Freddie Mac Loss Drags Stocks, Oil at $98

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

U.S. market averages see-sawed for the most of the session. Aveerages opened higher on positive outlook from HP, expanded stock buyback from Nordstrom, and lower than expected loss from D R Horton. Market soon focused on losses at Freddie Mac and lost steam in the late afternoon. The minutes of meeting of FOMC suggested that the Fed is worried about eocnomic slow-down than the inflation. At close averages recovered most of the losses but oil reached above $98 per barrel.

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

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average added 51.70 or 0.44% to a close of 13,010.14, S&P 500 increased 0.45% or 6.43 to 1,439.70, and Nasdaq Composite Index gained 3.43 or 0.13% to a close of 2,596.81. In Toronto TSX Composite increased 111.53 or 0.84% to close at 13,459.77.

Of the 30 stocks in Dow Jones Industrial Average, 19 closed higher, 10 closed lower, and one was unchanged.

AIG led the decliners in the index with a loss of 1.9% followed by losses in 1.7%, in Citigroup of 1.3%, in American Express of 1.1%, and in Boeing of 0.7%. Exxon Mobil led the gainers in the index with a rise of 5.3% followed by increases in Microsoft of 2.2%, in IBM and United Tech of 1.2%.

Of the stocks in S&P 500, 261 closed higher, 235 fell, and 4 were unchanged. Thirty two stocks fell more than 3% and twenty two stock increased 3% or more.

Freddie Mac led the decliners in the index with a fall of 29% followed by losses in Fannie Mae of 25%, in E*Trade of 19.7%, in Pulte Homes and Lennar of 9%, in Countrywide and CIT group of 8%, in AMD of 6.7%, and in XL Capital of 5.5%. Nordstrom led the gainers in the index with a rise of 13%, followed by increases in Consol Energy of 8.7%, in Medtronic of 7%, in Dillards of 5.7%%, and in Newmont Mining and Transocean of 5.5%.

In London FTSE 100 Index closed up 105.70 or 1.73% to 6,226.50, in Paris CAC 40 Index increased 74.11 or 1.36% to close at 5,506.68, and in Frankfurt DAX index increased 118.34 or 1.58% to close at 7,630.31. In Zurich trading SMI declined 68.07 or 0.82% to close at 8,338.95.

In Tokyo Nikkei 225 Index added 168.96 or 1.12% to close at 15,211.52, in Hong Kong Hang Seng index closed up 311.04 or 1.13% to 27,771.21, in Australia ASX 200 closed down 109.80 or 1.68% to close 6,425.40. India lost 1.83% or 352.56 to 19,280.80.

In South Korea Kospi Index decreased 21.23 or 1.12% to close at 1,872.24, Thailand closed down 1.09 or 0.13% to 830.05, and Indonesia edged lower 21.95 or 0.83% to 2,624.86.

In Latin Markets Peru led the decliners for the second day in a row with a loss of 4.4% followed by losses in Brazil of 3.5%, in Mexico of 1.96%, and in Chile of 1.70%. Venezuela fell 0.6% but Argentina edged 0.11%.

Bond Yields edged higher on 10-year U.S. bonds to 4.09% and 30-year bonds decreased to 4.48%.

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

Crude oil added $3.39 to close at $98.03 per barrel for a front month contract, up 48.00% for the year, natural gas decreased 31 cents to $7.48 per mBtu, and gasoline futures increased 6.99 cents to close at 245.15 cents per gallon.

Gold edged lower $13.43 in New York trading to close at $791.40 per ounce, silver closed up 34 cents to $14.50 per ounce, and copper for front month delivery increased 4.45 cents to 306.95 cents per pound and in London trading closed down $246.00 to $6,767.00.

Dollar edged lower against euro to $1.4816 and lower to 109.9970 yen.


[R]1:00 New York - Hewlett-Packard Co fourth quarter revenue climb 15%, sets aside $8 billion for share buybacks in 2008.[/R]

Hewlett-Packard reported fourth quarter revenue increase of 15% to $28.3 billion compared with $24.6 billion reported in the year-ago quarter, with three-digit growth in the software unit. Revenue gained sharply across major business lines for the company, but grew at a slower rate of 11% on constant currency.

H-P chairman and chief executive, Mark Hurd said they had ""added over $12 billion of new revenue this year.""

GAAP net income in the quarter rose 28% to $2.2 billion from $1.7 billion from a year ago. Earnings per share in the quarter increased 35% to 81 cents up from 60 cents a year ago. Excluding charges and one-time items, H-P would have earned $2.3 billion, or 86 cents a share.

For the fiscal year 2007, net revenue rose 14% to $104.3 billion and in constant currency increased 10%. GAAP operating profit for the year was $8.7 billion and diluted earnings per share increased to $2.68 from $2.18.

Operating margins gained 1.6 basis points to 9.3% with operating profit climbing to $2.6 billion.

For the quarter, Hewlett-Packard said revenue in the Americas rose 10% to $11.9 billion from a year earlier, and was up 19% to $11.6 billion in Europe, the Middle East and Africa.

Revenue grew 20% in the Asia-Pacific region to $4.8 billion.

When adjusted for the effects of currency, revenue in the Americas grew 9%, in Europe, the Middle East and Africa rose 12%, and in Asia Pacific increased 14%.

Revenue from outside of the United States in the fourth quarter was 67%, with revenue in Brazil, Russia, India and China growing 37% over the prior-year period and accounting for 9% of total revenue.

Personal Systems Group reported a 30% growth in revenue in the quarter to $10.1 billion, as unit shipments gained 31% from a year ago. Notebook revenue increased 49% and desktop revenue increased 15%. Operating profit in the group was $589 million or 5.8% of the revenue, up from 4.3% a year ago.

At Imaging and Printing Group, revenue was up 4% at $7.6 billion. On a year-over-year basis, supplies revenue grew 6%, Commercial hardware revenue grew 5% and Consumer hardware revenue declined 5%. Printer unit shipments increased 5% year over year, with Consumer printer hardware units up 3% and Commercial printer hardware units up 15%.

Enterprise Storage and Servers revenue rose 10% to $5.2 billion. Server revenue increased 78% and storage revenue increased 7%. Business critical systems revenue increased 5%, with Integrity systems growth of 59% offset by declines in PA-RISC and Alpha. Operating profit in the group was $693 million, or 13.5% of revenue, up from $502 million, or 10.7% of revenue,

In the quarter, HP Services revenue increased 7% to $4.4 billion and at HP Software rose 100% to $698 million. Hp acquired Mercury Interactive which contributed to the growth.

Revenue rose to $657 million at the HP Financial Services unit while the Asset Management earned $3.6 billion in cash flow.

For the fiscal year 2007, HP net earnings climbed 17% to $7.3 billion from a year earlier on revenues of $104.3 billion, up from 14% from 2006.

Earnings per share rose 23% to $2.68 from $2.18 reported in the year-ago quarter.

The company said the board had approved $8 billion for the repurchase of shares during 2008.

HP estimates that first quarter 2008 revenue in the region $27.4 billion to $27.5 billion and $111.5 billion at full-year. Earnings are targeted at 75 cents per share for the first quarter and between $3.12 and $3.17 for fiscal 2008.

Analysts surveyed by Thomson Financial expect first quarter revenue at $27.03 billion and $109.55 billion in the fiscal year 2008. Consensus earnings per share are estimated at 77 cents in the quarter and $3.27 in 2008.

HP stock was up $0.38 or 0.77% at $49.82. The stock has traded in the range $38.15 to $53.48 in the previous 52 weeks.


[R]9:45AM New York – U.S. stocks open higher on increased October housing starts and Hewlett Packard and Nordstrom earnings surprised the market.[/R]

U.S. housing starts increased 3% in October from the previous month to a seasonally adjusted 1.229 million annual rate after it was revised lower to 11.4% to 1.193 million according to the Commerce Department. Housing starts in October fell 16% from a year ago. October building permits declined 6.6% to a 1.178 million annual rate from September

Freddie Mac reported third quarter loss of $2 billion after it said that market value of securities it holds has declined in value by $8.1 billion. The company also added that it may reduce its quarterly dividend in the fourth quarter.

Hewlett Packard ((HPQ)) jumped 2% at the opening after it reported fourth quarter revenue increase of 15% to $3.7 billion and operating earnings increase of 38% to $2.6 billion and earnings per share increase to 81 cents from 60 cents.

Nordstrom ((JWN)) jumped 10% after it reported third quarter earnings of $165.7 million or 68 cents per share compared to $135.7 million or 52 cents a year ago. Total sales increased 5.3% and comparable sales in the quarter inched 2.2% higher. The company expanded its stock-buyback program by $1 billion to $2.5 billion.

D R Horton, home builder, ((DHI)) added 5% after it reported smaller than expected loss. The company reported in the fourth quarter loss of $50.1 million or 16 cents per share compared to income of $277 million or 88 cents per share a year ago.

Euro edged to a record high against dollar and gold jumped $11.50 to $789.50 per ounce. Front month oil contract increased 95 cents to $95.64 per barrel.

Asian markets closed lower ahead of the U.S. housing starts report. Philippines led the decliners with a sharp drop of 2.9% followed by losses in India of 1.8%, in Australia of 1.7%, and in Korea of 1.1%. Hong Kong and Japan led the gainers in the region with a rise of 1.1%.Singapore added 0.8%.

European markets ahead of the U.S. opening were trading mildly higher. Norway led the gainers in the region with a rise of 0.9% followed by increases in Germany of 0.8%, in France and Italy of 0.7%, and in UK of 0.4%.

Broker-dealer firm ICAP jumped 10% after it said that the annual profit will be ahead of analysts estimate on higher than normal market volatility.

European banks jumped after a week of decline however the banks gave up most of the gains at the opening by mid-day trading. Barclays jumped 3%, BNP Paribas increased 2%, and Commerzbank edged up 0.6%.

Real estate companies rebounded after a week of decline. U.S. commercial realty brokers have lost more than 50% of their value in the last three months of trading. CB Richard Ellis has lost 50% from its peak and Jones La Salle has declined 30% from its recent highs.

[R]5:00AM New York, 7:00PM Tokyo – Tokyo stocks rebounded on weak yen, falling metal prices, and the U.S. private equity investments.[/R]

Deals and weakening yen leads Tokyo up 1.12%. The Financial Services Agency considers relaxation of bank investment restrictions.[/R]

Japanese stocks recovered from a 1.5% slump by mid-day to close up 1.12% on deals and a weakening yen.

In Tokyo trading Nikkei 225 gained 1.12% or 168.96 to 15,211.52, while the Topix Index gained 12.66 to 1,469.27.

In the first section of the Tokyo Section Exchange 11 billion shares worth 1.2 trillion yen were traded and in the second section 394 million shares value at 5.7 billion yen changed hands.

Of the Nikkei 225 stocks 148 gained, 67 retreated, and 10 were unchanged. Shinsei Bank Limited led gainers, rising 9.34% after the U.S. investment fund J.C. Flowers & Company announced its plans to raise its stake in Shinsei Bank Limited to help its capital base.

Exporters also gained as the yen weakened from 109.76 to 110.14 against the dollar.

Metal prices declined as comments by Governor of the China Central Bank Zhou Xiaochuan that the central bank would continue to “withdraw liquidity” to cool economic expansion stoked expectations demand for metals might fall. Copper futures plunged 5.4% as a result. However, Sumitomo Metal Mining and Nippon Mining gained 4.26% and 1.49% respectively.

Canon Incorporated rose 0.18%, Honda Motor Corporation climbed 1.32% and Sony Corporation rose 0.19%.

Shinsei Bank Limited shareholders agreed on an offer led by U.S investment fund J.C. Flowers & Company LLC to increase its equity in the financial institution to 32.6% for 202 billion yen. The offer, at 425 yen per share, is at a 17% premium at yesterday’s closing price. Shinsei Bank will sell 50 billion yen worth of new shares as part of the deal.

Nasdaq.com reported yesterday that Japan’s Financial Services Agency is considering relaxing rules to allow banks to fully trade commodities and futures and ad releasing a ban on bank involvement in greenhouse gas emission trading. The move is meant to broaden bank’s operations by investing in non-financial firms operated through subsidiaries.

Nikkei News reported today Cerberus Partners LP owned Aozora Bank Limited will ally with Sumitomo Trust & Banking Company in real estate, capital management and private equity investments. The tie-up would allow Sumitomo Trust and Aozora’s debt collection unit to boost corporate clients list and give Aozora’s customers access to loans and property backed loans.

Bloomberg news reported today that Boeing is in talks with Toray Industries to expand a $6 billion contract and supply carbon-fiber sheet for the 787 Dreamliner, the passenger jet whose production is scheduled to begin in November next year. Toray Chief Executive Officer Sadayuki Sakakibara said the company might raise production of re-inforced plastic sheets to supply 14 787 a month in 2010.


Of the Nikkei 225 index shares, Shinsei Bank Limited led the gainers with a rise of 9.34%, followed by rises in Chuo Mitsui Trust of 7.77%, in Tosoh Corporation of 6.99%, in Sojitz Corporation of 6.75, and in Mitsubishi UFJ Nicos of 6.64%.

Yokohama led the decliners in the Nikkei 225 index stocks with a loss of 4.29%, followed by losses of 3.40% in Nippon Sheet Glass, 3.16% in Sumpo Japan Insurance, 2.99% in Tokai Carbon Company, and 2.65% in Shimizu Corporation.

Goldman Sachs yesterday lowered its rating to ‘sell’ on Citigroup and estimated that the bank may have to record a loss on collaterized debt obligations up to $15 billion over the next two quarters, adding to $11 billion in writedowns this month.