NY Averages in Free Fall

123jump.com Staff
03 Aug, 2007
New York City

New York Averages were in the gravitational pull, and it got only tighter in the last hour of trading. Market averages fell further in the last thirty minutes of trading. Three popular averages fell more than 2.5% at close, the worst level of the day. Brazil dropped more than 3% and Mexico fell 2.4%. S&P put Bear Stearns on credit watch list with a negative outlook. Toyota Motors reported earnings rise of 32%. Crude oil fell 2% but gold jumped 1.5%.

[R]4:00PM New York, 10:00PM Frankfurt, 1:30 AM Mumbai[/R] – New York markets were in the free fall in the last hour of trading. Credit watch on Bear Stearns prompted market fears in financial stocks and dragged housing, financials, and real estate companies. European markets closed lower. Emerging Markets in Latin America fell sharply. Asia closed higher in the overnight trading.[/R]

Dow Jones closed up 99.50 to 13,461.87, Nasdaq advanced 22.11 to 2,575.98, and S&P 500 increased 6.33 to 1,472.15.

FTSE 100 Index in the U.K. closed down 76 to 6,224.30, in Tokyo Nikkei 225 closed at 16,979.86, down 4.25, and in Brazil, iBovespa plunged 2,043.18 or 3.3% to close at 52,647.74.

Yields edged lower on 10-year U.S. bonds and closed at 4.73% and 30-year bond rose to close at 4.88%.

Crude oil decreased $1.45 to close at $75.41 per barrel, natural gas closed 1 cent lower to $6.10 per mBtu, and gasoline futures decreased 0.97 cents to close at 202.65 cents per gallon.

Gold traded higher $9.80 to close at $686.40 per ounce, silver down 16 cents to close at $13.15 per ounce, and copper futures gained $10 to close at $7,988 per metric ton.

In New York trading last hour trading amplified the earlier declines in the averages. The market averages were in the free fall in the last twenty minutes of trading and closed at the lows of the day.

Payroll in the month of July rose 92,000 and the growth in the payroll slowed, down from 126,000 in June, and 188,000 in May. The slow growth is payroll addition was also followed by stagnant wages. The average hourly wages increased 6 cents to $17.45, 3.9% hike from a year ago. While the headline number looks smaller but when compounded over ten years the impact on inflation can be severe.

A warning from at least one of the leading rating agency, on Bear Stearns credit watch with a negative outlook, fueled credit worries in the afternoon trading. Bear Stearns fell 6% and dragged other bond market related companies with it. Lehman Brothers fell 7%, followed by 5% loss in American Express, MasterCard with a decline of 8%, Goldman Sachs with a loss of 4.25%, and Merrill Lynch declined 3.5%.

Home Builders came under pressure as well. DR Horton and KB Homes lost 5% but Toll Brothers fell 6% and Beazer Homes USA fell 13%. Commercial realtors CB Richard Ellis ((CBG)) plunged 9% and Jones Lang LaSalle ((JLL)) fell 5%. Countrywide Financial ((CFC)) fell 7% and insurance company CIT dropped 5%.

Asian markets closed higher in the region on the bank of rising indexes in New York and European trading. Shanghai led the regions gainers for the second day with a rise of 3.5% followed by a gain of 1.2% in South Korea and Taiwan, 1% rise in India and Thailand. Hong Kong added 0.4% and Australia edged a fraction higher. Philippines led the decliners in the region with a loss of 0.2% followed by fractional losses in Japan and Indonesia.

Latin American Markets plunged across the region led by 3.7%% fall in Brazil, 2.4% decline in Mexico, 1.8% loss in Argentina, and 0.9% drop in Chile.

In Sao Paolo trading only 3 of the 59 stocks managed to gain and rest of the others declined. Telephone operators TIM lost 8% and Brasil Telecom by 6%. Souza Cruz dropped 7%. Petrobras, CVRD, Lojas Renner, and Votorantim declined 4%.

[R]1:00PM NY, 5:00 PM Frankfurt European markets dropped, pressured by U.S. economy fears.[/R]

European stock markets closed in the negative territory, pressured by fears of slowing U.S. economy amid a weaker-than-expected jobs data. The economy-related concerns offset the positive sentiment generated by strong earnings reports from companies like British Airways. France led decliners with a 1.5% drop, followed by Germany, losing 1.3% and the U.K. falling 1.2%.

In Frankfurt BMW and Philips fell, due to the U.S. economy concerns. The world's largest luxury carmaker slipped 2% as it makes 25% of its sales in North America. Philips lost 1.1% as the maker of electric shavers makes 28% of its revenue in the U.S.

In Paris oil company Total declined 1.2% for a third day as Citigroup cut its rating on the oil and gas industry. EDF, the country's biggest utility company, lost 1.3%, while Suez declined 0.8%. Among other movers, Linedata Services, a designer of financial software, slumped 13% on quarterly earnings.

In London energy stocks showed a notable decline. Royal Dutch Shell slid 1.6%, while BP, the region's second-largest oil company, fell 1.5%. Gas producer BG Group lost 2.52%, while BP slid 1.51%. British Airways shares fell 0.3%. The airline carrier reported a 75% jump in Q1 profit to 269 million pounds from 154 million pounds, although revenue fell 2% to 2.19 billion pounds.


[R]11:30AM Market averages moved steeply down, led by financial and broker stocks.[/R]

Weaker-than-expected economic data and continuing credit market jitters weighed stocks down Friday. U.S. market averages posted a steeper decline in late morning trading, receiving additional pressure from 4% drop in the shares of Bear Stearns Cos. ((BSC)) after Standard & Poor's downgraded its outlook for the company to negative.

As a result the financial and brokerage sectors declined, with Lehman Brothers ((LEH)) falling 3% and Merrill Lynch ((MER)) losing 1.5%. Still in the sector, Countrywide Financial ((CFC)) fell 5% after it said it had access to nearly $50 billion in short-term funding as a cushion. Shares of lender IndyMac Bancorp. ((IMB)) dropped 9%.

On the economic news front, reports came in below economist expectations. After the Labor Department said jobs growth slowed in July, the Institute for Supply Management said its non-manufacturing index for July slipped to 55.8 from 60.7 in June. Analysts had expected a reading of 59.

In late morning trading, the Dow Jones industrial average fell 87.06, or 0.65%, to 13,376.27. At times, the Dow fell more than 100 points. The Standard & Poor's 500 index dropped 11.90, or 0.81%, to 1,460.30, and the Nasdaq composite index fell 20.65, or 0.80%, to 2,555.33. Bonds rose Friday after the economic reports. The 10-year Treasury note's yield fell to 4.72% from 4.77%late Thursday.


[R]11:00AM New York, 8:30PM Mumbai – Banks and infrastructure stocks rally lifted Sensex in Mumbai trading.[/R]

Sensex gained 152.70 or 1.02% to close at 15,138.40. The index declined for the second week in a row. In the broader market 1,581 gained, 1,081 declined, and 73 were unchanged.

Total daily turnover on the exchange fell to 3,981 crore rupees from 4,435 crore rupees in previous session. In the Sensex 23 closed higher and 7 declined.

Economic News

Wholesale inflation index, measuring inflation for the last 52 weeks, declined to 4.36% at the end of July 21 from 4.41% a week ago.

NTPC increased 2.5% to 166.40 rupees after the news that Chattisgarh State Electricity Board has offered the company to build partner for four power projects. Reliance Energy fell today, after gaining 2% in the previous session. Era Construction jumped 5% after receiving order from NTPC for 136 crore rupees for thermal power project in Andhra Pradesh.

IPO

Simplex Projects listed its initial public offering of 67.2 lakhs or 6.72 million shares at 185 rupees. The stocks closed at a premium of 47% to 272 rupees on its first day of trading on oversubscription of 85 times.

Gainers

Cement companies jumped for the second day in a row. ACC increased 1.7% to 1,002 rupees on top of 2% rise in the previous day’s trading. The company reported shipment increase of 15% to 1.6 million or 16.4 lakh tons of cement. Ambuja Cements shipment jumped 20%.

Grasim jumped 2% and UltraTech Cement increased 0.7% on the news that the parent company the Aditya Birla Group shipment gained 13% to 2.4 million or 24 lakh tons in July from a year ago.

GMR Infrastructure surged 9% after it selected Apollo Hospital to add a wing in its new airport at Hyedrabad. Apollo Hospital gained 4% to 508 rupees.

Real estate stocks rebounded sharply after correcting on the worries in the global markets. Orbit Corporation surged 10%, Indiabulls Real Estate increased 4.6%, and DLF regained 2.2%.

JSW Steel, part of O. P. Jindal group of companies, reported that steel production rose 18% to 2.37 lakh or 237,000 tons. The hot rolled coil production rose 9% and that for plates increased 15%. After the news that company stock declined 2.06% to 679 rupees. Jindal Stainless Steel, another group company, increased 2.1% to 157 rupees.


[R]09:45AM Wall Street opened down amid higher unemployment in July.[/R]

Wall Street started Friday session moderately lower after an economic report showed a weaker-than-expected jobs growth and higher unemployment in July. The Labor Department said nonfarm payrolls rose 92,000 last month, below the average forecast of about 135,000. Unemployment rose 4.6% to hit a seven-month high.

In corporate news, Procter & Gamble ((PG)) posted 19% earnings rise on new products and said it will repurchase up to $30 billion in shares over the next three years. In Q2 it earned 67 cents a share, up from 55 cents a year earlier on, beating estimates. The stock lost 0.9%.

Toyota Motor ((TM)) added 1.3% after the auto maker reported a stronger-than-forecast profit on the back of a weak yen. American Home Mortgage ((AHM)) was in the spotlight with a heavy drop of 47% after it revealed plans to close its operations Friday and cut about 7,000jobs.

In the first minutes of trading, the Dow Jones industrial average fell 13.17, or 0.10%, to 13,450.16. The Standard & Poor's 500 index slipped 1.81, or 0.12%, to 1,470.39, and the Nasdaq composite index fell 5.29, or 0.21%, to 2,570.69. Bonds rose after the jobs report, and the 10-year Treasury note's yield slipped to 4.76% from 4.77% late Thursday.

[R]9:15AM New York, 2:00PM Frankfurt – Shanghai climbs the wall of worries to reach a record high.[/R]

Asian markets closed higher in the region on the bank of rising indexes in New York and European trading. Shanghai led the regions gainers for the second day with a rise of 3.5% followed by a gain of 1.2% in South Korea and Taiwan, 1% rise in India and Thailand. Hong Kong added 0.4% and Australia edged a fraction higher. Philippines led the decliners in the region with a loss of 0.2% followed by fractional losses in Japan and Indonesia.

In Shanghai trading CSI 300 rose 3.7% to close at 4,598.38, fourth higher close in a row this week. Rising stocks in financial and banking, property, and consumer sectors lifted the average. The 6.8% gain of the week lifted the average to a record high. The Shanghai Composite Index gained 3.5% to close at 4,560.77. China Vanke jumped 7%, Merchants Bank soared its daily limit of 10%, and Shanghai Pudong increased 6%. Citic Securities, the largest financial broker soared 10% as well. China reported that new daily account openings in the July month averaged 122,000.

Lenovo Group first quarter revenue jumped 13% to $3.9 billion and pre-tax net income before restructuring soared to $123 million or 258%. The net income jumped to $67 million or an increase of 1,184%. Diluted earnings per share increased to 76 cents from 6 cents a year ago. The sales in Greater China form 39% of total sales jumped 14% to $1.5 billion and sales in the Americas form 29% of total sales. PC sales in the region increased 15%. With 19% sales in the Europe, Middle East, and Africa sales increased 22%. Shipments in Asia including India jumped 12% forming 13% of global sales.

Airlines and Shanghai International Airport jumped on the news that the industry returned to profitability of 4.6 billion yuan from a loss of 350 million yuan a year ago. There are 133 airports in the country and domestic passenger traffic has been increasing at 15% or more for the last five years.


[R]09:00AM U.S. stock futures pointed lower Friday on slower jobs growth in July.[/R]

U.S. stock futures declined Friday, as jobs data reignited worries that weakness in the housing sector will continue spreading. A Labor Department report showed slowing jobs growth in July and the highest unemployment rate since January. Nonfarm payrolls expanded by 92,000 in July, lower than the 133,000 expected by economists. The unemployment rate gained to 4.6% from 4.5% in the previous month.

In corporate news, American Home Mortgage ((AHM)) dropped 41% after it revealed plans to close its operations Friday and cut about 7,000jobs. Procter & Gamble Co. ((PG)) posted 19% earnings rise in Q2 and said it will repurchase up to $30 billion in shares over the next three years. The consumer products giant attributed its quarterly growth to new products. It earned 67 cents a share, up from 55 cents a year earlier on 8% sales growth, beating estimates.

Take-Two Interactive ((TTWO)) fell 16% in pre-open trade after the company said it would delay the release of one of its games. Of major European companies, British Airways reported a 75% jump in Q1 profit to 269 million pounds from 154 million pounds, although revenue fell 2% to 2.19 billion pounds. S&P 500 futures slipped 2.9 points at 1,478.90 and Nasdaq 100 futures dropped 6 points at 1,974.00. Dow industrial futures fell 27 points.


[R]8:15AM American Home Mortgage dropped 41% after it revealed plans to close its operations Friday.[/R]

American Home Mortgage Investment Corp ((AHM)) tumbled 41% standing out as one of the biggest victims of the struggling U.S. credit market. The lender revealed plans to close most operations on Friday and reduce nearly 7,000 jobs. The company said its employee base will be reduced to about 750 workers, down from the 7,409 it reported at the end of 2006.

American Home originated $59 billion in loans in 2006 mostly to people with better credit than risky subprime borrowers. Nearly half of those mortgages were adjustable-rate loans, with an interest rate that can be adjusted upward. According to experts, company will have to seek bankruptcy protection, and no later than Monday.

[R]7:00AM New York, 8:00PM Tokyo – Nikkei closed 1.8% lower for the week. After the close Toyota reports 32% rise in earnings on sales gain of 16%.[/R]

Nikkei 225 in Tokyo closed down 4.25 or 0.03% to 16,979.86. For the week Nikkei lost 1.81% and Topix lost 1.6%. Despite a week of widening credit problems in the U.S. markets in Asia and Europe stabilized. The yen jumped above 119 for a dollar helping export sensitive stocks.

Sumitomo Realty & Development Company jumped 4.5% after the company reported first quarter earnings gain of 54% to 30 billion yen. The net income increase at the company has tracked rising real estate values in Tokyo and other locations in Japan. Central Tokyo has seen prices gain sharply in the last one year on tight inventory supplies. Mitsui Fudosan and Mitsubishi Estates gained 1.5%. Mitsubishi Estate income jumped three times on higher condo prices in Tokyo.