Nasdaq, Dow Down 1.7%, Europe, Brazil Drop

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

U.S. market averages fell sharply as housing market worries intensified. Dow and Nasdaq lost 1.66% and S&P 500 declined 1.75%. Lowes reported lower than expected earnings and issued a cautious earnings guidelines and a rating downgrade to sell on Citigroup from Goldman Sachs hurt the banking stocks. The gloom in the market led stocks in banking, retail, and housing sectors lower. Of the S&P 500 index stocks, 435 declined and 126 fell more than 3%. Peru and Brazil fell sharply.

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

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average fell 218.35 or 1.66% to a close of 12,958.44, S&P 500 declined 1.75% or 25.47 to 1,433.27, and Nasdaq Composite Index lost 43.86 or 1.66% to a close of 2,593.38. In Toronto TSX Composite declined 182.12 or 1.35% to close at 13,348.24.

Of the 30 stocks in Dow Jones Industrial Average, 3 closed higher, 27 closed lower, and none were unchanged. General Motors led the decliners in the index with a loss of 8.5% followed by decreases in Citigroup of 5.6%, in AT&T of 4.6%, and in JP Morgan of 4%. Altria Group led the gainers with a rise of 0.9% followed by increases in McDonalds of 0.8% and in 3M of 58%.

Of the stocks in S&P 500, 63 closed higher, 435 fell, and 2 were unchanged. One hundred and twenty six stocks fell more than 3% and only one stock closed at 3%.

Intercontinental Stock Exchange led the gainers with a rise of 3%. E*Trade led the decliners with a fall of 14% followed by losses in Countrywide of 13%, in Unisys of 9%, in Lennar of 8.7%, in Pulte, Fannie Mae, and Freddie Mac of 7%, and in Lowe’s of 6.7%.

In London FTSE 100 Index closed down 170.40 or 2.71% to 6,120.80, in Paris CAC 40 Index decreased 91.06 or 1.65% to close at 5,432.57, and in Frankfurt DAX index lost 100.29 or 1.32% to close at 7,511.97. In Zurich trading SMI declined 207.92 or 2.45% to close at 8,270.88.

In Tokyo Nikkei 225 Index fell 112.05 or 0.74% to close at 15,042.56, in Hong Kong Hang Seng index closed down 154.26 or 0.56% to 27,460.17, in Australia ASX 200 closed up 73.30 or 1.13% to close 6,535.20. India lost 0.33% or 65.00 to 19,633.36.

In South Korea Kospi Index decreased 32.73 or 1.70% to close at 1,893.47, Thailand closed down 17.93 or 2.11% to 831.14, and Indonesia edged lower 21.89 or 0.82% to 2,646.81.

In Latin Markets Peru led the decliners with a loss of 5.3% followed by losses in Brazil of 3.5%, in Chile of 1.96%, in Argentina of 1.7% but Mexico closed 1.6% higher.

Bond Yields edged lower on 10-year U.S. bonds to 4.06% and 30-year bonds decreased to 4.47%.

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

Crude oil added $0.80 to close at $94.64 per barrel for a front month contract, up 45.00% for the year, natural gas decreased 21 cents to $7.79 per mBtu, and gasoline futures increased 0.62 cents to close at 238.16 cents per gallon.

Gold edged lower $0.430 in New York trading to close at $787.00 per ounce, silver closed down 35 cents to $14.16 per ounce, and copper for front month delivery lost 17.40 cents to 302.50 cents per pound and in London trading closed up $107.00 to $7,013.00.

Dollar edged lower against euro to $1.4666 and lower to 109.81 yen.

[R]1:00PM New York - Starbucks fourth quarter profit jumped 35%, as company lowers sales and earnings guidance.[/R]

Starbucks Corp ((SBUX)), the world''s largest coffee chain, reported fourth quarter revenue increase of 22% to $2.4 billion from $2 billion a year ago and warned of a difficult fiscal 2008.

The company said it expected U.S. consumers to buy less of lattes and espressos in the next quarter adding that rising dairy costs would also dent profits. Revenues in the domestic market climbed 19% to $1.9 billion in the quarter.

Starbucks chief executive Jim Donald said in a conference call last week the company was planning its first-ever-countrywide TV advertisement campaign to attract customers.
It said it would open 2,500 stores in its 2008 financial year, 100 less than planned originally.

For the quarter, international revenue increased 31% to $472 million compared with $361 million last year. At global consumer products group revenue gained to $33 million.

Starbucks said that fourth quarter net income jumped 35.9% to $159 million from $117 million a year earlier. Operating margins rose 30 basis points to 10.2%

Per share earnings in the quarter increased 40% to 21 cents from 15 cents a year ago. Excluding $17 million accounting charge in 2006, earnings gained 18% and earnings per share increased 24%.

Same-store sales, a key measure of a retailer''s health, increased 4% in the quarter, said the company, which was within its long-term target of 3% to 7%.

Business in overseas stores was healthier, with traffic rising 5% and average transaction value increasing 1%.

For the full-year to September 30, revenues gained 21% to $9.4 billion from $7.8 billion. Revenues from company operated retail rose similarly to $6.6 billion, driven by opening of 1,342 new stores in the year. Specialty revenues were up 17% at $1.4 billion.

Comparable store sales rose 5% on a 4% increase in the median value per transaction.

For fiscal 2007, operating income increased to $1.1 billion, compared to $894 million for fiscal 2006. Operating margin fell 30 basis points to 11.2% due to higher costs of sales.

Net income rose 19.3% to $673 million or 87 cents per share from $564 million or 71 cents per share in the year ago quarter. Excluding the accounting charge, income rose 16% and earnings per share gained 19%.

In the year, Starbucks net cash flow from operating activities totaled $1.3 billion, compared to $1.1 billion in the same period a year ago.

The company repurchased 33.0 million shares at a cost of $1 billion. In 2007, and at the end of the fiscal fourth quarter, 13.5 million shares remained available for repurchase.

Starbucks lowered its earnings guidance prompted by falling consumer spending in the U.S. The company, which operates more than 15,000 stores worldwide, has guided total revenue growth of 17% to 18% in fiscal year 2008.

It expects same store sales growth in the range of 3% to 5%, compared with its prior estimate of 3% to 7%.

Earnings per share for the year 2008 are targeted in the range of $1.02 to $1.05, representing growth of 17% to 21% over fiscal 2007. Starbucks had previously anticipated earnings growth between 20% and 22%.

Capital expenditure is estimated to remain flat at $1.1 billion.

In after-hours trading Friday, shares of Starbucks fell $1.90, or 7.9%, to $22.20. It last traded at $23.17 on Friday and fell further in the morning trading today to $22.46. In the past 52 weeks, the stock has traded in the range $21.77 to $37.54.

Analysts surveyed by Thomson Financial are targeting a one-year price of $33.94.


[R]11:00AM New York – U.S. market averages declined after Lowe’s reported lower than expected earnings and Swiss Re booked a large loss in sub-prime lending.[/R]

Dow Jones Industrial Average declined 160 to 13,020, Nasdaq fell 37 to 2,599, and S&P 500 lost 21 to 1,437. Housing market weakness and lower than expected earnings from Lowe’s led the indexes lower.

Lowe’s reported third quarter net income declined 10.2% to $643 million or earnings per share fell 6.5% o 43 cents from 46 cents. For the fourth quarter the company expects comparable same stores to decline 3% to 5% and total sales to increase 3%. Earnings per share in the quarter are expected in the range of 25 cents to 29 cents.

Citigroup declined 5% or $1.77 after analyst at Goldman Sachs estimated that the bank is likely to lose $15 billion in leveraged loans in the next two quarter.

European markets fell at mid-day after the opening at the U.S. market. The persistent housing market worries and lower than expected earnings form Lowe’s, home products retailer in the U.S., confirmed the rapidly slowing housing market.

Swiss Re dropped 11% after it declared after-tax loss of SFr980 million in the month of October from the credit default swaps of derivative exposure. The re-insurer expects to earn of 1.47 billion in the third quarter and still expects to be profitable for the full year.

The news quickly sent the insurance companies lower with Zurich Financial Services leading the decliners with a loss of 3.6%, in Allianz of 2.5%, in AXA of 2.7%.

Northern Rock dropped 15% after the local news report suggested that the mortgage lender may be taken over by the UK government. The takeover bids received by the bank have been below the banks expectations.

Asian markets fell across the region on the worries that the U.S. housing market may weaken further and hurt the domestic banks and slow down the exports from China and Japan.

Thailand led the decliners in the region with a loss of 2.1% followed by losses in South Korea of 1.7%, in Taiwan of 1%, in Singapore of 0.9%, in Indonesia of 0.8%, in Malaysia of 0.4%. Philippines led the gainers with a rise of 1.3% followed by increases in Pakistan of 1.2%, and in Australia of 1.1%.

Chinese authorities have asked banks not to issue any commercial or project loans till the rest of the year. Chinese economy has been growing at more than 10% and the authorities are trying to control the rising inflation and economy from overheating. Real estate, steel projects, and mining sector are likely to suffer fro the curtailed lending. Profits at banks are likely to come into sharp focus. The banks in China and Hong Kong fell on the worries that the current lending freeze will curtail earnings.


[R]5:00AM New York, 7:00PM Tokyo- Tokyo retreats 0.74% on stronger yen. Prime Minister Yasuo Fukuda says subprime crisis has not had a major impact on economy.[/R]

In Tokyo trading Nikkei 225 retreated from a 0.3% advance by mid-day to close down 0.74% or 112.05 to 15,042.56 and Topix Index fell 15.06 to 1,456.61.

In the first section of the Tokyo Stock Exchange 7.6 billions shares worth 917 billion yen were traded and 255 million shares valued at 4.1 billion yen changed hands in the second section.

Of the Nikkei 225 stocks 72 gained, 142 declined, and 9 were unchanged. Shizuoka Bank Limited led advancers with a gain of 4.60% after Resona Holdings lifted its full year profit forecast by 9.5% and didn’t announce a writedown on subprime loan investments.

Japan Times reported yesterday 21 financial institutions are in an alliance to acquire temporarily nationalized bank Ashikaga Bank for 310 billion yen. 75 billion yen would be jointly contributed by the Bank of Yokohama, Toho Bank, Gunma Bank, Joyo Bank, Chiba Bank, Yamanashi Chu Bank, Hachijuni Bank and Shizuoka. Nikko Citigroup Limited would pay for another 75 and 80 billion-yen.

Nomura Securities Company is also leading another consortium that is vying for the bank that was put under state control in 2003.

Of the Nikkei 225 index, Shizuoka Bank led gainers, rising 4.60%, followed by increases of 4% in Bank of Yokohama, 3.87% in Toho Company Limited, 3.70% in Fast Retailing, and 3.09% in Chiba Bank Limited.

Shizuoka Bank gained after Resona Holdings raised its full year profit forecast by 9.5% and didn’t announce any writedowns on subprime loan investments, stoking expectations that losses on sub-prime securities might be limited. The bank also is part of an alliance by twenty one financial institutions to acquire nationalized bank Ashikaga Bank.

Tosoh Corporation led decliners in the Nikkei 225 index stocks with a drop of 8.53%, followed by losses of 7.69% in Komatsu Limited, of 7.67% in Sojitz Corporation, of 7.34% in Mitsui Engineering & Shipbuilding, and of 7.18% in Sumitomo Heavy.

Nikkei news reported today Komatsu Limited would build a factory in Kanazawa, Ishikawa Prefecture, for assembling ultralarge coal and iron ore excavators for export to China, Indonesia and other Asian countries. The facility is expected to open in August 2009.

The Wall Street Journal reported China’s regulators have ordered banks to freeze lending until the end of the year. Authorities in China are making efforts to prevent the economy from overheating. Machinery makers and trading houses fell on the news. Mitsui Engineering & Shipbuilding Company fell 7.34%, Kawasaki Heavy Industries plunged 5.10% and Mitsui & Company plummeted 6.49%.

Exporters declined as the yen firmed to 110.54 from 110.52 against the dollar on the comments by the Federal Reserve Bank of Minneapolis President Gary Stern foreclosures would likely rise and homebuilding would remain subdued. Canon slumped 0.36% and Sony Corp climbed down 0.56%

Meiji Dairies Corp slumped the most in 16 months by 6.35% after Daiwa Institute cut its rating to “underperform”. Last week the company cut its net income forecast 23% to 10.6 billion yen for the year ending March 31. The company’s profits fell 23% to 7.88 billion yen against the forecasted 8.6 billion yen as sales of yoghurt plummeted.