Global Investors Sell as Worries Mount

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

U.S. stocks declined as investors sentiment deteriorated on credit market malaise, weak forecast for economy, and rising oil, and falling dollar. Dow and S&P 500 lost 1.6% and Nasdaq declined 1.3%. Of the stocks in S&P 500, 80% stocks fell. Oil recovered from its worst level of the day but came close to reaching $100 a barrel. Gold inched higher to $800. Hong Kong, India, Brazil, and Mexico fell sharply.

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

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average lost 211.10 or 1.62% to a close of 12,799.04, S&P 500 decreased 1.59% or 22.93 to 1,416.77, and Nasdaq Composite Index declined 34.66 or 1.33% to a close of 2,562.15. In Toronto TSX Composite decreased 179.19 or 1.33% to close at 13,280.58.

Of the 30 stocks in Dow Jones Industrial Average, 2 closed higher, 28 closed lower, and none were unchanged.

AIG led the decliners in the index for the second day in a row with a loss of 5.5% followed by declines in American Express of 4.3%, in Intel of 3.1%, and in Verizon of 2.4%. General Motors and Caterpillar were the only two gainers in the index, rose with fractional gains.

Of the stocks in S&P 500, 98 closed higher, 398 fell, and 4 were unchanged. Forty three stocks fell more than 3% and twelve stocks increased 3% or more.

E*Trade led the gainers in the index with a rise of 11% followed by increases in Deer & company of 6%, in Target of 4.8%, in U.S. Steel of 4.4%, and in EDS of 4.3%. Patterson Companies led the decliners with a loss of 22% followed by declines in Pulte Homes of 12%, in XL Capital of 8%, in Countrywide of 7.1%, and in MBIA of 6.8%.

In London FTSE 100 Index closed down 155.60 or 2.50% to 6,070.90, in Paris CAC 40 Index decreased 125.38 or 2.28% to close at 5,381.30, and in Frankfurt DAX index decreased 111.89 or 1.47% to close at 7,518.42. In Zurich trading SMI declined 213.53 or 2.56% to close at 8,125.42.

In Tokyo Nikkei 225 Index declined 373.86 or 2.46% to close at 14,837.66, in Hong Kong Hang Seng index closed down 1,153.02 or 4.15% to 26,618.19, in Australia ASX 200 closed down 41.10 or 0.64% to close 6,384.30. India lost 3.52% or 678.18 to 18,602.62.

In South Korea Kospi Index decreased 65.25 or 3.49% to close at 1,806.99, Thailand closed down 22.47 or 2.71% to 807.58, and Indonesia edged lower 61.24 or 2.33% to 2,563.62.

In Latin Markets Peru led the decliners for the third day in a row with a loss of 2.5% followed by losses in Brazil of 2.81%, in Mexico of 2.15%, in Chile of 1.51%, and in Argentina of 1.32%. Venezuela fell 0.9% and Colombia declined 0.63%.

Bond Yields edged lower on 10-year U.S. bonds to 3.99% but closed at 4.02% and 30-year bonds decreased to 4.46%.

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

Crude oil fell $1.37 after reaching a record high of $99.48, to close at $96.66 per barrel for a front month contract, up 45.00%. U.S. Department of Energy reported that at the end of the last week inventory of crude fell by 1.1 million barrels to 313.6 million barels, natural gas increased 7 cents to $7.55 per mBtu, and gasoline futures decreased 1.44 cents to close at 243.71 cents per gallon.

Gold edged higher $7.20 in New York trading to close at $798.60 per ounce, silver closed down 8 cents to $14.42 per ounce, and copper for front month delivery decreased 13.95 cents to 293.00 cents per pound and in London trading closed up $1.50 to $6,768.00.

Dollar edged lower against euro to $1.4828 and lower to 108.5855 yen.


[R]2:00PM New York-Nordstrom Inc third quarter earnings rise 22% but company lowers profit forecast.[/R]

Nordstrom Inc ((JWN)) reported third quarter sales increase of 5.3% to $1.97 billion compared with $1.87 billion posted in the year ago. Same-store sales increased 2.2 percent in the quarter from the last year.

The department store, however, lowered same-store sales guidance for the fourth quarter to flat from earlier estimates of a 2% to 3% gain, citing lower sales trends.

In September, the National Retail Federation warned that sales growth in the holiday shopping season would hit a five-year low.

Nordstrom said net income jumped 22% to $165.7 million from $135.67 million a year earlier. Earnings surged 30% to 68 cents per share from 52 cents per share last year. Analysts polled by Thomson Financial predicted profits of 52 cents per share.

Nordstrom will pay a quarterly dividend of 14 cents per share.

Included in the results is a gain of $20.9 million or $0.09 per diluted share from the sale of the Faconnable business in the quarter. Excluding these items, earnings per share were up 13% at 59 cents.

The company said the third quarter started later this year and included more high-volume fall shopping days, versus a year ago. This timing shift positively impacted sales results for the third quarter of 2007.

In the quarter, gross profit, as a percent of sales, decreased 38 basis points compared to last year''s third quarter, dragged by higher markdowns on merchandise.

Selling, general and administrative expenses, as a percent to sales, decreased 70 basis points versus the same period 2006 primarily due to reduced performance based incentives.

Nordstrom repurchased approximately 16.4 million shares of its common stock during the third quarter for $750 million.

The board approved an additional $1 billion for stock buy-backs in the quarter, bringing the total for the nine months to $2.5 billion.

After opening three new stores in the third quarter, Nordstrom is planning to spend $3 billion in capital expenditure over the next five years of which eight percent will be used for new store openings.

In the nine months to November 3rd, revenues climbed 6.8% to $6.31 billion from $5.93 billion same period last year.

Earnings rose 12.8% to $502.95 million or $1.98 per share from $445.66 million or $1.67 per share in the year ago quarter.

Nordstrom now expects profits in the fourth quarter between 88 cents and 92 cents per share, down from the previously forecast range of 99 cents to $1.02 per share.

The monthly same-store sales rates in November are expected to be above the anticipated quarterly rate. In December, the monthly same-store sales rate is expected to be below the anticipated quarterly rate.

For the full year, Nordstrom is predicting earnings in the range of $2.78 to $2.82 per share, down from $2.80 to $2.86 per share.

Nordstrom shares soared 12.1% in Tuesday to $34.21 after the department store released its earnings. At the mid-day trading Nordstrom increased $1.02 to $35.23. Over the last 52 weeks, Nordstrom has traded in the range $30.36 to $59.70.

Analysts estimate fourth quarter earnings of 94 cents per share and $2.76 per share for the fiscal 2007.

Wal-Mart Stores, Inc reported last week third quarter net sales increased 8.8% to $90.9 billion from $83.5 billion from a year ago. Net income from continuing operations rose 7.9% to $2.86 billion from $1.65 billion a year earlier.

Nordstrom, Inc operates 157 stores located in 28 states in the U.S. The company also runs 101 full-line stores, 51 Nordstrom Racks, two Jeffrey boutiques, one free-standing shoe store, and two clearance stores.


[R]1:30PM New York, 11:00PM Mumbai - Sensex fell for the third day in a row.[/R]

The Sensex in Mumbai dropped 3.5% or 678.18 to close at 18,602.60, third biggest fall this week on heavy selling of stocks in metal and capital goods sector. Banking and IT shares fell sharply.

NTPC, Bharat Heavy Electricals, ITC, and Reliance Energy led the decliners in the index.

A record high crude oil prices nearing $100 a barrel and a weak global markets sentiment affected trading in India.

Local news reports suggested that the government may increase capital gains tax by 5% sparking a sell-off by foreign institutions.

On Tuesday net sales by FII''s amounted 4,201.14 crore rupees while data released by the National Stock Exchange, the FIIs were net sellers of index futures to the tune of 2,897.67 crore rupees and bought index options worth 35.34 crore rupees.

As 614 shares advanced on the BSE, 2,184 retreated while 29 remained unchanged while all index stocks declined. Turnover on the BSE stood at 7,301 crore rupees pushed by revenues recorded by Reliance companies.

A latest report jointly prepared by PricewaterhouseCoopers, the World Bank and IFC has revealed that India has a better tax system as compared to its neighbor China. In comparison of the two counties, the report said India has lower tax rates and flexible way of payments than the tax payments system in China.

Of the index shares, Reliance Industries fell 2.3% to 2,722 rupees on news that it has signed production sharing agreement for two exploratory blocks 34 and 37 located in the Jeza basin of eastern Yemen. Reliance Industries already has 7 overseas exploratory blocks.

ITC retreated 6% to 184.85 rupees on news that it is preparing for a series of acquisitions to strengthen its food business.

ICICI Bank fell 5.5% to 1,003.1 rupees, HDFC Bank fell 3% to 1,583 rupees while and State Bank of India slid 5.5% to 2,154.65 rupees.

NTPC shed 8% to 239.5 rupees. Tata Power Company lost 4.8% to 1,159.25 rupees, Reliance Energy retreated 5.7% to 1,692.85 rupees while PowerGrid Corporation of India shed 7.7% to 146.9 rupees.

Bharat Heavy Electricals fell 6.3% to 2,486.1 rupees while and Suzlon Energy slid 6.7% to 1,905 rupees. Metal share fell on global metal prices falls. Sterlite Industries shed 7.7% to 885.5 rupees, Hindalco Industries retreated 5% to 184.55 rupees, Steel Authority of India closed lower at 6.9% to 245.45 rupees.

Tata Steel declined 4.4% to 822.rupees on news it is coming out with a mega rights issue of about 10,000 crore rupees as it seeks to repay the ''bridge loans'' raised for funding acquisition of British steel behemoth Corus. Tata Steel UK had raised 3.15 million of debt for financing the acquisition.

The issue will open on November 22nd. It will include 12.18 crore shares of 300 rupees each to be issued on rights basis in the ratio 1 to 5 and cumulative preference shares of 100 rupees to be converted into equity on September 1st, 2009.

Wipro slid 2.7% to 436.55 rupees, Satyam Computer was down 1.6% to 412 rupees, Infosys dropped 1% to 1,548.1 rupees while Tata Consultancy Services slumped 1.3% to 948.5 rupees.

DLF declined 4.1% to 870.5 rupees. Indiabulls Real Estate shed 6.9% to 615.3 rupees and Unitech slid 5.5% to 359.35 rupees.

ACC shed 0.5% to 1,079.4 rupees on the news that it had sold surplus assets, including land in Haryana state, for 205 crore rupees. Reliance Natural Resources declined 9.8% to 149.75 rupees.

Reliance Petroleum clocked the highest turnover of 400.9 crore rupees on the BSE. Reliance Natural Resources, Reliance Industries, Reliance Capital and Reliance Energy were other actively traded stocks on the BSE.

[R]1:00PM New York, 6:00PM London - UK stock fell led by Northern Rock. Oil prices peaks at $99. UK interest rates are likely to remain unchanged.[/R]

In London trading, FTSE 100 declined 2.5% or 155.6 at 6,070.9 on broad selling led by Northern Rock, and weakness in financial and resource stocks. BG Group led the advancers. Of the FTSE 100 index stocks, only 5 advanced while the rest retreated.

The BoE''s Monetary Policy Committee voted 7 to 2 in favour of holding the UK interest rate at 5.75%, according to the minutes from MPC meeting held between November 8th and 9th and released by the BoE today.

The UK interest rates may remain unchanged at 5.75% after seven out of nine policy makers at the Bank of England voted to keep the rates unchanged.

Deputy governor John Gieve and David Blanchflower were the only policy makers who voted for a quarter point reduction to borrowing costs. The two argued that the five increases in rates since August 2006 was sowing the housing market and any delay in lowering the rates will only trigger a wider slow down in the economy.

However, of the policy makers who voted against a move including BoE governor Mervyn King said while there had been a clear change in financial markets and credit conditions, the evidence of significant effects on household or business activity was so far limited.

Oil prices reached a record high on Wednesday as the price of a barrel reached near $100. Prices rose in U.S. trading of Tuesday and were higher in Asia with the light sweet crude West Texas Crude reaching a peak of $99.29. In the UK, Brent crude added 91 cents to a record $96.40 a barrel.

Renewed supply fears and concerns over the weakness of the U.S. dollar lifted oil prices higher. Oil price may rise if the U.S. weekly inventory report show larger decline that expected. Oil price breached the November 7 record prices of $98.62 a barrel are expected to remain high as the beginning of winter in the northern hemisphere approaches.

Oil has risen more than 60% since the beginning of the year and over 40% over the past three months.

Of the FTSE 100 shares, Northern Rock led the decliners at 12.6% on reports that some companies were still interested in taking over the bank but at a lower than yesterday’s close price. After the seventh decline in a row, Northern Rock has lost more than 90%.

In London, other financial share traded lower. Barratt Development shed 5.5%, Standard Life retreated 5.4%, Home Retail slumped 5.2%, Barclays traded lower at 5%, Standard Chartered lost 4% while Bank Scotland fell 3.7%.

Mining stocks were lower. Vedanta Resources lost 5.1%, Anttofagasta fell 4.9% while Anglo America traded lower at 4.5% as platinum and gold prices fell.

Of the UK shares, BG Group surged 2.5%, Royal Dutch SH-B went up 1.8%, Royal Dutch SH-A jumped 1.7%, Enterprises Inns clumped 1.5% while Imperial Tobacco traded firmer at 0.2%.

[R]11:00AM New York – Weakness in the U.S. stocks drag European and Latin markets.[/R]

Stocks in New York fell in the morning trading as oil approached $100 a barrel, gold jumped, dollar edged to record low against euro, and economic slow-down inflicted by the on-going housing market correction worried investors.

Dow Jones Industrial Average fell 164 to 12,846, Nasdaq declined 45 to 2,550, and S&P 500 lost 21 to 1,418.

Of the stocks in the S&P 500 index, 437 declined, 61 rose, and 2 were unchanged. Patterson Company led the decliners in the index with a fall of 22%, followed by losses in Countrywide of 10%, in CIT Group of 8%, in XL Capital and MBIA of 7%. E*Trade led the gainers in the index stocks with a rise of 9% followed by increases in EDS of 4%, in Abercrombie and Terex of 2.3%.

Ten year treasury yield fell below 4% for the first time since 2005 after the Fed lowered its expectations for the economic growth. The bond yields declined to 3.99% before it settled at 4.02% in the morning trading.

With the slow-down in the U.S. economy, weakness in the housing market, and record low value of dollar in the international markets, investors are speculating the Fed may be forced to lower interest rate again. Short term bonds of 2-year duration and shorter increased in prices again today.

Separately the spread, between the 3month Treasury bill yield and interest rate charged by banks to each other known as Libor rate, jumped to four-month high indicating that investors are expecting further losses in the credit markets. Libor rate, The London inter-bank rate increased 2 basis points to 5.02%.

Ten largest markets across the European region fell on the weakness in the U.S. market, worries related to sub-prime losses in the European and American banks, and strength of euro. Belgium led the decliners in the region with a loss of 2.7% followed by losses in France and Spain of 1.9%, in the Netherlands and Switzerland of 1.7%, and in the U.K. of 1.6%.

Goldman Sachs lowered its ratings on Societe Generale and Credit Suisse. Worries related to sub-prime lending exposure and structured financing played a key role in the downgrade decision. Societe Generale fell 6.5% and Credit Suisse declined 3.6%.

Asian markets closed sharply lower on the rising oil, falling dollar, and worries that the U.S. is slowly inching toward a recession.

Hong Kong led the decliners in the region with a loss of 4.2% followed by losses in India and Korea of 3.5%, in Singapore and Thailand of 2.7%, in Indonesia of 2.3%, in Taiwan of 2.3%, in Philippines of 0.9%, and in Australia of 0.6%.

Stocks in Korea fell for the fifth day in a row and weakness persisted in trading in Hong Kong and Shanghai.

Banks, realty, life insurance, and export companies fell sharply in Tokyo trading as dollar fell below 109 yen level.

[R]7:00AM New York, 8:00PM Tokyo - Record oil price, U.S. sub-prime losses and weakening yen leads Tokyo down 2.5%. October trade surplus soars 66.1% to 1.02 trillion yen.[/R]

Japan’s stock averages plummeted on resurgent fears on subprime losses and as the yen climbed to a two-year high against the dollar.

In Tokyo trading Nikkei 225 slid 2.46% or 373.86 to 14,837.66, while the broad Topix Index fell 30.55 to 1,438.72.

U.S. mortgage finance company, Freddie Mac posted a second quarter net loss of $2 billion on higher provisions of credit losses, adding that the housing slump would continue through year end. Separately new home construction in the U.S. in October fell and new permits for home building fell as well. The decline in housing market may take longer than anticipated earlier by the most analysts.

Financial stocks fell on the news. Mitsubishi UFJ Financial Group retreated 1.60%, Mizuho Financial Group declined 4.08% and Sumitomo Mitsui Financial Group dropped 0.87%.

In the first section of the Tokyo Stock Exchange 9.0 billion shares valued at 1.1 trillion yen were traded and 463 million shares worth 6.7 billion yen were traded in the second section.

Of the Nikkei 225 stocks 32 gained, 191 declined, and 2 were unchanged. Mitsubishi Paper Mills Limited led advancers with a rise of 4.81% on news that Oji Paper Company Limited would pay 1.8 billion yen for a 2.34 stake in company as part of a production alliance, followed by Chuo Mitsui Trust rising 7.77%.

Oil prices for January delivery rose 1.3% to $99.29 per barrel. Inpex Holdings edged up 3.60%. Mitsubishi UFJ also raised the rating of the stock to “outperform”.

Japan’s Ministry of Finance announced today in its preliminary October trade statistics. Exports soared to a record 13.9% on increased exports of automobiles and electronics to Asia and Europe that helped offset a 1.5% decline of shipments to the U.S. Analysts had forecasted a 12.2% rise in aggregate exports.

According to the statistics, exports to China jumped 19.2% from an increase of 16.4% in September to a record 1.17 trillion yen. Shipments to Asia rose by a seasonally adjusted 12.9%, while exports to Europe spiked 23.7% to a record 1.14 trillion yen.

However, shipments to the U.S. declined 1.5% from a 9.3% slump in September to 1.5 trillion yen. Overally, imports rose 7%, yielding a trade surplus of 66.1% to 1.02 trillion yen. Rising oil prices and a strengthening yen against the dollar are threatening export gains in November.

The yen firmed to 109.94 from 108.98 against the dollar as minutes from the U.S. Federal Reserve October meeting showed revision of 2008 economic growth forecast to 1.8% from an estimate of 2.5% and 2.7%. Exporters fell on the news. Canon dipped 1.82%, Sony Corporation declined 1.88% and Toyota Motor Corporation dropped 2.78%.

Of the Nikkei 225 index shares, Mitsubishi Paper Mills Limited led gainers with a rise of 4.81%, followed by rises of 4.22% in Nippon Sheet Glass, 3.60% in Inpex Holdings, 3.49% in Toho Company Limited and 2.78% in Shizuoka Bank.

Mitsubishi Paper Mills Limited gained after announcing Oji Paper Company would pay 1.8 billion yen for a 2.34% stake in the company.

Nippon Sheet Glass Company rose after rebounded from a loss in the first quarter to record an increase in net profit from 3.86% to 4.55% in the second quarter. Sales in the three months to September also gained 2.9% to 216.1 billion yen. First half net income also jumped to 51.5 billion yen from 20.3 billion yen, more than the 47 billion yen forecasted. Net income for the fiscal year is expected to firm to 53 billion yen and full year sales are expected to rise 25% to 850 billion yen.

Sompo Japan Insurance led the decliners in the Nikkei 225 index with a drop of 15.58%, followed by losses in Sumco Corporation of 12.04%, Toho Zinc Company Limited of 8.37%, in Taiheiyo Cement of 7.49%, and in Fuji Heavy Industries of 7.39%.

Sompo Japan Insurance slumped the most in a decade after announcing it might have to pay 30 billion yen in subprime related insurance claims. Insurance company Millea Holdings fell 3.36% as well.

Mitsui O.S.K. Lines fell 5.52% and Kawasaki Heavy Industries Limited plunged 0.57%.