U.S. Down 2.5%, Cisco Fell, Gold Shines

123jump.com Staff
07 Nov, 2007
New York City

U.S. stocks fell sharply across various market caps and sectors as market was grippped by sub-prime worries. Dow Jones, S&P 500, and Nasdaq dropped more than 2.5%. New York Attorney General started an investigation involving sale of subprime loans to Fannie Mae and Freddie Mac from Washington Mutual. General Motors reported worst quarterly loss in its history and Toyota reported the second best quarter ever. Gold reached to a new peak and oil fell after the weekly inventory report.

[R]4:00PM New York, 10:00PM Frankfurt, 8:00AM Sydney[/R]

U.S. averages fell sharply on the new worries related to sub-prime mortgage loans and health of banking and financial brokerage institutions. After months of denying the banks and brokerages have reported large losses topped by Citigroup with a loss of $11 billion. Analysts today said that total losses in the industry may rise between $250 billion and $500 billion.

Fannie Mae and Freddie Mac fell after the New York Attorney General subpoenaed two lending institutions and said that Washington Mutual residential loans should not be refinanced by Fannie and Freddie. Stocks of all three lenders fell to multi-year lows.

Record oil and gold prices and record low in dollar against euro and other European and Asian currencies hurt the trading sentiment. Gold reached another high.

European markets closed lower led by UK with a loss of 1.3%. Banks in the region led the decline.

Cisco ((CSCO)) reported first quarter net sales increase of 17% to $9.6 billion and net income rise of 37% to $2.2 billion, and earnings per share of 35 cents compared to 26 cents a year ago. In the regular market hours at close Cisco dropped $1.33 to $32.75 and in the after hours trading stock declined to $30.85.

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed sharply lower 360.92 or 2.5% to a close of 13,300.02, S&P 500 dropped 2.7% or 44.63 to 1,475.64, and Nasdaq Composite Index declined 76.42 or 2.6% to a close of 2,748.76. In Toronto TSX Composite lost 251.14 or 1.75% to close at 14,119.42.

Of the 30 stocks in Dow Jones Industrial Average, 1 closed higher, 29 closed lower, and none were unchanged.

AIG led the decliners in the index ahead of earnings with a loss of 6.3% followed by declines in General Motors of 5.01%, in American Express of 4.3%, and in Citigroup of 3.2%. Boeing was the only gainers in the index with a rise of 0.17%.

Of the stocks in S&P 500, 49 closed higher, 446 fell, and 5 were unchanged. Ninety five stocks fell more than 3% and only two stocks rose more than 3%.

Washington Mutual led the decliners in the index with a sharp fall of 16% followed by declines in Capital One of 13%, in Expeditors International of 10.4%, in Fannie Mae of 9.8%, Sovereign Bancorp of 7.8%, Countrywide Financial of 7.79%, Yahoo of 7.2%, and Freddie Mac of 6.7%. Ambac, CIT, and MGIC fell more than 6.3%. Cognizant led the gainers in the index with a rise of 4.4%, followed by increases in Polo Ralph Lauren of 3.2%, in Western Union of 2.9%, and in Expedia of 2.8%.

In London FTSE 100 Index closed down 89.80 or 1.31% to 6,385.10, in Paris CAC 40 Index decreased 26.20 or 0.46% to close at 5,683.22, and in Frankfurt DAX index lost 27.57 or 0.35% to close at 7,799.62. In Zurich trading SMI dropped 67.12 or 0.77% to close at 8,703.17.

In Tokyo Nikkei 225 Index retreated 152.95 or 0.94% to close at 16,096.68, in Hong Kong Hang Seng index closed up 270.80 or 0.92% to 29,708.93, in Australia ASX 200 closed up 64.40 or 0.97% to close 6,692.00.

Sensex in India fell 110.84 or 0.57% to 19,289.83. In South Korea Kospi Index decreased 11.05 or 0.54% to close at 2,043.19, Thailand closed down 6.04 or 0.68% to 880.27, and Indonesia closed up 32.08 or 1.20% to 2,713.98. Philippines gained 14.63 or 0.39% to 3,788.26, Singapore declined 10.09 or 0.27% to 3,673.01, and Malaysia increased 24.74 or 1.78% to 1,413.85.

In Latin Markets Peru led the decliners with a fall of 3.28% followed by decreases in Mexico of 2.34%, and in Chile and Brazil of 1.54%. Venezuela led the gainers with a rise of 0.7%, followed by increases in Colombia of 0.6%, and in Argentina of 0.04%.

Bond Yields decreased on 10-year U.S. bonds to 4.33% and 30-year bonds gained to 4.66%.

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

Crude oil fell $0.33 to close at $96.37 per barrel for a front month contract, up 46.0% for the year, natural gas decreased 24 cents to $7.62 per mBtu, and gasoline futures increased 0.56 cents to close at 244.06 cents per gallon.

Gold edged higher $10.10 in New York trading to close at $833.50 per ounce, silver closed down 5 cents to $15.33 per ounce, and copper for front month delivery lost 8.25 cents to $325.90 per pound and in London trading closed up $74 to $7,484.00

Dollar edged lower against euro to $1.4554 and higher to 114.49 yen.


[R]1:00PM New York---International sales push Blue Nile third quarter profit up 26.5%, as company raises profit guidance.[/R]

Blue Nile Inc, Internet based jewelry retailer, reported third quarter net sales increase of 26.5% to $67.4 million compared with $53.2 million reported in the year ago quarter.

The growth was led by a 105% increase in international sales with U.K and Canada sales increased to $4.5 million.

In the quarter, net earnings rose 66.7% to $3 million from $1.8 million from a year earlier. This translated in per share earnings of 18 cents up 63.6% from 11 cents posted in the same period in 2006.

In early Wednesday trade, Blue Nile stocks surged 8.22% or $6.72 to $81.40 from Tuesday closing price of $74.68.

Blue Nile said operating income gained 67.3% to $3.6 million from $2.2 million a year earlier. Gross profit increased 28.4% to $13.4 million from $10.4 million previously. As a percentage of sales, gross profit margins increased to 19.8% from 19.5%.

Net cash generated in the quarter rose to $33.2 million compared to $30.3 million last year on capital expenditures of $1.5 million, up 200% from $0.5 million in the prior year.

Expenses rose 18% to $9.7 million from $8.2 million and as a percentage of sales fell to 14.5% from 15.5% in 2006. Included in the overhead figure is a stock based compensation expense of $1.4 million from $1.2 million.

In the nine months to September 30, Blue Nile net sales rose 28.9% to $207.35 million from $160.85 million in the year ago quarter.

Net earnings rose 35.6% to $9.91 million or 59 cents per share from $7.31 million or 42 cents per share last year.

Blue Nile has raised fourth quarter net sales forecasts to between $109 million and $115 million and between $316 million and $322 million at full-year. Analysts at Thomson Financial have guided fourth quarter sales at $82.69 million and $321.7 million for fiscal 2007.

Blue Nile estimated fourth quarter earnings in the range of 40 cents per share to 45 cents per share. For the year, earnings per share are estimated between $1 and $1.05.

Capital expenditures are expected to be approximately $5 million for the year. Capital expenditures for 2007 include investments related to the expansion of the company''s U.S. fulfillment centre and its new international facility in Ireland.

Blue Nile, Inc. sells diamonds and fine jewelry online only. In the last 52-weeks Blue Nile has traded between $33.05 and $106.16 and trades at a earnings multiple of 93.50 on trailing earnings.

[R]11:00AM New York – U.S. stocks declined in the morning hours on falling dollar, rising metals prices, and less than expected decline in weekly oil inventory.[/R]

U.S. market averages fell in the first hour of trading on rising oil and metals prices, declining dollar, and a huge loss from General Motors.

Dow Jones Industrial Average declined 131 to 13,527, Nasdaq lost 29 to 2,796, and S&P 500 fell 17 to 1,503.29.

Chinese government official indicated that China may diversify its large and growing foreign currency reserve away from a ‘weak’ currency like dollar. China has $1.43 trillion in foreign reserves. Separately Japan reported that at the end of October its foreign currency reserve stood near $890 billion.

The comments from the Chinese official sent dollar to a record low against euro and pound and multi-year low against Australian dollar, Indian rupee, Thai baht, and Korean Won.

Gold surged to a high of $838 an ounce on record weakness in dollar.

General Motors reported its largest quarterly loss ever on $38.5 billion in non cash charge related to write-downs and tax credits. GM reported a net loss of $1.60 billion or $2.80 per share compared to a year ago loss of $497 million or 88 cents a share.

Separately Toyota reported profit rise of 11% in the second quarter ending in September of 451 billion yen on 12% rise in sales.

European markets edged lower on rising oil and metals prices in the early morning trading. U.K. and the Netherlands led the decliners with a fall of 0.8% followed by losses in France of 0.6%, in Spain of 0.5%, and Germany and Italy of 0.4%.

Oil and resources stocks gained but airlines and transportation stocks fell. Rio Tinto led the gainers with a rise of 3% followed by fractional increases in BHP Billiton, Mittal Arcelor, and Vedanta Resources. British Air fell 3% and Ryanair declined 3.7%.

Asian markets closed mixed on domestic news, weak dollar, and rising metals and oil prices. Shanghai led the gainers in the region with a rise of 1.7% followed increases in Malaysia f 1.6%, in Indonesia of 1.2%, in Australia of 1.1%, and in Hong Kong of 0.9%.

Australia hiked interest rates by o.25% to 6.75%, 11-year peak, and second increase this year. Property stocks rose in Hong Kong and Alibaba.com fell 18% on the second day of trading after nearly tripling on its first day of listing. Banks in Shanghai gained.

[R]10:00AM New York, 7:30PM Mumbai - Sensex stocks retreated as rupee climbed to a record high and IT stocks declined.[/R]

Sensex in Mumbai fell on heavy losses in IT shares. A report by Moody, a credit rating agency indicated that the appreciation of the rupees since the beginning of the fiscal year has hurt exports but helped to contain the import bill.

Software companies are the hardest hit as they derive over 50% of their revenue from exports to the U.S. In the recent weeks, selling in IT shares hit the market as the rupees continued to strengthen unabated.

The rupee rose 10% against major currencies on strong inflows on foreign investment on the stock markets on sharp economic growth that attracted foreign investors including the short term speculators on the Indian bourses. The key index, Sensex touched record highs as a result. On Wednesday, rupee rose to 39.16 against one dollar, record high in sixteen years.

Infosys Technologies lost 5.8% to 1743.85 rupees, Wipro shed 2% to 477.35 rupees, Satyam Computer slid 4% to 434.85 rupees, and TCS fell 0.6% to 998.25 rupees.

The 30-share BSE Sensex declined 0.6% or 110.84 at 19,289.83.and the S&P CNX Nifty lost 0.07% or 4.15 at 5,782.35.

Turnover on the Bombay Stock Exchange stood at 6,837 crore rupees and at 18,280 crore rupees on the National Stock Exchange.

Of the 30 stock Sensex index share, 20 advanced and ten traded lower. Of the BSE stock 1,028 traded higher, 1,674 retreated and 77 stocks remained unchanged.

Eleventh Plan is likely to relax foreign investment criteria in banking, insurance, and financial services industries. Discussion on the draft plan will begin on Thursday. Foreign investors stake is limited to 26% in insurance companies, 51% in FM radio broadcasting, 49% in air transport, asset reconstruction firm and cable network, 26% in print and electronic media and 74% in atomic minerals, private sector banking, telecom and establishment and operation of satellites.

Reliance Industries gained 4% to 2,762.65 rupees on news that it has discovered gas deposits at one of its block in the Krishna Godavari offshore basin. Commercial feasibility plans have not been completed.

Amtek Auto rose 4.2% to 469.85 rupees, Mahindra & Mahindra gained 2.5% to 759.8 rupees, Maruti Suzuki India surged 2.4% to 996.8 rupees while Hero Honda Motors grew 1.8% to 680.1 rupees.

Amtek is set to take over a UK based automotive machineries manufacturer Triplex Ketlon Group for 600 crore rupees.

Reliance Communications slumped 2.5% to 726.75 rupees and Bharti Airtel shed 2% to 900.25 rupees on news that the Department of Telecom will set up of a committee to review the spectrum allocation policy.

HDFC Bank fell 5.2% to 1,617.95 rupees, ICICI Bank retreated 3% to 1,203.8 rupees, and Canara Bank traded weaker at 3.4% to 271.85 rupees. State Bank of India rose 2.66% to 2267.45 rupees, Bharat Heavy Electrical rose 3.6% to 2,821 rupees and Larsen & Toubro fell 0.3% to 4,114.5 rupees.

The company has priced its 400 million-dollar Global Depository Shares offering at $100 per share. Each GDS represents one equity share of the company of nominal value of 2 rupees each. The GDS are proposed to be listed on the Luxembourg Stock Exchange.

ONGC fell 0.9% to 1,289.25 rupees.


[R]6:00AM New York, 7:00PM Tokyo - Tokyo closes lower at 0.94% on rising yen. Japan’s foreign exchange reserves climb to record $804.8 billion in October.[/R]

In Tokyo trading Nikkei 225 declined from a 0.5% surge induced by bargain hunting in the morning session to close lower 0.94% or 152.95 to 16,096.68, while the broad Topix Index shed 17.90 to 1,556.69.

In the first section of the Tokyo Stock Exchange 8.5 billion shares valued at 1.0 trillion were traded and in the second section 476 million shares valued at 6.2 billion yen changed hands.

Of the Nikkei 225 stocks, 53 rose, 167 fell, and 5 were unchanged. Taiyo Yuden led gainers, rising 4.38%, followed rises in Nitto Boseki of 3.72%, in OJI Paper Company Limited of 3.71%, in Mitsui Minerals & Smelting of 3.71%, and Sumitomo Metal Mining of 2.57%.

Commodity stocks rose on soaring prices of metals. Copper prices rose 1% and gold jumped to a 27-year high of $827 per ounce.

Oil prices rose 1.3% to a record $98 per barrel. However, energy stocks fell. Inpex Holdings declined 2.40%, Nippon Oil Corp slid 3.82%, and Showa Shell Sekiyu K.K fell 1.35%.

Shimizu Corporation led decliners in the Nikkei 225 index plunging 7.38%, followed by losses of 7.05% in J Front Retailing, 6.81% in Ebara Corporation, 6.38% in Credit Saison Company, and 6.16% in Obayashi Corporation.

Exporters fell after the yen firmed to 113.76 from 113.78 against the dollar. Canon plummeted 1.55%, Matsushita Electric Industrial Company plunged 4.46% and Sony Corporation dipped 0.72%.

Japan’s Ministry of Finance announced today the country’s foreign exchange reserve assets climbed $ 8.883 billion to a record $954.484 billion as of October 31.

According to the statistics from the ministry, securities amounted to $804.839 billion, deposits stood at $125.420 billion, the International Monetary Fund was at $1.448 billion, SDR’s added up to $2.991 billion and gold accounted for $19.423 billion yen.

Toyota Motor Corporation second quarter net income increased 11% to 450.9 billion yen beating the estimates of 445 billion yen.

The automakers profits were spurred by increased sales in Russia and Asian countries on the popularity of Camry. Sales in the U.S. however declined 5% to 671,000 vehicles and in Europe increased 7.5% to 302,000 vehicles.

Sales in the quarter rose to 6.49 trillion-yen from 5.83 trillion yen. Net income is expected to rise to 1.7 trillion yen in the fiscal year 2008 ending in March from 1.65 trillion in the fiscal year 2007. Annual sales in the fiscal 2008 are estimated at 25.4 trillion yen.
Toyota will open an assembly plant in Russia to meet rising demand driven by annual wage gains of 6% in the last two years.

SoftBank Corp also reported today that second quarter net income grew 64% to 21.3 billion yen after it attracted more new customers then NTT DoCoMo and KDDI Corp combined. UBS and Credit Suisse raised the stock rating. Softbank closed 0.60% up.

Yamada Denki reported first half net income increase of 31% and raised its full year forecast by 7.3% on sales of flat panel televisions and computers.

Mitsubishi Heavy Industries Limited received a one billion yen order from Electrobas Termonuclear S.A., electric utility of Brazil, related to nuclear reactor. Mitsubishi Heavy fell 2.83%.

[R]4:00AM New York, 8:00PM Sydney - The Australia index 1% traded in the positive due to gains in mining shares.[/R]

ASX 200 index gained 1% or 64.40 to close at 6,692.40. BHP Billiton added 1.6%, Newcrest Mining Ltd increased 6.3%, and Woodside Oil gained 3.4%.

Preliminary stock turnover reached 1.87 billion, worth a total value of A$6.66 billion, with 742 stocks up, 561 down, and 366 unchanged.

Comdek topped the most active stock list with 99.54 million shares changing hands worth A$6.7 million.

The Reserve Bank of Australia today raised interest rates by 25-basis points to 6.75%, marking the sixth increase since the 2004 election. The interest rates are at 11-year high.

Prime Minister Howard apologized to the people struggling to pay off their mortgages, saying the decision will have negative consequences for a lot of borrowers. He said he sympathized with them.

The statistics bureau reported that home prices surged 10.6% in the third quarter from a year ago.

Australian conglomerate Wesfarmers received approval for its A$19.7 billion ($18.5 billion) takeover of supermarket giant Coles, in the largest buyout in Australia.

Shareholders trust that the new owner can reverse a two-year decline in sales growth at the supermarket giant. Of the total shareholders 99% voted in favor of the merger, above the required 75% for the transaction. The approval finally puts an end to 15 months of tussling for control of Coles, which twice rejected cash offers from buyout firms led by Kohlberg Kravis Roberts & Co.

Wesfarmers plans to spend A$5 billion on Coles 3,000 supermarkets, Kmart discount department stores and Officeworks stationery outlets to increase sales. Coles added 1.4% and Wesfarmers edged higher 1%.

Telstra shareholders have rejected the dominant Telco''s new executive pay structure, with early figures showing the majority of votes were cast against the company''s remuneration report. In a non-binding voting of the 3.63 billion share holders voting, only 1.83 billion were in favor of the pay rises at Telstra''s annual general meeting today.

The Australian dollar crossed through the $0.93 today to reach 23-year high on hike in interest rate. The Australian dollar was trading at $0.9374 up almost one and a half cents from yesterday''s close of $0.9230. During the day, it traded between a low of $0.9275 and reached a 23-year high of $0.9386.

Of the ASX 200 index shares, Bolnisi Gold led the gainers with a rise of 12.6% followed by increases in Independence group by 7.7%, in Pan Australia Resource Limited by 7.1%, in Mincor Resources by 6.5%, and in Newcrest Mining by 6.3%.

Of the ASX 200 index stocks, CSR Limited led the decliners with a fall of 2.4% followed by Macquarie DDR TR on 2.5%, Ansell Limited by 3.7%, in Downer EDI Limited by 4.2%, and 11.1% in Emeco Holdings L.

In the resource stocks Rio Tinto put on 3.4%. In the energy sector Santos and Oil Search were up at 2.2% and 4.2% respectively after oil prices rose to a record high of more than $97 a barrel overnight.

In the gold sector Lihir Gold added 5% after a near three-decade peak in gold price at $834.80 an ounce.

The banks were mixed, with National Australia Bank gaining 1%, Commonwealth Bank adding 0.6%, Westpac dipping 2% and Australia and New Zealand losing 0.3%.

CSR dipped 2.4% after the company reported a fall in first half profit and forecast an expected dip in annual earnings. The company said its sugar operations continue to be hampered by lower commodity prices and a high Australian dollar.

The retailers were stronger after Woolworths added 2.5%, David Jones increased 1.5% and Harvey Norman gained 2.5%.