U.S. Stocks Declined, Record Highs in Asia

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

U.S. stocks fell after early morning earnings warning from Valero, Chevron, and Monsanto. However, Costco jumped 10% on earnings news. Stocks fell in the early morning and recovered in the afternoon with a strength in financials, banks, and home builders. Alcoa fell after earnings and Boeing dropped on delays in 787 delivery. European markets closed fractionally higher. Asian markets closed sharply higher led by records in South Korea, Indonesia, India, Australia, and Hong Kong.

[R]5:30PM New York, 11:30 PM Frankfurt, 3:00AM Mumbai – Asian stocks led the markets around the world. U.S. stocks fell after mixed earnings report.[/R]

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed down 85.84 or 0.61% to a record close 14,078.69, S&P 500 edged lower 2.7 or 0.17% to 1,562.47, and Nasdaq Composite Index traded up 7.70 or 0.27% to a close of 2,811.61. In Toronto TSX Composite gained 14.00 or 0.10% to close at a six year high of 14,276.19.

Of the 30 stocks in Dow Jones Industrial Average 9 closed higher, 20 closed lower, and one was unchanged. Boeing led the decliners with fall of 2.7% followed by losses in Alcoa of 2.5%, in AIG of 2.25%, Caterpillar of 1.6%, and JP Morgan Chase of 1.4%. Wal-Mart led the gainers with a rise of 0.8% followed by increases in Exxon Mobil by 0.5%, Procter & Gamble by 0.45%.

Of the stocks in S&P 500 187 closed higher, 308 fell, and 5 closed unchanged. Seventeen stocks rose 3% or more and twelve fell 3% or more. Costco led the gainers with a rise of 9.2% followed by increases in Lexmark of 6.6%, Tesoro of 6.2%, Dillards of 5.3%, and Baker Hughes of 4.8% respectively. Equifax led the decliners with a fall of 6.5% followed by losses in Qwest Communications of 5.3%, Genworth of 5.1%, and Teradyne of 4.3%.

In London FTSE 100 Index closed up 17.60 or 0.27% to 6,633.40, in Paris CAC 40 index fell 23.44 or 0.40% to close at 5,838.49, and in Frankfurt DAX index increased 0.08% or 6.13 to close at 7,986.57. In Zurich trading SMI added 0.49% or 44.48 to close at 9,182.30.

In Tokyo Nikkei 225 index added 0.1% or 17.99 to close at 17,177.89, in Hong Kong Hang Seng index closed up 1.21% or 341.29 to 28,569.33, in Australia ASX 200 closed up 0.91% or 60.50 to a close of 6,738.30, Sensex surged 2.1% or 378.01 to 18,658.25. In South Korea Kospi Index added 26.99 or 1.34% to a record close of 2,041.12. Indonesia surged 44.88 or 1.76% to a record close of 2,591.48.

In Latin Markets Mexico led the gainers with a rise of 1.03% followed by increases of 0.65% in Peru, 0.6% in Peru. Argentina led the decliners with a fall of 0.63% followed by declines in 0.50% in Colombia and in Chile and Venezuela of 0.33%.

In Brazil, iBovespa Index fell 0.55% or 351.65 to close at 63,197.04 and in Mexico Bolsa Index rose 1.03% or 327.71 to close at 32,129.40. Of the 63 stocks in iBovespa index in Brazil, 13 gained, 49 lost, and 1 closed unchanged.

CCR led the decliners for the second day in a row with a loss of 7.7% followed by losses in Duratex of 3.6%, Vivo of 3.3%, and Tele Norte of 3.1%. CEEP led the gainers with a rise of 6% followed by increases of 3.5% in Petrobras, 3% in TAM, and 2.7% in Tim.

Bond Yields edged a fraction on 10-year U.S. bonds to 4.64% and 30-year bond were unchanged to close at 4.863%.

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

Crude oil rose $1.04 to close at $81.23 per barrel for a front month contract, up 33.0% for the year, natural gas increased 14.7 cents to $7.01 per mBtu, and gasoline futures increased 1.4 cents to close at 203.36 cents per gallon.

Gold increased $2.90 in New York trading to close at $746.00 per ounce, silver closed up 8 cent to $13.67 per ounce, and copper for front month delivery in London increased $104.00 to $8,107.00 per pound.

Dollar edged lower against euro to $1.4147 from $1.411 and higher to 117.26 yen from 117.15 yen.

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

Costco ((COST)), largest warehouse club retailer, reported fiscal fourth quarter earnings of 83 cents per share compared to 75 cents a year ago, an increase of 4.7%. Earnings in the quarter were $372.4 million compared to $355 million a year ago. Excluding one-time charges earnings rose 21% to $372 million or 91 cents per share on revenue rise of 3% to $20.5 billion. Costco jumped 10% at the close to $69.13.

Monsanto ((MON)) fell 4% after it reported fiscal fourth quarter earnings. The company reported a loss of $210 million compared to a loss of $144 million from a year ago on revenue rise of 13% to $1.6 billion. Earnings per share were 39 cents loss compared to a loss of 27 cents a year ago. For the fiscal year company reported a profit of $993 million compared to $689 million or $1.79 per share compared to $1.25 a year ago.

Ruby Tuesday ((RT)) reported fiscal first quarter 21 cents per share compared to 37 cents a year ago. The same-store sales at the company owned restaurant decreased 4.8% and at franchise owned restaurant decreased 2.9%. The company forecasted a decline of same store sales in the second quarter between 6% and 8% and diluted earnings per share of 1 cents and 3 cents.

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.


[R]2:00PM New York, 7:00PM London – UK stocks edged higher. Cadbury plans to spin-off the beverage unit as it fails to find a buyer. Northern Rock attracts two investors.[/R]

In London trading FTSE 100 advanced 0.27% to 17.60 or 6,633. Northern Rock led the climbers. Of the UK shares, 62 gained, 36 fell, and 4 remain unchanged.

Northern Rock surged 32.3% to 273.50p in London trading on Wednesday, valuing it at 1.15 billion pounds or $2.35 billion. The stock has fallen 78% year to date. Two investors have acquired little more than 5% stake in the troubled home lender Northern Rock. SRM Adviser announced that it had bought 4% in the UK fourth largest mortgage lender. E. Shaw & Co., a New York-based hedge fund manager also said that it had bought 1% percent stake in the lender. A number of investors are still bidding for different stakes in the bank.

Global credit market malaise in the mid- July nearly shut off access to new loan funds to Northern Rock forcing the Bank of England to issue emergency loans. On Monday the government also extended a guarantee on customer deposits until financial markets become less volatile. The stock rose 19.7% by the close of trade on Monday trading. The BoE also widened the range of assets that Northern Rock can use to secure its credit line.

Cadbury Schweppes ((CSG)) said today that it had abandoned plans to sell its American beverage unit and intend to list its unit as a separate company on a stock exchange in New York. News reports said investors would be allotted shares in the business, which will be eventually listed during the second quarter of 2008. Cadbury said it could not secure a buyer capable of financing the deal at good value.

Cadbury CEO Todd Stitzer said that the spin-off may take longer but shareholders are likely to receive same value that may be recognized in the sale of the unit.

Analysts said the spin-off would lift uncertainty over Cadbury. The stock has fallen from 722p at the beginning of June to as low as 521p before rebounding to 600p. Analysts had hoped that the company will be able to fetch at least 7 billion pounds before the credit market jitters. Earlier Financial Times had reported that a consortium of private equity funds had offered $13 billion, far less than what company had hoped for.

Cadbury Schweppes beverage division includes Dr Pepper, Seven Up, and Snapple beverages. The unit accounts for 35% of total sale of 7.4 billion pounds at Cadbury.

Of the FTSE 100 shares, Northern Rock led the gainers followed by increases in Schroders Plc at 5.7%, in British Airways at 4.6%, and Xstrata at 4.4%. Of the index stocks Experian lost 7% followed by losses in HBOS of 3%, in Shire of 2.1%, in ITV and Barclays of 1.5% each.


[R]10:30:00AM New York – Stocks in New York trading fell after earnings warnings from energy companies. Costco jumped 8% on earnings.[/R]

In the early trading in New York stocks opened lower on mixed earnings. Dow Jones fell 47 to 14,118, Nasdaq declined 1.5 to 2,802, and S&P 500 lost 3 to 1,561.

Costco ((COST)), largest warehouse club retailer, reported fiscal fourth quarter earnings of 83 cents per share compared to 75 cents a year ago, an increase of 4.7%. Earnings in the quarter were $372.4 million compared to $355 million a year ago. Excluding one-time charges earnings rose 21% to $372 million or 91 cents per share on revenue rise of 3% to $20.5 billion.

Monsanto ((MON)) fell 4% after it reported fiscal fourth quarter earnings. The company reported a loss of $210 million compared to a loss of $144 million from a year ago on revenue rise of 13% to $1.6 billion. Earnings per share were 39 cents loss compared to a loss of 27 cents a year ago. For the fiscal year company reported a profit of $993 million compared to $689 million or $1.79 per share compared to $1.25 a year ago.

Monsanto said that its full-year 2008 EPS guidance, both on a reported and ongoing basis, is in the range of $2.20 to $2.40. The company''s 2008 EPS guidance reflects a projected growth rate of 10 percent to 20 percent from the fiscal year 2007 EPS ongoing base of $2.00 per share.

Chevron Corporation ((CVX)) reported interim update for the third quarter earnings and warned that the company earnings are expected to be ‘significantly below’ the record $5.4 billion in the second quarter of 2007. The company added that one time charge of $700 million and lower refining margins will hurt earnings. In the last quarter the company had booked gain of $860 million for its stake in Dynegy and expects to record a gain of $260 million for sale of its marketing assets in Benelux countries.

Refining margins were $19.36 per barrel in the third quarter of 2006, $20.55 in the fourth quarter of 2006, and rose to $30.28 per barrel in the second quarter of 2007. The margins are estimated to be $14.77 per barrel in the third quarter of 2007.

Separately Valero Energy ((VLO)) also fell after it warned that third quarter earnings excluding one-time charges are likely to be between $1.30 and $1.40 per share. The company added that it expects to report lower throughput margins for the third quarter of 2007 primarily due to substantially higher feedstock costs resulting from increased premiums for light sweet crude oils and narrower discounts for sour crude oils and other feedstocks. Higher feedstock costs are expected to reduce the company’s throughput margins by approximately $700 million in the third quarter compared to a year ago.

The one-time items consist of a $91 million pre-tax gain on repayment of a loan by a foreign subsidiary and the effects on the computation of diluted earnings per share related to the company’s $94.5 million final payment for the accelerated stock repurchase program that was completed on July 23, 2007. Including these special items, third quarter earnings from continuing operations are expected to be in the range of $1.25 to $1.35 per share. The company also expects to report third quarter earnings from discontinued operations of approximately $0.75 per share related to the $827 million pre-tax gain on the sale of the Lima refinery.

[R]6:00AM New York, 7:00PM Tokyo- Japan climbs 0.1% on retailers and commodity stocks. August industrial orders were down 12.3%.[/R]

Japan’s stocks retreated from a 0.3% gain in the morning session to close 0.1% on profit taking in financial stocks. In Tokyo trading Nikkei 225 rose 0.1% or 17.99 to 17,177.89.

Of the Nikkei 225 stocks 102 gained, 100 declined and 23 traded unchanged. Aeon Co Limited led gainers, surging 6.19% after the retailer announced a business alliance with Japan Airlines Corp to expand market share. Energy and commodity stocks rose on higher oil and metals prices.

Daily trading volume on the first section was recorded at 1.7 billion shares valued at 2.2 trillion yen and in the second section trading volume was recorded at 80 million shares at 12.5 billion yen. Mining, air transportations, and retailers led the stocks and banks, insurance, and rubber products companies fell according to indexes tracked by Tokyo Stock Exchange.

Of the 1,722 listed issues in the first section, 706 gained, 863 declined, and 146 were unchanged. Three stocks did not trade. Of the 470 issues listed on the second section, 201 advanced, 153 declined, and 56 were unchanged.

Crude oil prices gained 1.6% to $80.26 per barrel lifting energy trading and exploring companies. Inpex Holdings firmed 3.42%, Nippon Mining Holdings rose 2.08% and Nippon Oil Corp edged up 2.09%.

Metal prices rose as nickel climbed 1.8%, copper spiked 1.3% and zinc rose 1.5%. Sumitomo Metal Mining Company rose 0.56%, while Nippon Light Metal Company jumped 0.37%.

Marubeni Coal Private Limited, a subsidiary of Marubeni Corp, announced today it has completed the purchase of a third of shares of Queensland Coal Mine Managament Private Limited worth 40 billion yen, which will increase its stake in Jellinbah East Coal Mine and Lake Vermont Coal Mine to 38.33% each.

The company plans to expand production of coal to 10 metric tons per annum to ensure reliable supplies to Asia and South America. After the acquisition Marubeni will have total equity coal production capacity of 6.0 metric tons per annum.

Japan Society of Industrial and Machinery Manufacturers said Tuesday the value of orders for industrial machinery placed with Japanese companies slumped 12.3% in August to 541.03 billion yen from a year earlier. However orders for industrial machinery rose 32.3% in July.

According to the survey covering 193 members of the Society, orders in the domestic market fell 0.3% from last year to 238.85 billion yen in August, while orders from abroad were down 18.5% to 302.18 billion yen.

Nomura Securities Financial and Economic Research Center said today company share buybacks reached a record 2.68 trillion-yen in the first half of 2007, as stocks declined and fears of the U.S. subprime mortgage crisis gripped the market. The Research Center forecasts purchases for fiscal year is expected to surpass the record of 3.98 trillion posted in 2006.

Of the index shares, retailer Aeon Company Limited paced gainers with a rise of 4.62% in Toki Carbon Company, 4.33% in Japan Airlines Corp, 3.69% in Seven & I Holdings and 3.68% in Mitsub Motors Company.

Aeon Company Limited and Japanese Airlines Corp rose after the two companies separately announced plans for a business alliance starting with the creation of two new loyalty cards to be introduced in March 2008 aimed at expanding market share.

The cards will combine the airline’s frequent flyer mileage card, the JMB Card and Aeon’s WAON Card that has both e-money and credit functions. Business tie-ups including sharing sales channels and distribution of goods during emergency situations are also being considered.

Retailers gained as well. Seven & I Holdings soared 3.7%, Daiei Inc rose 3.9% while Takashimaya Company climbed 3.2% after posting a second quarter profit of 2.24 billion yen and brokerage firms raised the company’s rating.

GS Yuasa Corp led declining stocks in the Nikkei 225 index with a fall of 4.44%, followed by losses in Shinsei Bank Limited of 3.02%, in Olympus Corp in 2.75% and in Japan Tobacco and Taiheiyo Cement of 2.51% each.

Financial stocks also tumbled on profit taking after gains in the last two weeks. Mitsubishi UFJ Financial Group fell 0.25%, Mizuho Financial Group declined 1.13% and Sumitomo Mitsui Financial Group decreased 2.47%.

Mitsubushi Heavy Industries said yesterday it plans to spend 150 billion yen on a project called Mitsubishi Regional Jet (MRJ) that aims to sell 1,000 regional passenger jets over the next 20 years, seizing a fifth of projected new demand. The company has selected Pratt & Whitney to supply engines for its new 70 to 90 seat passenger jets.

Yamazaki plans to raise the price of 500 products including bread and confectionery items by an average of 8% in December for the first time in 17 years on rising prices of cooking oil, wheat, wrapping materials and dairy products. Sliced bread will rise to a 24 year high as the popular loaf will be priced at 190 yen up from 170 yen.

Wholesale prices have risen for more than three years yet consumer prices continue to decline. Consumer prices slipped 0.1% in August. However the quarterly Tankan survey released last week showed consumers expect costs of goods to rise by 4.6% over the next 12 months, heightening expectations the economy will be able to stave off a decade old deflation.


[R]5:00AM New York, 5:00PM Tokyo – Gold miners lifted stocks in Australia to a record close.[/R]

In Sydney trading ASX 200 Index gained 0.9% or 60.5 to 6,738.30. Australia''s S&P/ASX 200 Index extended its jump into record territory riding on gains in resource stocks led by mining giants BHP Billiton, which rose by 2.3% and Rio Tinto which added 0.9%.

Trade on the Australian stock exchange was on the upside as gains were recorded in all sectors including banks and commodity stocks. In the energy sector Woodside trade stronger at 0.8%, Oil Search was up 1.9%, but Santos declined 1.7%. Gold miners also rose on higher metal prices. Newcrest rose 0.2% and Lihir added 2.3%. Great Gold Mines was the most active stock with 216 million shares changing hands.

The big banks were also stronger with ANZ gaining 0.6%, the Commonwealth Bank adding 1.6%, the National Australia Bank adding 0.7% and Westpac edged 0.3% higher.

Retailers were mixed, with Woolworths putting on 0.03%, Harvey Norman adding 1.6%, Coles rising by 0.1% and David Jones was down by 2.8%.

In the media sector, Fairfax was up 0.8%, PBL rose 2.5%, and News Corp edged lower 0.3%.

Murchison Metals Ltd controlled by Mitsubishi launched a hostile and unconditional bid for Midwest Corp controlled by Sinosteel Corp to build shipping port to ship iron ore from Perth on the western coast of Australia. The surprise takeover offer values Midwest at A$4.70 or 34% higher than its closing price. Midwest jumped 28% on the news and Murchison added 2%.

Murchison hopes that after the purchase the combined company will produce 45 mtpa and have cash reserve of $200 million with no debt. Murchison is valued at $2.2 billion and Midwest is valued at $855 million. The surprised bid offers 34% premium from the recent close. The Midwest stock surged 28% after the news.

The Western Australian state government recently rejected the plan from Murchison to build a port and railroad line in the region. WA Planning and Infrastructure Minister Alannah MacTiernan announced yesterday that the right to construct the port would be subject to a contestable process, limited to the two mining companies (Murchison and Midwest Corporation) who have requested this right. These companies could nominate in their own right or through a nominated infrastructure provider. The state Government cancelled the approval for Midwest''s port and railroad project in July.

The dollar closed stronger today but missed the $0.90 mark with traders locking in their bets ahead of tomorrow''s local jobs data. The American currency was weakened by minutes from the US Federal Reserve''s last meeting as the market took the view that the U.S. interest rates are more likely to be lowered.

The Australian dollar traded at $0.8992, up from yesterday''s close of $0.8945. During the day it traded between a low of $0.8981 and a high of $0.9008.

Of the ASX 200 index shares, Mt Gibson Iron led the gainers with a rise of 15% followed by increases in Perilya Ltd by 6.6%, in Gunns Limited by 5%, in Paladin Resource by 4.8%, and in Jubilee Mines NL by 4.2%.

Of the ASX 200 index stocks Stigma Pharmaceuticals led the decliners with a fall of 2.4% followed by losses in Energy Resource Australia of 2.6%, David Jones Ltd of 2.8%, in Alumina Ltd and Ansell of 4.1%.