Countrywide Financial Slips 8%

Elena
10 Aug, 2007
New York City

U.S. market averages continued to trade sharply lower but managed to pare some losses after the Fed Reserve made a second move Friday to ease the quell fears around the world by injecting another $16 billion into the market. Financial stocks posted significant losses, with Bear Stearns down 4.6%, Merrill Lynch losing 1.4% and Lehman Bros falling 2.6%. Countrywide Financial slid 8% after it said its allowance for credit losses climbed 97% from the end of last year.

[R]11:30AM Market averages tumbled, hurt by credit markets worries.[/R]

U.S. market averages continued to trade sharply lower but managed to pare some losses after the Fed Reserve made a second move Friday to ease the quell fears around the world by injecting another $16 billion into the market. Earlier, the Fed injected $19 billion and the ECB added another $83.6 billion, after Thursday's $130 billion injection. The Bank of Japan on Friday added $8.5 billion.

Financial stocks posted significant losses, with brokerage and banks posting the biggest drop. Bear Stearns ((BSC)) was down 4.6%, Merrill Lynch ((MER)) lost 1.4% and Lehman Bros ((LEH)) fell 2.6%. Countrywide Financial ((CFC)) slid 8% after it said its allowance for credit losses climbed 97% from the end of last year. Crude oil dropped Friday, as credit-market worries escalated.

Crude for September delivery fell $1.21 to $70.40 a barrel. In late morning trading, the Dow Jones industrials dropped 122.34, or 0.92%, to 13,148.34, adding to a 387-point plunge on Thursday. The Standard & Poor's 500 index fell 9.54, or 0.66%, to 1,443.55, and the Nasdaq composite index fell 26.19, or 1.02%, to 2,530.30. The yield on the benchmark 10-year Treasury note fell to 4.74% from 4.79% late Thursday.


[R]Import prices jumped 1.5% in July.[/R]

Friday morning, the Department of Labor released its report on import and export prices in the month of July. While the report showed a notable increase in import prices, export prices showed a much more modest increase. The report showed that import prices jumped 1.5 percent in July after rising 0.9 percent in each of the two previous months. The increase in import prices marked the biggest increase in prices since March.

A sharp rise in prices of petroleum imports contributed to the increase in import prices, with petroleum import prices surging up 7.0 percent in July following a 4.4 percent increase in June. Excluding petroleum imports, import prices increased by a much more modest 0.2 percent compared to a 0.1 percent increase in the previous month.

As mentioned above, the report also showed that export prices edged up 0.2 percent in July following a 0.3 percent increase in June. The modest increase in prices was largely due to a 1.5 percent increase in prices of agricultural exports, which came on the heels of a 2.7 percent increase in the previous month. Excluding agricultural exports, export prices were unchanged in July.


[R]09:45AM Wall Street opened steeply down, pressured by subprime worries.[/R]

Wall Street plunged for a second straight session, as credit markets concerns continued to generate negative mood. The Federal Reserve joint other central banks in their efforts to ease quell fears around the world by pouring cash into the markets for a second day. The Fed injected $19 billion into the banking system after the ECB added another $83.6 billion, and the Bank of Japan added $8.5 billion.

Shares of financial companies were sold off, with Goldman Sachs Group ((GS)) losing more than 2%. Countrywide ((CFC)) tumbled 10% after the U.S. largest mortgage lender said future profits may be hurt by the severe credit market disruptions.

Other financial stocks posting significant losses included Bear Stearns ((BSC)), down 4.9%, Merrill Lynch ((MER)), losing 0.5% and Lehman Brothers ((LEH)), falling 3%. Shares of industrial conglomerates declined, with plane maker Boeing ((BA)) down 3.1% and diversified manufacturer General Electric ((GE)) losing 1.7%.

The Dow Jones industrial average was down 108.20 points, or 0.82%, at 13,162.48. The Standard & Poor''s 500 Index fell 11.91 points, or 0.82%, at 1,441.18. The Nasdaq Composite Index lost23.97 points, or 0.94%, at 2,532.52.


[R]09:00AM U.S. stock futures indicated a steeply lower start, pressured by continuous credit worries.[/R]

U.S. stock futures predicted another day of heavy losses Friday, extending the steep decline from the previous session amid constantly growing credit market worries. On Friday, market received a fresh injection of cash by overseas central banks. The ECB injected 61 billion euros in a tender auction, and the central banks of Japan and Australia poured in roughly $12.5 billion.

According to Citigroup, investors using quantitative strategies, or computer models are experiencing a lot of difficulties. Countrywide Financial ((CFC)) fell 15% in pre-open after the U.S. mortgage lender said future profits may be hurt by the severe credit market disruptions.

In earnings-related news, California Pizza Kitchen ((CPKI)) dropped 12% as the company''s yearly earnings forecast came at the low end of analyst expectations. Graphics chip provider Nvidia ((NVDA)) fell more than 8% after it announced a 3-for-2 stock split. The company posted stronger-than-forecast quarterly earnings.

The concerns about credit and the effect of bad subprime loans sent global markets sharply lower. Japan''s Nikkei fell 2.4%, Hong Kong''s Hang Seng Index fell 2.9%. In early afternoon trading, Britain slipped 2.98%, Germany fell 1.59%, and France''s CAC-40 dropped 3%.

S&P 500 futures, in volatile moves throughout the morning, dropped 19.3 points at 1,438.60 and Nasdaq 100 futures dropped 21.5 points at 1,924.00. Dow industrial futures dropped 190 points. The yield on the benchmark 10-year Treasury note fell to 4.74% from 4.79%late Thursday.


[R]8:30AM New York, 8:30 PM Hong Kong – Asian markets corrected sharply on weakness in European and New York markets.[/R]

Asian markets closed declined with heavy losses in Korea, Hong Kong, and Australia tracking lower markets in New York and Europe. Korea led the decliners in the region with a loss of 4.2% followed by 3.6% fall in Australia, 3% decrease in Philippines and Hong Kong, 2.7% fall in Taiwan, and 1.5% decline in India, Indonesia, and Singapore.

In Hong Kong trading stocks fell sharply largely on the market nervousness than on fundamentals. Daily turnover on the main board dropped to HK$65.5 billion from HK$ 85.2 billion and volume on GEM market was reported at HK$0.5 billion, a decline of 50% from the previous session. Hang Seng Index opened sharply lower and attempted several rebounds in the morning trading but failed to gain much ground. Banks led the decliners. HSBC dropped 2% and Bank of East Asia fell 3%.

China reported July trade surplus of $24.4 billion, 67% jump from a year ago, and declined from $26.9 billion from June. The elevated surplus is fueling sharp rise in bank deposits, real estate prices, and stock market valuations. The rising demand is also fueling inflation in energy and food prices above the target set by the central bank. The People’s Bank of China said that the broadest measure of money supply, M2, rose 18% in July. Outstanding local currency loans in the month surged 16.6% and deposits in the local currency increased 16%.

Shanghai Composite Index edged fractionally lower to close at 4,749.37, still near the record high.

In Sydney trading ASX 200 fell 222.50 or 3.6% to 5,965.20. Of the total 201 stocks in the index, 9 gained, 189 declined, and 3 remained unchanged.

Perilya Ltd led the stocks in the index with a fall of 13.6% followed by 10% loss in Compass Resources, Mincor Resource, and Monadelphous Group. PMP Ltd led the gainers in the index with a rise of 2.6% followed by 2.11% gain in Futuris Corp, 1.7% increase in City Pacific, and 1% rise in Boom Logistics.

The Reserve Bank of Australia added liquidity in the market to stem the rising interest rates and worries that credit crunch may stem economic growth. The global injection of liquidity in local markets was carried out by the Federal Reserve Bank in Washington, the European Central Bank in Europe, and Central Bank in Japan.


[R]8:00AM Nvidia said its Q2 profit doubled.[/R]

Nvidia Corp. ((NVDA)), graphics chip maker, said late Thursday its Q2 profit nearly doubled, boosted by increased use of graphics-intensive applications. Quarterly net income rose to $172.7 million, or 43 cents per share, up from $86.8 million, or 22 cents per share a year ago. Company’s revenue jumped 36% to $935.3 million. Analysts had expected earnings of 43 cents per share on $859.9 million in revenue. Shares of Nvidia dropped 6.7% in pre-market trading.


[R]7:00AM New York, 8:00PM Tokyo – Market indexes in Tokyo more than 2% as fears arising from credit worries in the U.S. spread to the Asian markets.[/R]

Nikkei 225 index plunged 406.51 or 2.37% to 16,764.09 at close with financial and brokerage stocks leading the decliners. Topix index dropped 2.96% to close at 1,633.93. Market turnover has reached peak level and today was no different. Daily turnover fell from 5.3 trillion yen to 4.5 trillion yen but still hovered at triple the daily average volume.

The Bank of Japan in a coordinated effort with other central banks in Australia, Europe and the U.S. added liquidity to the market by lending 1 trillion yen. The central bank lent money at 0.49% to fight the rising interest rate which had reached above 0.55%. Reserve Bank of Australia loaned A$5 billion to provide the liquidity in the market. In the overnight trading the European Central Bank and the Federal Reserve Bank in Washington added liquidity in the market to fight the rising interest rates and perceived credit crunch. Central Banks in Indonesia, Philippines, and South Korea expressed willingness to provide liquidity if needed.

According an analyst report cited by Nikkei News, nine largest Japanese financial groups have combined exposure to the U.S. subprime market of 1 trillion yen. The relatively light exposure in the Japanese banking system to the troubled mortgage market in the U.S. did not prevent investors selling stocks in droves.

Mizuho Financial Group, Nomura Holdings, and Shinsei Bank have confirmed exposure to the mortgage market in the U.S.

Of the 225 stocks in the index, 182 declined, 39 gained, and 4 were unchanged. Shinsei Bank led the stocks in the index with a loss of 10% followed by 9.2% decline in Nisshinbo Industries, and 9% fall in Mitsubishi Materials, Komatsu, and NSK Limited. Trading companies Itochu, Marubeni, and Mitsui fell 7% or more. Nippon Suisan led the stocks with a gain of 6% followed by 4% gain in Fast Retailing, and 3.5% rise in CSK Holdings.

Shipbuilding and shipping line operators were hit hard. Mitsui OSK, Sumitomo Osaka, Kawasaki Kisen Kaisha fell more than 4%.

Energy and metal stocks fell sharply in the sell-off in the market. Mitsubishi Materials plunged 9%, Nippon Soda, Nippon Mining, and Mitsui Chemicals dropped 7%, Toho Zinc lost 6%, and Nippon Steel declined 3%.

Trend Micro after surging for the each of three days in a row for 7% declined 2.5%.

Japan Tobacco fell 1.97% to 598,000 yen after rising in the previous. Japan Tobacco reported its first quarter sales of 1.2 trillion yen, a decline of 5.4% from a year ago and net income fell 15.2% to 64.4 billion yen. Domestic sales fell 13% but international sales rose 25.3% limiting the net profit decline. The company revised its sales forecast for the year to 6.41 trillion yen from 4.89 trillion yen and net income was revised to 256 billion yen from 186 billion yen.

Fast Retailing increased 4.2% after soaring 11% in the previous session on the news that the company plans to drop its bid for the U.S. based retailer Barneys New York.