Stocks, Bond Yields, Metals Decline

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

In New York trading averages declined after invesstors reviewed the text of the recent FOMC meeting. The committee members worried that economic growth may be at risk with recent turmoil in credit market jitters. Investors looking for rate cut in the next meeting were disappointed. In the afternoon trading averages fell sharply after the release of the statement. Indicators for consumer confidence and home prices showed decllines. Latin and European markets fell sharply.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00 AM Mumbai[/R]

[R]Market averages in New York fell in the final hour of trading as investors speculated that hoped interest rate cut may not materialize. The sharp decline in the averages in New York markets dragged European and Latin markets.[/R]

FTSE 100 Index in London fell 117.90 or 1.9% to 6,102.20, in Tokyo Nikkei 225 closed at 16,287.49, down 13.90, and in Brazil, iBovespa Index traded down 1,439.63 or 2.71% to 52,813.74.

Yields edged lower on 10-year U.S. bonds and closed at 4.52% and 30-year bond rose to close at 4.86%.

Crude oil declined $0.24 to close at $71.73 per barrel, natural gas closed up 21 cents to $5.59 per mBtu, and gasoline futures increased 2.4 cents to close at 201.54 cents per gallon.

Gold declined $2.70 in New York trading to close at $673.50 per ounce, silver closed unchanged to close at $11.92 per ounce, and copper for August month delivery fell 1.6 cents to $3.321 per pound in New York trading.

In New York averages fell sharply after investors grappled with a possibility of no rate cut in the upcoming Fed meeting. The FOMC statement released by the Fed discussing the latest cut showed that committee members are concerned with growth rates more than the inflation. The reversal in the psychology among Fed members shows altered priorities.

In economic news consumer confidence fell in August but not as much as economists had forecasted. The index is used to estimate near-term spending plans of consumers. According to S&P/Case Shiller Home Price Index home prices fell 3.2% in the second quarter from a year ago across the nation. Seattle led the nation with a home price decline of 7.9% followed by a fall of 7.7% in Tampa, 7.3% in San Diego, and 7% in Washington. Phoenix and Charlotte lost more than 6% and Miami and Las Vegas dropped 5%.

Last week the Commerce Department reported that new home sales in July, a notoriously volatile economic indicator, jumped to 870,000, increase of 2.8% from June and 10.6% lower from a year ago and the median price for new home jumped 0.6% to 239,500 in the month. Seasonally adjusted inventory of new homes rose to 7.5 months supply.

Home Builders, mortgage lenders, banks, and brokers fell sharply. Merrill Lynch downgraded Lehman Bros. led the decline in brokerage stocks. Citigroup led the declines in banks and Lehman Brothers led the fall in brokerage companies. State Street Bank fell 4.5% or $2.72 to $61.15after it reported that it has credit line of $27.9 billion to hedge funds and private funds. Bed Bath & Beyond fell 6% to after Merrill Lynch downgraded the stocks to ‘sell’. Lennar, D R Horton, Beazer Homes, and Toll Brothers fell for the third day in a row.

Wendy’s International was one of the few stocks that closed higher after it entered in confidentiality agreements with investment funds controlled by Nelson Peltz.

Of the 30 stocks in Dow Jones Industrial Average listed, all closed lower. Of the 30 stocks in index, 7 stocks lost 3% or more. Alcoa Inc led the index stocks with a loss of 4.2% followed by declines of 4.1% in American Express, 3.7% in General Motors, 3.4% in Citigroup, and 3% in AT&T, J P Morgan, and Boeing.

Of the stocks in S&P 500, 485 stocks closed lower and 14 gained, 1 stock closed unchanged. Tenet Healthcare with a drop of 9% led the index stocks followed by declines of 7.3% in MGIC Investment, 7% in Centex, 6.2% in U.S. Steel, Nvidia, Lehman Brothers, and Compuware. Of the index stocks 21 lost more than 5%.

Asian Markets closed mixed. Indonesia led the region with a gain of 1.5% followed by rises of 1.4% in Korea and Philippines. Singapore led the decliners with a loss of 1.4% followed by losses of 0.9% in Hong Kong and 0.4% in Thailand. Trading volume was very light in Tokyo and Mumbai.

Bank and properties stocks fell in Hong Kong led by 3% decline in Industrial & Commercial Bank of China. Metal stocks lifted the Shanghai Composite Index for the seventh day in a row to a record close. The index increased 0.9% to 5,194.69. In Korean trading shipbuilders and steelmakers led the rally.

In Latin Markets trading Argentina led the region with a fall of 4.3% followed by Mexico with a decline of 3.2%, Brazil with a loss of 2.7%. Of the 60 stocks listed in iBovespa index in Brazil, 49 fell, 9 increased, and 2 were unchanged.

[R]2:00PM New York, 7:00PM London - UK shares fell after a day of holiday. Sell off in financials continued on renewed subprime market fears. UK housing loans drop 11% in July. At least 33% giant UK businesses evade tax.[/R]

London stocks weakened sharply on concern the US housing market slowdown will slow down global economic growth. London in subdued trading fell 1.9%. The index opened 1% lower and dropped more in the afternoon trading. On Friday, UK gained 0.37% in shaky trading. Of the 102 FTSE 100 shares, 95 dropped and only 7 rose, in a broad selling not seen in a week. Of the index stocks, 50 fell over 2% and 6 gainers were less than 1%.

In London trading FTSE 100 sank 1.9% or 117.9 to 6,102.20 pulled down by financials and banks. The British Bankers Association said that approved home loans fell 11.1% in July at 66,965 from 75,318 in June of this year and declined 1% from a year ago. The value of the loans issue rose to 5.7 billion pounds in July versus 5.4 billion pounds in June. BBA said 182,950 mortgages were approved for all purposes last month with an aggregate value of 21.5 billion pounds. The average home loan approved was up 13% from a year ago to 156,900 pounds. Credit card borrowing fell by £0.1 billion in the month, while borrowing on personal loans and overdrafts rose by £0.2 billion.

The National Audit Office reported that at least 33% of UK’s biggest 700 companies did not pay tax in financial year 2006. Two thirds of cumulative company tax paid emanated from banking, insurance and oil and gas sectors. Aggregately, big firms paid only 24.4 billion pounds in taxes during the review period. The Audit Office established that 50 businesses or 7% of the 700 paid 67% of the tax while about 220 paid none and another 210 paid less than 10 million pounds each.

Of the FTSE 100 shares, financials fell sharply. Lonmin paced decliners with a sharp loss of 6.02% followed by Schroders down 4.67%. Standard Life fell 4.29%, Experian Group losing 4.13% and Alliance & Leicester shed 3.91%. Northern Rock lost 3.72%, Barclays plc down 3.60%, Intercontinental easing 3.38%, Royal Bank of Scotland finishing lower 3.10% and HBOS plc retreated 2.26%. Metal stock Rio Tinto and Xstrata fell over 2% each. The gains were limited to only 7 stocks. Drax Group led up 1.65% followed by Enterprise Inns rising 0.90%. British Airways lost 0.86%, Punch Taverns up 0.10% and Shire plc adding 0.9%.

Oil field servicing company John Wood Group said today its full-year annual earnings may be ahead of predictions. The shares were up 9.1% in early afternoon trading. During the first half, net earnings rose to $81.2 million from $49.2 million a year ago. Higher activities in engineering and gas turbine services helped revenues. Earnings per share were up 64% at 15.7 cents from 9.6 cents a year ago. Revenue in the period increased 35% to $2.12 billion from $1.6 billion and increased its dividend 33% to 2 cents from 1.5 cents.

[R]1:00PM NY, 5:00 PM Frankfurt European markets broke a seven-session winning streak.[/R]

European stock markets closed lower Tuesday, breaking a seven-session winning streak. Decliners were led by financial companies on concern the credit-market turmoil might spread into the broader economy, hurting economic growth. Barclays, Societe Generale and Deutsche Bank AG paced the retreat. France posted the sharpest decline, down 2.1%, followed by the U.K. losing 1.9% and Germany, falling only 0.7%.

In Frankfurt an economic report showed that German business confidence dropped for a third month in August, hurt by credit markets crisis. The most notable decliners in the financial sector included Deutsche Postbank, down 2.3% and Deutsche Bank, down 1.7%. Insurer Allianz saw its shares fall 1.2%. Among tech stocks, engineering company Siemens fell 1.9%. Deutsche Post also posted steep losses, with its shares falling 2.8% on broker downgrade to sell from buy.

In Paris losses were paced by Societe General, BNP Paribas and Arcelor Mittal. In the financial sector, BNP Paribas dropped 2.3%, Societe Generale, France's second-largest bank, slipped 2.9%, Credit Agricole fell 1.7%, and Dexia lost 1%. Mining companies also weighed, with steel maker Arcelor Mittal falling 2.1%. The company is holding an extraordinary shareholders' meeting in Amsterdam to vote on completing the merger of Arcelor and Mittal. On the positive side, utility company Suez rose 1.4%.

In London shares of third-biggest U.K bank Barclays declined 3.6% after a report that exposure from its link to German lender Sachsen LB may result in a severe loss. The bank denied preoviding funding to an investment unit for Landesbank Sachsen Girozentrale. Outside the sector, J Sainsbury dropped 2.5%. Among rising stocks, EasyJet gained 2.4% on positive comment from JPMorgan Chase.


[R]11:30AM Market averages dropped further lower, pressured by economic growth concerns. Housing stocks dropped.[/R]

U.S. stocks extended losses in late morning trading Tuesday, with the three major averages falling over 1%. A broker downgrade of giant investment banks renewed credit worries and concerns about economic growth. As a result, financial stocks were negatively affected, with the banking and brokerage sectors posting notable losses.

Citigroup ((C)) dropped 2.5%, Lehman Bros ((LEH)) fell 4.2% and Bear Stearns ((BSC)) declined 2% after Merrill Lynch cut its rating on the stocks to neutral from buy, citing the impact of debt market exposure. The broker forecast a sharp decline in earnings for Lehman Bros and Bear Stearns, while Citigroup is expected to see a smaller reduction in earnings owing to its diversified business.

In addition, Standard & Poor's housing index showed that U.S. home prices in Q2 hit a 20-year low, sending housing stocks down. Hovnanian Enterprises ((HOV)) slipped 3.6%, luxury homebuilder Toll Brothers ((TOL)) dropped 3%, and D.R. Horton Inc. ((DHI)) declined 3.6%.

Also in economic news, the Conference Board announced that its Consumer Confidence Index plunged to 105.0 in August from a revised reading of 111.9 in July. Analysts had expected a decline to 104.5. The FOMC is due to release the minutes of its Aug. 7 policy-setting meeting, expected to disclose clues about interest-rate cuts.

In late morning trading, the Dow fell 104.86, or 0.79%, at 13,217.27. The blue-chip average was led down by Alcoa Inc. ((AA)) and American Express Co. ((AXP)), falling 2.9% and 2.5%, respectively.

The Standard & Poor's 500 index was down 15.39, or 1.05%, at 1,451.40, and the Nasdaq composite index shed 30.21, or 1.18%, to 2,531.04. Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.55% from 4.57% on Monday.

[R]Consumer confidence dropped to 105 in August.[/R]

Tuesday morning, the Conference Board released its report on consumer confidence in the month of August, showing that its consumer confidence index fell roughly in line with economist estimates. The report showed that the consumer confidence index fell to 105.0 in August from a downwardly revised 111.9 in July.

Economists had expected the index to drop to 104.5 compared to the 112.6 originally reported for the previous month. The Conference Board also said that the present situation index fell to 130.3 in August from 138.3 in July, as those claiming conditions are ‘good’ decreased to 26.4 percent from 28.3 percent and those saying conditions are ‘bad’ increased to 16.3 percent from 14.5 percent.

The report also showed that the expectations index declined to 88.2 from 94.4 in the previous month, as those expecting business conditions to worsen in the next six months rose to 10.6 percent from 8.2 percent. The labor market outlook was also less favorable, with those expecting more jobs in the months ahead falling to 13.0 percent from 13.8, while those expecting fewer jobs increased to 15.3 percent from 14.9 percent.

[R]10:30AM New York, 8:00PM Mumbai – In subdued trading in Mumbai, stock averages fell and metals gained. ICICI Bank and Hindlaco led the stocks in Sensex.[/R]

Sensex in Mumbai trading closed up 58.84 or 0.4% higher to 14,901.22. CNX Nifty traded up 12.40 to close at 4,315.00. Rupee edged lower to 41.01 to one dollar.

Of the stocks on Bombay Stock Exchange, 1,593 gained, 1,061 declined, and 75 were unchanged. Of the 30 stocks in the index, 19 increased and 11 declined. Hindalco, the largest Aluminum maker, jumped 3.10% to 153 rupees. ICICI Bank led the decliners in the index with a loss of 2.9% to 858 rupees.

Daily turnover on the National Stock Exchange was reported at 9,198 crore rupees with 1,146 stocks changing hands.

The ruling coalition and communist parties appear to have found a common ground in resolving their differences related to nuclear deal with the U.S. The key demand to stop negotiations with the International Atomic Energy Agency is still unresolved.

Weaker rupee against dollar helped software services stocks edge higher. Satyam Computers led the sector with a rise of 2.1% to 448 rupees followed by 1.7% increase to 1,880 in Infosys, and fractional gains in Wipro and TCS.

The recent turmoil in credit markets in the U.S. has forced several mortgage brokers and originators to reduce staff. The volume of new mortgage issued has been dramatically lowered in the last three months affecting the need for staff and outsourcing. Several business process outsourcing companies including Wipro, WNS, and iGate have been forced to redeploy staff to other activities.

ICICI Bank fell 2.9% on the news that the Reserve Bank of India challenged its plan to sell a stake in its subsidiary that plans to distribute insurance and financial products.

Bharti Airtel fell 0.4% to 874 rupees after the Telecom regulatory authority asked the company to terminate its value added services that uses truncated codes, violating national numbering and code convention.

Reliance Retail the newly formed division of Reliance Industries has entered in alliance with Concor, Container Corporation of India to provide transportation and distribution infrastructure through 60 terminals across the country. The parent company Reliance Industries stock jumped 2.8% to 1,890 rupees.

Metal stocks jumped after metal prices firmed in Asia trading. Steel Authority led the sector with a gain on 2.6% to 153 rupees followed by 1.7% advance in Hindustan Zinc to 697 rupees, and 0.5% increase in Tata Steel to 606 rupees.


[R]09:45AM Wall Street opened lower ahead of consumer-confidence data. Bank stocks weighed.[/R]

Wall Street declined at opening for a second day Tuesday, with investors nervous before a likely drop in consumer confidence and commentary from the Fed Reserve. The FOMC is expected to release the minutes of its Aug. 7 policy-setting meeting, which could give a clue about the central bank's intentions before its next meeting in September.

At the last meeting, policymakers kept rates steady and pointed out that inflation remains its main concern despite credit-market turmoil and slowing housing market. The Fed has recently lowered the discount rate, the interest it charges banks.

Market sentiment was additionally hurt by losses in the shares of three giant investment banks. Citigroup ((C)) dropped 4.1%, Lehman Bros ((LEH)) fell 2.3% and Bear Stearns ((BSC)) declined 2.3% after Merrill Lynch cut its rating on the stocks to neutral from buy, citing the impact of debt market exposure. Street ((STT)) was another notable mover in the sector, falling 3.3% on a report it has exposure to $22 billion of asset-backed commercial paper conduits

In earnings-related news, Coronthian College ((COCO)) lost 0.4% after it reported a lower Q4 profit. Borders Group ((BGP)) is also expected to report a Q2 loss, due to stiff competition from rivals including Wal-Mart Stores and Amazon.com.

In the first hour of trading, the Dow Jones industrial average fell 69.58, or 0.52% to 13,252.55. The Standard & Poor's 500 index was down 10.23, or 0.70%, at 1,456.56, and the Nasdaq composite index shed 19.20, or 0.75%, to 2,542.05.


[R]9:00AM U.S. stock futures pointed to lower opening ahead of data.[/R]

U.S. stock futures looked inclined to lower opening Tuesday, reflecting nervousness ahead of consumer-confidence data and fears that financial markets turmoil will spill over into the broad economy. The Conference Board's gauge is expected to have dropped sharply. A broker downgrade of three giant investment banks further weighed sentiment down.

Citigroup ((C))) lost 1.2%, Lehman Bros ((LEH)) dropped 2.6%, and Bear Stearns ((BSC)) slipped 2.9% after Merrill Lynch ((MER)) cut its rating on the stocks to neutral from buy, citing the impact of debt market exposure.

The broker said Bear Stearns and Lehman are dependent on the debt markets to a larger extent than other firms. Consequently, earnings are likely to suffer from a slowdown in securitization and mortgage business. Merrill cut its 2008 profit outlook for Lehman by 22% and for Bear Stearns by 16%. The broker cut its earnings forecast for Citigroup by 5% only as the group's broader business mix is expected to soften the earnings shortfall.

Among other pre-market highlights, State Street ((STT)) fell 2.8% on a report it has exposure to $22 billion of asset-backed commercial paper conduits, the highest exposure to conduits of any European or American bank.

In merger-and-acquisitions news, PolyMedica ((PLMD)) climbed 14% after MedcoHealth Solutions ((MSH)) agreed to buy it in a $1.5 billion all-cash deal. Companies expected to release quarterly earnings included Borders ((BGP)) and Corinthian Colleges ((COCO)). S&P 500 futures fell 6.7 points at 1,463.10 and Nasdaq 100 futures declined 7.5 points at 1,943.00. Dow industrials futures fell 60 points.


[R]8:00AM MedcoHealth Solutions agreed to buy PolyMedica for $1.5.[/R]

MedcoHealth Solutions ((MHS)), pharmacy benefits management company announced Tuesday it will acquire diabetes treatment supplier PolyMedica Corp. ((PLMD)) in a $1.5 billion cash deal, or $53 per share. The purchase price represents a 17% premium to PolyMedica's closing stock price Monday.

The transaction, which is expected to complete late this year, was unanimously approved by the boards of both companies. It is also subject to the approval of PolyMedica shareholders and other customary closing conditions. Lazard served as financial advisor to Medco, while PolyMedica received financial advice from Deutsche Bank Securities.

The combined company, Medco-PolyMedica, will serve 3.8 million diabetes patients under treatment. PolyMedica serves nearly 1 million diabetes patients through its Liberty Healthcare division. The company said that it will retain its patient engagement and service model along with its Liberty brand. MedcoHealth expects the transaction will slightly contribute to its earnings in 2008.

[R]7:00AM New York, 8:00PM Tokyo-Japanese shares retreated on a firming yen, as weak US housing market data sucked out investor confidence. Tokyo Stock Exchange to list exchange-traded fund. Isuzu and Hino sign diesel technology agreement.[/R]

Japanese stocks ended down marginally in mixed trading, dragged by losses in exporters. U.S. inventory of unsold houses climbed 5%, the biggest increase in 17 years kept investors on the edge. Tokyo fell 0.09%, down from a marginal gain of 0.32% on Monday. Of the 225 Nikkei shares, 128 fell, 87 gained while 10 were unchanged.

In Tokyo trading Nikkei 225 lost 0.09% or 13.9 to 16,287.48 in volatile trading led by exporters, as yen firmed against major foreign currencies. Exporters feared foreign earnings would take a hit. Against the euro, the yen was up 157.58 from 158.12 yesterday. To the American dollar, the yen closed up 115.63 from 116 yesterday, tracking firmer gains of as high as 112 reported last week.

The Ministry of Finance completed sale of 20-year bonds worth 800 billion yen at 2.1%. The auction drew bids worth 3.4 times the bond sales lower than 3.63 times in the previous auction in July.

Of the Nikkei 225 shares, exporters fell on concern foreign earnings will fall on a rising yen. Industrials dropped too in mixed trading Nippon Suisan led decliners falling 5.4% followed by Tokyo Dome Corp down 3.10% and Keio Corp lost 2.75%. Mitsubishi UFJ dropped 2.74% while Sumitomo Metals Mining edged lower 2.60%. Paper manufacturing firms, some banks gained. Nippon Sheet Glass led up 4.83% followed by Yahoo Japan Corp up 3.88%. Mitsubishi Paper rose 3.45% while Kyowa Hakko kog and OKI Electric closed higher 3.10% and 2.88% respectively. Softbank Corp, Bank of Yokohama and Shinsei Bank Ltd all gained over 1.5%. OSI Paper Co Ltd and Nippon Paper Group firmed as well.

The Tokyo Stock Exchange is planning to list an exchange-traded fund that is linked to the price of gold and can be exchanged for the metal, Japan press reports said Monday. The ETF will help TSE’s diversification away from shares and commodities.

Mitsubishi UFJ Financial Group Inc will form a capital alliance with Australian financial service firm Challenger Financial Services Group Ltd by buying firm's new shares. This may be an extension to Challenger’s Monday announcement that Mitsubishi UFJ Ltd. and Mitsubishi UFJ Securities Co. subsidiaries to Mitsubishi UFJ will buy some 40 million Challenger shares at A$5.20. Mitsubishi UFJ closed lower 1.77%.