U.S. Markets Retreat, Retail Sales Decline

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

U.S. stocks declined on a late-afternoon sell-off. Investors dumped department store stocks after Macys warned lower than expected revenue and same-store sales decline in the holiday season. Merrill Lynch appointed John Thain as its first outside head of the company. United Rental said that Cerberus will not carryout $7 billion buyout offer. Oil and gold rose sharply. Asian and European markets surged.

[R]5:00PM New York, 11:00PM Frankfurt, 9:00AM Sydney[/R]

U.S. market averages declined after a day of sharp rise. Asian and European markets in overnight trading surged on the back of market rise in New York in the previous session. Macy’s reported that same-store sales are likely to decline in the fourth quarter and revenue may rise at a slower pace then earlier estimated. Apparel retailers fell after the Macy’s forecast. Sears, Kohl’s, Dillards, and JC Penney declined.

Macy’s reported third quarter earnings of 8 cents compared to 3 cents a year ago on 0.3% sales increase to $5.91 billion. Macy’s expects sales in the fourth quarter to be between down 2% to up 1% and expects to be between $8.7 billion and $8.9 billion.

United Rental fell more than 30% after Cerberus Capital withdrew its offer. Cerberus had agreed to acquire the company at $34.50 per share or $7 billion.

The rental company said in a statement, “The Company noted that Cerberus has specifically confirmed that there has not been a material adverse change at United Rentals. United Rentals views this repudiation by Cerberus as unwarranted and incompatible with the covenants of the merger agreement.”

Merrill Lynch has reportedly appointed John Thain as its chief executive. Thain is currently heading NYSE Euronext and will be the first outsider to head the company at Merrill Lynch.

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average fell 92.75 or 0.70% to a close of 13,214.34, S&P 500 dropped 0.78% or 11.53 to 1,469.52, and Nasdaq Composite Index declined 29.33 or 1.10% to a close of 2,644.32. In Toronto TSX Composite added 69.08 or 0.50% to close at 13,774.22.

Of the 30 stocks in Dow Jones Industrial Average, 7 closed higher, 23 closed lower, and none were unchanged.


Disney led the decliners in the index with a fall of 3.64% followed by losses in IBM of 2.1%, in Microsoft of 1.8%, and in Caterpillar of 1.6%. Wal-Mart Stores led the gainers in the index with a rise of 0.8% followed by increases in Honeywell International of 0.6%, in Coca-Cola of 0.52%.

Of the stocks in S&P 500, 138 closed higher, 359 fell, and 3 were unchanged. Fifty Eight stocks fell more than 3% and seven stocks rose more than 3%.

E*Trade Financial led the gainers in the index for the second day in a row with a rise of 10% followed by increases in Allegheny Technology of 5.6%, in Leggett & Pratt of 5.4%, in Ambac Financial of 5.1%, in McCormick of 4.33%, in Monster Worldwide of 3.1%, and in Bear Stearns of 3%. Avery Dennison led the decliners in the index with a fall of 7.4% followed by losses in Macy’s of 7%, Jones Apparel of 6.5%, in Sun Microsystems of 6%, in Family Dollar of 5.5%, and in Tesoro Corp of 5.2%.

In London FTSE 100 Index closed up 69.70 or 1.10% to 6,432.10, in Paris CAC 40 Index increased 74.69 or 1.35% to close at 5,613.60, and in Frankfurt DAX index gained 5.55 or 0.07% to close at 7,783.11. In Zurich trading SMI added 130.40 or 1.53% to close at 8,631.04.

In Tokyo Nikkei 225 Index surged 372.93 or 2.47% to close at 15,499.56, in Hong Kong Hang Seng index closed up 1,362.66 or 4.90% to 29,166.01, in Australia ASX 200 closed up 83.40 or 1.28% to close 6,598.60. India soared 4.69% or 893.58 in largest one-day gain to 19,929.06.

In South Korea Kospi Index increased 39.69 or 2.05% to close at 1,972.58, Thailand closed up 3.85 or 0.45% to 861.51, and Indonesia edged higher 37.66 or 1.42% to 2,691.87.

Philippines increased 82.13 or 2.28% to 3,681.62. Singapore increase 49.44 or 1.42% to 3,524.91 and Malaysia increased 1.15 or 0.08% to 1,384.58.

In Latin Markets Brazil led the gainers with a rise in Bovespa Index of 2.71% followed by increases in IGBC General Index in Colombia of 2.46%, in Lima General Index in Peru of 2.18%, in Chile Stock Market Select of 1.43%, and in Bolsa Index in Mexico of 0.73%. Merval Index in Argentina edged 0.2% higher but Venezuela Stock Market Index dropped 0.7%.

Bond Yields edged higher on 10-year U.S. bonds to 4.26% and 30-year bonds were unchanged to 4.60%.

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

Crude oil rose $2.92 to close at $94.09 per barrel for a front month contract, up 43.00% for the year, natural gas decreased 11 cents to $7.84 per mBtu, and gasoline futures increased 5.37 cents to close at 237.04 cents per gallon.

Gold edged higher $15.70 in New York trading to close at $814.70 per ounce, silver closed up 46 cents to $15.06 per ounce, and copper for front month delivery added 18.95 cents to 329.65 cents per pound and in London trading closed down $27.50 to $6,891.00.

Dollar edged lower against euro to $1.4648 and higher to 111.4350 yen.




[R]9:30AM New York – U.S. stocks rise at the opening. Bear Stearns and HSBC reported additional losses in risky loans.[/R]

U.S. market averages opened higher after a day of sharp rally. Dow Jones Industrial Average 40, Nasdaq increased 18 to 2,692, and S&P 500 added 9 to 1,490.

The Commerce Department reported that October retail sales increased 0.2% after revised increase of 0.7% in September and the Department of Labor said that the producer price index rose 0.1% in October from September. The core price index, which excludes the fuel and food prices, was unchanged from the month ago.

European markets traded higher on the rise in global markets. France led the gainers in the region with a rise of 1.4% followed by increases in UK of 1.2% and in Germany of 0.7%. HSBC rose 2.2% after surging 5% and ArcelorMittal increased 4%. UK insurer Friends Provident jumped 6% after its chief executive decide to leave the company following unsuccessful attempt to merge with another insurance company Resolution.

HSBC increased its loan loss provision to $3.4 billion, $1.4 billion more than previously estimated by the bank. In addition, HSBC Finance increased its loss reserve to $3.4 billion from $2.6 billion. HSBC also said that higher charges are likely in the coming months if the housing market deteriorates. HSBC estimated that 5.5% of total mortgages are at least two payment behind at the end of the third quarter compared to 4.3% of delinquent mortgages at the end of the second quarter.

Arcelor Mittal third quarter net income increased 36% to $2.96 billion from $2.18 billion a year ago on net revenue rise of 15% to $25.5 billion. The largest steel company proposed to increase its quarterly dividend to 37.5 cents from 32.5 cents beginning in March 2008. Earnings per share in the quarter increased 33% to $2.10 from $1.58 a year ago.

Asian markets surged after a rally in New York in the previous session. Markets in China, Hong Kong, and India led the gainers in the region. Of the thirteen markets in the region followed by 123jump.com, only Pakistan closed lower on local political worries.

Markets in China, Hong Kong, and India increased 4.9% followed by increases in Japan and Taiwan of 2.5%, in Philippines and Korea of 2.1%, in Indonesia of 1.4%, and in Australia of 1.2%.

Banks and mining stocks rallied in Japan. Mitsubishi UFJ Financial led the gainers in the financial sector and Toyota led the auto sector with a rise of 4%. Separately Mizuho Financial Group reported that it has booked a charge of $630 million to reflect weakness in its sub-prime loan portfolio. The loss in the portfolio lowered its earnings to 65 billion yen compared to 327 billion yen. Mizuho had earlier said that its exposure in the risky segment of mortgage securities was limited. As the sub-prime mortgage market deteriorated in the last four months, the bank is forced to take charge to reflect deterioration in its portfolio.

Sensex in India surged 6.4% in two days of trading and clocked record one-day gain today with a sharp rise in financial and metals and mining stocks.

Stocks in China closed higher led by a rise in energy, banks, and mobile telecom companies. Sinopec soared 10%, PetroChina added 7%, and China Unicom jumped 6%.


[R]5:30PM Mumbai, 7:00AM New York – Sensex in Mumbai surged to its best one-day rally ever.[/R]

Sensex in Mumbai trading surged to largest one-day gain reflecting the strength in New York and Asian markets. Index of 30 stocks surged 893.58 or 4.82% to close at 19,929.06. Sensex during the session at its peak rose 952 points. CNX Nifty soared 243.35 or 4.27% to close at 5,938.75.

Sensex in a two day surge has added 1,191 or 6.4%.

Of the stocks traded on the Bombay Stock Exchange, 2,019 gained, 748 declined, and 67 were unchanged. Trading volume on BSE surged to 8,796 crore rupees compared to 7,964 crore rupees. On the NSE the trading volume increased to 20,726 crore rupees from 19,646 crore rupees.

Banks, IT, and infrastructure stocks rallied.

Reliance Industries surged 7% to 2,885 rupees.

ICICI Bank soared 11% to 1,300 rupees, HDFC Bank jumped 11% to 1,747, HDFC advanced 6% to 2,742, State Bank of India added 2.2% to 2,346 rupees, and Punjab National Bank advanced 7.6% to 989 rupees.

Hindalco has increased delivery price aluminum by 2,000 rupees per ton. Hindalco Industries increased 7.0% to 217 rupees, Sterlite Industries edged 3.6% to 1,012 rupees, and Steel Authority of India increased 5.6% to 263 rupees.

According to local news reports, Reliance Industries and Essar Oil have increased retail price of diesel and petrol fuel per liter by 4.50 rupees. Essar Oil surged 37% to 120 rupees on volume of 1.9 crore shares.

Cellular communications companies advanced the market rally today. Bharti Airtel added 3.2% to 859 rupees and Reliance Communications increased 2.4% to 724 rupees. Seprately Bharti Airtel added 20 lakh (2 million) subscribers in October matching the new subscribers in September.

Fertilizer stocks were in favor after the news reports suggested that the Government of India is likely to issue 7,500 crore rupees bonds to cover deficit of government controlled companies. National Fertiliser surged 10% to 76 rupees, Mangalore Chemicals & Fertiliser added 9% to 41 rupees, and Rashtriya Chemicals & Fertilisers surged 20% to 72 rupees.




[R]9:30PM Sydney, 5:30AM New York – Stocks in Australia jumped 1.3% on a strength in financial stocks, sharply higher close in New York, and merger talks between BHP and Rio.[/R]

ASX 200 index gained 1.3% or 83.40 to close at 6,598.60. Preliminary stock turnover was 1.92 billion shares worth $7.04 billion, with 809 stocks rising, 498 falling and 328 unchanged.

The most traded stock on the market was Kalgoorlie-Boulder with 154 million shares changing hands worth $33 million. Its shares gained 108.7% to 24 cents.

Banks led the rising stocks. Commonwealth bank was up 1.5%, Westpac added 1.3%, Australia and New Zealand bank was higher at 1.1% and National Australia Bank edged higher by 1.6%.

Stock broker, UBS indicated that BHP Billiton Ltd could afford to make a $27 billion offer in cash to push through its proposed three-for-one stock offer for rival Rio Tinto Group.

According to a report dated November 13th that was released by the company, a cash-and-stock bid would be more attractive to Rio''s shareholders, than the all-stock bid by BHP and a promise to buy back $30 billion of shares in the combined company. BHP has offered 28 premium to the then trading price of RTP, but market is looking for a premium as high as 60%.

BHP''s initial bid valued Rio at $153 billion or 28% premium to its trading price before the date of the offer. BHP estimates cost synergies and savings of $3.5 billion and the merged company is likely to have pre-tax earnings of $40 billion.

The combined company will control one third of global iron-ore production, and will be the largest global producer of coal, aluminum, and copper, with operations in six continents.

Qantas today announced that it would buy up to 188 narrow body aircraft for short haul flights in Australia and Asia. The airline said the funding of the purchases wouldn''t affect its investment grade credit rating. Qantas plans to open operating hubs for its discount travel carrier Jetstar in Darwin and Perth. Qantas closed down 1.2%.

At the close the Australian dollar was trading at $0.9035, up sharply from yesterday''s close of $0.8880. During the day it traded between $0.8950 and $0.9029.

Of the ASX 200 index shares, Iluka Resources led the gainers with a rise of 11.4% followed by increases in Caltex Australia Limited by 7.9%, in Sally Malay Mini by 7.1%, in Con Minerals by 6.5%, and in Gwa International Limited by 6.4%.

Of the ASX 200 index stocks Hills Industries led the decliners with a fall of 2.6% followed by losses in AED Oil Limited of 2.7%, Macquarie Office by 2.95%, in Kagara Zinc Limited by 2.96%, and 7.5% in Murchison Metals.

Shares in Babcock & Brown Environmental Investments Ltd (BEI) vaulted 24% after investment house Babcock & Brown Ltd offered to buy the 70% of poorly performing bio-fuels listed fund that it does not already own, for about A$48 million.

In other stocks, resource stocks were both up with BHP Billiton edging higher by 1% and Rio Tinto 1.1% lower for the second day in a row.

Stocks in the energy sector were down after oil fell by more than $3 a barrel, the largest decline in three months. Oil closed at $91.40 per barrel. Woodside lost 0.8%, Santos was 0.7% lower and Oil Search sank by 0.4%.

Weakness in gold price did not hurt gold stocks. Lihir Gold put on 2%, Newcrest added 1.8% and Newmont gained 0.5%.

In media sector, News Corp added 1.5% while its non-voting shares were up 0.5% to $23.50. Fairfax Media dipped 0.2% and Publishing and Broadcasting shares lost 0.2%. Seven Network traded up 1.8% and Ten Network increased 1.5%.

BlueScope Steel''s share price powered ahead by 6.6% after managing director Paul O''Malley told shareholders """"the future of the steel industry is rosy''''.

Project developer Leighton Holdings was up 3.4%, while building and construction materials manufacturer Boral jumped 1.7%.

Investors snapped up shares in fertilizer producer Incitec Pivot after it more than tripled its annual profit and said that the outlook for global fertilizer prices is strong. Incitec surged 5.3%.


[R]5:30AM New York, 7:30PM Tokyo – Tokyo rebounded 2.5% on the strength in the New York.[/R]

Nikkei 225 Index rose for the first time in nine-days with a gain of 2.47% on waning fears over credit market losses and better than expected earnings from the largest retailer Wal-Mart.

In Tokyo trading Nikkei 225 rose 2.47% or 372.93 to 15,499.56, while the broader Topix Index gained 42.98 to 1,497.71.

In the first section of the Tokyo Stock Exchange 9.7 billion shares worth 1.2 trillion yen were traded compared to 9.9 billion shares worth 1.2 trillion yen traded yesterday, while 278 million shares valued at 5.7 billion yen changed hands in the second section.

Of the Nikkei 225 stocks 204 climbed, 19 retreated, and 2 were unchanged. Of the index stocks, 26 stocks gained 4% or more.

Commercial bank Chiba Bank Limited led gainers, rising 10.09%, followed by increases in IHI Corp of 8.94%. Financial stocks gained as well on easing credit worries. Mitsubishi UFJ Financial Group rose 6.26%, Mizuho Financial Group jumped 6.38% and Sumitomom Mitsui Financial Group soared 8.49%.

Goldman Sachs chief executive Loyd Blankfein said yesterday at a Merrill Lynch sponsored conference it does not expect to be making any significant writedowns on mortgage related securities. Bank of America reported a write-down of $600 million and chief executive of JP Morgan said that the loss exposure to collaterized loans is not significant. Investors breathed a sigh of relief after commnets from the executives and Bank of America loan loss that met earlier estimates.

Wal-Mart Stores, the largest retailer, also announced yesterday that the company third quarter sales rose 9% and earnings gained 8%.

Nikkei News reported today 10-year Japanese bonds fell to a 26-month low of 1.49% yesterday, compared to the 1.5% average dividend yield on Topix index stocks.

The World Semiconductor Trade Statistics said yesterday on its website it expects the global semiconductor market to grow 3.8% to $257.2 billion in 2007. The association revised its projection upwards by 1.5% compared to its previous forecast in May of this year. Projections for 2008 and 2009 were maintained at 9.1% and 6.2% growth correspondingly.

Of the Nikkei 225 index shares, Chiba Bank Limited led advancers, rising 10.09%, followed by gains of 8.94% in IHI Corp, 8.70% in JGC Corp and 8.49% in Sumitomo Mitsui Financial Group and 8.19% in Comsys Holdings.

Exporters also gained after the yen retreated for the second day as investors resumed buying high yielding assets that are funded by Japanese loans. The yen was quoted at 111.27 at the close of trade compared to 109.22 against the dollar yesterday. Sony Corporation soared 2.47%, Toshiba Corporation firmed 3.84%, and Toyota Motor Corporation jumped 3.65% on the news.

Chipmakers also gained after the World Semiconductor Trade Statistics, forecasted sales would probably climb this year. Advantest Corp rose 1.99% and Sumco Corporation spiked 7.80% on the news.

Bloomberg news reported today that UBS said in a report it expects steelmaker’s profits to show robust recovery in the fourth quarter, adding that steel prices will remain firm in 2008 buoyed by rising demand in emerging markets such as China and India. Nippon Steel gained 4.64% on the news.

Kajima Corporation led decliners, falling 7.51%, followed by losses in Taiheiyo Cement of 4.89%, in Toho Zinc Company of 3.03%, in Asahi Brewers of 2.04% and Nippon Oil Corp of 1.23%.

Shinsei Bank Limited said today first half net income fell to 23.1 billion yen from 38.8 billion yen a year earlier. The U.S. subprime mortgage slump forced the bank to add $69 million in provisions for loans of such credits, spurring total charges to $172 million. Furthermore, Shinsei Bank said credits related to the U.S. mortgage market total $500 million compared with assets of $92 billion as of March 31. Shinsei Bank closed up 4.62%.

Mitsui & Co reported yesterday its Brazilian affiliate Multigrain SA has bought 100,000 hectares of farmland in western Bahia, western Minas Gerais and Southern Maranhao to secure a stable supply of soybeans and other farm produce. Mitsui & Co rose 0.99%.

Tokyo Electron forecasted yesterday third quarter orders would rise for 170 billion yen from 127.5 billion yen in the previous quarter. Tokyo Electron rose 4.69%.