Fed Kept Rates at 5.25%; Cisco Earnings Up 25%

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

Market averages in New York closed higher as expectations of rates cut were dashed in the afternoon trading. The Fed left the rates unchaged to 5.25% and said that inflation remains its key focus. The productivity in the second quarter rose at 1.8%, lower than estimated. The rates were revised lower dating back last three years. Cisco reported earnings of 31 cents compared to 25 cents a year ago on 18% rise in revenue.

[R]4:00PM New York, 10:00PM Frankfurt, 1:30 AM Mumbai[/R]

Market averages in New York closed higher on the productivity report and the Fed decision to leave rates unchanged. European markets closed higher. Asian markets closed lower but Australia and Philippines advanced.

Dow Jones closed up 35.52 to 13,504.30, Nasdaq advanced 14.27 to 2,561.60, and S&P 500 increased 9.04 to 1,476.71.

FTSE 100 Index in the U.K. closed up 119.70 to 6,308.80, in Tokyo Nikkei 225 closed at 16,921.77, up 7.31, and in Brazil, iBovespa closed up 762.59 or 1.44% to close at 53,853.69.

Yields edged higher on 10-year U.S. bonds and closed at 4.79% and 30-year bond rose to close at 4.94%.

Crude oil increased 32 cents to close at $72.42 per barrel, natural gas closed 1 cent lower to $6.20 per mBtu, and gasoline futures increased 1.83 cents to close at 194.42 cents per gallon.

Gold traded 60 cents higher to close at $683.90 per ounce, silver down 6 cents to close at $13.09 per ounce, and copper futures gained $24 to close at $7,815 per metric ton.

In New York trading averages climbed fractionally higher after digesting reports on productivity and Fed decision to leave the rates unchanged. Labor Department reported non-farm productivity gained at 1.8% rate and unit labor cost rose at 2.1% in the second quarter at annualized rates. The productivity rates were revised lower since 2004. Private economists think that the economy needs to increase productivity at or above 2%.

Wynn Resorts reported earnings of $89.6 million, up 10.5% from a year ago in the second quarter or 82 cents a share from a loss of $20.1 million or 20 cents per share. The company revenue jumped to $687.5 million from $273.4 million.

DreamWorks Animation ((DWA)) fell 8% on the report that Paul Allen, major shareholder plans to sell 10 million shares in public offering.

Cisco Systems reported fourth quarter net income of 31 cents per share or $1.93 billion compared to 25 cents a share or $1.54 billion on revenue rise of 18% to $9.43 billion.

Of the 30 stocks in Dow 21 closed higher and 9 declined. General Motors led stocks in the average with a gain of 3% followed by ExxonMobil with a rise of 2.6%. Boeing led the decliners with a loss of 1.37% followed by 1.2% fall in Hone Depot. Of the 500 stocks in S&P 500 index, 304 stocks gained, 191 fell, and 5 declined. Tenet Healthcare led the decliners in the index with a loss of 15% followed by 7% fall in Dean Foods, and 6% decrease in International Flavors & Fragrances and Convergys Corp. Interpublic Group led the gainers with the rise of 16% followed by 8% gain in Pulte Homes, and 7% increase in BMC Software and First Horizon National.

Asian markets closed lower but select emerging markets managed to close higher. Philippines led the region with a gain of 2.8% followed by 1.1% rise in Australia and fractional gains in India, Japan, and Korea. Taiwan with a loss of 0.9% led the decliners in the region followed by 0.7% in Indonesia, followed by fractional losses in Thailand, Singapore, and Hong Kong. The Shanghai Composite gained 0.5% bucking the regional trend of lower markets for the last one week.

In Latin Markets trading Mexico led the region with a gain of 1.74% followed by 1.34% increase in Brazil, and 0.7% advance in Argentina.

In Sao Paolo trading of the 59 members of the iBovespa index 41 closed higher and 18 declined. Telecom stocks led the decliners. TIM led the decliners with a loss of 3% followed by 2.5% decline in Tele Norte Leste, and 1.6% fall in Telesp. Real estate company Cyrela jumped 10% followed by 6% rise in Embraer, and 5.5% gain in CCR.

[R]1:00PM NY, 5:00 PM Frankfurt European markets gained ground, boosted by financial stocks.[/R]

European stock markets gained ground on Tuesday, boosted by strength in the financial sector, as well as gains in the shares of airlines Air France-KLM and easyJet. Investors expected signals from the Federal Reserve that credit market losses are slowing U.S. economic growth and as a result borrowing costs will fall. Regional indexes climbed, led by the U.K. with an advance of 1.9%, France rising 1.6% and Germany, up 0.9%.

A broker upgraded the European banking sector to overweight from neutral, saying that it now sees considerable potential upside for sector share prices after the recent market correction. Spanish banks Santander and BBVA rose 2.7% and 2%, respectively. Credit Suisse Group jumped 5.2% in Switzerland.

In Frankfurt the financial service sector advanced; with property finance firm Hypo Real Estate rising 4.4%. Commerzbank shares jumped 5.2% after a broker upgrade of the sector. Banks also performed well, with Deutsche Bank rising 3.9%.

In Paris BNP Paribas was a notable gainer among bank shares, posting an advance of 3.8%. Societe Generale followed suit, jumping 3.2%. Dexia, owner of bond insurer Financial Security Assurance, gained 3.3%. Air France-KLM Group added 3.4% after Europe''s biggest air carrier said passenger traffic rose in July on increased travel to the Americas and Asia.

In London financial stocks led gainers, with Royal Bank of Scotland moving up 3.5% and HSBC rising 1.5%. Barclays climbed 2.6% and hedge fund manager Man Group rose 3.2%. Standard Chartered climbed 4.3% after the bank said first- half profit rose 26%, beating analyst estimates. Elsewhere, Tesco climbed 2.6% after Deutsche Bank upgraded its stock.


[R]11:30AM Market averages traded lower. Banks and insurers traded mixed. Luminent plunged 80%.[/R]

U.S. market averages continued to trade lower, reflecting reports of increased Q2 labor costs and lower-than-forecast productivity, as well as cautiousness ahead of the Fed Reserve''s interest-rate decision.

Shares of major U.S. banks and brokerage firms traded mixed. Insurer Assurant ((AIZ)) advanced 3.5% after Merrill Lynch upgraded its stock to buy. At the same time, Luminent Mortgage Capital ((LUM)) plunged 80% after it was cut to sell from neutral by UBS. The lender suspended its quarterly dividend and said it would explore options including a sale. Hedge fund Blackstone ((BX)) gained 1.8% after Lehman Bros. gave it an overweight rating.

On the earnings news front, Tyco International ((TYC)) fell 2.5% after posting Q3 loss due to charges primarily related to a legal settlement. However, adjusted results exceeded analyst expectations. Cisco Systems ((CSCO)) is scheduled to release earnings after the closing bell. Shares edged down 0.7%.

In late morning trading, the Dow Jones industrial average was down 47.80, or 0.35%, at 13,420.98 after soaring 286 points Monday. The Standard & Poor''s 500 index fell 2.66, or 0.18%, to 1,465.01, and the Nasdaq composite index fell 7.90, or 0.31%, to 2,539.43. The yield on the benchmark 10-year Treasury note was unchanged at 4.74%.


[R]10:30AM New York, 8:00PM Mumbai – Banks, real estate, and cement stocks led a mild rise in Sensex in India.[/R]

Sensex in Mumbai trading closed up 29.74 or 0.2% to 14,932.77. Weakness and volatility in New York trading has held most global markets hostage to vagaries of traders in New York. In the broader market in Mumbai trading, 1,660 stocks gained, 1,026 declined, and 62 remained unchanged.

Of the 30 stocks in Sensex, 17 increased and 13 declined. ITC with a loss of 3% led the decliners in the index. Bajaj Auto lost 2% to 2,262 and Bhel declined 0.8% to 1,670.
Companies in power generation, cement, banks, and mobile telephony led a mild advance.

Ambuja Cements gained 0.8% to close at 127 rupees, ACC increased 0.35% to 982 rupees, and Grasim increased 0.45% to 2,910 rupees. Rising construction in Mumbai and surrounding areas in Maharashtra has prompted cement prices to jump 20% above 280 rupees.

Bharti Airtel jumped 1.9% to 877.20 rupees but Reliance Communication decreased 0.2% to 530 rupees.

Banks led the most gainers in the index. Canara Bank led the banking stocks with a gain of 4% and Kotak Mahindra, Bank of India, and Union Bank of India jumped 2%. ICICI Bank dropped 2% to 870 rupees and State Bank of India lost a fraction to close at 1,726 rupees.

Punk Llyod surged 3.6% to 287 rupees on an order to build a unit for Bharat Oman Refineries. The project with a 2-year completion date, has lifted total order backlog to 16,480 crore rupees.

Sharp decline in oil prices led state owned oil companies higher. HPCL jumped 2.4% to 256 rupees, BPLC closed 1.7% higher to 316 rupees, and Indian Oil Corp gained 1.8% to 407 rupees.

Kale Consultants soared 4% to 95 rupees on the news that the company has acquired UK based airline revenue auditing company for nearly $10 million. Zero Octa, based in the UK, has revenue of $6 million.

Real estate stocks were on the upswing after falling sharply in the previous session. Housing Development & Infrastructure soared 4%, DLF increased 1.3%, and Mahindra Gesco increased 0.7%.


[R]09:45AM Wall Street opened lower ahead of Fed’s rate decision.[/R]

Wall Street declined at opening Tuesday amid cautiousness ahead of the Fed Reserve''s interest-rate decision and government reports which showed increased labor costs and lower-than-expected Q2 productivity. The Labor Department reported that productivity rose 1.8%, below the 2.1% gain expected by economists. Unit labor costs rose at an annual rate of 2.1%, vs. expectations of a 1.6% gain.

In corporate news, Wynn Resorts ((WYNN)) surged 13.5% after it said its revenue more than doubled due to strength in Las Vegas and a new casino in Macau. On the side of the losers, Marsh & McLennan Cos. ((MMC)) dropped 5.5% after the largest U.S. insurance brokerage posted a 3% increase in its Q2 profits amid growth in its risk and insurance business. The company also approved a $1.5 billion share- buyback plan.

Among stocks driven by analyst comments, Luminent Mortgage Capital ((LUM)) plunged 31% after it was cut to sell from neutral by UBS. Bear Stearns Cos. ((BSC)) was in focus again amid reports that its CEO has called Merrill Lynch ((MER)) and Citigroup ((C)) executives to reassure them about his company''s financial health. The stock gained 1%.

In the first hour of trading, the Dow Jones industrial average was down 48.86, or 0.36%, at 13,419.92 after soaring 286 points Monday. The Dow was down more than 100 in the early going Tuesday. The Standard & Poor''s 500 index fell 5.56, or 0.38%, to 1,462.11, and the Nasdaq composite index rose 7.14, or 0.28%, to 2,540.19. The yield on the benchmark 10-year Treasury note rose to 4.75% from 4.74% late Monday.

[R]09:00AM U.S. stock futures indicated a flat start ahead of Fed’s decision.[/R]

U.S. stock futures traded near the flat line Tuesday, following a strong rally the previous session when the Dow hit a 4-year high of 286 points as investors bought financial stocks that suffered weakness in earlier hours amid worries over credit markets. Traders were cautious in pre-market hours, awaiting a Federal Reserve decision on interest rates and its view on risk after the recent troubles in credit markets.

Casino stocks were in the spotlight, with shares of Wynn Resorts ((WYNN)) climbing 9.7% after the casino operator said its Q2 revenue more than doubled due to strength in Las Vegas and a new casino in Macau. Rival Harrah''s Entertainment Inc. ((HET)) added 1% in pre-market trading after it posted 85% profit jump in Q2, due to a strong performance in Las Vegas.

Among companies posting disappointing results, Tyco International ((TYC)) reported a $3.55 billion net loss for the third quarter, due to $3.3 billion in charges. Underlying earnings beat expectations of 55 cents a share. Duke Energy ((DUK)) reported a 17% drop in Q2 net profit, but beat estimates.

In economic news, productivity in the total manufacturing sector grew 1.6% in Q2, as output rose 3.5% and hours increased 1.8%. S&P 500 futures slipped 1.3 points at 1,466.40 and Nasdaq 100 futures lost 2.5 points at 1,960.00. Dow industrial futures gave up 9 points.


[R]8:30AM New York, 9:30PM Tokyo – Asian markets make a feeble attempt to climb. Japan lost most of the day’s gain at the close.[/R]

Asian markets closed lower but select emerging markets managed to close higher. Philippines led the region with a gain of 2.8% followed by 1.1% rise in Australia and fractional gains in India, Japan, and Korea. Taiwan with a loss of 0.9% led the decliners in the region followed by 0.7% in Indonesia, followed by fractional losses in Thailand, Singapore, and Hong Kong. The Shanghai Composite gained 0.5% bucking the regional trend of lower markets for the last one week.

In Hong Kong trading insurance companies fell. China Life and Ping An lost nearly 0.7% dragged by weakness in financial and banking sector across the region. The regional commercial property developer Hong Kong Land reported first half profit increase of 32% to $155 million. The commercial property vacancy rates fell to 3% in Hong Kong but residential market remained relatively soft. The company is enjoying a rising demand from financial services segment. When counting the property valuations gain the profit in the first half jumped to $1.2 billion from $924 million a year ago. Diluted earnings per share jumped to 50.49 cents from 39.92 cents.

Indonesia Central Bank left the key interest rate unchanged to 8.25% meeting the expectations of the most economists. Food and energy prices have been stubbornly high and continue to rise. In July the prices gained 6.1% after rising 5.8% in June. The bank is targeting inflation between 5% and 7%. Rising prices of palm oil and crude oil have forced the government to reduce exports of palm oil. Indonesian currency rupiah edged a fraction lower at close to 9,316 to a dollar.

In Sydney trading Macquarie Bank recovered with a gain of 6.4% after falling more than 15% in the first week of this month. Novo Energy jumped 8% after a takeover offer from Toro Energy valuing the company at A$276 million. Primary Healthcare and Hills Industry edged up a fraction after reporting earnings. Australian Agriculture fell 7% after reporting first half profit decline of 31%. Casino operator, Publishing & Broadcasting jumped 4% and Austar United fell 2% on broker rating revisions.

[R]8:00AM Harrah’s Entertainment Q2 profit jumped 85%.[/R]

Harrah''s Entertainment Inc. ((HET)) posted 85% earnings jump in Q2 to $237.5 million or $1.25 per share, vs. $128.6 million, or 69 cents per share a year ago, boosted by strong results in Las Vegas and Atlantic City. Quarterly results beat analyst estimates of 98 cents per share.

Las Vegas revenue climbed to $922.5 million from $803.3 million, while Atlantic City revenue increased to $592.6 million from $521 million. The casino operator posted revenue increase of 14% to $2.7 billion from $2.37 billion last year.

However, adjusted results from continuing operations came in below expectations. Income from continuing operations rose to $195.5 million, or $1.03 per share, compared with $128.7 million, or 69 cents per share, a year earlier.


[R]7:00AM New York, 8:00PM Tokyo – Market opened higher but steadily lost its gain the afternoon trading.[/R]

Nikkei 225 closed 7.31 or 0.04% higher to close at 16,921.77. The index opened nearly 1% higher but gave up most of its gains on weakness in banking and commodities related stocks. Topix index fell 0.5% or 7.8 to close at 1,660.01

Toyota is planning to increase its global of production of vehicles to 10.5 million vehicles. According to a report in local business newspaper, the Nikkei Weekly, in a recent meeting with parts suppliers the company is targeting higher global sales to meet rising demand. Toyota last week reported 32% rise in quarterly earnings on 16% gain in sales and planned to produce 8.9 million vehicles in the fiscal year ending in March 2008.

According to Bloomberg news Shinsei Bank Ltd reported accumulated losses from subprime lending in the U.S. of $30 million and has exposure of $200 million to mortgage bond market. After the news the stock jumped 8% but closed 3.3% higher at 430 yen.

Trend Micro, Internet security and software provider, jumped 14% or 500 yen to close at 4,100 yen. The company revised its guidance for the second quarter sales to 25 billion from 22.5 billion yen and earnings to 6.2 billion yen from 3.7 billion yen. The sales were revised up 11% and earnings were revised up 67%.

Japan Steel Works soared 5.8% to close at 1,926 after reporting 300% increase in earnings to 7.9 billion yen.

Softbank said that it has added 224,000 mobile users in the month of July.

Nomura Holdings lost its gain of 3% in the morning trading to close up 0.5% to 2,145 yen. The brokerage company in the previous week had reported a sharp rise in earnings on higher trading and brokerage revenue. Mizuho Financial after reversing from an earlier gain of 2.2% to close 2% lower at 687,000 yen. In the last week the company reported lower that expected earnings.

Oil closed sharply lower in the international markets with a loss of 5% dragging energy and trading companies. Inpex, oil explorer, fell 8% to 90,000 yen. Mitsui & Company fell 5.2% and Mitsubishi dropped 4.5%.