Tech Stocks Lift U.S.; Europe, Asia Decline

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

Markets in the U.S. edged higher as tech stocks showed strenght in the last hour of trading. The sharply lower opening in the morning was quickly reveresed by mid-day as oil, copper, and gold fell. The strength in tech stocks lifted the averages at the close. European markets fell in sympathy with a lower close on Friday in the U.S. and a sharp correction Asian markets. Hong Kong, Korea, Philippines, and Indonesia fell more than 3%. Apple earnings surged 67% on 29% rise in sales.

[R]5:00PM New York, 11:00PM Frankfurt, 2:30AM Mumbai – Markets in Asia and Europe fell sharply but in the U.S. edged higher. Gold, oil, natural gas and other metals fell.[/R]

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed up 45.04 or 0.33% to a close of 13,567.06, S&P 500 edged higher 0.38% or 5.70 to 1,506.33, and Nasdaq Composite Index traded up 28.77 or 1.06% to a close of 2,753.93. In Toronto TSX Composite rose 38.74 or 0.28% to close at 14,040.40.

Of the 30 stocks in Dow Jones Industrial Average 20 closed higher, 10 closed lower, and none were unchanged.

Exxon Mobil led the decliners with a fall of 1.4% followed by losses in McDonalds of 0.8%, Du Pont of 0.7%, and AT&T of 0.5%. Merck led the gainers with a rise of 3% followed by increases of 2.4% in Disney, 1.4% in Altria, and 1.3% in Intel.

Of the stocks in S&P 500, 358 closed higher, 138 fell, and 4 were unchanged.

Six stocks fell more than 3% and thirty two stocks rose more than 3%.

SanDisk led the decliners with a sharp fall of 15% followed by losses in Schlumberger of 11%, Smith International of 10%, and MGIC of 9.8%, and National Oilwell of 9.1%, and in Paccar of 8%. Boston Scientific led the gainers with a rise of 4.1% followed by increases of 3% in IMS Health, 2.4% in V F Corp, and 2.3% in First Horizon.

In London FTSE 100 Index closed down 68.60 or 1.05% to 6,459.30, in Paris CAC 40 index fell 79.21 or 1.38% to close at 5,661.27, and in Frankfurt DAX index decreased 1.13% or 89.18 to close at 7,794.94. In Zurich trading SMI fell 1.03% or 91.81 to close at 8,845.39. Norway led the decliners in the region with a loss of 2.4% followed by losses in Iceland of 2%, Ireland of 1.9%, Amsterdam of 1.8%, Italy of 1.6%, and Denmark of 1.4%.

In Tokyo Nikkei 225 index lost 2.2% or 375.90 to close at 16,438.47, in Hong Kong Hang Seng index closed down 3.7% or 1,091.42 to 28,373.63, in Australia ASX 200 closed down 129.00 or 1.92% to close 6,577.30.

Sensex in India edged higher 0.31% or 54.01 to 17,613.99. In South Korea Kospi Index fell 66.29 or 3.36% to close at 1,903.81 and Indonesia closed down 110.54 to 4.31% to 2,453.21. Philippines fell 4% to 3,667.87, Singapore declined 2.81%, and Malaysia lost 1.4%.

In Latin Markets Peru led the decliners with a fall of 2.16% followed by losses of 0.60% in Venezuela, and 0.4% in Colombia and 0.10% in Argentina. Brazil led the gainers with a rise of 0.5% and Mexico added 0.44%.
Bond Yields edged higher on 10-year U.S. bonds to 4.41% and 30-year bond were unchanged to close at 4.69%.

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

Crude oil fell $1.04 to close at $87.56 per barrel for a front month contract, up 40.0% for the year, natural gas fell 15 cents to $6.89 per mBtu, and gasoline futures declined 3.53 cents to close at 213.34 cents per gallon.

Gold edged lower $8.40 in New York trading to close at $760.00 per ounce, silver closed down 8 cent to $13.55 per ounce, and copper for front month delivery in London gained $11.00 to $7,898.50 per pound.

Dollar edged higher from the record low against euro to $1.4166 from $1.4302 and lower to 114.300 yen from 114.522 yen.

[R]Earnings reported - After the Close of the U.S. markets[/R]

American Express ((AXP)) reported earnings of $1.067 billion compared to $967 million a year ago on revenue increase of Earnings per share increased to 90 cents from 79 cents a year ago.

Netflix ((NFLX)) reported earnings of $15.7 million compared to $12.8 million from a year ago or earnings per share increased to 23 cents compared to 18 cents. The total number of subscribers to the service increased 24% to 7 million. The company raised its earnings guidance for the fourth quarter from a range of loss to of a penny to 6 cents peer share profit to earnings between 9 cents and 16 cents.

Texas Instruments reported earnings from continuing operations increased to 52 cents from 45 cents or to $758 million from $686 million on revenue decline to $3.66 billion from $3.76 billion. The company guided earnings for the fourth quarter between $3.4 billion and $3.68 billion and earnings of 48 cents to 54 cents.

Apple ((AAPL)) reported financial results after the market close its fiscal 2007 fourth quarter ended September 29, 2007.

The Company posted revenue of $6.22 billion and net quarterly profit of $904 million, or $1.01 per diluted share. These results compare to revenue of $4.84 billion and net quarterly profit of $542 million, or $.62 per diluted share, in the year-ago quarter.

Gross margin was 33.6 percent, up from 29.2 percent in the year-ago quarter. International sales accounted for 40 percent of the quarter''s revenue.

Apple shipped 2,164,000 Macintosh computers, representing 34 percent growth over the year-ago quarter and exceeding the previous quarterly record for Mac shipments by 400,000. The Company sold 10,200,000 iPods during the quarter, representing 17 percent growth over the year-ago quarter.

Quarterly iPhone sales were 1,119,000, bringing cumulative fiscal 2007 sales to 1,389,000.

In the first fiscal quarter 2008, which includes the holiday season, Apple guided revenue of $9.2 billion and earnings per share of $1.42. In the after-market trading Apple stock jumped $8.00 to $182.36.



[R]3:30PM New York, 7:30PM London - UK stocks fell on the worries of the economic slow-down and sharp fall in metal prices.[/R]

London''s FTSE 100 index opened down today on renewed concerns that a U.S. housing slump would hamper growth in the world''s largest economy.

In the early hours of trading, the UK stocks slid 1.7% with the weakness in other European markets and sharply lower correction in the Asian markets.

In London trading FTSE 100 fell 1.5% or 69 at 6,459.30. Resource and energy stocks fell. Of the stocks in the FTSE 100 index, 19 gained, 82 fell and one remained unchanged.

A sharply lower close in the U.S. which was after the market close in Europe and UK was prompted by renewed fears that the ongoing correction in the housing market has may take longer than anticipated. Weak earnings from several large banks and a parade of charges related to credit market did not help the sentiment either.

Of the FTSE 100 index, British Energy led the decliners with a sharp fall of 8.1% followed by declines in Tullow Oil of 5.8%, Kazakhmys of 5.2%, Vedanta Resources of 5%, and Xstrata of 5%.

Of the FTSE 100 shares, Vodafone led the advancers followed Home Retail grew 1.8%,
Morrison climbed 1.6%, Carnival added 1.6% while Pearson surged 1.4%.

Mining and resources stocks fell sharply. Copper fell 2.5% to 7,665 per ton, on the worries that a global economic slow-down will lower the demand for the metal. Anglo America closed weaker at 4.8%, Antofagasta slid 4.6%, Lonmin lost 4.1%, BHP fell 3.9%, Rio Tinto slump 3.7%. Most financial shares were also in the red.

Standard Life retreated 3.1%, Standard Chartered lost 3.9%, British Land fell 1.3% while Barratt closed weaker at 2.02%.

Royal Bank of Scotland Group Plc is reported to be in talks to acquire the assets of Cheyne Finance Plc. Royal Bank of Scotland fell 1.8%.

The pound fell the most against the yen in two months as worries related to carry trade arbitrage mounted. Investors worried that rising energy cost and a slow-down in the U.S. housing market may slow economic growth in Japan.

The pound declined to a month-low after policy makers at this weekend''s Group of Seven meeting said the credit-market rout will slow global growth, stoking speculation the Bank of England will cut interest rates from a six-year high.

London Brent crude traded lower by 52 cents to close at $83.27 for a barrel and pound fell to $2.025 and to 230.26 yen.
[R]2:00PM New York, 11:30PM Mumbai - Sensex edged higher ahead of the earnings season and bucking the trend of sharp declines in Asian markets.[/R]

The BSE 30-share Sensex rose 0.3% or 54 at 17,613.99. The S&P CNX Nifty lost 0.6% or 31.30 to close at 5,184.

Of the 30 shares of the Sensex, 17 rose while the rest declined. Of the BSE shares, 1,341 advanced, 1,314 fell and 70 were unchanged. The total turnover on the BSE was 7,486 crore rupees and on the NSE was 15,736 crore rupees.

Ambuja Cements, the most active stock with total turnover of 787.18 crore rupees Ambuja Cements gained 4.48% to 145.9 rupees on 5.44 crore shares after three block deals of 1.57 crore shares changed hands on the Bombay Stock Exchange at an average price of 144 rupees per share.

Reliance Energy, United Breweries, Reliance Industries and Reliance Communications were the other stocks on the most active list.

An International Monetary Fund official said India''s recent economic performance has been impressive but it needs to reduce its high public debt and carryout structural reforms to further deregulate its economy to have a sustainable economic growth.

IMF in the recent years has lost its credibility in advising emerging markets economies. Several of its prescriptions in the last ten years have landed countries like Indonesia and Eastern European nations in severe financial difficulties. Only five years ago, IMF had hinted that growth in India will remain sub-par and its export competitiveness will not improve without structural reforms. The IMF’s reputation in Asia has come under sharp focus and is increasingly viewed as an irrelevant institution.

Of the Sensex stocks, Housing Development Finance Corporation led the advancers. It surged 6% to 2,540 rupees on 2.25 lakh shares ahead of its earnings result next week. Satyam Computers led the decliners in the Sensex index. It lost 3.14% to 445.6 rupees.

Mahindra & Mahindra surged 4% to 757 rupees, ACC climbed 3.92% to 1,030 rupees and ITC jumped 2.4% to 179 rupees. Bhel gained 1.48% to 2,080 rupees, Larsen & Toubro surged 3.04% 3,115 rupees, Reliance Energy rose 2.38% to 1,370 rupees.

ICICI Bank rose 4.74% to 1,072.5 rupees after its earnings rose 32.7% to 1,002.60 crore rupees on 41% growth in total income to 9,588.41 crore rupees in the second quarter earnings. The earnings news lifted stocks in the banking sector.

State Bank of India gained 1.94% to 1,700 rupees, Union Bank of India advanced 2.6% to 141.95 rupees, and Kotak Mahindra Bank surged 1.42% to 840 rupees.

Oil and Natural Gas Corporation shed 1.4% to 1,090 rupees on reports that its joint venture firm ONGC-Mittal Energy had acquired a 30% participating interest in an exploration block in Turkmenistan. Reliance Industries lost 2% to 2,420.2 rupees.

TCS declined 3% to 1,074 rupees, Wipro shed 1.3% to 494 rupees and Infosys lost 1.5% to 1,878.15 rupees. Government has proposed to give a sector-specific package for refund of taxes and levies to exporters hit by a sharp rise in rupee.

Bharti Airtel lost 1.49% lower to 954 rupees, Reliance Communications shed 0.7% to 722 rupees, Tata Motors retreated 2.3% to 765 rupees and Maruti Suzuki India slid 2.2% to 1,050 rupees.

Of the Nifty index SAIL lost 4% to 213.6 rupees, National Aluminium retreated 3.1% to 279.2 rupees and ABB slid 2.79% to 1376.95.

[R]1:00PM New York – Goodman Global agrees to be sold for $2.7 billion to a private equity firm Hellman & Friedman.[/R]

Goodman Global ((GGL)), second largest manufacturer of heating, ventilation, and air-conditioning equipment agreed to merge to be acquired by private equity firm Hellman & Friedman in all cash transaction valued at $2.65 billion. The transaction is valued at $25.60 per share for each outstanding stock.

The transaction will be financed by 50% of debt. Hellman & Friedman, according to the press release, has obtained $1.1 billion in commitments for senior secured credit facilities from Barclays Capital, Calyon New York Branch, GE Commercial Finance, and certain vehicles managed by GSO Capital Partners LP, and $500 million in commitments for senior subordinated financing from vehicles managed by GSO Capital Partners LP and Farallon Capital Management, L.L.C.

Stockholders holding a majority of Goodman’s outstanding shares have agreed to vote in favor of the transaction.

Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are acting as advisors to Goodman’s Board of Directors in connection with the transaction. O’Melveny & Myers LLP and Simpson Thacher & Bartlett LLP served as legal advisors to Goodman and Hellman & Friedman, respectively.

Goodman sells equipment under the brand names Goodman, Amanda, and Quietflex through a dealer network of 800 distributors.

Goodman Global ((GGL)) stock jumped $2.50 to $24.34 after the news.

[R]11:00AM New York – Citic and Bear Stearns invest in each other.[/R]

Bear Stearns ((BSC)) and Citic Securities, a subsidiary of China Citic Group have agreed to invest in each other to the tune of $1 billion. China’s banks in the last five years have recovered from a mountain of bad debts and falling credit qualities of its companies.

Citic will invest $1 billion in Bear Stearns through convertible securities which will convert to 6% of Bear Stearns. Citic will have a right to buy up to 3.9% of Bear Stearns in the open market. Bear Stearns will invest in Citic debt that can be converted to 2% stake in the securities firm and Bear Stearns will have an option to buy additional 5% stake in the company in the next five years.

Chinese banks, only five years ago were suffering from inadequate capital ratios and mounting bad debts. The surging economy driven by strong exports has propelled valuations in the stocks market and real estate to record highs.

Citic and Bear Stearns in a joint venture will explore investment banking and capital markets services in Asia including China through a company in Hong Kong.

Bear Stearns sponsored hedge funds have lost $1.6 billion and suffered losses in its securities trading business from the current credit market turmoil in mortgage markets and its stock has fallen more than 35% in the last six months.

Despite a recent surge in Chinese stock markets foreign investors are still not permitted to invest in local companies or run securities or brokerage business independently.

Bear Stearns ((BSC)) rose a fraction on the news to $116.48 but is still down from its peak of $172.61 reached in the January 2007 and trades at ten times earnings near $16 billion of market cap. Citic which now trades at nearly 52 times earnings closed at 105.93 yuan with a market cap of 312.6 billion yuan and earnings multiple of 53.

[R]10:00AM New York – U.S. stocks recovered from a sharply lower opening.[/R]

Dow Jones Industrial Average fell at the opening nearly 80 points to settle after 30 minutes of trading with a loss of 50 to 13,471.25. Nasdaq declined more than 25 points but managed to recover to a loss of 4.40 to 2,720.54. S&P 500 lost 13 points at the opening but retraced to a loss of 3.5 to 1,495.73

U.S. stocks at the opening fell sharply reflecting a global weakness. Asian markets fell more than 3% in the overnight trading led by a sharp decline in Indonesia, Singapore, Philippines, Hong Kong, and Australia.

European markets at mid-day trading declined. Markets across the region fell led by 2.6% drop in Norway followed by declines of 2% in Italy, and more than 1% declines in the UK, France, and Germany.

Merck ((MRK)) reported third quarter earnings of $1.53 billion from $940.6 million in the earlier year or 70 cents per share from 43 cents a year ago. Revenue in the quarter rose 12% and charges in the quarter declined. In the current quarter the company took a charge of $70 million related to Vioxx litigation compared to $598 million a year ago. The company also took a restructuring charge of $129 million and $325 million charge in relation to recent acquisition of drug research firm NovaCardia.

Schering Plough ((SCP)) reported third quarter sales increase of 9.2% to $2.81 billion from $2.57 billion on the strength in its cholesterol drug Zetia and Vytorin. Third quarter earnings increased to $750 million from $309 million or earnings per share increased to 45 cents from 19 cents a year ago.


[R]6:00AM, 7:00PM Tokyo – Asian markets corrected in the region on the weak closing in the U.S. Tokyo index fell 2.3%.[/R]

Japan stock index slumped the most in four weeks to 2.2% led by exporters as yen appreciated against the dollar on G-7 statement indicated global economic slowdown.

In Tokyo trading Nikkei 225 shed 2.24% or 375.90 to 16,438.47, while the broader Topix Index fell 1.8% to 1, 563.07.

Of the Nikkei 225 stocks 17 gained, 205 declined, and 3 were unchanged. Exporters fell as yen climbed to a 7-week high against the dollar. Canon fell 1.35%, Honda Motor Corporation dipped 2.09% and Sony Corporation retreated 1.88%.

In the first section on Tokyo Stock Exchange 8.9 billion shares worth 1.1 trillion yen were traded and on the second section 265 million shares valued at 5.1 billion yen changed hands.

The Bank of Japan governor Fukui Toshihiko said Saturday at a press conference after meeting with the IMF Committee the bank’s confidence that Japan economy is on track for sustained economic growth.

Separately, Japan’s Finance Minister Fukushiro Nukaga on Saturday urged the IMF to establish a new financial crisis resolution strategy to cope with any future crisis ignited by private capital flows. According to Nukaga, the Funds’ grip on global financial markets had weakened as private capital could now finance global imbalances without IMF funding that comes with policy recommendations. He added that the effective surveillance by the IMF was the first step to preventing a financial crisis.

Group of Seven Finance Ministers and Central Bank Governors said in a statement on Friday last week that the global economic growth will slow-down because of financial market turbulence, high oil prices, and the U.S housing market decline.

Permira Advisers LLP said today to Bloomberg News that the buyout fund would buy farm chemical maker Arysta Lifescience Corp for about 250 billion yen in Japan’s biggest leveraged buyout this year. 100 billion yen will be raised from the global buyout fund, while the remaining 150 billion yen will be leveraged with loans. The deal will be sealed in the first quarter of 2008 according to an earlier report in Nikkei News.

Of the index shares, Osaka Gas Company led advancers with a rise of 2.99%, followed by gains in Daiichi Sankyo of 2.81%, in Yahoo Japan Corp of 2.49%, in Takashimaya Company of 2.28% and in Marui Group of 1.37%.

Consumer credit lenders also advanced after brokerage J P Morgan lifted its recommendation for the industry on expectations that companies will be able to recover from refunds to customers as dictated by the government. Aiful surged 18% to 2,670 yen and Acom jumped 14% to 3,000 yen.

Nitto Boseki Company led the declining stocks in the Nikkei 225 Index with a sharp drop of 6.07%, followed by losses of 5.47% in Inpex Holdings, 5.47% in Itochu Corp, 5.36% in Sumitomo Metals and Mining Company and 5.26% in Kawasaki Heavy Industries.

Exporters tumbled as the yen climbed to a 7-week high against the dollar, strengthening to 113.98 from 114.03. Toyota Corporation 2.08%, Sony tumbled 1.88% and Canon plummeted 1.01%.

Nippon Steel Corp announced today that it would enter into a 16 billion yen joint venture with South Korea’s largest steel maker POSCO to produce direct reduced iron from dry dust in order to increase competitiveness in an industry that has been consolidating fast.

Nikkei News reported today Wal-Mart Stores Inc is planning to delist Seiyu supermarket from the Tokyo Stock Exchange and turn it into a wholly owned subsidiary. Wal-mart was reported to make a bid for the 50% of the company it does not own. Seiyu did not trade in Tokyo today.