Retail, Financials Lower; Low Trading Volumes

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

Volatility is driving away investors around the globe. U.S. market inflicted volatility has driven investors away from trading in the U.S., Japan, Germany, India, and Australia. In New York, investors sought refuge in tech stocks lifting Cisco, Dell, AMD, and Intel. Brokerage stocks fell after Lehman lowered earnings on Goldman, Morgan Stanley, and Merrill Lynch. Freddie Mac earnings plunged 45%. Thornburg Mortgage sells $500 million of convertible stocks. European markets closed higher.

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

[R]Market averages in New York trading were lifted strength and tech stocks and weakness in financial sector. Stocks in retail sector fell after earnings. European stocks closed higher. Weak trading volume in Japan, Korea, India, and Australia persisted as investors stayed on the sideline.[/R]

FTSE 100 Index in London increased 79.80 or 1.30% to 6,212.00, in Tokyo Nikkei 225 closed at 16,153.82, up 0.88% or 140.99, and in Brazil, iBovespa Index traded up 123.2 or 0.23% to 52,857.84.

Yields edged lower on 10-year U.S. bonds and closed at 4.51% and 30-year bond rose to close at 4.84%.

Crude oil declined 15 cents to close at $73.36 per barrel, natural gas closed up 5 cents to $5.63 per mBtu, and gasoline futures decreased 2.07 cents to close at 208.01 cents per gallon.

Gold lost $1.50 in New York trading to close at $673.90 per ounce, silver closed 4.7 cents higher to close at $11.96 per ounce, and copper for August month deliver in London gained $92 to $7,430.00 per pound in New York trading.

In New York light trading volume and upcoming long weekend dominated trading sentiment. Tech stocks led the rising stocks for the second day and financials declined. The investors looking for safe havens gravitated to tech stocks and worried that there are significant unknowns in the financial sectors. Techs gained but financial stocks lost for the second day in a row.

Nasdaq gained a fraction when Dow and S&P 500 declined. Cisco, Motorola, Dell, and Advanced Micro, Intel and IBM gained in trading. Financials and brokerage stocks declined. Lehman Brothers lowered earnings forecast for the current quarter and the second half earnings for several brokerage companies. Goldman Sachs, Morgan Stanley, and Lehman Brothers declined more than 1%. Freddie Mac lost 5% after reporting 45% decline in second quarter profit dragging Fannie Mae 3.7% lower. Thornburg Mortgage sold $500 million of convertible preferred stocks. The sale by a company in troubled mortgage lending boosted confidence in the afternoon trading.

Earnings in the retail sector drove several stocks lower. Chico’s FAS ((CHS)) reported 28% decline in earnings on 8% rise in sales and cautioned that earnings in the current quarter and same store sales may be lower than anticipated. Stock closed lost 11%. Coldwater Creek ((CWTR)) plunged 26% after reporting 28% decline in profit and 6% loss in same store sales. Sears Holdings ((SHLD)) second quarter earnings fell to $1.17 per share from $1.74 excluding one-time gain of 14 cents in the prior period. Sears dropped 2.3%. Wal-Mart fell 2% after Merrill Lynch cut its rating to ‘sell’.

Second quarter economic growth was revised to 4% from 3.4% by the Commerce Department and weekly jobless claims at the end of the last week rose 9,000 to 334,000. The government also reported that home prices across the nation increased 3.2% from a year ago and 0.1% from a year ago.

Of the 30 stocks in Dow Jones Industrial Average listed, 24 closed lower and 6 closed higher. Wal-Mart led the decliners with a fall of 1.97% followed by decrease of 1.5% in Citigroup, 1.25% in Honeywell and Disney, and 1.1% in AT&T. Home Depot led the gainers with a rise of 1.4%. Intel and IBM closed up 0.7%.

Of the stocks in S&P 500, 348 stocks closed lower and 147 gained, 5 stocks closed unchanged. Ensco International led the index stocks with a fall of 5.2% followed by losses of 5% in Freddie Mac and MGIC Investment, 4.8% in Dillard’s, 4.4% in Janus and King Pharmaceuticals. Noble Corp, CSX, and Rowan Companies fell 3.6%. Novell led the gainers with a rise of 8% followed by gains of 3.5% in Laboratory Corp, Celgene Corp and Tellabs. Coach, Tiffany, and Broadcom jumped 2.7%.

Asian Markets rose across the region closed higher. Philippines led the region with a gain of 3.5% followed by rises of 2% in Hong Kong, 1.5% in Taiwan, 1.1% in Shanghai, 0.9% in Tokyo and Korea, and 0.6% in Australia. In today’s trading 75% stocks in the Nikkei 225 index jumped in Tokyo and 70% of stocks in the ASX200 increased.

Trading volumes have declined in the region. Australia, Japan, India, Korea have seen volumes decline as much as 30% from the peak. The volatility of more than 1% up and down on almost daily basis appears to have put investors on hold. Shanghai is the only market that appears to attract new investors and grow trading volume and immune to daily volatility inflicted by the U.S. market in the region.

In Latin Markets trading Chile led the region with a gain of 0.43% followed by Brazil with a rise of 0.23% and Mexico with an increase of 0.11%. Argentina fell 0.25%. Of the 60 stocks listed in iBovespa index in Brazil, 27 fell and 32 increased and 1 remained unchanged. Cyrela led the stocks in the index with a gain of 4.6%. Eighteen stocks in the index lost more than 1%.


[R]2:00PM New York, 6:00PM London - Oil, mining and financial stocks led UK stocks higher for the second day running. Bank of England extends 1.6 billion pounds to unidentified borrower. July mortgage approvals remained steady.[/R]

UK shares closed higher helped by gains in oil related shares and mining stocks. London finished up 1.3% adding to the 0.5% rise yesterday. Of the 102 FTSE 100 shares, 92 gained, 9 dropped while 1 remained unchanged. Of the index stocks 20 shares rose above 2%.

In London trading FTSE 100 surged 1.3% or 79.8 to 62,212.00. The pound fell 0.4% to 2.01 dollar, as investors shifted funds to equities. To the euro, the sterling eased to 0.6785. The Bank of England extended 1.6 billion pounds to an unnamed borrower at a penalty rate of 6.75%, 1% higher than normal key bank rate. Almost two weeks back, the bank lent $628 million to Barclays, as well, at peak of U.S credit market crunch. Interbank overnight rates rose to 6.13% from 5.9% yesterday, as a result, amid cash shortage fears.

The Bank of England reported Thursday a total of 115,000 mortgages worth 9.2 billion pounds were approved in July. In June mortgage lending rose by 9.34 billion pounds. London credit card debt rose 224 million pounds, said the Bank, with the cumulative year-to-date figure now at 54 billion pounds. Overall unsecured borrowing increased 1.1 billion in July, the biggest monthly increase since November 2006. Mortgages have become more expensive over the past year as lenders have passed on the five interest rate hikes from the Bank of England. Thursday, Nationwide building society released its property survey saying UK house prices rose 0.6% in August, but the annual rate of house price inflation fell to 9.6% from 9.9% in July.

Of the FTSE 100 stocks oil shares gained helped by rising international crude oil prices. Oil firm, BG Group led gainers rising 4.3% followed by Liberty Intl plc up 3.8% while Sabmiller plc closed higher 3.51%. Enterprise Inns added 3.2% while Legal & Gen Group lifted higher 3%. Oil stocks, Royal Dutch Shell and BP plc gained 2.32% and 1.4% respectively. Financial and mining shares rose. Standard Chartered, Old Mutual plc, Schroders plc NV, Man Group plc and Capita Group plc gained 2.8%, 2.5%, 2.32%, 1.6% and 1.55% respectively. Mining stocks BHP Billiton plc, Xstrata plc, Vedanta Resource, Rio Tinto plc and Antofagasta plc all rose between 1.4% and 2.8%.

Of the index shares losses were paced by DSG Internation down 1.6% followed by Barclays plc that closed lower 0.42%. Kingfisher plc and HBOS plc sagged 0.24% and 0.23% while Barratt Dev ended down 0.22%.

Consumer goods firm, Diageo plc reported Thursday that profit in the year to June 30 dropped 22% to 1.5 billion pound from 1.91 billion pounds a year ago. Sales rose 3% to 7.5 billion pounds from 7.3 billion pounds in 2006 while earnings per share fell 18% to 55.4 pence from 67.2 pence. Diageo will pay a dividend of 32.7 pence per share after paying out 858 million pounds in dividend in the prior year. At least 1.4 billion was spent on share repurchase. However, turnover rose 7.3% while operating profit was up 8.7%, in organic terms. Diageo shares finished up 2.4% in London.


[R]1:00PM NY, 5:00 PM Frankfurt European markets closed higher, led by energy and tech stocks.[/R]

European stock markets finished in the positive Thursday, boosted by strength in the tech and energy sectors ahead of Chairman Ben Bernanke’s speech on U.S. interest rates. Upbeat financial results at Royal Ahold also provided a boost to the market sentiment. The owner of U.S. and Dutch supermarkets jumped 6.5% on sharp increase in Q2 net income to 2.2 billion euros and plans to buy back 1 billion euros in stock. Across regional markets, France and the U. K. climbed 1.3%, followed by Germany which advanced 1.1%.

In Frankfurt stocks rallied, led by Infineon Technologies, Metro and Siemens. Semiconductor Infineon climbed 2.9% after Sanford C. Bernstein raised its rating on the stock to outperform from market perform. Engineering company Siemens added 2.1%, while Metro, Germany's largest retailer, surged 4.5%.

In Paris Suez gained 5.3% after reporting a 10% rise in firs-half operating profit. However, shares of Carrefour ended little changed erasing an earlier advance of 4%. The supermarket giant posted 3.3% profit rise in the first half but cut its sales outlook for 2008. It also said it considered listing the real-estate part of its business in 2008 and to returning up to 4.5 billion euros to shareholders. In the financial sector, two banks stood out among their peers after posting strong earnings. Credit Agricole advanced 2.3%, while smaller bank Natixis rose 7.1%. Among tech stocks, microchip maker STMicroelectronics ended up 3%.

In London stock gainers were led by oil companies, with oil refiner BP Plc rising 1.6% and Royal Dutch Shell jumping 2.3%. Further in the energy sector, oil and natural-gas company BG Group climbed 4.3%, following a broker upgrade to buy from hold. Elsewhere, Diageo, the world's biggest liquor maker, climbed 2.4% after it forecast strong full-year earnings on sales of Johnnie Walker Scotch whisky and Smirnoff vodka in the U.S. and Latin America.


[R]11:30AM Market averages traded mixed. Tech and oil stocks advanced.[/R]

U.S. market averages erased some of the earlier losses to turn mixed in late morning trading, as slightly weaker-than-expected GDP report raised hopes that the Fed Reserve will reduce interest rates in the near future. Fed Chairman Ben Bernanke is expected to give a speech Friday in Wyoming.

By sector, financial stocks posted significant losses on continuous concerns about credit markets. Goldman Sachs ((GS)) fell 0.8%, Morgan Stanley ((MS)) lost 0.9% and Merrill Lynch ((MER)) dropped 0.5% Lehman also reduced its earnings estimates for Wall Street's top investment banks. Shares of Freddie Mac ((FRE)) dropped 3.4% after the mortgage giant posted 45% profit decrease.

At the same time, tech stocks moved to the upside on optimism business spending will boost tech profits despite turmoil from the housing sector. Among tech stocks, Dell ((DELL)) rose 2% ahead of quarterly earnings release after the closing bell. On average, analysts expect Dell will earn 30 cents a share on $14.6 billion in revenue for Q2.

Still in the sector, International Business Machines ((IBM)) added 1%, Intel Corp. ((INTC)) was up 1.5% and Hewlett-Packard ((HPQ)) rise 1%. Mobile phone maker Motorola ((MOT)) surged 3% after Lehman Bros upgraded its stock to overweight from equal weight on hopes of higher production in Q3. Oil stocks were pushed up by higher crude oil price.

Among other notable movers, Coldwater Creek ((CTWR)) tumbled 24% on broker downgrade from buy to hold after the company posted Q2 profit drop. Chico's FAS ((CHS)) slipped 11% after posting 28% earnings drop in Q2 and warned of weaker Q3 results.

The Dow Jones industrial average was up 7.89 points, or 0.06 percent, at 13,297.18. Wal-Mart ((WMT)) was a leading loser on the blue-chip average, posting a decline of 1.7% after Merrill Lynch downgraded it to sell, citing margin erosion at the company's core U.S. division. The Standard & Poor's 500 Index was up 2.17 points, or 0.15 percent, at 1,465.93. The Nasdaq Composite Index was up 22.56 points, or 0.88 percent, at 2,585.72.


[R]09:45AM Wall Street opens sharply down on profit-taking ahead of Bernanke’s speech.[/R]

Wall Street opened sharply lower, reflecting profit-taking and nervousness ahead of Fed Reserve Chairman Ben Bernanke's speech Friday. The Fed's objectives remain unclear yet, but Bernanke has already confirmed that the Federal Reserve is closely watching markets and is ready to act if necessity should arise.

Financial stocks moved top the downside after Lehman Bros ((LEH)) cut its profit estimates for 2007 and 2008. Lehman also reduced its earnings estimates for Wall Street's top investment banks. Following the news, Goldman Sachs ((GS)) fell 1.5%, Morgan Stanley ((MS)) lost 2% and Merrill Lynch ((MER)) dropped 1.4%. Among other stocks driven by analyst comments, Dow member Wal-Mart ((WMT)) fell 1.7% after Merrill Lynch downgraded it to sell, citing margin erosion at the company's core U.S. division.

Weak quarterly earnings from Freddie Mac and H&R Block built on troubles in mortgage lending, also triggering sell-off. H&R Block ((HRB)) fell 2% after it said its Q1 loss widened compared with last-year figures as it struggled with its mortgage lending arm. Mortgage giant Freddie Mac ((FRE)) posted Q2 net income drop of 45% mainly due to a higher provision for credit losses. The stock slipped 3.3%.

In major economic news, the Commerce Department said Q2 gross domestic product rose at its fastest pace in more than a year, but came in slightly below expectations. The GDP was revised up 4%, vs. estimates of an upward revision of 4.1%. According to another report, U.S. jobless claims surprisingly rose last week to the highest level since April.

In early trading, the Dow fell 79.82, or 0.60%, to 13,209.47. The Standard & Poor's 500 index dropped 8.98, or 0.61%, to 1,454.78, and the Nasdaq composite index slipped 11.98, or 0.47%, to 2,551.18. The yield on the 10-year Treasury note, which moves inversely to its price, fell to 4.52% from 4.56% late Wednesday.


[R]09:00AM U.S. stock futures pointed to a lower opening. Robust GDP figures helped limit losses.[/R]

U.S. stock futures pointed to a weak opening Thursday after prior session’s strong rally on bargain-hunting. Market sentiment was hurt by growing uncertainty about how soon the Fed may cut interest rates. However, indexes pared losses after data showed that economy continued to grow in Q2 despite the subprime home-loan crisis.

The Commerce Department said that U.S. economy bounced back in Q2, growing at a 4% annual real growth rate, led by trade and business investment. The upward revision to GDP was attributed to an improved trade balance and to the biggest increase in investments in commercial buildings in 26 years. Consumer spending, government spending and inventories also contributed, while housing was the biggest drag. Economists had been expecting GDP in Q2 to be revised to 4.1% from the 3.4% growth rate originally estimated a month ago.

Lehman Brothers ((LEH)) also weighed on sentiment after cutting its profit estimates for 2007 and 2008. It also said that earnings at the U.S. biggest securities firms will be hurt by credit-market woes. Lehman reduced its earnings estimates for Wall Street's top investment banks. Following the news, Goldman Sachs Group ((GS)), Morgan Stanley ((MS)) and Merrill Lynch & Co. ((MER)) moved to the downside.

In corporate news, Motorola ((MOT)) shares rose 0.4% as Lehman Brothers upgraded its stock to overweight from equal-weight on recovery hopes. On the earnings news front, H&R Block ((HRB)) said its Q1 loss widened compared with last-year figures as it struggled with its mortgage lending arm. Mortgage giant Freddie Mac ((FRE)) posted Q2 net income drop of 45% mainly due to a higher provision for credit losses.

Another economic report showed that initial jobless claims unexpectedly rose in the latest week by 9,000 to 334,000 from last-week revised figure of 325,000. The 4-week moving average was 324,500, an increase of 6,250 from the previous week's revised average of 318,250.S&P 500 futures fell 7.9 points, below fair value. Dow Jones industrial average futures shed 58 points, and Nasdaq 100 futures fell 4 points.


[R]8:30AM New York – 6:00 PM Mumbai – Market in Mumbai trading advanced on broad rally. Deal making and expectation of lower inflation helped averages to gain.[/R]

Sensex in Mumbai trading jumped 0.86% or 128.7 to close at 15,121.74 and CNX Nifty increased 53 or 1.22% to close at 4,412.30.

Daily turnover on Bombay Stock Exchange rose to 5,378 crore rupees from 4,815 crore in the previous session. Turnover on National Stock Exchange increased to 6,171.7 crore rupees from 5,197 crore.

Of the stocks traded on BSE, 1,578 advanced, 1,112 declined, and 84 were unchanged. Among the stocks included in Sensex 21 edged higher and 7 fell. Mahindra & Mahindra led index stocks with a rise of 2.5% or 672 rupees.

M&M, truck and auto vehicle maker said that it is conducting due diligence to purchase Ford luxury car divisions Jaguar and Land Rover. Tata Motors gained 0.6% to 679 rupees.

Sugar companies rallied for the second day in a row after the report that the government is looking to blend 10% ethanol in petrol sales as early as October 2008. The government is also planning to reduce import duty to 5% from 7.5% on industrial ethanol.

Smaller mills Dwarikesh Sugar and Triveni Sugar jumped more than 10%. Baja Hindustan increased 2.5% to 137 rupees and Balrampur Chini Mills increased 2.7% to 61 rupees.

Sun TV Network gained 5.5% to 329 rupees on the news that that the company has purchased 49% stake in Red FM radio station to expand its business in the Northern India. NDTV added 3.5% to 351 rupees on the news reports that UB group has agreed to spend 100 crore rupees on the upcoming life style television channel NDTV Good Times.

Banks were in demand and closed higher in the rally as investors hoped that rate hikes are not likely in the near future. Traders speculated that inflation report due tomorrow will show lower rate of 3.9% from the latest report of 4.1% at the end of August 11.

Syndicate Bank led the sector with a gain of 2.8% to 76 rupees followed by HDFC Bank with a rise of 2% to 1,180 and Andhra Bank gain of 2% to 82 rupees. ICICI Bank increased 1.5% to 869 rupees. Vijaya Bank gained 5% to 56 rupees after the bank said that it plans to sell a stake in its asset management subsidiary.

Software exporters gained on the news report that Infosys plans to raise billing rates up to 4% for new customers and 3% for existing clients. Infosys jumped 1.4% to 1,860 rupees.

Tata Consultancy Services gained 0.8% to 1,040 rupees on the news that it has selected to provide a telecom services over several years for 574 crore rupees.

Bhel, power plant maker, was selected to install and manage power plant for a project worth 1,990 crore rupees. Bhel declined 0.9% to 1,835 rupees.

Tata Steel declined 0.5% to 656 rupees after soaring 9% to 659 rupees in the previous session. Yesterday the company reported consolidated first quarter result including recent acquisition of Corus. The sales rose 440% to 31,155 crore rupees and earnings increased 186% to 4,904 crore rupees. The net income increase reflected one time gain from higher pension asset valuation held for Corus.


[R]8:00AM Jewelry retailer Zale swung to profit in Q4, while Tiffany posted 10% profit drop inQ1.[/R]

Jewelry retailer Zale Corp. ((ZLC)) swung to a Q4 profit from a year-earlier loss although revenue and same-store sales fell 0.5%. Zale posted profit of $1.5 million, or 3 cents a share, compared with a loss of $27.4 million, or 57 cents a year ago. Company’s revenue declined to $488 million from $491 million. Analysts, on average, had expected a loss of 13 cents on $483 million of revenue. Looking ahead, for 2008 Zale forecast earnings $1.11 to $1.16 a share, with same-store sales higher by 1% to 2%.

Another jewelry retailer, Tiffany & Co.'s ((TIF)) reported Q1 net income drop of 10% to $37 million, or 26 cents a share, down from $41.1 million, or 29 cents a share last year. Excluding special charges, earnings from continuing operations were 45 cents. The company said quarterly net sales increased 19% to $662.6 million as same-store sales grew 17% in the U.S. and 7% internationally.

According the average analyst estimates, the jeweler was anticipated to post earnings of 34 cents a share and revenue of $643.4 million. For 2007, Tiffany predicted earnings from continuing operations of $2.64 to $2.69 a share on sales growth of 14%. In addition, the company said it had sold the land and business housing of its Tokyo flagship store for $328 million. As a result, it expects a pretax gain of 47 cents a share for Q3.


[R]7:00AM New York, 8:00PM Tokyo - Japanese stocks recovered, ending two day losses lifted by higher U.S. stocks and rate cut hopes. Retail sales slump 2.2% in July. Japan proposes 2% hike in consumption tax to cover social welfare costs.[/R]

Shares in Japan rose on speculation the Federal Reserve will slash rates in September. Energy, electric and financial stocks led Japan higher 0.9% after losing 1.7% on Wednesday. Of the 225 Tokyo stocks 148 gained, 60 fell while 17 remained unchanged. Of the index shares, 11 stocks gained over 4% while 27 fell more than 1%.

In Tokyo trading Nikkei 225 gained 0.88% or 140.99 to 16,153.82 helped gains in energy related shares. The yen finished stronger at 115.52 to one dollar having closed yesterday at 116.17. To the euro, it ended firmer at 157.54 from 158.89. Yesterday, the yen had gained as high as 114 against the dollar at mid-day.

Japan’s Ministry of Economy, Trade and Industry announced Thursday July retail sales fell 2.2% to 11.4 trillion yen from a year ago, the second decline in as many months. Textiles and clothing sales fell the most in six years by 9.7% and dragged retail sales with it. The ministry’s preliminary report indicated that automobile sales dropped 4.8% and for machinery were down 4.7%.

Health, Labour and Welfare Minister Yoichi Masuzoe said today raising the consumption tax 2% to 7% is a viable option, which should help social welfare activities. Masuzoe said that tax hikes would become inevitable if the government has to cover mounting social security costs. """"""""We will endeavour to work on spending cuts but we have no choice but to ask people to pay more taxes in the future,"""""""" Japanese media quoted him saying today. """"""""I consider it better to raise the consumption tax and disburse much of the increased tax income on welfare programs."""""""" The minister is already under pressure to fix the missing papers of 50 million pension papers.

Of the Nikkei 225 shares energy related stocks led on firming crude oil prices. Mitsubishi Corp led movers gaining 6.6% after crude oil touched $73.51 today. Showa Shell followed up 5.64% and Nippon Mining pushed higher 4.8%. NSK Ltd surged 4.54% while Okuma Corp closed up 4.5%. Nippon Oil, Mitsubishi Chemicals, Mitsui Chemicals and Tokyo Gas Co Ltd all rose over 3%. Electric and some financials also gained. Yokohama Electric, Mitsubishi Electric, Chiba Bank and Yokohama Bank surged.

Of the index shares, retail stocks retreated after negative July retail sales data. Fast Retailing led decliners falling 3.1% followed by T&D Holdings Inc down 3% while Nippon Sheet Glass closed lower 2.91%. Hitachi Zosen and Mitsukoshi Ltd lost 2.6% and 2.43% respectively. Paper manufacturing firms and motor shares sank on similar retail sales sentiment. Nippon Paper Group, Mitsubishi Paper and OJI Paper fell 2.08%, 2.06% and 1.22% respectively. Mazda Motor, Mitsubishi Motors Co, Honda Motor Co and Nissan Motor Co fell between 0.8% and 1.6%.

Inpex Holdings Inc said Wednesday it will purchase a 35% stake in an oil and natural gas mining block in Suriname from Denmark's Maersk Oil and Gas AS, Japan media reported today. Inpex said the 13,860-square-kilometre area, called Block 31, in the Guyana Basin off the northern coast of South America is recognised as having all the essential elements of a major hydrocarbon basin and promises to yield good quantities of petroleum and natural gas. Inpex shares closed unchanged at 1 million yen Tokyo.

Isuzu Motors Ltd and General Motors Corp said Wednesday they had signed a memorandum of understanding aimed at buttressing co-operation in the selling of trucks in Colombia, Venezuela and Ecuador. The firms said they were also studying the possibility of establishing a joint venture in the Andean region. Isuzu Motors finished up 2.34%.