Fed Minutes Lifted U.S. Markets

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

U.S. stocks closed higher after the Fed minutes showed that the Fed believes inflation is under control and is prepared to act to support economic growth. The 50 basis points rate reduction is widely percieved as a gift to Wall Street. The preemptive action by the Fed was partly based on weak August employment report which was revised to 89,000 new job additons from a decline of 4,000 after the rate cut. European and Asian markets closed higher. Oil rebounded.

[R]5:30PM New York, 11:30 PM Frankfurt, 3:00AM Mumbai – U.S. stocks advanced after the Fed statement indicated that inflation is under control and is ready to support economic growth.[/R]

[R]Global Market Indexes[/R]

Dow Jones Industrial Average closed up 210.80 or 0.86% to a record close 14,164.53, S&P 500 added 12.57 or 0.81% to 1,565.15, and Nasdaq Composite Index traded up 16.54 or 0.59% to a close of 2,803.91. In Toronto TSX Composite gained 30.81 or 0.22% to close at a six year high of 14,264.15.

Of the 30 stocks in Dow Jones Industrial Average 27 closed higher, 3 closed lower, and none was unchanged. Alcoa led the gainers with a rise of 3.7% followed by increases of 3.02% in American Express, 2.2% in Exxon Mobil, and 1.5% in Verizon. The three decliners, Citigroup, Wal-Mart, and Home Depot fell a fraction.

Of the stocks in S&P 500 363 closed higher, 128 fell, and 9 closed unchanged. Twenty eight stocks rose 3% or more and eight fell 3% or more. Molson Coors jumped 10.5% and led the gainers in the index followed by increases in Janus Capital of 6.7%, Franklin Resources of 6.3%, Goldman Sachs of 5.4%, and Yum! Brands of 5.02%. Akamai closed higher for the second day with a rise of 5% to $35.62.

Microchip Technology ((MCHP)) fell 12.7% to close at $31.98 and led the decliners followed by losses in Countrywide Financial of 4.2%, Supervalu of 3.6%, Limited Brands of 3.5%, and Liz Claiborne of 3.4%.

In London FTSE 100 Index closed up 74.50 or 1.14% to 6,615.40, in Paris CAC 40 index rose 32.53 or 0.56% to close at 5,861.93, and in Frankfurt DAX index increased 0.08% or 6.07 to close at 7,980.44. In Zurich trading SMI added 0.45% or 40.78 to close at 9,137.82.

In Tokyo Nikkei 225 index added 0.56% or 94.86 to close at 17,159.90, in Hong Kong Hang Seng index closed up 1.65% or 457.75 to 28,228.04, in Australia ASX 200 closed up 0.35% or 23.50 to a close of 6,677.80, Sensex surged 4.5% or 788.85 to 18,280.24. In South Korea Kospi Index added 1.31 or 0.07% to 2,014.13.

In Latin Markets Brazil led the gainers with a rise of 1.42% followed by increases of 1.3% in Chile, 0.6% in Peru, and 0.22% in Argentina. Colombia fell 0.9% and Venezuela declined 0.2%.

In Brazil, iBovespa Index closed 1.4% higher or 887.84 to close at 63,548.69 and in Mexico Bolsa Index fell 0.07% or 23.82 to close at 31,801.69. Of the 63 stocks in iBovespa index in Brazil, 45 gained, 15 lost, and 3 closed unchanged.
CCR led the decliners with a loss of 6.7% followed by losses in Duratex of 6.1%, Natura of 2.8%, and CESP of 2.6%. Perdigao led the gainers with a rise of 7% followed by increases of 4.8% in Sadia, 4.3% in Gol, and 4.2% in Copel.

Bond Yields rose on 10-year U.S. bonds to 4.65% and 30-year bond edged down a fraction to close at 4.863% in Friday’s trading and were closed for trading on Monday.

[R]Commodities, Metals, and Currencies[/R]

Crude oil rose $1.24 to close at $80.26 per barrel for a front month contract, up 32.0% for the year, natural gas increased 1.7 cents to $6.86 per mBtu, and gasoline futures increased 2 cents to close at 202.02 cents per gallon.

Gold increased $4.40 in New York trading to close at $743.10 per ounce, silver closed up 22 cent to $13.58 per ounce, and copper for front month delivery in London fell $257.00 to $8,003.00 per pound.

Dollar edged lower against euro to $1.4109 from $1.404 and lower to 117.15 yen from 117.4 yen.

[R]Deal News[/R]

SAB Miler and Molson Coors agreed t unite their U.S. operations under a new name MillerCoors with total sales of $6.6 billion. The two companies will control 33% of the beer market in the U.S. after the market leader Anheuser Busch with a market share of nearly 50%. SAB Miller will control 58% of the new company and Molson Coors will own 42%.

AT&T agreed to purchase for $2.5 billion wireless spectrum from Aloha Partners. The wireless spectrum purchase gives AT&T access to 12 MHz in the 700 MHz frequency at which signals are stronger than at 1 GHz spectrum.

NBC Universal, unit of General Electric, agreed to pay $925 million for Oxygen Media and expand its portfolio of cable channels including channels USA Network, CNBC, MSNBC, and Sci Fi. The young women focused media channel was launched in 2000 and is now available in 74 million homes. The current Chairwoman and chief executive Geraldine Laybourne said in television interview that she will stay on board till the end of the year.

Newmont Mining agreed to pay C$1.5 billion for Miramar Mining Corp. The Canadian gold explorer was offered C$6.25 or 20% premium to its closing price of C$5.19. Nunavut Territory based Hope Bay Project over 1,000 square kilometers is considered one of the most promising gold exploration region in the world.

SLM, student lender widely known as Sallie Mae, sue the private equity led group to force the buyout at $60 per share price or pay $900 million fee.

[R]U.S. Earnings Watch[/R]

After the close Alcoa ((AA)) kicked off the earnings season with the release of third quarter earnings from continuing operations of 64 cents per share, 3% increase from a year ago on the revenue of $7.4 billion. The quarterly result includes sale of Chinese company Chalco and charges related to the upcoming sale of packaging and auto casting unit.

Net income in the third quarter was 63 cents per share or $555 million compared to $537 million or 61 cents a year ago and $715 million or 81 cents per share in the second quarter. Revenue in the quarter declined to $7.4 billion from $7.6 billion a year ago and $8.1 billion in the second quarter of 2007.

The company board authorized repurchase of up to 25% of the outstanding common stock or app 217 million shares.

Microchip technology ((MCHP)) fell 12% after reporting preliminary second quarter earnings of 38 cents per share and revenue decline of 2% from the first quarter between $258 and $259 million.

Mr. Gordon Parnell, Microchip’s Chief Financial Officer, said, “We expect days of inventory to increase based on these revenue levels. Days of inventory at September 30 are expected to be approximately 112 days, up 5 days from overall inventory levels as of the end of June.”
Mr. Steve Sanghi added, “Our book-to-bill ratio for the September quarter was 0.94, leading our business into a more seasonally challenging period in the December quarter. While we are not in a position to give specific guidance at this point, we expect that December net sales will be sequentially down. Based on the current level of uncertainty in the consumer segment of the business, we expect that the range of our guidance will be wider than our typical level.”

[R]12:00AM New York, 9:30PM Mumbai – Sensex surged 4.5% to a new record as two factions in ruling coalition decide to talk.[/R]

Sensex in Mumbai recovered from three-day of losses as tension between the Congress-led government and its communist allies over the nuclear deal temporarily eased. Every stocks in the 30-BSE Sensex index rose. Reliance Industries led the gainer and stocks of real estate, capital goods, and metal stocks edged higher.

The Congress-led United Progressive Alliance government and its communist allies agreed Tuesday to meet in the next two weeks to resolve their differences over a nuclear agreement with the United States. Market watchers interpreted this as a positive sign and surmised that ruling coalition is likely to survive.

The 30-share BSE Sensex jumped 4.5% or 788.6 points to 18,280. The CNX Nifty ended up 4.8% or 242 to 5.327. Of the BSE shares 1,754 advanced, 930 declined, while 380 were unchanged.

All shares in the 30-share BSE Sensex index gained. The BSE turnover was 7,793 crore rupees and on the NSE was 18,456 crore rupees.

International ratings agency Standard & Poor''s said on Tuesday it expects India''s economy to grow by 9% in 2007 and 8.8% in 2008. The report said the Indian economy was mainly driven by strong local demand and a moderation in growth in the current fiscal year was a soft landing. The agricultural sector is projected to grow 3.4% while industrial sector will surge by 9.2%, the report said. Factory output will increase by 11.3%. The report also said the rupee would further strengthen against major currencies. S&P said interest rates were peaking, and the rupee was likely to end the year at 40.50 against the U.S. dollar.

Of the Sensex shares, Reliance Energy climbed 11.2% to 1,533.7 rupees and led the gainers in the Sensex index. Reliance Capital surged 8.7% to 1,768 rupees. Maruti Suzuki gained 8% to 1,105.35 rupees, and NTPC closed up at 6.2% to 217.7 rupees.

Reliance Industries was up 7.6% to 2,600.5 rupees. Reliance Industrial Infrastructure hit 5% upper daily trading limit at 1,868.70.

Metal stocks recovered from Monday''s losses. Tata Steel grew 5.8% to 834.6 rupees. Hindalco Industries gained 1.5% 164 rupees, JSW Steel surged 5.7% to 850 rupees while State Bank rose 6% to 1,889.8 rupees.

Infosys closed up 2.4% to 2,048 rupees, ahead of its earnings this week. Analysts are projecting a sales rise of between 7% and 10% and profit gain of between 1% and 4.5%. The revenues are estimated between 4,050 crore and 4,150 crore rupees and with the earnings between 1,072 crore and 1,130 crore rupees.
Suzlon Energy jumped 1.6% to 1,673 rupees after its American subsidiary received an order for 400 mw wind mill turbine from Horizon Wind energy.

Larsen & Toubro surged 4.7% to 3,163 rupees after it received an order from Indian Oil Corporation for 693 crore rupees. Bharat Heavy Electricals closed up 2.1% to 2,236.75 rupees after the company received an order for 390 crore rupees power plant in Andhra Pradesh.


[R]10:00AM New York, 10:00PM Tokyo – Real estate and exporters lift Japan 0.56%. Bank of Japan starts its three-day meeting.[/R]

In Tokyo trading Nikkei 225 rose 0.56% or 94.86 to 17,159.90.

Of the Nikkei 225 stocks 138 gained, 77 declined and 10 traded unchanged. Tokyo Dome led advancing realty stocks, climbing 4.14%. Other realty stocks gained as well. Comsys Holdings declined 0.48%, Kajima Corp jumped 1.55% and Taisei Corp edged up 1.49%. Commodity and energy stocks however slumped as oil and metal prices retreated.

Crude oil prices retreated 2.7% to $79.02 per barrel. Inpex Holdings and Nippon Oil fell 3.31% and 1.96% respectively as a result.

Metals prices also tumbled as nickel slipped 4%, zinc dropped 3.4% and copper shed 3.1%. Nickel producer Sumitomo Metal Mining declined 1.06%, while Nippon Mining House plunged 0.35%.

Finance Minister Fukushiro Nakaga said today the Bank of Japan’s monetary policy should support economic growth in order to achieve sustainable economic recovery. Bank of Japan today began its 3-day policy meeting today which is expected to culminate in the bank holding its key bank rate at 0.5% on Thursday.

Deputy Governor of the Bank of Japan Kazamusi Iwata and board member Miyako Suda favor a rate hike, while Governor Toshihiko Fukui contends the bank will gradually raise interest rates to prevent inefficient investments and sustain long-term growth.

Economists believe growing business confidence among Japanese large manufacturers and huge capital outlays showed in the Tankan Survey will force the bank authorities to forgo an interest rate hike.

Dealogic, Merger and advisory data tracking company said today that Japan’s equity capital markets had raised $19 billion by the end of September compared to $46 billion a year ago. Japan as ranked eleventh in the global ranking of funds raised. However, debt markets raised $160 billion year compared to $150 billion a year ago.

The yen traded at 117.26 to the dollar at the close of trade from 116.59 on October 5th. Exporters Honda, Sony gained 0.01% and 0.52% in that order.

Of the Nikkei 225 index shares, Fast Retailing led advancers with a rise of 6.94%, followed by gains of 6.85% in UBE Industries, 5.66% in Clarion Co, 4.90% in Toray Industries and 4.14% in Tokyo Dome.

Toray Industries, Inc. today announced its decision to expand domestic production capacity of its PAN-based carbon fiber TORAYCA. The company plans to add two integrated production lines for carbon fiber covering polymerization, precursor spinning, and carbonization (total of 2,200 tons per year), and one production line for prepreg (5.8 million m2 per year) at its Ehime Plant. Toray will spend a total of 25.0 billion yen for this expansion and these additional production facilities are expected to start operation from January 2007 and estimates sales to exceed 110 billion yen in 2010.

Financials gained as well. Mitsubishi UFJ rose 0.08%, while Mizuho Financial jumped 0.14%.

Taiheiyo Cement led decliners, falling 9.52% followed by losses in Sumitomo Osaka Cement Company Limited of 5.02%, in Sumitomo Metals and Mining of 3.78%, in NTT Data Corp of 3.75% and Sumco of 3.63%.

Cement producer fell on news that declining housing starts had led to August shipment to decline between 4% and 8% from a year ago.

Goldman Sachs offer to buy Simplex at a premium of 43% or valued at 124.7 billion yen prompted buy orders to outnumber sells by 748 to 1 kicking trade curbs on the exchange. Goldman Sachs plans to invest 200 billion yen in Japan’s properties this year after properties gained the most in 16 years by 1%. Commercial land prices in Tokyo and Osaka have jumped more than 15% in the last year. However, land prices are still considered cheaper than in the U.S. and Europe.

Olympus Corp posted its biggest gain of 0.58% to 5,100 yen on Nikkei News report that the company will exceed its earnings estimates.