Fed Action Focused Trading

123jump.com Staff
10 Sep, 2007
New York City

Market averages in New York traded sideways as worries on the economic growth continued. The Fed officials sent mixed signals but the general tone of the comments remained upbeat. However, investors are increasingly coming to a conclusion that the Fed action may not change the weak sentiment in the market. Oil jumped 1% in trading and for the year has surged 27%. Gold closed higher for the third day in a row. Brazil fell 3.5% and in the overnight trading Japan and Korea lost more than 2%.

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

[R]Market averages in New York traded sideways as worries of the economic slowdown mounted. European markets closed lower. Japan and Korea fell more than 2%. Brazil led the South American markets with a loss of 3.5%.[/R]

Dow Jones Industrial Average increased 0.11% or 14.47 to 13,127.85, Nasdaq declined 6.58 to 2,559.11, and S&P 500 lost 1.85 to 1,451.70.

FTSE 100 Index in London decreased 57.1 or 0.92% to 6,134.10, in Tokyo Nikkei 225 closed at 15,764.97, down 2.22% or 357.19, and in Brazil, iBovespa Index traded down 3.5% or 1,908.27 to 52,660.73.

Yields edged lower on 10-year U.S. bonds and closed at 4.33% and 30-year bond rose to close at 4.63%.

Crude oil increased $1.15 to close at $77.85 per barrel, natural gas closed up 39 cents to $5.89 per mBtu, and gasoline futures decreased 0.78 cents to close at 197.86 cents per gallon.

Gold gained $2.50 in New York trading to close at $712.20 per ounce, silver closed 6 cents lower to close at $12.70 per ounce, and copper for August month deliver in London lost $126 to $7,361.00 per pound in New York trading.

In New York trading averages traded with no direction as investors debated the direction of interest rate. The intense focus on the Fed action in the upcoming meeting on September 18th has left the market directionless. The Fed officials in speeches over the weekend and today sent mixed signals. The weak employment report and worries about the widening impact of the credit market turbulence and falling housing values have left investors nervous.

Dallas Fed President Richard Fisher praised the resilience of the economy and over the weekend Philadelphia Fed President said that there are tools available to deal with financial market malaise without the action in monetary policy. San Francisco Fed President Yellen stressed that the economic growth outlook has higher risk but its implication for monetary policy is not clear. The Atlanta Fed President Lockhart said that the employment report and weekly jobs data should viewed ‘seriously’.

Employment report on Friday indicated that August total payroll employment declined by 4,000 and the numbers for the July month was revised to lower 68,000 and in June to 68,000. In August employment fell in manufacturing by 46,000 and in construction by 22,000 but gained 35,000 in healthcare and 24,000 in leisure, hospitality, and food services.

The survey is based on data collected between August 12th and 18th as credit market malaise was still rippling through the economy. Most analysts expect the next report to show deeper problems in the economy. The credit shock rumbling through the economy is not likely to be captured fully in the August employment report.

Investors are increasingly viewing that the Fed action may be too late in containing the widening fallout from the credit market turmoil.

Of the 30 stocks in Dow Jones Industrial Average listed, 11 closed lower and 19 closed higher. Six stocks in the index gained 1% or more. American Express led the gainers with a rise of 1.9% followed by increases in McDonalds of 1.9%, in AIG and JP Morgan 1.3%.

Of the stocks in S&P 500, 277 stocks closed lower and 217 gained, 6 stocks closed unchanged. Ten stocks in index lost more than 4%. CB Richard Ellis and Countrywide Financial led the decliners with a loss of 5.2% followed by declines in Office Depot of 4.9%, Cognizant Technology 4.7%, and in RadioShack 4.4%. Mylan Labs led the gainers with a rise of 4.11% followed by 3.7% increase in Apple. Goldman Sachs and Bear Stearns jumped 3%. Ace Ltd and MEMC Electronics added 2.4%.

In European Markets trading indexes closed sharply lower. Indexes in France, Germany, Italy, and Spain fell nearly 1%. Spain and Norway led the region with a loss of 1.1% followed by 0.9% loss in UK and Belgium. Italy decreased 0.23%.

In Latin Markets trading Brazil led the decliners with a loss of 3.50% followed by decreased of 1.5% in Chile and 1.2% in Argentina and Mexico. Every stock in the 63 stock iBovespa index declined. Aviation sector led the decline. Gol led the decliners with a loss of 8.2% followed by 7.3% loss in Embraer, and 6.5% in Tam Air.

Veracruz, the energy center of Mexico, was the target of oil and gas pipeline. The attacker blew up three oil and gas pipeline with the help of six explosions. The attack followed two attacks in July and managed to stop the flow of gas to several companies including Vitro, the largest gas company in Mexico. No one has claimed responsibility for the attack. Mexican president begins his six-day visit to India to widen trade cooperation. The two developing countries are small but growing trade of $1.8 billion.

[R]3:00PM New York, 7:00PM London - UK shares closed lower following weaker Asian markets and global economic growth worries. U.K firms overheads drop 0.5%. No pay rise for London civil servants, says Prime Minister Brown.[/R]

London stocks dropped on weaker U.S. jobs data and deep-seated sub-prime mortgage market fears siphoned out investor confidence. FTSE 100 fell 0.9% extending last week’s losses when it closed 2% lower on Friday. Declines in property, mining, financial and consumer shares underpinned the loss. Of the 102 stocks in the index, 88 dropped, 13 gained while only 1 remained unchanged. Of the index shares 19 stocks fell over 2%.

In London trading FTSE 100 lost 0.92% or 57.1 to 6,134.10, as stock prices trembled on weak America employment statistics. Investors also remained concerned that continued housing woes in the U.S. will lead to global economic contraction.

The Office of National Statistics reported producers saw the price of goods they bought in August fall 0.5% from July while price of goods sold rose 0.2%. The output prices measure for all manufactured products rose 0.1% in August, mainly reflecting rises in transport equipment, food products and other manufactured products, said the Office. In the year to August, core output prices have risen 2.4% while producers’ costs have increased by 0.7%. The ''narrow'' input prices measure rose 1.7% in the year to August. In seasonally adjusted terms the index rose 0.1% between July and August.

Prime Minister Gordon Brown said today raising salaries for public servants would fuel inflation and must be contained. The Prime Minister told the Trade Union Congress that: “No loss of discipline, no resort to the easy options, no unaffordable promises, no taking risks with inflation. So let me be straightforward with you: pay discipline is essential to prevent inflation, to maintain growth and to create more jobs.'''' The Congress believes employee purchasing power parity has been severely curtailed by rising retail prices.

Of the FTSE 100 stocks consumer, real estate and mining shares dropped most. Investment firm, Invesco plc paced decliners shedding 3.72% followed by Wolseley plc down 3.6% and Associated British Foods lost 3.4%. Hammerson plc sank 3.3% while Shire plc ended down 3.2%. Of the London shares, real estate stocks Land Securities fell 3.10%. British Land Co plc declined 2.63% while building and commercial land developer Barrat Development eased 2.2%.

Financials and miners traded weak. 3i Group plc lost 2.3%, ICAP plc down 1.72% and Man Group plc finished weaker 1.5%. Old Mutual plc, Capitra Group plc, Schroders plc all lost over 1.38%. Metal stocks Xstrata plc eased 3%, Lonmin plc 2.3% and Anglo-American plc fell 2.1%. Antofagasta plc, BHP Billiton and Rio Tinto plc dropped as well. Consumer shares, Tesco plc, DSG Internation, Marks & Spencer, Kingfisher all declined above 1.9%.

Of the FTSE 100 index shares ITV plc led gainers rising 2.02% followed by British Energy up 1.8%. Kelda Group plc rose 1.6% while Rentokil Initial and Scottish & Newcastle closed up 0.9% and 0.7% respectively.

[R]1:00PM NY, 5:00 PM Frankfurt European markets closed in the negative, led by construction stocks.[/R]

European stock markets closed lower on Monday, continuing a downward trend from the previous week when investors sold off stocks with a high proportion of debt or exposure to the U.S. subprime crisis. Leading losers included companies related to the construction sector, such as Acciona and Vinci. Other companies posting significant losses included car maker DaimlerChrysler, as well as financial firms like Credit Suisses Group and Commerzbank. Across regional markets, the U.K. dropped 0.9%, while both France and Germany ended down 0.8%.

Spanish construction company Acciona lost 5.6% while Credit Suisse fell 1.2%. On the positive side, Philips Electronics was a notable gainer, rising 3.4% after it said it expects operating margin above 10% by 2010 with a minimum of 6% per year comparable-sales growth from 2008 through 2010.

In Frankfurt the decline was pace by DaimlerChrysler and ThyssenKrupp. The world’s second-biggest luxury car maker slipped 2.7%, while the steel maker dropped 2%.

In Paris Steelmaker Arcelor slid 1.6% after Citigroup cut its recommendation on the stock to hold from buy. Among rising stocks, Peugeot advanced 1.8% on plans to cut up to 3,000 jobs each year in Western Europe until 2010 as part of a cost-reduction plan.

In London shares of Associated British Foods dropped 3.4% after the retailer said increased costs would hurt profit margins. Mining stocks also contributed to the broad market weakness, with Anglo American falling 2.1% on speculations the company will buy Toronto-based miner Katanga Mining. Among other notable decliners, CRH fell 3.4%. In the financial sector, Barclays failed to sustain earlier gains, closing down 0.4%. At the same time, tech stocks moved to the upside, benefiting from an improved outlook by Intel and strong iPhone sales at Apple.

[R]10:00AM New York - 7:30PM Mumbai – Brokerage and financial stocks gain ahead of Motilal Oswal IPO.[/R]

Sensex in Mumbai trading gained 6.4 or 0.04% to close at 15,596.83 and managed to recover from 220 point loss during the trading. CNX Nifty fell 1.66 or 0.04% to close at 4,507.85. Rupee recovered to 40.64 against dollar from 40.68 in Friday trading.

Of the stocks trading on BSE, 1,682 gained, 1,083 declined, and 58 closed unchanged. Daily turnover on the exchange declined to 4,026 crore rupees from 4,890 crore rupees in Friday’s trading. In trading on National Stock Exchange volume declined to 8,908 crore rupees from 9,980 crore rupees.

Of the 30 stocks in the Sensex, 14 fell and 16 gained. ITC led the gainers in the index with a rise of 3.8%.

Reliance Industries jumped 1.3% to 1,986 rupees after the company agreed to acquire assets of Malaysian polyester company Hualon.

Weak U.S. trading and concerns of economic slowdown hurt software exporters again. Infosys fell 2% to 1,869 rupees, Wipro declined 2.5% to 466 rupees, and Satyam Computers lost 1.4% to 443 rupees. Education and training company Aptech surged 4% to 380 rupees after it reported that U.S. investment bank Bear Stearns has sold 1 million stock and lowered its holding in the company to 2.3% from 3.5%.

Ahead of Motilal Oswal IPO, brokerage stocks rallied. Emkay Shares led the sector with a rise of 11% followed by 10% increase in India Infoline and JRG Securities, and 7% increase in Geojit Financial Services. Prime Securities jumped 4% to 100 rupees and Khandwala Securities gained 3% to 47 rupees.

Motilal Oswal priced its offering at the high end of its filing range to 825 rupees and valuing the company at 31 times earnings. The offering is oversubscribed by 27 times. The stock is expected to trade tomorrow.

Banks declined. HDFC dropped 1.7% to 2,095 rupees and ICICI Bank dropped 0.7% to 912 rupees. Corporation Bank gained 0.9% to 338 rupees after it reported to sell its stake in National Stock Exchange for 35 crore rupees.

ONGC dropped 2.2% to 832 rupees after paying 13 rupees dividend per share.

ITC, cigarette maker, jumped nearly 4% to 184 rupees on the news that the company has received approval to expand its cigarette facility from Kolkata Port Trust.

In other trading, NTPC, the domestic leader in power generation, gained 2.5% to 191 rupees. Cement companies rallied led by 3% gain in Ambuja Cements and 1% in Grasim.

Ranbaxy Laboratories gained 2.2% to 418 rupees after the World Health Organization included its three AIDS treatment drugs totaling 15 drugs in the prequalification list.

Gammon India fell 9% to 420 after the news that a bridge under construction in Hyderabad collapsed on Sunday. Gammon, the general contractor for the construction may suffer financial liabilities from the collapse.


[R]09:45AM Wall Street rebounded on rate-cut optimism and strong tech stocks.[/R]

Wall Street opened higher Monday, lifted by investor optimism that surprisingly weak employment report will lead the Fed Reserve to cut interest rates at its policy-setting meeting next week.

A notable strength in the tech sector also contributed to the early gains. Intel ((INTC)) rose 1.3% after the chip maker lifted its Q3 revenue forecast on stronger-than-expected chip demand. Advanced Micro Devices ((AMD)) climbed 2.9% after it launched its latest microchip, Barcelona, which is designed to be the heart of corporate server networks.

Among declining stocks on the tech-dominated Nasdaq, Yahoo ((YHOO)) slipped 2.9% on speculations that it will retain the Web-search-advertising businesses that it had planned to outsource to Google ((GOOG)).

Bucking the upward move, Countrywide Financial ((CFC)) dropped 4% after the mortgage lender said it may reduce up to 12,000 jobs. Washington Mutual Inc. ((WM)) slid 3.2 % after it said it may set aside $500 million more than it had previously planned for loan losses in 2007.

The Dow Jones industrial average rose 63.24, or 0.48%, to 13,176.62. The Standard & Poor''s 500 index rose 5.71, or 0.39%, 1,459.26, and the technology-heavy Nasdaq composite index was up 19.28, or 0.75%, at 2,584.98.


[R]09:00AM U.S. stock futures pointed to a steady opening.[/R]

U.S. stock futures were indicating a flat opening Monday, recovering from heavy losses in the previous session inflicted by unexpected employment decline. Investors were also awaiting speeches from Fed Reserve officials expected to give a clue about the central bank''s reaction to the weaker-than-expected U.S. employment report Friday.

In a light economic agenda, the Fed Reserve is scheduled to release its consumer credit report. The report is expected to show that Americans tacked on debt at a slower pace in July compared to the previous month, due to higher gas prices rose and weakness in the housing market.

Among companies in focus, Countrywide Financial ((CFC)) fell over 1% in pre-market trading after the mortgage lender said it may reduce up to 12,000 jobs in areas impacted by lower mortgage-market origination volumes. Advanced Micro Devices ((AMD)) jumped 2.7% as the chip maker launched its latest microchip, Barcelona, which is designed to be the heart of corporate server networks.

In other corporate news, Philips Electronics ((PHG)) lifted its margin targets. S&P 500 futures eased a half-point at 1,459.30 and Nasdaq 100 futures were unmoved at 1,970.50. Dow industrial futures slipped 24 points.


[R]7:00AM New York, 8:00PM Tokyo - Japanese stocks opened week in the red after economy shrank 1.2% in second quarter. Tokyo banks’ lending rises 0.5% in August. Yen rallies most in a fortnight.[/R]

Japanese stocks fell sharply Monday pulled back by negative economic news at home and in the U.S. Tokyo added to the losses started last week, fell 2.2% today. Property and financial stocks dropped heaviest. Of the 225 Toko shares, 206 shares fell, only 13 gained and 6 remained unchanged. Of the index shares, 28 stocks dropped over 4%.

In Tokyo trading Nikkei 225 plunged 2.22% or 357.19 to 15,764.97 on increased selling pressure. Investors were jittery over a contracting economy in Japan and higher job losses in the U.S. Exporters dropped after yen rose to 113.10 against dollar from 113.38 Friday and over 115 beginning of last week. Analysts expect the yen to touch a high of 111 per dollar this week.

Japanese Government announced Monday the economy shrank an annualised 1.2% in the second quarter to June, lower than initial forecast of 0.5% growth. The contraction corresponds to a 0.3% drop from the first quarter and is the first negative economic growth since 2004 year-end quarter, measured in term of GDP.

The Bank of Japan reported today Japan’s money supply indicator increased 1.8% in August from a year ago. The average daily balance of M2 plus certificates of deposit came to 723.6 trillion yen. M2 consists of cash in circulation, demand deposits and quasi-money. The bank said again Monday the average daily balance of domestic bank lending rose 0.5% to 387.02 trillion yen in August from 12 months ago The loan balance, excluding loans by credit cooperatives, was adjusted for special factors — loan securitisation, exchange-rate fluctuations and the allocation of loan-loss reserves.

Real estate, financial and technology shares declined most in Tokyo. Of the Nikkei 225 stocks, Topy Industries Ltd paced decliners slumping 7.7% followed by Shimizu Corp that plunged 7.1%. Technology group, Sony Corp fell 6.03%, Okuma Corp down 5.8% and Resona Holdings lost 5.6%.

Of the Nikkei 225 index stocks, property shares Kajima Corp lost 5.44%, Heiwa Real Estate closed lower 5.34% while Tokyu Land Corp, Mitsui Fudosan, Sumitomo Realty and Mitsubishi Estate Co fell 4.7%, 4.67%, 4.5% and 3.8% respectively. Financials Mistubishi UFJ and Sojitz Corp dragged 4.93% apiece. Chiba Bank Ltd, Chiyoda Corp, Shizuoka Bank, Marubeni Corp lost over 3.5%. Industrial and steel companies dropped too.

Of the index shares, Nippon Suisan led gainers rising 4.8% followed by Daikin Industries up 4% and Mitsubishi Electric Corp added 3.6%. Kyowa Hakko KOG and Denki Kagaku ended up 2.4% and 2.3% respectively.