Mortgage Lenders Gain on Bush's Plan

Elena
31 Aug, 2007
New York City

U.S. market averages posted solid gains Friday, as comments from President Bush and Fed Reserve Chairman Ben Bernanke reassured investors that Wall Street would not be left to cope with mortgage and credit market problems on its own. President Bush proposed a change in the Federal Housing Administration mortgage insurance program to let more people get federally insured mortgages. Shares of Accredited Home Lenders surged 40%, Countrywide rose 1%, while Impac Mortgage Holdings climbed 1.8%

[R]11:30AM Market averages rallied. Mortgage lenders gained on Bush’s comments.[/R]

U.S. market averages posted solid gains Friday, as comments from President Bush and Fed Reserve Chairman Ben Bernanke reassured investors that Wall Street would not be left to cope with mortgage and credit market problems on its own. President Bush proposed a change in the Federal Housing Administration mortgage insurance program to let more people get federally insured mortgages.

The markets saw broad based strength, with financials providing a significant boost to the sentiment. Banking and brokerage stocks advanced on speculation that the Fed will reduce interest rates in September.

Shares of mortgage lenders gained, following Bush's speech. Accredited Home Lenders ((LEND)) surged 40%, Countrywide ((CFC)) rose 1%, while Impac Mortgage Holdings ((IMH)) climbed 1.8%.

Most of the Dow components traded higher on the day, with Hewlett Packard ((HPQ)) leading gainers, up 2.3%. Caterpillar ((CAT)) advanced 1.8%, followed by Intel ((INTC)) and Exxon Mobil ((XOM)) each rising 1.4%.

The Dow Jones industrial average rose 90.64, or 0.68%, to 13,329.37. The Standard & Poor's 500 index rose 9.60, or 0.66%, to 1,467.24, and the Nasdaq composite index rose 16.86, or 0.66%, to 2,582.16.


[R]10:00AM New York, 7:30PM Mumbai – Second quarter GDP growth was reported at 9.3%. Manufacturing and Service sectors grew at more than 10%.[/R]

Sensex in Mumbai trading jumped 196.86 or 1.3% to close at 15,318.60. CNX Nifty gained 51.70 or 1.17% to 4,464.

Of the stocks traded in Mumbai 1,653 gained, 1,049 declined, and 73 remained unchanged. Of the 30 stocks in the Sensex, 24 advanced and the rest declined. Daily turnover on the BSE exchange declined to 5,038 crore rupees from 5,668 crore rupees. The turnover on the NSE exchange dropped to 11,088 crore rupees from 15,126 crore rupees in the previous session.

State Bank of India closed up 1.6% to 1,596 rupees after three blocks of stocks totaling 2.45 lakhs (or 245,000) changed hands at a price of 1,886.75 rupees.

Manufacturing and services led the growth in economy in the second quarter. In the quarter the economy grew at 9.3% from a year ago led by 11.9% in manufacturing and 10.6% growth in services, and 3.6% in agriculture. The lag in farming has spread the benefits of economic growth unevenly to the urban region. Rural and agricultural driven regions in the country continue to suffer from low growth in productivity and investment.

Wholesale price index, a measure of annualized wholesale inflation declined to 3.94% ending on August 18 from 4.10% at the end of previous week.

Essar Oil is planning to raise $750 million in the international markets. The news sent the stock up 1.2% to 52 rupees.

Auto sector rallied led by Mahindra & Mahindra with a gain of 4.5% to 705 rupees in addition to 10% rise in the earlier session. The company is in early stages of exploring a bid for luxury divisions Jaguar and Land Rover of Ford Motor Company. In the rally, Maruti Udyog jumped 4.1% to 867 rupees and Tata Motors increased 3% to 701 rupees.

The court battle between NTPC and Reliance Industries inched further as both companies sought early hearing for the natural gas distribution dispute. NTPC jumped 4% to 172 rupees and Reliance increased 2.5% to 1,955 rupees.

Wipro ((WIT)) has agreed to pay $160 million for New Jersey, U.S.A based marketRx. The company provides web based marketing solutions for healthcare and pharmaceutical companies. The company provides web based sales and marketing tracking and customer behavior tools.

Stocks of sugar companies fell sharply after gaining in the last two trading session. Dwarikesh Sugar, Balrampur Chini, Shree Renuka Sugars and Bajaj Hindustan lost mre than 2%.

Hindustan Zinc surged 3% to 722 rupees after the reports that Sterlite Industries is looking to buy 29.54% stake and raise its holding in the company to 95%.


[R]09:45AM Wall Street opened sharply higher ahead of Bush’s speech.[/R]

Wall Street rallied at opening, lifted by news that President Bush will announce a plan to support subprime mortgage borrowers and loosen credit conditions. Reportedly, the planned proposal would allow another 80,000 homeowners in 2008 to get federally insured mortgages in addition to the 160,000 estimated to use the insurance.

Market sentiment was further boosted by optimism that Federal Reserve Chairman Ben Bernanke might hint an interest-rate cut in his speech. However, stocks erased some of their early gains after Chairman Bernanke said that lenders and investors should not rely on protection from the central bank, as it holds no responsibility for their financial decisions.

In general, the Fed Reserve Chairman matched market expectations in his speech. He said the Fed reserve is ready to act adequately to prevent the turmoil in financial markets from spreading into the broader economy. Bernanke also said that the central bank is prepared to take further action to provide liquidity and promote the orderly functioning or markets.

In addition, several economic reports were released on Friday morning. The Commerce Department reported milder-than-expected inflation in July and better-than-forecast growth in personal incomes and spending. The Commerce Department also said factory orders surged 3.7% in July, higher than the 3.3% increase that had been expected.

Among companies in focus, Accredited Home Lenders ((LEND)) soared 36% after Lone Star Funds said it will offer $214 million for the firm, which is 44% less than it first offered for the troubled lender. Mortgage lender Countrywide Financial ((CFC)) climbed 3.5%.

In early trading, the Dow Jones industrial average rose 118.44, or 0.89%, to 13,357.17. The Standard & Poor''s 500 index rose 15.65, or 1.07%, to 1,473.29, and the Nasdaq composite index rose 27.19, or 1.06%, to 2,592.49. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.56% from 4.51% late Thursday.


[R]09:00AM U.S. stock futures rallied, boosted by rate optimism.[/R]

U.S. stock futures pointed to a sharply higher opening of Friday trading session, boosted by optimism that Chairman Ben Bernanke will give a clue about interest rate cuts in his speech. The financial futures markets expect one and even two reductions of the key interest rate by the end of September.

Investors were also optimistic because President Bush is expected to announce strategy to aid borrowers struck by the housing market slump to keep their homes. Mortgage lender Countrywide Financial ((CFC)) surged 6.3% in the pre-open, while Accredited Home Lenders ((LEND)) soared 38% after Lone Star Funds said it will offer $214 million for the firm, which is 44% less than it first offered for the troubled lender.

On the earnings news front, Dell ((DELL)) rose 1.9% in pre-open trade after it reported a 46% profit rise and a 5% revenue gain, beating analyst estimates.

Traders also digested economic data which showed that inflation remained cool while household incomes and spending strengthened in July. Personal incomes and spending rose 0.5% and 0.3%, respectively, while core PCE remained at 1.9%.

Dow Jones industrials futures expiring in September rose 101, or 0.76%, to 13,380, while Standard & Poor''s 500 index futures rose 14.60, or 1.00%, to 1,476.20. Nasdaq 100 index futures rose 17.75, or 0.90%, to 1,992.50.

[R]8:00AM Computer maker Dell posted 46% profit increase in Q2.[/R]

Computer maker Dell Inc. ((DELL)) advanced 2.4% in pre-market trading after it reported positive Q2 results, prompting it is trying to regain stability and lost positions in the computer industry. According to preliminary results released after the closing bell Thursday, Dell’s quarterly earnings jumped 46% to $733 million, or 32 cents per share, compared with $502 million, or 22 cents per share a year ago.

The profit increase was attributed to stronger sales of business products and services, improved average selling prices and lower component costs. Sales rose 4% to $14.8 billion. The quarterly financial results exceeded analyst expectations of earnings of 30 cents per share on sales of $14.63 billion. Dell said results were dragged down 5 cents per share by a $102 million charge for payments for expired stock options. Another $59 million was related to the internal probe, which found that Dell employees had misled auditors and manipulated results to meet performance.


[R]7:00PM New York, 8:00PM Tokyo - Japanese stocks jumped the most in a fortnight spurred by a weaker yen. Japan fiscal budget for 2008 is likely to reach 85 trillion yen. Industrial production shrank 0.4% in July while unemployment rate dropped to 3.6%.[/R]

Tokyo rallied Friday helped by a falling yen and hopes that the U.S. government may take action to prevent subprime lending crisis from widening to the general economy. Japan climbed 2.6% on increased buying, adding to the 0.9% gain yesterday. Of the 225 Tokyo shares 210 gained, 13 dropped and 2 remained unchanged. Of the index shares, 16 stocks gained over 5%.

In Tokyo trading Nikkei 225 rose 2.57% or 415.27 to 16,569.09 led by exporters. Against the U.S. dollar, the yen weakened to 116.22 from over 115 yesterday while it dropped to 158.87 to the euro from 157.48 Thursday.

Japan Finance Ministry announced Thursday it expects fiscal 2008 budget to grow to 85.71 trillion, driven higher by escalating debt-servicing costs and domestic tax grants. The 2007 budget stood at 82.91 trillion yen. This would be the second straight state budget increase in two years despite Japan’s efforts to rebuild its strained national finances. The Ministry of Economy, Trade and Industry reported Japan''s industrial production shrank a seasonally adjusted 0.4% in July drained by powerful earthquake that hit Niigata Prefecture and hurt auto production. The index of output at mines and factories stood at 108.1 against the base of 100 for 2000. The quake paralysed the automobile industry, as production of auto parts stopped.

Government said Friday unemployment rate dropped 0.1 percentage points to 3.6% in July, the lowest in 9 years, and second straight monthly decline. In July, the number of unemployed reached 2.34 million, down 340,000 from a year earlier, the Ministry of Internal Affairs and Communications said in a preliminary report. However, analysts were less optimistic, saying the improvement only resulted from a decline in the country''s potential labour force — the total of jobholders and unemployed — due largely to a mass retirement of baby boomers. The total dropped 290,000 in July from June to a seasonally adjusted 66.46 million.

The Natural Resources and Energy Agency said today that Japan''s July crude oil imports rose 7.1% to 338.63 million barrels from a year ago, the second straight monthly increase. Imports from the Middle East accounted for 85%. Saudi Arabia remained Japan''s largest oil supplier in July, with its exports down 3.9% to 89.03 million barrels followed by The United Arab Emirates shipments falling 10% to 79.81 million barrels. Qatar with exports to Japan rose 13.7% to 41.65 million barrels. Iran ranked fourth with shipments surging 10.2% to 35.45 million barrels.

Of the Nikkei 225 stocks, exporters led the rising stock helped by a weaker yen. Furukuwa Electrical led gainers rising 8.3% followed by Fujikura Ltd up 7.32% and Minebea Co Ltd closed higher 6.8%. Mitsui & Co rose 6.64%. Technology stocks, Sony Corp, NTT Data Corp, TDK Corp and Fujifilm Holdings gained 5.5%, 5.1%, 4.9% and 4.6% respectively. Industrial and motor shares gained strongly as well. Of the index shares, energy related stocks fell after leading yesterday’s rebound. AEON Co Ltd led decliners falling 2.4% followed by Chugai Pharmacy down 2.12%. Shionogi & Co lost 1.4%, Isetan down 1.23% and retailer Mistukoshi Ltd ended lower 1.2%.