Weak U.S. Retailers, Dollar, Home Sales

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

In New York trading tech stocks rallied with Apple and Research in Motion reaching new highs but retailers fell on warning from Target and Lowes. Existing home sales fell 4.3% in August from July and declined 13% from a year ago. Consumer confidence fell to a 20-month low. Copper edged higher. Oil fell below $80 per barrel. European markets closed mixed. India and Australia closed at record highs.

[R]4:30PM New York, 10:30PM Frankfurt, 2:00AM Mumbai – Retail stocks led the decline in stocks in S&P 500 index. India and Australia closed at record level. Oil and gold declined but copper rose. Dollar fell for the fourth day in a row.[/R]

Dow Jones Industrial Average increased 19.59 or 0.14% to 13,778.65, Nasdaq gained 15.50 or 0.58% to 2,683.45, and S&P 500 declined 0.52 or 0.03% to 1,517.21. In Toronto TSX Composite gained 0.28% or 39.34 to close at 13,997.62.

In Brazil, iBovespa Index closed 0.24% higher or 138.41 to 58,857.78 and in Mexico Bolsa index fell 0.81% or 248.68 to close at 30,294.77.

In London FTSE 100 Index in London gained 9.20 or 0.14% to 6,465.90, in Paris CAC 40 index fell 0.89% or 50.90 to close at 5,641.59, and in Frankfurt DAX index fell 0.24% or 18.48 to close at 7,769.44. In Zurich trading SMI fell 0.86% or 77 to close at 8,829.15.

In Tokyo stock market Nikkei 225 index jumped 0.55% or 89.12 to close at 16,401.73, in Hong Kong Hang Seng closed down 0.46% or 121.65 to 26,430.29, in Australia ASX 200 closed up 0.49% or 31.50 at record level to 6,483.00, and in India Sensex closed up 39.70 or 0.2% to a record close of 16,885.55.

Bond Yields rose on 10-year U.S. bonds to 4.63% and 30-year bond to close at 4.90%.

Crude oil fell $1.42 to close at $79.53 per barrel for a front month contract but still up 31% for the year so far, natural gas fell 2 cents to $6.36 per mBtu, and gasoline futures declined 4.5 cents to close at 218.13 cents per gallon.

Gold declined $0.50 in New York trading to close at $738.80 per ounce, silver closed down 2 cents to $13.62 per ounce, and copper for front month delivery in London gained $161.00 to $8,006.00 per pound.

Dollar fell 0.4% to record low $1.41439 to a euro and 0.1% to 114.709 yen. For the year the dollar is down 7.1% against euro and 3.9% against yen.

Of the 30 stocks in Dow Jones Industrial Average, 15 closed lower, 15 closed higher, and none was unchanged. Honeywell international led the decliners with a rise of 1.9% followed by a rise in Boeing of 1.8%, and 1.65% in Microsoft. Home Depot fell 2.36% to $33.08 and led the decliners followed by 1.9% loss in Wal-Mart.

Of the stocks in S&P 500, 229 stocks closed higher, 263 fell, and 7 closed unchanged. Twenty stocks in the index fell more than 3%. Lowe’s led the decliners with a decline of 6.7% followed by losses in E*Trade of 5.2%, in Supervalu of 5%, and Whirlpool of 4.9%. Target fell 4.6% after it warned that same store sales will be lower than previously estimated. Cummins led the gainers with a rise of 4% followed by gains in IMS Health and MEMC Electronics of 3.4%, 3.3% in Precision Castparts, and Apple and Cognizant added 3%.

In New York market traded in a lackluster fashion after a week of steady advances. Before the market opening Lennar reported sharply higher than anticipated loss and consumer confidence report showed a decline dragging the index in the first hour of trading. After the release of existing home sales, even though home sales declined but lower than anticipated, market made a mild advance. At the mid-day after the speech from the President Bush at the United Nations and steady decline in oil price Dow and S&P 500 fell. Nasdaq rose with a strength in Cisco, Apple, Microsoft, and other large tech companies, lifting the averages in the last hour of trading.

Retail stocks traded lower on profit warning from Lowe’s and lowered same store sales forecast from Target. Lowe’s fell nearly 7% and Target lost 4.5%. Other retailers fell as well. Nordstrom declined 4.5%, Macy’s fell 3%, Wal-Mart edged lower 2%, and J C Penney lost 3.5%.

Vonage Holdings ((VG)), Internet based telephony provider, fell 33% to $1.30 after the Federal jury found the company guilty of violating patents of Sprint Nextel and ordered the company to pay 5% of revenue during the period in question totaling to $70 million.

Tech stock rally was led by record high in Apple and Research in Motion. Apple ((AAPL)) surged 3.5% to close at $153.18 and Research in Motion added 3% to $96.88.

European markets declined with weakness in mining stocks and fall in energy prices. Rise in copper and other metals failed to lift sentiment in European markets.

In the overnight trading Asian markets closed mixed but India and Australia closed at a record high. Hong Kong sold off from the record level but still traded at elevated levels. Airlines and energy companies fell. Reliance Industries closed up 1.8% to a record high followed by strength in HDFC Bank. Software exporters declined in Mumbai trading. BHP Billiton jumped to a record high after the news that the discovery of gold in South Australia may be bigger than anticipated. The company claims the discovery to be the largest ever.

In Latin Markets trading Brazil led the gainers with a rise of 0.24% followed by increase of 0.03% in Argentina and a loss of 0.81% in Mexico. Chile declined 0.5%. Of the 63 stocks in iBovespa index 36 gained, 26 lost, and 1 closed unchanged. Tele Norte Leste led the decliners with a loss of 3.4% followed by losses of 2.3% in Cosan, and 2% in Ambev. Gol (GOL)) led the gainers with a rise of 6.45% and Tam ((TAM)) jumped 4.5%.

[R]2:00PM New York, 7:00PM London - London index tumbled as mining and oil stocks retreated. Pound fell against dollar and euro. BP share decline amid speculation that it might announce poor financial results.[/R]

UK stocks fell as mining and oil stocks retreated to close lower. Mining stocks dominated the gainers on Monday but today they led the decliners. Vedanta was the biggest loser followed by Antofagasta. BP declined after its chief executive said that the earnings will be ‘dreadful.’

In London trading FTSE 100 index lost 1.1% or 69 to close weaker at 6,396.90. Vedanta led the decliners, shedding 6.5% by the close of the trading. The mining company had gained 4.6% a day before.

Oil stocks fell in response to a fall in crude prices on commodity exchanges. BP lost 2.8% on news that the financial performance of the oil giant could be at its lowest since 1993.

BHP shed 2.2% despite news that latest gold discovery by the mining company in South Australia may be 50% more than the initial projections.

The discovery may mean that the mining giant could be sitting on the world's largest gold mine, according to news reports. BHP stocks hit record high Monday after gold prices surged. Economists predict international gold prices will touch a high of $800 per ounce by year-end, lifted by the current global financial crisis. Investors are buying gold as a hedge against inflation and credit market turmoil in the U.S. economy. Gold hit all time high $850 in 1980 Analysts now expect the annual profits for BHP of $14 billion or 6.8 billion pounds an.

The pound marginally weakened against the dollar and euro on the trader speculation that the Bank of England may be forced to lower interest rates. The pound weakened to 70.02 pence per euro from 69.66 at close.

Of the FTSE 100 shares, National Grid led the gainers with a rise of 2.5% followed by rise of 2.2% in Man Group, 1.4% in Scottish and Smith, and 1.2% in Smiths Group, and Hammerson gained 1%. Vedanta led the decliners with a loss of 6.5% followed by loss of 6.4% in Antofagasta. Taylor Wimpy closed weaker 5.72%, Lonmin retreated 5.35% while the troubled Northern Rock declined 5.2%.

[R]1:30PM New York – Market Movers – Retailers led the decliners among S&P 500 stocks.[/R]

Stocks declined on Tuesday, after retailers lowered their sales and profit forecasts. Market sentiment was bruised after two major retailers lowered their sales forecasts for this year and new data showed consumer confidence had fallen to near a two-year low.

New consumer confidence data weighed on retail stocks and consumer discretionary stocks. The Conference Board index of consumer confidence fell to 99.8 in August versus 105.6 in July, its lowest level since November 2005.

The Dow Jones Industrial Average shed 0.1 per cent to 13,749.96 while the Nasdaq Composite again outperformed the other major indices, remaining flat at 2,668.92.

The retail sector was in focus after Target Corp ((TGT)) lowered its September store sales to an expected rise between 1.5% and 2.5%, down from a prior range of 4% to 6%. The company cited citing weaker than expected traffic and sales softness in the northeast and Florida. The shares fell 3.7 per cent to $61.88 by 1:00PM in New York trading.

Of the 500 stocks in the S&P 500 index at 1:30 pm in New York, 208 stocks were up and 283 stocks were down. Yahoo ((YHOO)), Gilead Sciences ((GILD)), and Precision Capstone ((PCP)) led the gainers with a rise of 3% and retailers led the decliners. Lowe’s, Bed Bath & Beyond ((BBBY)), Nordstrom ((JWN)), and SuperValu led the decliners with a loss of 4%.

Lowe’s ((LOW)), the home improvement chain, fell 4.81% to $29.08 after it said late Monday that slower sales would reduce its full year profit. The company said late Monday that it now expects fiscal full-year earnings at the low end of its earlier forecast of $1.97 to $2.01 a share.

Maxim Integrated Products Inc. ((MXIM)) shares gave up $1.39, or 4.8%, to $27.59. On Aug. 17, Nasdaq said Maxim's stock would be suspended if it does not file its overdue reports by Sept. 25. In a filing with the SEC, Maxim said it would not be able to file its reports by then.

Whirlpool Corp ((WHR)) was also among the top decliners after it lost $4.10, or 4.49% to $87.20. Members of the union for 2,400 workers at a Whirlpool Corp. refrigerator plant in eastern Iowa have given preliminary approval to a new four-year contract, despite failing to give it a majority vote.

Advanced Micro Devices Inc ((AMD)) added 1.82% to close at 13.72. The company no longer has the right to appoint any directors to flash memory maker Spansion Inc.'s board, Spansion said Tuesday in a Securities and Exchange Commission filing. In a Form 8-K filing, Spansion said that last Friday AMD transferred its only Class B common share to Spansion, where it was automatically converted into a Class A common share.

Lockheed Martin Corp. ((LMT)) was up $1.75, or 1.71% to $104.10. The world's biggest military contractor said Tuesday it secured a $20.6 million contract for work on Australian Navy missile systems.

InterActiveCorp ((IACI)) added 1.63% to $28.60. The company was upgraded by Merrill Lynch from ‘neutral’ to ‘buy.’ The broker said in a research note that the company looks attractive at 7 times expected fiscal 2008 operating earnings and buybacks should add materially to earnings.

Agricultural chemicals and seed manufacturer Monsanto Co. ((MON)) was the second gainer with a rise of 2.17% to $80.86. The company and Israeli agro-biotechnology company Evogene Ltd. on Tuesday announced a joint-development agreement to improve nitrogen use efficiency in certain crops.


[R]1:00PM New York, 10:30PM Mumbai - Sensex recovered from morning losses. France courts investments from India. ONGC Videsh to explore oil in Myanmar.[/R]

Sensex in Mumbai recovered from early session losses to end higher at 0.2% or 39.7 or 16,885.55. In the morning trade, Sensex index had lost 168.80. The CNX Nifty lost 0.3% or 1.3 to close at 4,930.8 after reaching intra-day high of 4,953.90.

Of the Bombay Stock Exchange stocks, 1,643 shares declined, 1,081 increased and 329 were unchanged. Of the Sensex 30 stocks, 16 stocks declined and rest advanced. Daily turnover declined to 7,468 rupees down from 7,783 crore rupees on Monday.

Hindustan Lever led the gainers in the Sensex with a rise of 1.3% to 226 rupees and Reliance Energy led the decliners. The BSE Realty index was the top loser among the sectoral indices shedding 3.1%. IT stocks recovered from Monday's fall.

ONGC Videsh, the international exploration arm of the company plans to invest $150 million in oil exploration project in Myanmar. The exploration blocks will be 100% owned by the company. Gremach Infrastructure jumped 5% to 266 rupees after the company said that it has acquired 75% stake in 11 coal mines in Mozambique. The mines are spread over 14,000 hectare area.

France has invited investments from India through setting up new businesses, joint ventures or acquisitions. Paris views last year's acquisition of European steel giant Arcelor Steel by Mittal Steel as a successful example which can also be replicated in France. France, through its investment promotion body, Invest In France Agency is targeting 300 Indian companies in the IT and pharmaceutical sectors.

HDFC Bank led the gainers with a rise of 3.8% to 1,397 rupees followed by increases of 2.8% in Hindalco, 2.1% in Bharti Airtel to 950 rupees, and 1.8% in Reliance Industries at 2,374.80 rupees. Mahindra & Mahindra led the decliners with a loss of 2.6% to 790 rupees followed b a loss of 2.2% in Bajaj Auto, 1.6% in State Bank of India.

Pharmaceutical company Ranbaxy said Monday it had signed a licensing agreement with Australia's Sirtex Medical to market the Australian firm's liver cancer product SIR-Spheres. The product which was already approved in the U.S is used to treat patients with inoperable tumors from primary colorectal cancer spread to the liver.

BPCL jumped 7% to 348 rupees after the reports that the company’s joint venture has discovered oil in the Northeast India. The company denied the discovery but stock still closed higher.

Sadhbhav Engineering reported that it has received an order of 245 crore rupees for coal field excavation. The stock closed unchanged at 727 rupees. Gayatri Projects received 154 crore rupees project lifting the stock 1.4% to 310 rupees.

[R]10:30AM New York – Existing home sales fell. Consumer confidence declined to a 20-month low. Retailers declined.[/R]

After the first hour of trading market averages in New York are heading lower. Dow, Nasdaq, and S&P 500 fell between 0.3% and 0.2%. Lennar, one of the largest home builder reported, five decade record loss of $514 million on 41% decline in revenue. The company also reported new orders fell 48% and cancellation rate jumped to 32%.

The Conference Board index of confidence fell to 99.8 in September from 105.6 in August.

Existing home sales in August fell 4.3% from July to annual rate of 5.5 million or declined 12.8% from a year ago. Median home prices gained 0.2% to $224,500 from a year ago and fell 0.2% from July price of $228,700.

Total housing inventory rose 0.4% at the end of August to 4.58 million existing homes available for sale, which represents a 10 month supply at the current sales pace, up from a 9.5 month supply in July.

Existing home sales make up more 84% of total home sales and new home sales are about 16% of home sales. Total home sales for the year are expected to be between 6.5 million and 7 million homes.

Existing home sales in the Northeast fell 2%, in the Southeast declined 2.7%, in the Midwest slumped 5.2%, and in the West plummeted 9.8%. The prices in the regions declined between 0.7% in the Midwest to more than 3% in all other regions.

Retailers fell in the morning trading on revised outlook from Target ((TGT)) and Lowe’s ((LOW)). Target after the close yesterday lowered its same store sales forecast between 1.5% and 2.5% from 4% to 6% and weaker than expected traffic. The home improvement chain Lowe’s blamed drought on slower than expected sales and lowered its earnings guidance for the year ending February 1, 2008 to the low end of its earlier forecast of $1.97 and $2.01 per share.

The company CFO Robert Hull in a prepared statement to be presented in a conference aid that ""external pressures weigh on our near-term performance, but looking past the current cycle, we see many opportunities for continued sales and earnings growth and increasing cash flow from operations.”.

""For the three year period, total sales are expected to increase between 8 and 11 percent per year, while earnings per share are expected to average 12 to 15 percent growth per year across the three years. Improving earnings and solid working capital management will drive compound annual growth in cash flow from operations of approximately 15 percent. The current pressures will likely continue into 2008, so we expect our earnings performance to improve from mid-single digit growth in 2008 to high-teens in 2010,"" Hull said.

[R]9:00AM New York – Lennar report $3.25 per share loss in the third quarter.[/R]

Lennar Corp. reported third quarter net loss of $513.9 million from $206.7 million a year ago or loss of $3.25 earnings per share compared to income of $1.30. The company recorded $344.7 million in write down related to land sales and losses of $127.4 million from subsidiaries.

Revenue in the quarter fell 44% $2.34 billion and sold 7,266 homes, 41% decline from a year ago at 6.3% lower home price of $296,000

Gross margin on home sales excluding valuation adjustments fell to 14% in the third quarter from 19.5% in 2006. Including the valuation adjustment the gross margin fell in the third quarter to 1.0 million from $729.2 million or 18.7% from a year ago.

Selling and general administrative expenses were reduced by $122.3 million or 29% in the quarter on reduction in staff and as a percentage of sales the margin increased to 14% from 10.9%. Operating loss in the financing subsidiary was $5.2 million compared to profit of $61.7 million a year ago.

Lennar ((LEN)) fell 5.5% in the pre-market trading. Lennar stock has fallen from a peak of $56.54 in February of this year and traded as high as $66.44 in January of 2006.

[R]6:00AM New York, 7:00PM Tokyo, Realty stocks lift Tokyo stocks higher. Bank of Japan to wait for global markets to stabilize before hiking interest rate.[/R]

Japan opened the week higher, climbing 0.55% or 89.12 to 16,401.73 buoyed by gains in realty stocks and electronic companies.

Of the Nikkei 225 stocks, 136 gained, 81 slipped and 8 traded unchanged. Realty concern Tokyu Land Corporation led the rise in the index shares. Automakers also rose. Nisshin Oillio led retreating stocks.

Minutes of last week’s Bank of Japan meeting released today show policymakers believe the economy will continue to grow in step with the twice-yearly outlook made in April this year. The bank also revealed that it will keep interest rates on hold at 0.5% until global credit markets return to normal.

While the benchmark interest rate was kept low by 8 to1 vote, Governor of the Bank of Japan Toshihiko Fukui said last week keeping borrowing costs low may encourage risky investments. Authorities are struggling to stave off a decade-old deflation.

Japan’s GDP declined by an annualized 1.2% in the second quarter and consumer prices, a measure of inflation, slid 0.1% in July as consumer prices grew by half the pace of the first quarter, a government survey showed recently. The board will meet again on October 31.

Yen rose against the dollar and it traded as high as 114.55 in Tokyo at close. Yen has advanced 1% against Aussie dollar to 98.65 and 2.1% to 84.12 against New Zealand dollar. The dollar is likely to come under renewed pressure after the release of home sales statistics this morning in New York.

Hino Motors Ltd. Revised its sales forecast ending the six months at the end of September by 9% to 665 billion yen and net income by 17% to 11 billion yen. The company expects the international unit sales to increase by 12%.

However, realty stocks continue to gain after the Ministry of Land, Infrastructure and Transport reported Japan’s commercial land prices rose 1% overall, the first increase since 1991, while residential land price increase narrowed to 0.7% from 2.3%.

The strike at U.S. automaker General Motors, which threatens to spread to Mexico and Canada, also spurred Japanese automakers whose niche market is in North America. Toyota generated 70% of its operating profit in North America last year, while Honda generated 55% of its sales in the region.

Industry analysts believe that the nationwide strike may cost the company a loss of daily sales of 12,200 vehicles in the U.S. Buyers may turn to Japanese and European makers to meet their needs.

Toyota firmed for the first time in 3 days to 1.22%, while Honda edged up 1.6%.

Of the index shares, Tokyu Land Corporation climbed 8.32%, NGK Insulators gained 5.93%, Tokyo Dome Corporation soared 5.84%. Fuji Electric added 5.71% and Mitsui Engineering and Ship Building edged up 5.33% on news the Baltic Dry Index, the benchmark for bulk shipping fees, had increased to a record. Other ship companies gained as well with Kawasaki Kisen and Mitsui O.S.K. soaring 4.95% and 4.60 respectively.

Leading the decliners in the index was Nisshin Oillio shedding 5.66%, Mitsubishi UFJ Nicos lost 5.31%, Topy Industrials Limited declined 5.20% and Trend Micro Corp slipped 4.98%. Adventest Corporation fell 4.7% after reports that the world’s biggest supplier of memory chip tester’s operating profit may fall 1% to 56 billion yen.