Nasdaq Surged 3.5%, S&P Soared 2.9%

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

U.S. stocks rebounded shaprly in a broad rally led by financial and tech stocks. Nasdaq led the indexes with a rise of 3.5% followed by 2.9% increase in S&P 500, and 2.5% in Dow Jones. Comments from financial executives suggested that their loss exposure to troubled loans is limited in the fourth quarter. Oil dropped more than 3% on lower demand estimate for the year 2008. Wal-Mart earnings increased in the third quarter. Vodafone returned to the profitability. The BOJ left the rates unchanged.

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

A drop in oil on lower demand forecast, investors’ enthusiasm, and better than expected earnings from Wal-Mart lifted the U.S. market averages. Tech and financial stocks surged the most.

Bargain hunting was in full swing by mid-day in New York and financial stocks led the rally that broadened to retailers, consumer focused stocks, techs, and then to resource companies. The sharp reversal in market mood was evident in strong rebound in market averages. Latin American markets rebounded as well.

After banks and brokerage firms reported more than $40 billion in loan write-downs associated with sub-prime lending or collateralized loans, investors are expecting a similar level of losses in the fourth quarter. So far the banks and brokers have reported possible losses of $17 billion, lower than what analysts have been estimating. Today, several banking and brokerage executives assured that their exposure to the troubled loans is very limited and do not expect any more losses in the sector. Bank of America reported a loan loss provision of $600 million in the fourth quarter today helping to spark a rally in financial stocks. Comments from executives of financial companies helped.

Goldman Sachs chief executive Lloyd Blankfein at a Merrill Lynch sponsored conference said that brokers does not expect significant write-down in the mortgage related securities. JP Morgan chief executive Jamie Dimon said that bank’s exposure of $1.5 billion to the leveraged loans is related to its trading business.

The positive comments from these executives and losses at Bank of America were not higher than earlier estimated by the banks drove investors to look for bargains. Falling oil price only helped.

Crude oil futures fell 3.7% or $3.28 to $91.34 per barrel on lowered demand forecast for the year 2008 from International Energy Agency. IEA, an association of wealthy Western nations, predicted lower oil demands on economic slow-down in the U.S. The news helped oil to drop.

Wal-Mart reported sales rise of nearly 9% and earnings gain of 8% and said that the domestic sales are expected rise in line with expectations for the rest of the year.


[R]Global Markets Indexes[/R]

Dow Jones Industrial Average surged 319.54 or 2.46% to a close of 13,307.09, S&P 500 soared 2.91% or 41.86 to 1,481.04, and Nasdaq Composite Index jumped 89.52 or 3.46% to a close of 2,673.65. In Toronto TSX Composite added 96.59 or 0.71% to close at 13,701.55.

Of the 30 stocks in Dow Jones Industrial Average, 27 closed higher, 3 closed lower, and none were unchanged.

JP Morgan Chase led the gainers in the index with a rise of 6.7% followed by increases in Wal-Mart of 6.63%, in Citigroup of 6.3%, in American Express of 4.85%. McDonalds led the decliners in the index was a fall of 2.5% followed by 1.7% decline in Du Pont and 0.4% loss in Altria of 0.4%.

Of the stocks in S&P 500, 457 closed higher, 41 fell, and 2 were unchanged. Two stocks fell more than 3% and one hundred fifty eight stocks rose more than 3%.

E*Trade Financial led the gainers in the index with a sharp rise of 47% followed by increases in MBIA of 18%, in Apple of 11%, in MGIC Investment Corp of 9.7%, in Ambac Financial of 9.2%, in Lehman of 9.11%, in Freddie Mac, and in Goldman Sachs, and Wachovia of 8%.

In London FTSE 100 Index closed up 24.50 or 0.39% to 6,362.40, in Paris CAC 40 Index increased 3.35 or 0.06% to close at 5,538.91, and in Frankfurt DAX index fell 29.28 or 0.38% to close at 7,777.56. In Zurich trading SMI added 58.60 or 0.69% to close at 8,500.64.

In Tokyo Nikkei 225 Index retreated 70.46 or 0.46% to close at 15,126.63, in Hong Kong Hang Seng index closed up 137.68 or 0.50% to 27,803.35, in Australia ASX 200 closed up 59.90 or 0.93% to close 6,515.20. India added 1.59% or 298.21 to 19,035.48.

In South Korea Kospi Index increased 9.47 or 0.49% to close at 1,932.89, Thailand closed down 4.27 or 0.50% to 857.66, and Indonesia edged lower 17.69 or 0.66% to 2,654.21.

Philippines declined 18.88 or 0.52% to 3,599.49. Singapore declined 35.65 or 1.02% to 3,475.47 and Malaysia increased 1.08 or 0.08% to 1,383.43.

In Latin Markets Mexico led the gainers with a rise in Bolsa Indiex of 4.60% followed by increases in Bovespa Index in Brazil of 2.29%, in Merval Index in Argentina of 1.41%. Chile Stock Market Select added 1.20% and Colombia IGBC Index lost 0.73%.

Bond Yields edged higher on 10-year U.S. bonds to 4.25% and 30-year bonds were unchanged to 4.60%.

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

Crude oil fell $3.28 to close at $91.34 per barrel for a front month contract, up 40.00% for the year, natural gas decreased 2 cents to $7.94 per mBtu, and gasoline futures decreased 9.87 cents to close at 231.78 cents per gallon.

Gold edged lower $8.70 in New York trading to close at $799.00 per ounce, silver closed down 15 cents to $14.61 per ounce, and copper for front month delivery lost 0.20 cents to 310.70 cents per pound and in London trading closed down $86 to $6,918.50.

Dollar edged lower against euro to $1.4602 and higher to 110.7980 yen.


[R]3:00PM New York – Home Depot third quarter sales declined 3.5% and earnings fell 27%.[/R]

Home Depot Inc ((HD)) reported third quarter net sales declined 3.5% to $18.96 billion from $19.6 billion in the year ago quarter dragged by the current housing market problems in the U.S.

Same store sales fell 6.2% in the quarter from a year ago on weak demand.

The company warned of more difficult times ahead due to the slow-down in the housing market. Home Depot lowered earnings forecast for the fourth quarter by as much as a decline of 11%.

In the third quarter, consolidated net earnings dropped 26.7% to $1.1 billion compared to $1.5 billion a year ago.

Home Depot said earnings per share fell 17.8% to 60 cents per share from 73 cents per share a year ago.

Excluding results from Home Depot Supply, which was sold in August, earnings came to 59 cents a share for the latest quarter. The company earned $20 million from the discontinued operations.

Home Depot will now adopt """"a cautious"""" approach in the $22.5 billion recapitalisation programme until the housing market problems pacify. So far, $10.7 billion has been utilised.

For the nine months ending on October 28, Home Depot said net sales dropped 3.1% to $59.69 billion from $61.61 billion a year earlier.

Net earnings declined 23% to $3.72 billion or $1.95 per share from $4.83 billion or $2.38 per share reported same period last year.

In the fourth quarter Home Depot estimates earnings per share to decline as much as 11%.

Analysts surveyed by Thomson Financial estimate fourth quarter per share earnings will fall to 49 cents on revenues of $18.3 billion. For the fiscal year 2007 analysts expect revenues at $78.48 billion. Sales are estimates to decline 9.5% in the fourth quarter and 13.6% for the fiscal year 2007.

Home Depot chairman and chief executive, Frank Blake said: """"We are facing a tough environment as housing indicators continue to deteriorate. Our financial performance in the third quarter reflects these tough conditions.""""

In morning trade, Home Depot traded as low as $27.77 but recovered in the mid-day to $28.81, up 38 cents. In the last 52-weeks, Home Depot traded between $42.01 and $27.77.

At the end of the third quarter, the company operated a total of 2,224 retail stores, which included 1,943 in the U.S., 160 stores in Canada, 64 stores in Mexico, and 12 stores in China.

[R]12:30PM New York –Wal-Mart Stores, Inc third quarter net sales increased 8.8% and earnings rose 7.9%.[/R]

Wal-Mart Stores, Inc, the world's largest retailer, reported third quarter net sales increase of 8.8% to $90.9 billion from $83.5 billion reported in the year ago quarter led by international sales.

Sales in the international unit rose 16.9% to $22.40 billion from $19.15 billion posted in the comparable period in 2006.

At Wal-Mart stores, sales gained 6.4% to $57.65 billion. In the quarter, Sam's Club sales at $10.82 billion were up 6.1% on prior year's $10.20 billion.

U.S. comparable-store sales were up 1.5% in the third quarter ended Oct. 31.

Wal-Mart said net income from continuing operations rose 7.9% to $2.86 billion from $1.65 billion a year earlier.

Earnings per share climbed 11.1% to 70 cents up from 62 cents. Earnings per share increased on after tax gain of $46.5 million from the sale of certain real estate properties. On average, analysts surveyed by Thomson Financial estimated earnings of 67 cents per share for the quarter.

In the nine months to October 31, Wal-Mart reported net sales increase of 8.6% to $268.25 billion from $246.9 billion previously.

Net earnings gained 17.8% to $8.6 billion or $2.15 per share from $7.3 billion or $1.98 per share in the year ago period.

Wal-Mart estimated earnings per share from continuing operations for the fourth quarter to be between $0.99 and $1.03.

Wal-Mart estimated fiscal 2008 earnings per share between $3.13 and $3.17. The guidance includes an anticipated restructuring charge for its Japan operation, Seiyu of approximately $40 million after tax.

The company is estimating domestic comparable same-store sales to be between flat and 2% in the fourth quarter.

Analysts expect fourth quarter revenues of $106.62 billion and for the year $377.39 billion. Sales are expected to rise 7.6% in the fourth quarter and 8.2% for the year 2007.

Wal-Mart president and chief executive Lee Scott said: """"During the Christmas and holiday season, our price leadership position will benefit both our customers and the company, “We have set the stage for a successful fourth quarter.""""

Wal-Mart ((WMT)) jumped 6.5% or $2.83 at $46.15. In the last 52 weeks, the stock has traded between $42.09 and $51.44.

Analysts surveyed by Thomson have average one year price target on Wal-Mart for $52.65 in the next 12-months.

Wal-Mart Stores, Inc. operates Wal-Mart discount stores, supercenters, Neighborhood Markets and Sam's Club locations in the United States. The retailer has operations in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom.


[R]9:40AM New York – U.S. stocks opened higher on better than expected earnings from Wal-Mart.[/R]

U.S. stocks trade higher at the opening. At the opening Dow Jones Industrial Average increased 80 to 13,071, Nasdaq added 32 to 2,616, and S&P 500 edged higher 12 to 1,452.

Wal-Mart jumped $2.60 to $45.95 after it reported its earnings. Earnings at the third quarter increased to $2.86 billion compared to $2.65 billion or earnings per share increased to 70 cents compared to 63 cents per share year ago. Revenue in the quarter increased 8.9% to $91.95 billion. Wal-Mart predicted fourth quarter earnings from continuing operations between 99 cents and $1.03 per share and fiscal 2008 earnings from continuing operations between $3.13 and $3.17 a share revised from earlier projection of between $3.05 and $3.15 a share.

European markets fell on weak oil and metal prices. Telecom stocks led the gainers in the region on earnings form Vodafone.

Norway, for the second day, led the decliners in the region, at mid-day trading, with a loss of 1.3% followed by losses in Germany and the Netherlands of 0.5%, in Spain and France of 0.2%, and in U.K. of 0.05%. Switzerland added 0.3% followed by increases in Italy of 0.07%.

Vodafone reported earnings for the six months ending on Sept 30 at 3.29 million pounds or 6.19 pounds per share compared to a loss of 5.11 billion on the charges of 8.1 billion pounds related to its Italian and German operations. Revenue in the first half increased 9% to 17 billion pounds from 15.59 billion pounds a year ago on the rising revenues at the recent acquisitions in Turkey and India.

Vodafone jumped 3.5% in London trading.

Asian markets tracked local news. India led the advancers in the region with a rise of 1.6% followed by increases in Australia of 0.7%, in Taiwan of 0.65%, in Hong Kong and in Korea of 0.5%.

Singapore led the decliners with a fall of 1% followed by losses in Indonesia of 0.7%, in Japan, Thailand, and in Philippines of 0.5%.

Third quarter economic growth in Japan was recorded at 0.6% on strong exports growth and rising consumer spending. In a near unanimous decision the Bank of Japan left the rate unchanged at 0.5%. Isuzu Motor dropped 6% on 16% decline in earnings.


[R]6:00AM New York, 7:00PM Tokyo - Tokyo stocks declined for the eighth session in a row. Rising consumer spending lifted third quarter GDP.[/R]

In Tokyo trading Nikkei 225 slumped 0.46% to 70.46 to 15,126.63, while the broad Topix Index shed 1.67 to 1,454.73.

In the first section of the Tokyo Stock Exchange 9.9 billion shares worth 1.2 trillion yen were traded compared to 260 million shares valued at 5.0 billion yen traded in the second section.

Of the Nikkei 225 stocks 84 gained, 134 declined and 7 were unchanged. Casio Computer Company led gainers, rising 13.86% after brokerage Merrill Lynch raised the rating on the stock to “buy” from “neutral”. Mitsubishi UFJ Nicos on Aiful return to profitability.

Japan’s Cabinet Office released its preliminary third quarter GDP estimates that real GDP soared by 0.6% from the previous year to an annualized 2.6% in the three months to September. GDP for the second quarter was revised to 1.6% compared to the preliminary figure of 1.2%. Net exports contributed 0.2% and local demand increased 0.4% from 0% and –4% registered in the first and second quarter respectively.

According to the statistics, private demand rose 0.3% from 0.2% in the April to June period, while the consumption of households also rose to 0.3% from 0.2%. Private residential investment tumbled 7.8% from a 4.1% decline in the second quarter. However, private non-residential investment rose 1.7% from a fall of 2.1% in the previous quarter.

Changes in private inventory contributed 0.1% from a 0.1% slump to GDP recorded in the second quarter. The Cabinet Office also noted that government consumption leapt 0.3% in the quarter under review, while public investment plunged 2.6%, extending a 2.7% drop in the previous quarter.

Exports rose 2.9% from 0.9% in the three months to April and imports similarly climbed 0.5% from 0.8%. The GDP deflator, which is a measure of prices, declined 0.3% and the domestic demand deflator and private consumption deflator fell 0.2% and 0.5 % in that order.

The Bank of Japan today kept its key interest rate on hold at 0.5% by an 8-1 vote after a two-day monetary policy. Again, Atsushi Mizuno was the only dissenter.

Of the Nikkei 225 index shares, Casio Computer Company paced gainers, with a rise of 13.86%, followed by increases in Mitsubishi UFJ Nicos of 12.44%, in Clarion Company Limited 7.93%, in Toto Limited of 7.93% and IHI Corp of 4.44%.

Casio Computer Company, which has a joint venture with Hitachi Limited Casio Hitachi Mobile Communications, gained the most since May 2004 after Merrill Lynch lifted the rating on the stock from “neutral” to “buy”, citing an increase in market share in the handset business that could help profits.

Mitsubishi UFJ Nicos rose after consumer lender Aiful Corp second quarter profit jumped to 14.2 billion yen from a loss of 194 billion yen a year ago. Revenue for the company however slumped 16% to 107 billion yen.

Isuzu Motors led decliners in the index with a fall of 5.86%, followed by losses of 5.56% in Sojitz Corporation, 5.29% in Nippon Mining house, 4.55% in Mitsumi Electric Company and 4.47% in Showa Shell.

Isuzu reported yesterday that first half profit fell 33% as domestic demand slumped. Net income dropped 37 billion-yen in the six months to September.

Commodity and energy related stocks fell on declining prices of metals and oil. Crude oil for December delivery fell 0.3% to $94.36 per barrel. Mitsubishi Corp plunged 3.73 and Nippon Oil declined 2.07%.

Sankyo rose after the first half net income fell to 16.3 billion yen, lower than the 16 billion yen analysts had predicted.

[R]4:00AM New York, 8:00PM Sydney – The Australia index rose 0.9% as major stocks led by banks traded stronger.[/R]

ASX 200 index gained 0.9% or 59.9 to close at 6,515.20. Banks led the gainer with Westpac adding 1.3% and National Australia Bank increasing 1.6%.

Preliminary stock turnover was 850 million shares worth A$3.41 billion, with 511 stocks up, 560 down and 356 unchanged.

The most traded stock on the market was Republic Gold Ltd, with 44.5 million stocks changing hands at a value of A$8.74 million.

The precious metal explorer's shares were 13.89% stronger to 20.5 cents.

Macquarie Group Limited today announced a record A$1.06 billion profit after tax attributable to ordinary shareholders for the half year ended 30 September 2007. This increase represents a 45% increase over the A$730 million profit for the half year ending on September 30, 2006.

The company said the 45% profit growth was driven by a 38% increase in total revenue, of which 55% was derived from international operations. Earnings per share for the six-month period increased 34% to A$4.02 from A$3.01 on the prior corresponding period.

But the bank said it is cautious about its outlook, forecasting its second half result to be in line with last year and further cautioned that it may be too early to forecast the results.

Macquarie Group Managing Director and Chief Executive Officer Allan Moss says equity market conditions may not continue to be as favorable, and noted that the first half had benefited from a large number of asset sales.

Moss said Macquarie Group Limited will pay interim dividend of A$1.45 per share, 16% increase form a year ago. Mcquarie targets to pay dividend between 50% and 60% of its profit.

Moss, said: """"This record half year result underscores the strength and diversity of our global business. He further added, """"The story of our strong growth beyond Australia continues and we are particularly pleased with the outstanding contribution from the Asia-Pacific region, which was largely unaffected by the credit market disruption.""""

Moss noted that Macquarie continued to hire quality staff, while maintaining a low expense-to-income ratio.

""""All operating groups have experienced continued international growth. For Macquarie Capital (formerly Investment Banking), Equity Markets, Treasury and Commodities, Real Estate and Funds Management Groups income from international activities was more than half of each group's total operating income,"""" Mr Moss said.

Gaming and media group Publishing and Broadcasting Ltd (PBL) indicated today that Canadian gaming regulators have approved the bid by its 50/50 joint venture for Gateway Casinos in Canada.

The company said regulators in the provinces of British Columbia and Alberta have approved the bid by the PBL and Macquarie Group joint venture, New World Gaming Partners, for Gateway Casinos Income Fund.

The joint venture partners will pay $1.3 billion for the fund, which holds a network of nine casinos in Vancouver, Edmonton and Alberta.

The decision by Reserve Bank of Australia to revise its inflation forecast has heightened speculation among economists of further hikes in interest rates.

Economists predict that the Governor Glenn Stevens and his board will increase the overnight cash rate target by a quarter of a percentage point to 7% by March.

In reviewing its inflation forecast, the bank noted that global financial-market sentiment ``remains fragile'' because of the U.S. sub-prime rout, indicating it may keep borrowing costs unchanged next month.

The bank indicated yesterday that core inflation would accelerate to 3.25% by December and remain there until June, more than a previous estimate of 3%. This would mean that annual price increases would exceed the 3% upper limit of the bank's target range.

News Corporation will use its newly acquired Wall Street Journal brand to reach deep into the world's developing economies with financial news.

Chairman Rupert Murdoch announced this at the company's annual general meeting in Adelaide. Mr Murdoch revealed plans to replace about one million paying subscribers of the paper's online edition, with 10-15 million who wouldn't pay a thing.

Of importance in his plan was a long term plan to penetrate developing markets like China and India, where demand for financial news and services would explode in the decades ahead.

Murdoch said the company needed to ride on the fact that about 50 and 100 million people a year are joining the world economy thereby creating an explosion of wealth and business opportunities and such people need up-to-the-minute information.

Murdoch believes that financial news supported on advertising revenue is likely to generate higher revenue than subscription revenue based business model. One million paying U.S. subscribers may not bring substantial revenue, but ten million visitors from China and India with no subscription revenue may not bring comparable revenue.

Murdoch paid approximately $5 billion to acquire Dow Jones and the deal has still not been approved by the regulators. The advertising driven revenue model may not generate enough revenue to justify the high price target.

The Australian dollar finished weaker today, dipping below $0.8800 during the local session.

At the close of trade the Australian dollar was trading at $0.8877/82, down from yesterday's close of 0.8967/72.

During the day, the Australian dollar traded between a low of $0.8754 and a high of $0.8900.

Of the ASX 200 index shares, ABC Learning led the gainers with a rise of 11.1% followed by increases in IOOF Holdings Limited by 6.5%, in Hills Industries by 6.3%, in Aristocrat Leisure by 5.7%, and in STW Communication by 5.1%.

Of the ASX 200 index stocks Macquarie Group led the decliners with a fall of 3.7% followed by losses in Paladin Resource of 3.7%, Newcrest Mining by 4%, in AWB Limited by 4.2%, and 5.6% in Sino Gold Mining Ltd.

In other stocks Commonwealth Bank was lower at 1.8%, Australia and New Zealand bank put on 3.6% and Macquarie was down 3.8%. In the Resource sector BHP Billiton was up 0.2%, and Rio Tinto shares dropped 0.5%.

In the energy sector Woodside Petroleum was up by 0.7%, Oil Search put on 1.6%, and Santos was up 1.8%. In the gold sector Lihir was weaker at 1.5%.

Zinifex lost 2.8% after indicating that declining price of zinc coupled with a stronger Australian dollar will cut its revenue this year.

Monto Minerals Ltd. (MOO AU), added 16% after opening its new industrial minerals project in central Queensland State, yesterday.

The retailers traded higher Harvey Norman by 0.9%, Woolworths added 0.5%, Wesfarmers Limited edged higher 0.8% and David Jones gained 3.1%.

Media stocks were mixed, with PBL gained 2.5%, Fairfax lost 0.4%, News Corp was down 0.04%.