields.[/R]

U.S. stock futures moved to the downside Friday, dragged lower by higher bond yields, renewed concerns about the impact of the subprime mortgage market and weaker overseas stocks. Private-equity giant Blackstone Group ((BX)) went public for $31 a share. Bear Stearns ((BSC)) is reportedly planning to take out $3.2 billion in loans to stop creditors from seizing assets of its money-losing hedge funds.

EBay ((EBAY)) advanced 1.9% in pre-open trading on speculations that the company will return to the Chinese auction market this summer. Dow futures expiring in September fell 32, or 0.23%, to 13,628, while S&P 500 futures fell 4.80, or 0.31%, to 1,531.00. Nasdaq 100 index futures fell 6.50, or 0.33%, to 1,959.25. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 5.19% from 5.20% late Thursday.


[R]8:30AM Asia ends lower on bond yield fears, HK bucks trend and gains on China Mobile.[/R]

Asian markets finished lower on Friday. In China, the Shanghai Composite Index plunged 3.3% to end at 4,091. Stocks plummeted in the afternoon session with worries emerging that the central bank will hike borrowing costs over the weekend as inflation rose to 3.4% last month, a two-year high, according to the statistic bureau. Industrial & Commercial Bank of China Ltd., the biggest lender in the country, shed 2.1% and China Vanke Co., the biggest property developer, lost 2.8%.

The Nikkei 225 Average in Tokyo lost 0.3% to settle at 18,188. Property developers and insurers lost the most as higher rates raise operating costs for developers. Mitsubishi Estate declined 3.9%, and Mizuho Bank lost 1.9%. Chip-makers gained, on a jump in the prices of memory chips. Advantest gained 3.6%.

Korea Exchange Bank sank heavily, down 3.4%, as its largest shareholder sold a stake in the bank in South Korea. In Seoul, the Kospi Index shed 1.3% to 1,770. Other financials also dipped in sympathy with Kookmin Bank off 4% and Hana Financial Group shedding 1.7%. In Australia, the market ended almost flat. Australia''s benchmark index S&P/ASX 200 edged 0.1% lower to 6,382. Although financial stocks finished higher, Caltex pulled the market lower, dipping 10.4%.

HK bucked the trend and advanced. The Hang Seng Index gained 0.2% to close at 21,999. China Mobile lifted the index, soaring 2.8%, while profit booking weighed on oil stocks. Cnooc dipped 1.8% and Sinopec lost 1.4%.


[R]8:00AM The Blackstone Group went public with shares priced at $3.[/R]

The Blackstone Group ((BX)) went public with shares priced at $31, at the top end of the private equity firm''s guidance of between $29 and $31 a share. With 133.3 million shares issued, the IPO is valued at $4.13 billion, standing out as one of the biggest in the financial-services industry and the sixth biggest in U.S. history. Blackstone''s offering represents a 12% stake in the firm. Blackstone shares are expected to start trading Friday on the New York Stock Exchange. AT&T Wireless ((T)) holds the No. 1 slot with $10.6 billion raised in 2000, followed by $8.7 billion for Kraft Foods ((KFT)) IPO in 2001 and $5.5 billion for UPS ((UPS)) in 1999.


[R]7:30AM NY – 6:30PM Mumbai Sensex ends lower in a highly volatile session.[/R]

The Sensex on BSE finished 31.88 points, or 0.22%, lower at 14,467.36.

The market-breadth was almost even as 1,274 stocks advanced, 1,280 declined and 86 were unchanged. Of the 30 stocks in the Sensex, 11 advanced, while all the rest declined. The turnover on BSE was Rs 5,302 crore, almost the same as Rs 5,307 crore on Thursday. On NSE, the turnover was Rs 9,521 crore, lower than Rs 10, 388 crore on Thursday.

Economic news

India’s wholesale inflation rate slowed to a thirteen-month low in the second week of June as the prices of food, fruit, lentils and cereals decreased. Wholesale prices advanced to 4.28% in the week ended June 9 from a year ago but down from 4.8% the previous week lower than estimates for inflation rate of 4.45% for the period.

The widespread interest in the second offering from ICICI Bank kept the rupee on the rise for a second straight week. The rupee also advanced as Indian companies take out loans abroad as the interest rates in dollars are lower than those in rupees. The rupee gained 0.4% to 40.695 against the dollar this week.

The government today approved 36 proposals for special economic zones. Among those which were approved were 3 Navi Mumbai SEZs jointly offered by Reliance India chief Mukesh Ambani and Anand Jain.

The failure of WTO talks among four trading groups representing rich and poor nations failed to resolve differences. The trade talk disputes have hinged on the farm subsidies paid in the rich countries to support small farm communities. There are more than 700 million farmers in Brazil and India living on less than one dollar a day and in the U.S. less than 0.5% of population works as a farmer. India’s two third of population relies on farming and generate less than 30% of its GDP. In the U.S. less than 1% of population rely on farming generating less than 4% of its GDP.

Trading highlights

TCS was the most-active stock with a turnover of Rs 562 crore followed by Time Technoplast and Reliance Industries.

Advancers

Reliance Energy surged 5.3% to Rs 590. The company submitted a bid for the for the 4,000-mega watt Sasan ultra mega power project. The stock was also given a boost by the Bombay High Court decision on gas deliveries by Reliance Industries.

NTPC surged 1.7% to Rs 153 on the Bombay High Court’s decision, that Reliance Industries was not required sell gas produced from one of its major blocks in the Krishna-Godavari basin to any one other than Reliance Natural Resources and NTPC. Hindalco gained nearly 1.9% to Rs 170 on market talk that promoters are raising their stake in the company.

Capital goods large-cap Hindustan Unilever advanced 1.2% to Rs 192 and housing finance company HDFC gained a 1.7% to Rs 1,880.

ICICI Bank was among the most active stocks, but the stock was volatile. It rose 0.4% to Rs 954 after its second offering attracted bids nine times the offer size. The issue closed today.

Decliners

BHEL plunged 2.8% to Rs 1,440, while cement stocks declined on heavy selling pressure. Gujarat Ambuja Cement dipped 2.6% to Rs 116, ACC was off 0.6% to Rs 85 and Grasim lost 0.5% to Rs 2,495.

Index heavy Reliance Industries lost 1.7% to Rs 1,704, on a petition by RNRL to the high court which had ordered yesterday after trading hours that the 81.6 million cubic meters of gas per day could be sold only to RNRL or NTPC.

The rise in the rupee impacted IT stocks negatively. Satyam Computers lost 1.1% to Rs 462, TCS was down 0.4% to Rs 1,140, Infosys declined 0.3% to Rs 1,951, and Wipro dipped 1.3% to Rs 517.

[R]7:30AM NY – 6:30PM Mumbai Sensex ends lower in a highly volatile session.[/R]

The Sensex on BSE finished 31.88 points, or 0.22%, lower at 14,467.36.

The market-breadth was almost even as 1,274 stocks advanced, 1,280 declined and 86 were unchanged. Of the 30 stocks in the Sensex, 11 advanced, while all the rest declined. The turnover on BSE was Rs 5,302 crore, almost the same as Rs 5,307 crore on Thursday. On NSE, the turnover was Rs 9,521 crore, lower than Rs 10, 388 crore on Thursday.

Economic news

India’s wholesale inflation rate slowed to a thirteen-month low in the second week of June as the prices of food and especially fruit lentils and cereals decreased. Wholesale prices advanced 4.28% in the week ended June 9 from a year ago, down from 4.8% the previous week and also lower than estimates for inflation rate of 4.45% for the period.

The great interest in the second offering of shares by ICICI Bank kept the rupee on the rise for a second straight week. The rupee also advanced as Indian companies take out loans abroad as the interest rates in dollars are lower than those in rupees. The rupee gained 0.4% to 40.695 against the dollar this week.

The government today approved 36 proposals for special economic zones. Among those which were approved were 3 Navi Mumbai SEZs jointly offered by Reliance India chief Mukesh Ambani and Anand Jain.

Trading highlights

TCS was the most-active stock with a turnover of Rs 562 crore followed by Time Technoplast and Reliance Industries.

Advancers

Reliance Energy surged 5.3% to Rs 590. The company submitted a bid for the for the 4,000-mega watt Sasan ultra mega power project. The stock was also given a boost by the Bombay High Court decision on gas deliveries by Reliance Industries.

NTPC surged 1.7% to Rs 153 on the Bombay High Court’s decision, that Reliance Industries was not to sell the gas to be produced from one of its major blocks in the Krishna-Godavari basin to any other than Reliance Natural Resources and NTPC. Hindalco gained nearly 1.9% to Rs 170 on market talk that investors are raising their stock in the company.

Capital goods large-cap Hindustan Unilever advanced 1.2% to Rs 192 and housing finance company HDFC gained a 1.7% to Rs 1,880.

ICICI Bank was in great demand today but also saw high volatility. It rose 0.4% to Rs 954 after its second offering of shares attracted bids for more than nine times the offer size. The issue closed today.

Decliners

BHEL plunged 2.8% to Rs 1,440, while cement stocks declined on heavy selling pressure. Gujarat Ambuja Cement dipped 2.6% to Rs 116, ACC was off 0.6% to Rs 85 and Grasim lost 0.5% to Rs 2,495.

Index heavy Reliance Industries lost 1.7% to Rs 1,704, on a petition by RNRL to the high court which had ordered yesterday after trading hours that the 81.6 million cubic meters of gas per day could be sold only to RNRL or NTPC.

The rise in the rupee impacted IT stocks negatively. Satyam Computers lost 1.1% to Rs 462, TCS was down 0.4% to Rs 1,140, Infosys declined 0.3% to Rs 1,951, and Wipro dipped 1.3% to Rs 517.