Techs, Retails Face Heavy Selling in NY

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

At the worst level of the day, Dow fell more than 1% and Nasdaq lost nearly 2%. Cisco comments hurt the sentiment in the tech sector. Techs viewed as immune from the sub-prime meltdown faced heavy selling after Cisco warned that a dramatic slow-down in orders from automotive and financial sector may limit future sales gains. Rio Tinto rejected an overture from BHP Billiton to form the largest mining company in the world.

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

U.S. stocks fell sharply for the third day in a row after weak same-store retail sales, rising oil and gold prices, and the Fed chairman Bernanke comments on inflation risks and slowing economy. The prospect of slowing economy and rising inflation put investors on defensive.

The Fed chairman added that the Federal Open Market Committee anticipated that the economy could slow considerably if the ongoing correction in the housing market spills into the broader economy and it may take another two to three quarters to recover. The statement from the chairman immediately prompted speculation among investors that rates may be lowered again in December.

The Bank of England and the European Central Bank left interest rates unchanged. The BoE left rates at 5.75% and ECB left rates at 4%. The ECB President Jean Claude Trichet also added that rising euro against dollar and inflation are a concern to the bank. Despite his tough talk euro climbed against dollar to another record level.

Rio Tinto rejected takeover overtures from BHP Billiton and may force BHP to pursue hostile takeover. Rio Tinto surged 22% after the news broke. When BHP and Rio Tinto are merged, the combined company may be worth more than $375 billion and may control one third of iron ore production with annual sales over $55 billion.

Same store sales at many of the U.S. retailing companies fell in October. Apparel retailers were the hardest hit for the third month in a row. J C Penney, Macy’s, Kohl’s, and Nordstrom reported declining same store sales. Wal-Mart reported 0.4% rise in October same-store sales but sales at Target rose 4.1% and at Costco increased 9%.

Cisco fell 9% after the comments from its chairman John Chambers failed to satisfy investors looking for faster growth. Chambers said that sales will rise 16% in the current quarter but warned that there is softness in sales in automotive and financial sectors. 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.

Cisco comments hurt stocks in tech sector and dragged with it Google, Dell, Motorola, Intel, Apple, Research in Motion, and Juniper Technology.

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average fell for the third day in a row by 33.73 or 0.25% to a close of 13,266.29, S&P 500 dropped 0.06% or 0.75 to 1,474.77, and Nasdaq Composite Index declined 52.76 or 1.92% to a close of 2,696.00. In Toronto TSX Composite gained 9.90 or 0.07% to close at 14,128.08.

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

IBM led the decliners with a loss of 5% followed by declines in Intel of 4.5%, in AIG of 4.4%, and Hewlett Packard of 4.3%, and Citigroup of 3.44%. Coca Cola led the gainers in the index with a rise of 2% followed by gains in Exxon Mobil of 1.99%, in Procter & Gamble of 1.76%, and in McDonalds of 1.7%.

Of the stocks in S&P 500, 224 closed higher, 274 fell, and 2 were unchanged. Sixty eight stocks fell more than 3% and only fourteen stocks rose more than 3%.

King Pharmaceuticals led the gainers with a rise of 13% followed by increases in Windstream Corp of 7.5%, in Rockwell Automation of 7.2%, in the Gap of 5.5%, in Biogen IDEC of 5.3%, in Capital One Financial of 4.4%, and in MEMC Electric Material of 4.35%.

Retailers and tech led the losers in the index. Limited Brands led the decliners with a loss of 9.6% followed by losses in Cisco of 9.5%, in Oracle of 8.7%, in EMC of 8.6%, in MBIA of 7.6%, in Network Appliance, Juniper, an Jabil Circuit of more than 6%.

In London FTSE 100 Index closed down 3.20 or 0.05% to 6,381.90, in Paris CAC 40 Index decreased 51.59 or 0.91% to close at 5,631.63, and in Frankfurt DAX index gained 19.85 or 0.25% to close at 7,819.47. In Zurich trading SMI dropped 97.94 or 1.13% to close at 8,605.23.

In Tokyo Nikkei 225 Index retreated 325.11 or 2.02% to close at 15,771.57, in Hong Kong Hang Seng index closed down 948.71 or 3.19% to 28,760.22, in Australia ASX 200 closed down 170.80 or 2.55% to close 6,521.60.

Sensex in India fell 230.90 or 1.20% to 19,058.93. In South Korea Kospi Index decreased 63.63 or 3.11% to close at 1,979.56, Thailand closed down 6.63 or 0.75% to 873.64, and Indonesia closed down 35.75 or 1.32% to 2,678.22. Philippines fell 96.16 or 2.54% to 3,692.10. Markets in Singapore and Malaysia were closed.

In Latin Markets Peru led the decliners with a fall of 2.57% followed by decreases in Mexico of 1.9%, in Argentina of 1.48%, in Colombia of 1%, in Venezuela of 0.8%, in Chile of 0.6%, and in Brazil of 0.5%.

Bond Yields decreased on 10-year U.S. bonds to 4.26% and 30-year bonds gained to 4.65%.

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

Crude oil fell $1.22 to close at $95.15 per barrel for a front month contract, up 44.75% for the year, natural gas increased 6 cents to $7.69 per mBtu, and gasoline futures decreased 1.10 cents to close at 242.96 cents per gallon.

Gold edged higher $4.00 in New York trading to close at $837.50 per ounce, silver closed up 19 cents to $15.51 per ounce, and copper for front month delivery lost 5.50 cents to $320.40 per pound and in London trading closed down $173 to $7,311.00

Dollar edged lower against euro to $1.4662 and higher to 112.255 yen.


[R]11:00AM New York, 9:30PM Mumbai - Sensex in India fell for the fourth day in a row.[/R]

The Sensex dropped 1.2% or 230.9 to close at 19,058.93, a fourth decline this week. The Sensex in the late afternoon fell below 19,000 level. In the last five sessions the index has lost nearly 5%.

The annual wholesale price index of inflation declined to a new low of 2.97% for the most recent 52 weeks compared to 3.02% at the end of previous week. The Reserve Bank of India said annual inflation stood at 5.46% a year ago but has gradually dropped from two-year highs of nearly 7%.

Heavy selling pulled the market down as it entered a fourth day in a row with weak trading. Banking, software and telecommunication stocks traded lower. Hindalco Industries and Reliance Industries gains helped market to recover from an earlier steep loss.

Of the stocks traded on the BSE 1,074 shares advanced, 1,646 declined, and 66 remained unchanged. Among the 30 stocks in the Sensex index, 22 advanced and 8 declined.

The turnover on BSE was 6,734 crore rupees lifted by leading turnover in Reliance Natural Resources of 539.76 crore rupees. Reliance Petroleum, Reliance Energy, Reliance Capital and Reliance Industries also led turnover list. The turnover on NSE was 16,852 crore rupees.

Of the index shares, Bharti Airtel lost 1.8% to 884.35 rupees and Reliance Communication shed 3% to 704.9 rupees.

State Bank of India slid 3.7% to 2,184.55 rupees, HDFC Bank retreated 3.6% to 1,559.4 rupees, ICICI Bank shed 2.9% to 1,168.65 rupees while Axis bank dropped 1.8% to 920.1 rupees.

Infosys Technologies fell 1.6% to a 52-week low of 1,715.75 rupees, Wipro shed 1.6% to 469.7 rupees, TCS slid 0.6% to 992.35 rupees and Satyam Computers lost 0.07% to 434.55 rupees.

Oil & Natural Gas Corporation shed 4.07% to 1,236.8 rupees. Reliance Industries retreated 0.7% to 2,742.75 rupees. RIL has reportedly bagged two oil blocks in Iraq''s troubled Kurdish region.

Indian Oil Corporation advanced 2.03% to 513.65 rupees on news reports that the company is planning to increase crude oil imports from Nigeria by 50% to 3 million tons a year.

Sterlite Industries fell 5.1% to 1,002.8 rupees, Steel Authority of India dropped 3.05% to 243.45 rupees and Sesa Goa declined 2.7% to 3,553.95 rupees.

Hindalco surged gained 8% to 203.65 rupees. National Aluminium Company gained 13.3% to 370.5 rupees and Larsen & Toubro gained 0.4% to 4,130.85 rupees.

Mahindra & Mahindra shed 1.1% to 751.45 rupees on news that the company may be back in race for acquiring Ford''s automobile brands.

Tata Tea fell 0.5% to 789.5 rupees. According to media reports, Tata Tea and Coca-Cola India are planning a strategic alliance to launch consumer products for the domestic markets. Domestic market for consumer products is estimated to be as large as 70,000 crore rupees.

Colgate Palmolive India surged 1.6% to 388.55 rupees on news reports that it has acquired 75% stake in Advanced Oral Care Products Private, Professional Oral Care Products Private and SS Oral Hygiene Products Private. These companies have been supplying toothpastes and other oral hygiene products to Colgate.


[R]10:00AM New York – Elevated oil, gold and falling dollar heightened the investor nervousness from sub-prime losses at the U.S. market opening.[/R]

World markets remained worries on the widening losses in sub-prime lending portfolio of U.S. financial institutions. Many, only few months had flatly rejected the notion of holding these securities and denied any losses in the financial instruments. Morgan Stanley, the latest institution, reversed its earlier projections, and wrote down $3.7 billion in mortgage related securities. AIG, the leading insurance agency, reported loss as well.

The news of the write-down sent Asian and European markets sharply lower. Stock markets in Japan dropped 2% and in Hong Kong fell 3% on the news.

In the pre-market trading crude oil fell a fraction to $96.78 per barrel and gold jumped $1.50 to $835.10.

Rio Tinto ((RTP)) surged 26% to $450.60 in the New York trading after BHP Billiton ((BHP)) confirmed that it had approached Rio Tinto for a friendly merger. Rio Tinto rejected the overtures. BHP opened $3 higher bit fell quickly by $3.42 to $76.94 in the opening trading in New York.

After the market close on Wednesday, AIG and Cisco reported earnings. Cisco earnings jumped sharply but the worries that the sales in the financial services sector may affect earnings. Cisco ((CSCO)) fell $1.77 to $30.97. AIG reported 27% decline in profit on $2.7 billion losses in loan portfolio. AIG fell $2.01 to $55.90 in the morning trading.

Ford Motor ((F)) reported third quarter loss of $380 million or 19 cents per share compared to loss of $5.2 billion and $2.79 per share a year ago. The total revenue including financial unit increased 11% to $37.1 billion of which automotive sales increased 12% $36.3 billion. Ford stock increased 25 cents to $8.45.

U.S. retailers reported lower than expected same store sales for October. Sales rose at Wal-Mart 0.4%, at Costco 9%, at Target 4%. Apparel retailers reported declining same store sales. Sales declined at Nordstrom by 2.4%, at Macy’s 1.5%, J.C. Penney 1.8%, Kohl’s 3.8%, and at Limited Inc 6%. Chico’s FAS same store sales in October declined 10.6% and total sales in the four weeks ended November 3rd fell 4.1% to $121.2 million.

In European markets, Belgium led the decliners with a loss of 3.3% followed by losses in Italy of 1.5%, the Netherlands of 1.3%, and Switzerland of 1.2%. U.K., Germany, Spain, and Norway edged higher.

Asian markets fell sharply ahead of the U.S. market opening. Shanghai led the decliners with a loss of 4.9%, followed by losses in Taiwan of 3.9%, in Hong Kong and Korea of 3.2%, in Philippines and Australia of 2.5%, in Japan of 2%, in India and Indonesia of 1.2%.


[R]6:00AM New York, 7:00PM Tokyo - Exporters, financial stocks drag Tokyo down 2% on weakening dollar and heightening concern over credit market losses. Machinery orders decline 7.6% in September.[/R]

In Tokyo trading Nikkei 225 declined 2.02% or 325.11 to 15,771.57, while the broader Topix Index fell 39.75 to 1,516.94.

Of the Nikkei 225 stocks, 20 gained, 202 shed, and 3 were unchanged. Chiyoda Corp led the decliners in the index falling 14.1%, followed by losses in Nippon Mining House of 13.94% on a sharp decline in profit of 30%.

In the first section of the Tokyo Stock Exchange 10.9 billion shares valued at 1.3 trillion yesterday compared to 8.5 billion yen worth 1 trillion traded yesterday and in the second section 339 billion shares valued at 6.2 billion changed hands.

The Cabinet Office’s Economic and Social Research Institute announced today the total orders received by 280 manufacturers operating in Japan slumped by a seasonally adjusted 14.5% to 2.37 trillion yen in September from August and in the fiscal second quarter ending in September 2007 orders fell 3.6% or 7.7 trillion yen compared to the previous quarter ending in June 2007.

Private sector machinery orders, excluding volatile orders from shipping and electrical power utilities, fell a seasonally adjusted 7.6% or 958 billion yen, but increased 2.5% to 3.1 trillion yen in the quarter ending in September.

According to the report, total manufacturing machinery orders increased 5.7% in September at 473 billion yen and added 2.7% in the quarter ending in September to 1.41 trillion yen. Orders are forecasted to increase 5.9% in the three months to December to 1.49 trillion yen. For non-manufacturing companies, excluding volatile orders, September orders fell 14.1% to 487 billion yen, while orders in the quarter ending in September rose 1.6% to 1.71 trillion yen and in the quarter to December orders are expected to rise 1.1% to 1.73 trillion yen.

The Cabinet Office also reported government orders in September slumped 18.6% to 198 billion yen, while in the quarter ending in September, orders fell 26.2% to 670 billion yen and are projected to increase 19.1% to 798 billion yen in the quarter to December. In addition, overseas orders plunged 7.8% in September to 1.1 trillion yen and 2.2% or 3.3 trillion-yen in the July-September quarter, but orders are forecasted to grow 4.8% to 3.4 trillion yen in the quarter ending in December.

Of the Nikkei 225 index shares, Alps Electric Company Limited paced gainers rising 2.96%, followed by gains of 2.34% in Konami Corp, 2.17% in Shinsei Bank Limited, 2.14% in Nippon Paper Group and 1.75% in Olympus Corporation.

Chiyoda Corp led decliners, slumping 14.09%, followed by losses in Nippon Mining House of 13.94%, in Dainippon Sumitomo of 8.73%, in Kubota Corp of 7.26% and Pioneer Corp of 7.11%.

Financial stocks declined, weighed down by losses declared in sub-prime portfolio of the U.S. securities firm Morgan Stanley and weak earnings from General Motors and AIG.

Morgan Stanley wrote down its portfolio by $3.7 billion. Separately, American International Group reported third quarter earnings plummeted 27%. General Motors Corp also announced a $39 billion quarterly loss, worst quarterly loss ever.

Mitsubishi UFJ Financial Group slipped 3.21%, Mizuho Financial Group, slumped 3.43% and Sumitomo Mitsui Financial Group fell 2.92%.

The yen firmed against weak dollar at 112.52 from 112.54 against the dollar. Exporters fell on weak dollar led by a loss in Sony Corp of 2.36%. Toyota Motor slipped 4.19% but Honda Motor climbed down 2.91%.

Brewer Kirin Holdings announced has agreed to acquire National Foods, Melbourne, Australia based dairy and fruit juice unit owned by San Miguel Corporation, for 294 billion yen, inclusive of a 200 billion yen debt.

National Foods, with 19 plants located in Australia of the total of 24 plants it owns, sells dairy products branded Pura Milk, Beri juices, King Island Dairy, Farmers Union and has Australian rights to Yoplait yoghurt.

National Foods generated revenue of A$1.84 billion and generated A$0.17 billion in the fiscal year 2006 ending in December and employs 3,500 people.

Kirin is trying to diversify its reliance from beer sales as younger population is increasingly opting for healthier alternative to beer. Kirin Holdings revised downwards its full year profit first year profit forecast by 3.6% to 54 billion yen.