Oil, Gold, and U.S. Stocks Drop

123jump.com Staff
02 Oct, 2007
New York City

In the late afternoon, stocks in New York were tradig lower. An index of existing home sales declined to a seven-year low. Sallie Mae received a revised offer of $50 per share, $10 lower from the previous offer. Oil fell and dollar rebounded. Energy stocks fell on lower oil. Gold dropped 2% as dollar rose against major currencies. Ford and Toyota auto sales in September fell. Honda and General Motors sales increase.

[R]3:00 PM New York – U.S. stocks fell in New York after the index of existing home sales fell to a seven-year low.[/R]

US home sales fell to a record low on Tuesday. Gold retreated from all time highs.[/R]

In the early afternoon trading Dow Jones Industrial Average declined 0.25%, and S&P 500 fell 0.12%, but Nasdaq rose 0.1%.

Of the thirty stocks in Dow Jones 13 traded higher, 17 declined and none were unchanged. Of the stocks in S&P 500 index 191 gained, 306 fell, and 3 were unchanged.

Smith International led the decliners in the S&P 500 index with a fall of 3.9% followed by Hess Corporation with a decline of 3.9%, and Hershey with a fall of 3.7%. Ciena led the gainers with a rise of 8.3% to $42.43 among index stocks.

The index of existing home sales fell to the lowest level since January 2001 but housing industry related stocks were on the rise. D R Horton, Lennar, and Pulte Homes jumped 7%. MGIC Investment traded up 5%. Recently priced IPO of Duff & Phelps jumped 30 cents to $18.61.

Morgan Stanley ((MS)) said today that it plans to eliminate 600 jobs and restructure its mortgage business. The company will consolidate its subprime and prime lending and mortgage buying unit into one group. After the news the stock jumped $2.41 to $66.42.

The leveraged buyout group led by J C Flowers & Company cut its offer price for the student lender Sallie Mae to $21 billion from $25 billion. The lower offer reflects current credit market condition and a new law signed last week. The offer is revised lower from $60 per share to $50 and has performance payment of between $7 and $10 per share.

Earlier Sallie Mae had said that the new law will reduce the core earnings between 1.8% and 2.1% every year for the next five years.

Energy stocks fell on the decline in crude oil price. The price of November delivery dropped 24 cents to $80 per barrel and gold fell $17.80 to $736.30 per ounce. Exxon Mobil, Conoco Phillips, Chevron, Tesoro, and Valero fell on weak trading in oil.

Dollar firmed against pound, yen, euro, Canadian dollar, and other Asian currencies.

European markets closed fractionally higher but Asian markets closed higher led by a sharp rise in Hong Kong.

[R]10:30AM New York – Stocks in New York edged lower after a day of sharp gains. Asian markets rallied. Commerce Bancorp has agreed to be acquired by Toronto Dominion Bank.[/R]

Stocks in New York inched higher after deal news, home sales index report, surging markets in Asia, and firm indexes in European trading.

Dow Jones Industrial Average is trading lower by 24.71 to 14,061.62, Nasdaq index is down 3.66 to 2,737.33, and S&P 500 index is on the decline by 4.37 to 1,542.67.

Toronto Dominion Bank has agreed to pay $8.5 billion for Commerce Bancorp ((CBH)). The offer price includes 75% of stock of Toronto Dominion and 25% cash. The acquisition will increase its branch network in the U.S to 2,100 and will be ranked seventh in the number of branches ahead of Sun Trust and Regions Bank.

The deal priced at $42 per share or $8.5 billion is expected to generate cost savings of $310 million. The offer is priced at 22.5 multiple of fiscal 2008 earnings or 2.96 times book value, and premium of 13.5% to core deposits level. The deal is expected to close around April of 2008.

The acquisition is expected to lower the earnings at TD Bank by 10 cents to $6.05 and earnings estimate of 2009 of $6.80 are not expected to be hurt.

Citigroup also agreed to buy 32% of the remaining stake in Japanese securities broker Nikko Cordial for $4.6 billion.

Rising metal prices have kept consolidation in high gear among metal processors. Steel Dynamics ((STLD)) will acquire all of the outstanding stock of OmniSource Corporation in a transaction valued at slightly more than $1 billion. OmniSource shareholders will receive 9.7 million shares of Steel Dynamics stock and $425 million in cash. The aggregate transaction value includes the assumption by SDI of certain liabilities, including net debt, which is expected to be approximately $210 million at closing.

Pepsi Bottling Group ((PBG)) reported earnings of $1.86 per share. Micro Technology ((MU)) is expected to report a loss of 23 cents after the close. Thor Industries ((THO)) 90 cents per share beating the estimate of 67 cents per share as reported by a survey from Thomson Financial. After the earnings stock jumped 2.5% at the opening in New York. Walgreen ((WAG)) fell 3% after reporting earnings decline of 4%.

The index of pending sales of existing home declined to its lowest level since 2001 to 85.5 in august. The index tracks the sentiment among home buyers and tighter lending standards and falling home prices have kept buyers away from the market.

Asian markets closed sharply higher on the first day of the month. Hong Kong led the gainers in the region. European markets at mi-day traded higher led Spain and France.

[R]8:00AM New York, 8:00PM Hong Kong – Hong Kong led Asian markets and deals in Australia helped to close the index at a record level.[/R]

Asian markets closed sharply higher led by record close in several markets.

Hong Kong led the gainers with a rise of 3.9% or 1,057.28 to close at 28,199.75 followed by increases of 2.7% in Indonesia, 2.6% rise in South Korea, 1.4% in Taiwan and Malaysia, and 1.2% in Japan. Australia jumped 87.80 or 1.33% to 6,667.60.

Hong Kong index crossed 28,000 for the first time led by rising banks and real estate stocks. Rally in the U.S. stocks in the overnight trading, hopes of additional funds from mainland China, and expectations of better earnings in the third quarter helped Hang Seng index close higher.

China Mobile jumped 6.4% to HK$135.36 and China Telecom surged 11% to HK$6.50.

Banks rallied after Citigroup and UBS provided an estimate of losses. The reported losses by two banks added to a large loss of $9.6 billion, lower than what investors had estimated, prompting a sharp rally in the U.S. banking stocks and broader market indexes. Industrial Bank of China jumped 4.6% to HK$5.70, Bank of China jumped 5.3% to HK$4.38, HSBC Holdings added 1.3% to HK$144, and China Life surged 8.4% to HK$48.40.

Property stocks in China rallied as well. Sun Hung Kai Properties jumped 7% to HK$139.80, Cheung Kong Limited added 4.8% to HK$134.30, New World Development increased 2.3% to HK$22, but Henderson Land was suspended in trading ahead of company announcement.

In Sydney trading ASX 200 Index gained 1.5% or 96.2 to 6,659.90 led by a sharp rebound in bank stocks.

National Australia Bank Ltd. climbed 1.6%, Macquarie Bank Ltd., Australia''s largest investment bank and securities firm, jumped 2.7% and Babcock & Brown Ltd rose by 5.6%.

BHP Billiton Ltd gained 3.5% as it led other mining stocks as metals prices soared. Rio Tinto Group added 3.4% and Zinifex Ltd, the world''s third-biggest zinc miner, rose by 2%.

Carlyle Group and National Hire Ltd agreed to pay A$1.7 billion ($1.5 billion) for Coates Hire Ltd. Coates bid is valued at A$6.70, or A$2.2 billion. The stock jumped 5.4% to A$6.42 after the news of the revised bid.

The third revised bid was accepted by the company that rents construction equipment, vehicles, and other equipment. The offer needs 75% of shareholder vote to be conducted in December. The combined company will be renamed Ned Group with a total sales of A$990 million and operating earnings of A$202 million.

The troubled lender Rams Home Loans Group agreed to sell its branch network to Westpac Banking. Westpac will pay A$140 million for 92 branches and takeover loan obligations for the company and provide financing for A$1.5 billion. The lender relied on securities market for its funding of mortgage loans faced a turbulent market conditions to refinance its debts. Rams relied on the U.S. commercial paper market to fund its mortgage products and faced market conditions that effectively shut down all lending operations during three weeks of turmoil.

After the news of the deal Rams fell 25% to 66 cents and Westpac gained 53 cents to close at A$29.00.

[R]6:00AM New York, 7:00PM Tokyo – Stocks in Asia jumped to record highs. Tokyo added 1.2% on strength in banks, brokerage, and metals stocks.[/R]

Japan’s stock indexes rallied 1.19% boosted by financial stocks on speculation global credit markets were on the mend.

In Tokyo trading Nikkei 225 added 1.19% or 200.83 to 17,046.78, nearly two month high. Of the Nikkei 225 stocks 171 advanced, 45 slipped and 7 traded unchanged. Mitsubishi UFJ Financial Group led gainers with a surge of 5.59%, followed by Adventist Corp, rising 5.04%. Other financial stocks gained as well. Mizuho Financial Group edged up 2.64% and Sumitomo Mitsui climbed 3.86%.

U.S. stocks rallied on write downs in bond portfolio by Citigroup and UBS. Citigroup wrote off $5.9 billion in bond portfolio and UBS booked a loss of $3.4 billion in mortgage related businesses. U.S. stocks jumped after the two big banks offered insights into the extent of losses and hinted that worst may soon be over.

Metal prices also rallied, with zinc and copper increasing 1.6% and 1.1% respectively. Nippon Light Metals rising 1.95%, Mitsui Mining and Smelting Company soaring 1.83% and Sumitomo Metal Industries jumping 1.68%.

The yen bucked the downtrend against the dollar, trading at 115.33 per dollar from 115.74.

Of the Nikkei 225 index stocks, Mitsubishi UFJ Financial Group led the advancers with a rise of 5.6%, followed by increases of 5.1% in Advantest Corporation, 4.96% in Nomura Holdings, 4.70% in Clarion Company Limited, and 4.44% in Sumitomo Trust.

Mazda soared 0.84% on news the company has developed a catalyst to cut the use of expensive metals by 90% while maintaining performance. It however maintained outlook for a net loss of 15 billion yen because of high taxes.

Kikkoman Corp led the decliners with a sharp fall of 7.92%, followed by losses in IHI Corporation of 6.05%, of 3.93 in Mitsubishi UFJ Nicos. Fuji Electric Company and Ajinomoto Company Inc shed 3.65% each.

Qimonda Ag announced today it would be partnering Sony Corp to form a joint venture company Qreatic Design to develop DRAM chips electronics including camera, televisions and other consumer electronics. Sony and Qimonda will own equal stakes in the venture that is expected to begin operations by end of year. Qimonda Ag is 86% owned by Infineon Technologies AG. Elpida, largest DRAM chip maker in Japan, fell 150 yen to close at 3,940 after the news of the joint venture. However, chip equipment makers Advantest added 180 yen to 3,750 and Tokyo Electron added 4.3% to 7,560 yen.

According to Matsushita Electric Industrial Co spokesman Akira Kadota the company will triple annual capacity at the No.2 factory in Hyogo, western Japan to 6.6 million plasma panels from the 2.2 million units currently produced to meet demand.

The company also said it sold 17 distribution centers last month to Pro Logis, the world’s largest publicly traded industrial developer, for 85 billion yen.

In other Asian markets trading Hong Kong, Australia, and Korea closed at record highs. Australia rose 1.3% to 6,667.60, Hong Kong increased 3.9% to 28,199.75 and Korea edged 2.6% higher to 2,014.09. Taiwan jumped 1.4% to 9,623.25.