Stocks Decline on Housing Worries

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

U.S. stocks fell ahead of rate decision by the Fed and weaker than expected outlook from Procter & Gamble. Three popular averages declined in the afternoon trading as oil and gold declined. Liz Claiborne earnings fell 65%. Merrill replaced its chief executive ater reporting subprime mortgage loss of $8.5 billion. European markets fell across the region. UBS reported quarterly loss of 830 million swiss francs. Dassaut Systems, Michelin, Statoil, and Norsk Hydro fell after reporting earning.

[R]5:00PM New York, 11:00PM Frankfurt, 8:00AM Sydney[/R]

U.S. stocks fell ahead of rate decision from the Fed and on weaker than expected earnings outlook from Procter & Gamble. Markets averages declined in the afternoon and closed at their worst level of the day. Tech stocks remained firm as Google raced to $700. Oil, gasoline, copper, gold, and silver fell as dollar closed to yet another record low against euro.

Procter & Gamble earnings rose 14%, Colgate Palmolive earnings jumped 22%, but earning at Liz Claiborne declined 65%.

Merrill confirmed that Stanley O’Neal, its Chairman and chief executive has ‘retired’ and replaced by Alberto Cribiore as interim chairman. O’Neal is expected to receive $161 million as his exit package.

European markets closed lower on weaker than expected earnings and worries related to stronger euro and rate cut in the U.S. Dassault Systems, tire makers Continental and Michelin, StatOil, and Norsk Hydro fell after reporting earnings. UBS reported a loss of Sfr830 million compared to a profit of 2.2 billion a year ago. The bank also said that it has exposure to $18.6 billion of mortgage securities and $20.2 billion in senior notes.

In Asian trading markets declined across the region. China bucked the trend and edged higher. Takeda pharmaceuticals fell more than 10% after delaying trials for cholesterol and memory loss drugs. Reserve Bank of India raised capital requirement ratio for banks by 0.5% to 7.5%. Local property developer in India, Unitech may raise $1.85 billion in a secondary offering.


[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed down 77.79 or 0.56% to a close of 13,792.47, S&P 500 edged lower 0.65% or 9.96 to 1,531.02, and Nasdaq Composite Index traded down 0.73 or 0.03% to a close of 2,816.71. In Toronto TSX Composite lost 115.27 or 0.80% to close at 14,312.08.

Of the 30 stocks in Dow Jones Industrial Average, 25 closed higher, 5 closed lower, and none were unchanged.

Microsoft led the decliners in the index with a loss of 1.6% followed by losses in JP Morgan of 1.4%, Caterpillar of 1.32%, and Hewlett Packard of 1.2%. Alcoa led the gainers with a rise of 2.82% followed by increases in Exxon Mobil of 2.2%, AIG of 2%, and McDonalds of 1.7%.

Of the stocks in S&P 500, 305 closed higher, 185 fell, and 10 were unchanged.

Twelve stocks fell more than 3% and twenty five stocks rose more than 3%.

Weyerhaeuser jumped 7.8% to lead the index followed by rise in Dillards of 6.4%, Juniper Networks of 5.6%, and RadioShack of 5%. Goldman Sachs, Deer & Company, and MEMC Electric Material jumped more than $5. Office Depot led the decliners with a plunge of 16% followed by losses in Yahoo of 7%, MBIA of 5.3%, and AMBAC of 5.2%. Tesoro, Unisys, Fannie Mae, and Teradata fell more than 4%.

In London FTSE 100 Index closed down 47.00 or 0.70% to 6,659.00, in Paris CAC 40 Index lost 32.26 or 0.55% to close at 5,803.93, and in Frankfurt DAX index lost 31.73 or 0.40% to close at 7,977.94. In Zurich trading SMI declined 68.06 or 0.76% to close at 8,939.21.

In Tokyo Nikkei 225 Index retreated 47.07 or 0.28% to close at 16,651.01, in Hong Kong Hang Seng index closed up 51.32 or 0.16% to 31,638.22, in Australia ASX 200 closed down 41.90 or 0.62% to close 6,750.20.

Sensex in India fell 194.16 0.97% to 19,783.51. In South Korea Kospi Index decreased 10.55 or 0.51% to close at 2,052.37 and Indonesia closed down 4.61 or 0.17% to 2,662.92. Philippines, lost 1.45 or 0.04% to 3,783.43, Singapore dropped 21.33 or 0.56% to 3,798.45, and Malaysia increased 1.17 or 0.08% to 1,412.79. Thailand fell 8.37 to 906.66 to 0.91%.

In Latin Markets Venezuela led the gainers with a rise of 2.73% followed by increases in Colombia of 0.11%, and in Argentina of 0.08%. Mexico led the decliners with a fall of 1.25% followed by a loss of 1.2% in Peru, in Brazil of 1.02%, and in Chile of 0.26%.

Bond Yields were unchanged on 10-year U.S. bonds to 4.38% and 30-year bonds rose to 4.67%.

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

Crude oil fell $3.15 to close at $90.38 per barrel for a front month contract, up 44.0% for the year, natural gas increased 5 cents to $8.02 per mBtu, and gasoline futures decreased 7.03 cents to close at 225.71 cents per gallon.

Gold edged lower $4.80 in New York trading to close at $787.80 per ounce, silver closed down 10 cents to $14.32 per ounce, and copper for front month delivery lost 3.95 cents to $348.15 per pound.

Dollar edged record low against euro to $1.4436 from $1.4424 and higher to 114.663 yen from 114.65 yen.


[R]10:00AM New York, 7:30PM Mumbai - Sensex declined as Reserve Bank hikes cash reserve ratios.[/R]

Sensex closed weaker at 1%, pulled back by the banking shares after the Reserve bank of India announced it had raised cash reserves ratios by 50 basis points to 7.5% with effect November 10th. IT shares and auto stocks also traded lower. The central bank increased the reserve requirements to drain the excess liquidity from the market. The Reserve Bank left the interest rates unchanged.

Banks fell on the hike in cash reserves. ICICI Bank fell 0.7% to 1,240.25 rupees, HDFC Bank lost 1.3% to 1,618.3 rupees and State Bank of India shed 2.6% to 2,062.2 rupees.

The S&P CNX Nifty ended fell 0.6% or 37.15 to 5,868.75. The Sensex index lost 1% or 194.16 to 19,783.51. Turnover on the BSE was recorded at 10,981 crore rupees while revenue on the National Stock Exchange was recorded at 24,636 crore rupees.

Of the Sensex 30 shares, 8 gained while the rests slumped. Of the BSE stocks 1,051 advanced 1,657 fell and 345 remained unchanged.

The Reserve Bank of India has increased the cash reserve ratio by 50 basis points to 7.50% as of November 10th. RBI left the annual growth forecast at 8.5% for the current fiscal year.

RBI said inflation will be contained close to 5% during the rest of the year 2007 and fiscal 2008 and said that it is targeting inflation in the medium term at 3%.

Oil companies will be permitted to hedge foreign exchange exposures by using overseas over-the-counter or exchange traded derivatives up to a maximum of one year forward.

Importers and exporters with foreign currency exposures will be allowed to write covered call and put options in both foreign currencies or rupees and take positions across different foreign currencies.

RBI said merchandise exports rose 18.2% in the dollars during the first half of fiscal 2008 ending in September compared to 27.1% in the same period a year ago. During the latest period growth in import was at 31% compared to 20.6% in the year ago.

Non-oil imports rose by 44.3% and oil imports increased 6%.

India''s foreign exchange reserve increased by $62 billion during the first half of the current fiscal year to $261.1 billion as of October 19th. The rupee appreciated by 10.3% against the US dollar and by 2.4% against the euro and by 5.4% against the pound sterling and 7.1% against the Japanese yen during the current financial year at the end of the last week.

Of the index share, Reliance Energy led the advancers. Reliance gained 9% to 1,789.20 rupees. The company announced its intentions to transfer its road, rail, real estate and other infrastructure projects to a separate unit.

Bharti Airtel gained 0.5% 999.75 rupees and Dr.Reddy''s Laboratories rose 0.6% to 615.45 rupees, Wipro edged 0.01% higher to 509.7 rupees, Bharat Heavy Electricals rose 1.6% to 2,654.55 rupees, Larsen & Toubro advanced 1.06% to 4,323 rupees.

Reliance Natural jumped 4.8% to 115.15 rupees and Reliance Petroleum gained 5.3% to 233.8 rupees.

Of the Sensex index stocks, Mahindra & Mahindra slid 7% to 740.6 rupees, Maruti Suzuki India shed 8.5% to 1,085 rupees, Hero Honda Motors lost 2.6% to 725 rupees, Tata Motors retreated 4.9% to 767.3 rupees and Bajaj Auto slumped 0.6% to 2,487.05 rupees.

Maruti Suzuki has announced it will invest $1.8 billion on research and development, marketing and capacity expansion in the next five years.

Infosys was down 0.5% to 1,851.3 rupees, Tata Consultancy Services lost 1.9% to 1,048.5 rupees, Satyam Computer Services shed 0.6% to 479.45 rupees, and Reliance Industries declined 2% to 2,770.50 rupees.


[R]9:35AM New York – U.S. markets open lower.[/R]

Dow Jones Industrial Average fell 38 at the opening to 13,835, Nasdaq declined 6 to 2,811, and S&P 500 lost 4.50 to 1,536.

Investors are cautious as the Fed starts two-day meeting and announce its rate decision. Economists are forecasting that the Fed will cut by either 25 or 50 basis points.

Procter & Gamble ((PG)) fiscal first quarter earnings of 92 cents compared to 79 cents a year ago on revenue increase of 7.5% to $20.2 billion. Earnings in the quarter increased to $3.08 billion from $2.7 billion a year ago. The company revised its earnings outlook for the fiscal 2008 by 2 cents to $3.46 per share on total sales increase between 6% and 8%.

Colgate-Palmolive ((CL)) reported third quarter sales increase of 12% to $3.53 billion on 5.5% growth in volume. Earnings in the quarter increased 22% to $420 million or 77 cents per share compared to $344.1 million or 63 cents per share.

Liz Claiborne Inc. ((LIZ)) reported third quarter sales decline of 3.9% to $1.26 billion and earnings of $33.1 million or 33 cents per share compared to $95.2 million or 94 cents per share. Earnings declined 65%. The company lowered its earnings outlook for the year 2007 between $1.70 and $1.80 a share, lower than its earlier projection by 20 cents.

European markers at mid-day fell ahead of rate decision in the U.S. Norway led the decliners in the region with a fall of 1.1% followed by losses in Switzerland and UK of 0.6%, France and the Netherlands of 0.56%, and Germany of 0.45%.

Weak earnings from Dassault Systems and Michelin in Paris, Norsk Hydro in Oslo, and Continental in Germany hurt the trading sentiment.

Asian markets fell across the region ahead of rate decision from Australia, India, Japan, and the U.S.

Pakistan led the decliners in the region with a loss of 2.5% followed by losses in India of 0.97%, in Thailand of 0.91%, and in Singapore, Korea, Australia, and Taiwan of 0.5%. Shanghai bucked the trend and surged 2.6% on a sharp rise in airlines and banks.

India fell after the Reserve Bank of India said that it will ask banks to increase cash reserve ratio to trim the liquidity.

Kookmin Bank fell 4% after it reported a sharply higher decline in net interest margin.

[R]6:00AM New York, 7:00PM Tokyo – Construction stocks rally. Takeda plunges on drug trial delays. Broader index Topix recovers from a loss of 1%.[/R]

In Tokyo trading Nikkei 225 shed 0.28% or 47.07 to 16,651.01 but the broader Topix Index rose 0.72 to 1,607.21 after dropping nearly 15 points.

In the first section of the Tokyo Stock Exchange 230 billion shares worth 3.1 trillion yen were traded and 393 million shares worth 8.4 billion yen changed hands.

Of the Nikkei 225 stocks 110 gained, 104 declined, and 11 were unchanged. Daiwa House Industries led advancing realty stocks, rising 13.41%, followed by gains in Toto Industries of 12.82%, in Sekisui House of 11.04%, in Sumitomo Osaka of 9.62% and Obayashi Corp of 8.41%.

The Daily Yomiuri reported that Land Infrastructure and Transport Minister Tetsuzo Fuyushiba may relax the new Building Standards Law implemented four months ago. Housing starts in August fell 43% after the introduction of the new law. The government is likely to allow builders to modify blueprints that have already been submitted for checks as long as it meets safety standards.

The Ministry of Internal Affairs and Communication’s Statistics Bureau announced today in the Family Income and Expenditure Survey the average household monthly consumption expenditure in September increased 3% to 281,448 yen or 3.2% in real terms over a year ago. Average monthly household income in the month was 431,793 yen, up 0.6% in nominal terms and 0.8% in real terms over the previous year, while consumption expenditure firmed 5.3% in nominal terms and 5.5% in real terms from a year earlier to 311,311 yen.

The Statistics Bureau also indicated food, housing increased 1.7% and 5.4% respectively, while fuel, light and water charges fell 0.1%. Incomes for worker’s household firmed 0.8% in real terms in September disposable income jumped 0.4% to 362,829 yen.

According to the Laborforce Survey, the number of employed persons in September declined 0.1% or by 90,000 to 64.22 million, while the number of unemployed in the September period fell 3.9% or by 110,000 to 2.69 million. The number of persons not in labor force stood at 43.50 million. The labor participation rate slipped 0.3% to 60.6% and the employment rate declined 0.3% to 58.1%.

The yen also continued to firm against the dollar, rising 114.81 from 114.80 and rose 165.25 from 165.27 against the euro.

Takeda Pharmaceutical Company led the decliners in the Nikkei 225 index with a loss of 12.41% followed by losses in Marui Group of 7.93%, in Toagosei of 7%, in Terumo Corp of 6%, and in Shionogi &Company of 4.5%.

The U.S. Food and Drug Administration requested more clinical data on the cholesterol drug TAK-475. Takeda also advised doctors in the study in U.S, Europe and Japan to suspend tests using 100-milligram doses on concerns it might increase the enzyme transaminase in some patients and cause liver damage according to local newspapers in Osaka, where the company is headquartered.

Extra tests might further delay the approval of the drug and deny the company the opportunity to enter the $28 billion market. Brokerages Shimura and Mitsubishi UFJ Securities also cut the recommendation of the stock.

Takeda is under pressure to find the next mega drug to replace ACTOS, diabetes treatment drug. ACTOS, since its introduction in August 1999, has been prescribed to 70 million times to more than 8 million patients with type 2 diabetes. ACTOS patent is expiring in four years and is expected to face a still competition from generic drug makers.

Eisai Company Limited slumped 3.12% after it reported that it will delay its application for breast cancer drug with the U.S. FDA and a set-back in tests on successor drug to Aricept for the treatment of Alzheimer and experimental drug for the treatment of Parkinson disease.