Europe, New York Decline 2%

123jump.com Staff
24 Jul, 2007
New York City

Nervous market lead to a sell-off in New York dragging with it other markets in Europe and South America. Three popular averages in New York fell nearly 2% prompting a similar declines in European exchanges. Brazil fell nearly 4%. Subprime worries got a new life after sharp declines in earnings reported by Countrywide Financial. Asian markets at the open will follow similar declines. Amazon.com, after the close reported earnings jump of 257% on revenue gain of 35%.

5:30PM New York – Amazon jumps 13% in the after hours trading sharply higher earnings.

Amazon.com Inc reported second quarter revenue increased 35%, net earnings jumped 257%, and earnings per share soared 280%.

For the quarter the revenue was $2.89 billon compared to $2.14 billion a year ago. North American sales rose 38% and international sales increased 31% and excluding currency impact increased 26%. The international sales include sales in UK, France, Germany, China, and Japan. Worldwide net sales at Amazon.com ((AMZN)) increased 33% excluding the impact of the currency.

Electronic sales in the quarter consisted 34% of sales from 29% of sales a year ago. Electronics and general merchandise sales rose 55% in the quarter lifting its total contribution in the total sales. Pre-orders of 2.2 million copies of Harry Potter and Deathly Hallows drove traffic on the various sites operated by Amazon.

Operating cash flow in the quarter jumped to $299 million for $130 million. Common stocks outstanding and plus options for stock awards decreased to 435 million in the quarter from 443 million a year ago. The company spent $180 million to purchase its stock in the quarter, a decline from $232 million a year ago. Cash and cash equivalent at the end of the quarter increased to $1.004 billion from $683 million a year ago.

For the third quarter the company expects net sales to be between $3 billion and $3.175 billion or a growth of between 30% and 38% from a year ago. Net sales for the year are estimated to be between $13.8 billon and $14.3 billion or a growth between 29% and 34% from the year 2006.

Gross profit in the quarter held steady from a year ago near 24% but net profit margin jumped to 2.7% from 1.2% a year ago.

Breakdown between domestic and international sales held steady with the ratio of 55% to 45% in the quarter from a year ago. International sales generated higher profit margin in the quarter as it did a year ago.

[R]4:30PM NY, 10:30 PM Frankfurt, 2:00AM Mumbai – Global Markets[/R]

Wall Street today faced a big wall of worries and decided to climb lower. Falling oil, weak dollar, worsening outlook in the sub-prime mortgage market left averages nearly 2% lower. European markets closed between 1.5% and 2% lower as well. Brazil dropped nearly 4%.

Yields edged lower on 10-year U.S. bonds and closed at 4.938% and 30-year bond rose to close at 5.06%.

Crude oil dropped $1.33 to close at $73.56 per barrel, natural gas closed 17 cents lower to $5.86 per mBtu, and gasoline futures decreased 5.6 cents to close at 204.77 cents per gallon.

Gold traded up $3.30 to close at $684.80 per ounce, silver increased 11 cents to close at $13.44 per ounce, and copper futures lost or $86 to close at $8,105 per metric ton.

Dow Jones plunged 226.47 to 13,716.95, Nasdaq fell 50.72 to 2,639.86, and S&P 500 fell 30.53 to 1,511.04. DAX index in Germany closed down 137.42 to 7,806.49, in Tokyo Nikkei 225 closed at 18,002.03, up 38.39, and Brazil Bovespa lost 2,242.20 to close at 55,794.57.

Market sells when it is nervous and today there was a lot of nervousness in New York trading.

Worries and worsening news from the sub-prime mortgage market and speculation that the problem, though contained in the mortgage industry may spread to the wider economy left stocks in New York lower. Retail and consumer driven stocks took the biggest hit. Nordstrom, Macy’s, Tiffany, and J C Penney fell more than 2%. Countrywide Financial reported lower earnings and gave sharply dire view on its outlook prompting a sell off in the stocks. Dow Jones Industrials fell 1.6%, Nasdaq dropped 1.9%, and S&P 500 fell 1.98%.

Countrywide Financial reported 33% lower earnings and closed 11% lower. The company, the largest mortgage lender in the U.S, is widely seen as a barometer of the health of the mortgage industry. More than 5% of company customers were delinquent or past due at the end of the June, an increase from 2.2% a year ago, and more than 20% of customers were delinquent in the sub-prime loan category, an increase from 13.4% a year ago.

What surprised the market was the quick spread of delinquencies from sub prime category of borrowers to the prime borrowers. During the earnings conference call that lasted nearly three hours, Angelo Mozilo, chairman and chief executive, said that the residential home market may continue to shrink in the year 2008 and may not recover till the year 2009.

Except Verizon, 29 of the 30 stocks in Dow Jones Industrial Average fell.

Apple ((AAPL)) fell 6.1% after estimates of preliminary iPhone sales were lowered. American Express ((AXP)) and Texas Instruments ((TXN)) plunged 5% after reporting weak earnings growth.

Latin American Markets closed sharply lower across the region led by a fall of 3.86% in Brazil followed by 2.7% decline in Argentina, and 2.2% decrease in Mexico.

In Sao Paolo trading iBovespa plunged 3.86% to 55,794.57 on falling oil and metals prices and sharply lower stocks in New York and European trading. Petrobras ((PBR)) was ordered by the National Petroleum Agency to pay $700 million of unpaid taxes which the company plans to appeal. The stock fell 3%. CSN, steel maker, gained 1.9% on the rating revision from S&P. The agency endorsed its acquisition of local iron ore mining operation for $430 million. CVRD fell 1.3% on lower metal prices in international markets. Airlines TAM and GOL fell after the local reported suggested that the airport authorities are likely to raise taxes to pay for added security.

In Mexico City trading IPC Index fell 2.2% to 31,462.15 on weakness in European and American trading. TV Azteca fell 2% after reporting earnings fall of 66% and sales decline of 19%. American Movil fell 1.4% and Alfa SAB fell 1.1%. Alfa worried that the proposed new tax plan will raise tax rate by 4%.


[R]1:00PM NY, 5:00 PM Frankfurt European markets steeply dropped amid weak financial and energy stocks.[/R]

European stock markets posted steep losses Tuesday, with financials and energy firms leading decliners. Disappointing earnings from U.S. mortgage lender Countrywide Financial pressured financial shares like Axa and HSBC. London closed down 1.9%, as the worst floods in 6-0 years weighed on retailers. France and Germany followed suit, each falling 1.7%.

In Frankfurt the auto-sector advanced after Merrill Lynch upgraded truck maker Man AG to buy from neutral, sending its shares up 1.5%. Utility company E.ON was another notable decliner, falling 2.4%.

In Paris the insurance sector was under pressure amid higher interest-rate worries. Shares in insurance company Axa fell 3.3%, while BNP, France's biggest bank, fell 2%. Unibail, Europe's largest publicly traded real-estate company, fell 2.3%. Among other losers, semiconductor STMicroelectronics fell 2.6%, while oil company Total declined 2.3%.

In London weaker oil prices pushed shares in energy companies lower, with Royal Dutch Shell losing 2.6%. BP fell 1.9%, despite a surprise rise in second-quarter profit. Among miners, BHP fell 1.7%, reversing from earlier gains. The firm said that annual output of alumina, copper, iron ore, aluminum, manganese ore, nickel and coking coal reached record levels. In the financial sector, HSBC, Europe's largest bank by market value, fell 1.6%. Among retailers, Next slid 2.7%, Kingfisher fell 2.3%, while Home Retail Group declined 3.3%. Telecom carriers also suffered weakness, with Vodafone's shares down 2.9%.


[R]11:30AM U.S. market averages steeply dropped amid disappointing earnings and subprime concerns.[/R]

U.S. stocks moved steeply lower Tuesday, reflecting disappointing quarterly earnings from DuPont Co. and American Express, as well as renewed subprime concerns.

Dow member DuPont ((DD)) fell 5.3% after the chemicals giant reported flat Q2 profit as higher sales offset the cost of energy and research. Company's earnings missed the average analyst expectations. Another blue-chip, American Express Co. ((AXP)) dropped 4% as the company posted 12% profit growth in Q2 on record card member spending, but also reported an 85% jump in loss provisions.

A considerable drop of 75% in Q2 profit of chip maker Texas Instruments ((TXN)), as well as softer-than-expected profit outlook also weighed on market sentiment. In addition, a 33% profit drop by subprime lender Countrywide Financial ((CFC)) added further pressure on the market, with the stock falling 7.8%.

Among other companies releasing Q2 results and again on the Dow, fast food giant McDonald's Corp ((MCD)), edged down after it reported in-line-with-expectations earnings per share. AT&T Corp. ((T)) fell 0.5% although the telecom's earnings beat expectations. The network provider for Apple Inc.'s iPhone, said it activated substantially fewer iPhones than expected during the quarter.

By sector, energy, natural gas and oil stocks posted the most notable declines, while the multimedia, semiconductor and hardware sectors advanced. In late morning trading, the Dow fell 89.50, or 0.64% to 13,853.92. The S&P's 500 index shed 10.69, or 0.69%, to 1,530.88. The Nasdaq lost 19.43, or 0.72%, trading at 2,671.15. Bonds rose, with the yield on the benchmark 10-year Treasury note down to 4.95 Tuesday from 4.96% late Monday.

[R]10:00AM New York, 7:30PM Mumbai – Sensex in India climbs on earnings report.[/R]

Sensex rose 62.72 to close at fifth record in a row to 15,794.92 after trading above 15,850, another intra-day high. In the last five sessions the index has gained 505 points. Of the Sensex stocks 21 stocks advanced and 19 declined.

On the broader market 1,776 stocks declined, 901 advanced, and 64 were unchanged. The total turnover on BSE was 5,558 crore rupees, 15% jump from 4,854 crore rupees a day ago.

Gainers

Reliance Energy surged nearly 8% to 769 rupees on the news that the company is in discussion to take a stake in power exchange launched by Multi Commodities Exchange and the National Commodity Derivatives Exchange.

ABG Shipyard jumped 7.7% to 492 rupees after the company received an order from Thailand company to build a 12 vessles of 32,000 DWT size worth 1,460 crore or $360 million.

Satyam Computer Services soared 5% on the news that the company plans to set up a subsidiary in South Africa to serve a large number of potential contracts in the near future.

Modern Dairies jumped 5% to 49.50 rupees after the company board declared one bonus stock for each stock.

Bharat Heavy Electricals jumped 4.58% to 1,846 rupees after trading as high as 1,899 rupees a day after reporting an order of power plant in Haryana. On the news other companies in the sector advanced led by 1.6% increase in Bharat Bijlee, 0.7% rise in Thermax and Crompton Greaves.

NTPC added 3.6% to 163 after reporting a joint venture with Asian Development Bank to produce renewable energy. NTPC along with the various Indian government agencies will have 50% stake in the venture and ADB will acquire 20% stake at a later date.

Earnings News

Castrol India, lubricant oil maker, jumped 11% to 280 rupees on the second quarter earnings gain of 31% to 66 crore rupees.

Jindal Stainless firmed 5.2% to 163 rupees after reporting earnings gain of 62% to 82 crore rupees on sales gain of 40% to 1,196 crore rupees in the first quarter.

Indiabulls Financial Services declined 3.6% to 530 rupees on first quarter earnings of 166 crore rupees compared to 77 crore rupees from a year ago.

Bharat Forge declined 1.3% to 301 rupees on first quarter earnings increase of 26% to 64.8 crore rupees.

Dr Reddy’s gained 0.7% to 672 rupees after reporting earnings growth of 30.5% to 182 crore rupees in the first quarter.

Hero Honda Motors earnings fell 20% to 190 crore rupees on sales gain of 3.6% to 2,448 crore rupees. The stock of Indian unit of Japan based Honda Motor has declined 1.4% to 695 rupees.

IPO News

IPO of Housing Development and Infrastructure closed at 558.6 rupees. The company offering was oversubscribed by 6.6 times. The stock jumped 11% from its offer price of 500 rupees and reached intra-day high of 567 rupees.

[R]9:00AM Credit-markets jitters and profit drop at TI weighed on pre-market mood.[/R]

U.S. stock futures were indicating a lower opening on Tuesday, dragged by continuous jitters in credit markets, as well as Q2 earnings drop and a soft outlook from chip maker Texas Instruments. Among other companies posting Q2 results, Lockheed Martin, AT&T and PepsiCo posted better-than-expected quarterly profits. S&P 500 futures slipped 2.70 points at 1,546.30 as Nasdaq 100 futures fell 6.75 points at 2,046.75.00. Dow industrial futures were down 34 points.

On the earnings news front, American Express Co. ((AXP)) reported a 12% rise in Q2 net income. However, profit increase was limited by an 85% jump in loss provisions at the credit-card giant's main U.S. business.

Netflix Inc. ((NFLX)), the online DVD rental pioneer, reported 50% increase in its Q2 profit, benefiting from a gain related to a patent lawsuit settlement.

AT&T ((T)), the U.S. largest provider of Internet and phone services, reported 61% jump in Q2 net to $2.9 billion, or 47 cents per share, up from $1.81 billion, or 46 cents per share last year.

Lockheed Martin Corp. ((LMT)), the world's largest defense contractor, said its Q2 earnings rose 34% on higher sales across most of its businesses. The company said it earned $778 million, or $1.82 per share, up from the $580 million, or $1.34 per share a year ago, while revenue rose 7% to $10.65 billion. Quarterly results beat estimates for earnings of $1.53 per share per share on $10.2 billion in revenue. Lockheed also lifted its 2007 forecast.

PepsiCo ((PEP)) said its Q2 net profit rose to $1.56 billion, or 94 cents a share, from $1.38 billion, or 81 cents a share, a year ago, beating estimates for earnings of 89 cents a share. The company lifted its 2007 earnings guidance to at least $3.35 a share.


[R]8:15AM Texas Instruments posted 75% earnings drop in Q2.[/R]

Texas Instruments Inc. ((TXN)), the world's largest supplier of chips used in mobile phones, reported 75% earnings drop in Q2, compared with the year-ago period. The company said net income for Q2 was $610 million, or 42 cents per share, down from $2.39 billion, or $1.50 per share. Quarterly revenue stood at $3.42 billion, down from $3.7 billion in the year-ago period, due to a weaker demand for a broad range of products. The financial results met the average analyst expectations of earnings of 42 cents per share on $3.45 billion in revenue.

Last year, the chipmaker's Q2 earnings were lifted by the $1.65 billion sale of its sensors business, as well as a $70 million royalty settlement and a $57 million sales tax refund. Texas Instruments projected Q3 earnings of 46 cents to 52 cents per share on revenue of $3.49 billion to $3.79 billion. Analysts expect earnings in the same range with quarterly sales of $3.7 billion. Company's shares fell 3.3% in pre-market trading.