Housing Market Worries Weigh

Elena
25 Jul, 2007
New York City

After the initial gains on the back of strong earnings from Boeing and Amazon, U.S. stocks fell sharply lower following the release of a report which showed a bigger-than-expected drop in existing home sales in June. The National Association of Realtors said that sales of existing homes dropped 3.8% to the slowest rate in over 4 years. Another delay of the Chrysler deal sent financial stocks down.

[R]11:30AM Wall Street erased earlier gains on housing market concerns.[/R]

After the initial gains on the back of strong earnings from Boeing and Amazon, U.S. stocks fell sharply lower following the release of a report which showed a bigger-than-expected drop in existing home sales in June. The National Association of Realtors said that sales of existing homes dropped 3.8% to the slowest rate in over 4 years.

News that Wall Street companies are incapable of raising money to fund the $12 billion leveraged buy-out of DaimlerChrysler ((DCX)) unit Chrysler by Cerberus Capital Management also generated negative mood. As a result shares of banks involved in the Chrysler underwriting declined. J.P.Morgan ((JPM)) fell 1% and Citigroup ((C)) lost 0.4%. Broker-dealers continued to trade up, led by Goldman Sachs ((GS)) and Lehman Bros ((LEH)).

On the earnings news front, health benefits group WellPoint Inc. ((WLP)) said its Q2 net profit rose 11.2% to $1.35 a share, up from $1.17 a share on 7.7% revenue growth, meeting analyst expectations. It also raised its earnings guidance for the year. The stock dropped 3.5%. Corning Inc. ((GLW)), supplier of high-technology components, dropped 5.5% after it posted Q2 earnings decline of 30 cents a share, off from 32 cents a year ago. Quarterly earnings and revenue missed analyst expectations.

In late morning trading, the Dow Jones industrial average fell 2.84, or 0.02%, to 13,714.11, after rising sharply in earlier trading. The Standard & Poor's 500 index fell 2.77, or 0.18%, at 1,508.27, and the Nasdaq composite index fell 4.68, or 0.18%, to 2,635.18.


[R]09:45AM Wall Street opened higher, driven by robust earnings from Boeing, Amazon, NY Times.[/R]

Wall Street opened in the positive territory, boosted by robust earnings from Boeing Co. and Amazon.com. The Dow gained 81 points in the early going, reversing from the steep drop of over 200 points in the previous session.

The blue-chip average was led higher by 3.5% advance in the shares of Boeing ((BA)). It swung to a Q2 profit of $1.1 billion, or $1.35 a share from a loss of $160 million, or 21 cents a share, due to growth in its commercial airplane business and 14% revenue increase. The airline carrier boosted its estimate for 2007 spending on research and development to $3.7 billion. A solid boost to the market sentiment was given by Amazon.com ((AMZN)) which soared 25% after it said Q2 profit more than tripled on strong sales.

Among other major companies posting earnings, New York Times ((NYT)) reported profit of $118.4 million, or 82 cents a share, higher than $59.6 million, or 41 cents a year ago, beating analyst estimates. The stock added nearly 1%. GlaxoSmithKline ((GSK)) rose 3.6% after it reported disappointing Q2 earnings and revenue. The company unveiled a new $25 billion buyback.

Further on the earnings news front, Colgate-Palmolive Co. ((CL)) added 0.7% after posting a 47% increase in Q2 profit. Xerox Corp. ((XRX)) posted 2.3% increase in Q2 earnings on strong revenue from financing and office equipment servicing and supplies. The company earned 28 cents a share, slightly better than the 27 cents expected by analysts. The stock dropped 5.3%.

In midmorning trading, the Dow Jones industrial average rose 72.11, or 0.53%, to 13,789.06. The Standard & Poor''s 500 index was up 10.15, or 0.67%, at 1,521.19, and the Nasdaq composite index gained 16.68, or 0.63%, to 2,656.54. Bond prices rose as stocks climbed, pushing the yield on the benchmark 10-year Treasury note down to 4.92% from 4.95%late Tuesday.


[R]9:00AM U.S. stock futures pointed higher, helped by Boeing and Amazon.[/R]

U.S. stock futures rebounded Wednesday from steep losses posted in the previous session. Stronger-than-expected results at Amazon.com and an improved earnings guidance at Boeing generated positive sentiment, helping to offset expectations of another decline in existing home sales.

Amazon ((AMZN)) soared 23% in pre-open trading after the online retailer said its Q2 earnings tripled on 35% revenue growth. Boeing ((BA)) rose 3% after posting a $1.05 billion profit on strong jets sales.

Among other stocks in focus, NutriSystem ((NTRI)) dropped 12% in the pre-open, despite 70% profit increase in Q2. The company''s Q3 outlook fell below analyst expectations. S&P 500 futures climbed 7 points at 1,529.50 and Nasdaq 100 futures improved 7.5 points at 2,033.00. Dow industrial futures climbed 67 points.


[R]8:45AM New York, 6:15 PM Mumbai – Sensex in India close lower led by cement, real estate, and infrastructure stocks.[/R]

Sensex 30 on Bombay Stock Exchange fell 95.59 to close at 15,699.33 on weakness in trading in cement, technology and auto stocks. Of the 30 stocks in Sensex 23 fell and the rest advanced. The turnover on the exchange was reported at 5,605 crore rupees, a decline from 6,464 crore rupees in the previous session.

Earnings News

ONGC, government controlled oil and natural gas leader, jumped 2.4% to 937 rupees after reporting first quarter earnings growth of 11% to 4,610 crore rupees. Revenue fell to 13,688 crore rupees from 14,600 crore rupees and subsidy from the government declined 29% on the higher value of rupee. The company produced 6.88 million tons of crude oil, a decline from 6.93 million tons a year ago. The company generated a gross profit of $50.21 per barrel oil arise of nearly 10% from $45 a year ago.

Decliners

The strength in rupee dragged down the technology and business services exporters. TCS fell 2% followed by 1.3% loss in Wipro but Infosys jumped 0.7%. After the close in Mumbai the company reported that it was awarded $250 million project from Philips Electronics.

Bajaj Auto fell 3.6% to 2,360 rupees after the company scheduled a meeting settle the dispute between the holding company, minority shareholders, and creditors. The meeting is scheduled on August 18th

Real Estate stocks fell sharply a day after rallying. DLF fell 3%, Parsvnath declined 3.8%, and Unitech dropped 3.6%. Stocks in the infrastructure developers fell sharply led by Suzlon energy with a loss of 6.7%. Praj Industry fell 3.5% and L&T declined 3.2%.

Cement stocks fell after the government agency ordered an investigation into the business practices of the largest eighteen cement companies. India cement plunged 9% to 204 rupees followed by 5% decline in Ambuja Cements, 3.8% loss to 1,075 rupees in ACC, and 1% to 2, 990 decreases in Grasim.

Gainers

Indian Tobacco Corporation known as ITC jumped 8.6% to 165.30 rupees on the news that the company is planning to sell consumer products through a network of kiosks and supermarket to stem the impact of higher taxes on cigarettes. The company is scheduled to report earnings on July 27th. Target price revision by CLSA brokerage group to 185 rupees contributed the firmness in the stock.

Hindustan Unilever edged 1% higher to 203 rupees on the speculation that the company may sell its vast real estate holdings in Mumbai or develop its property in Bangalore.

Ballarpur Industries, largest paper company in India, jumped 3.6% on the news that the company is looking to restructure and may buyback up to 40% of its holding.


[R]8:00AM New York, 8:00PM Hong Kong – Shanghai index climbs to a record and Hong Kong closed a fraction lower.[/R]

Asian markets decline following sharp declines in Europe and America in the overnight trading. Philippines led the region with a loss of 1.6% followed by 1.2% decline in Australia, 0.8% decrease in Japan, and 0.6% fall in India. Hong Kong edged 0.5% lower but Shanghai advanced 2.7%.

In Hong Kong Hang Seng Index lost 110.7 to close at 23,362.18 and CSI 300 Index in Shanghai closed up 2.3% to 4,255.46 and Shanghai Composite Index jumped 2.7% to 4,323.97.

Airlines stocks soared on the earnings news. China Southern Airlines surged 9%, Hainan airlines jumped 2.6% lifted on the news that Air China earnings surged on higher demands for its international flights. The company stock jumped 7% on earnings growth of 20-fold.

Baotou Aluminum surged 9.9% and Aluminum Corp of China jumped 9.3% on the speculation that aluminum prices will gain in the coming months.

Industrial and Commercial Bank of China, the largest bank in China, jumped 2.6% in sympathy with the broader market rise. The recent rise in the stock has lifted its market value to the largest bank in market capitalization in the world.

Shanghai Automotive jumped 4.8% after it said that it plans to issue convertible bonds to expand its production and hunt for acquisition in the overseas market. The 8 billion yen bond is likely to be priced before the end of the year. Huaneng Power surged 10% after Goldman Sachs upgraded the stock.

Exposure to sub-prime lending in the U.S. left HSBC lower 1% in Hong Kong trading. Lower oil price in the region dragged CNOOC 3% lower. Property stocks held steady but telecom and retail stocks edged a fraction higher.


[R]6:30AM New York, 6:30PM Tokyo – Oil complex stocks and leading exporters lead a sell-off in Tokyo. Shipping companies recover at close[/R]

In Tokyo trading Nikkei 225 fell 143.61 to close at 17,858.42 on weak oil and sharp fall in New York trading. The index recovered from its mid-day trading losses of 1.5% to close only 0.8% lower.

Nintendo stock rebounded 6% from a loss of 2.5% to 3.5% at close during the day. Nintendo reported first quarter earnings of 80.3 billion yen from 15.6 billion a year ago and revised its annual earnings projection to 245 billion. The sharp revision in earnings 41% from an earlier projection lifted the stock and trading sentiment in the market. Nintendo also pays out high percentage of its earnings in dividend.

Nomura Holdings reported first quarter earnings of 76.7 billion yen compared to 20.1 billion yen from a year ago on higher asset under management and profits in stock trading. The boom is assets to manage retirement accounts in mutual funds helped the largest securities company to reach 30 trillion yen in assets under management. The investment management fees rose 47.3 billion from 29.7 billion and trading and brokerage commissions jumped to 113 billion from 79.6 billion.

Mistukoshi jumped 7% after Nikkei newspaper reported that the company may be exploring merger or other recapitalization plans.

Shipping companies closed higher after facing a sell-off in the morning trading. Kawasaki Kisen Kaisha closed up 2.7% followed by 1.4% gain in Mitsui O.S.K. Lines, and 1.3% in Nippon Yusen K.K.

Victor Company of Japan, popularly known as JVC, unit of Matushita declined 10% on the news that the company has agreed to acquire Kenwood. The worries of earnings dilution hurt the stock.

Lower oil dragged oil trading and refining companies at close. The refiner, Nippon Mining Holdings dropped 2.8% and Nippon oil fell 4%. Inpex, the largest oil explorer edged 3.2% lower.