Weakness in Financials Drag U.S. Stocks

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

U.S. stocks were caught again in a downward draft as investors worried the impact of credit crunch and ongoing housing market correction. Dow lost 1.8%, S&P 500 declined 2.3%, and Nasdaq lowered 2.2%. Of the stocks in S&P 500 index, 450 declined and 48 closed higher. HSBC decided to support with $35 billion in funding its structured investment vehicles. UBS analyst downgraded Fannie Mae and Freddie Mac dragging brokerage and other financial sevices stocks with it.

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

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average fell 237.44 or 1.83% to a close of 12,743.44, S&P 500 decreased 2.32% or 33.48 to 1,407.22, and Nasdaq Composite Index lost 55.61 or 2.14% to a close of 2,540.99. In Toronto TSX Composite decreased 146.15 or 1.09% to close at 13,321.05.

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

Home Depot led the decliners in the index with a fall of 5.1% followed by losses in American Express of 3.8%, in JP Morgan of 3.6%, in AT&T of 3.4%, and in Microsoft of 3.3%. Johnson & Johnson increased 0.7% and Boeing added 0.44%.

Of the stocks in S&P 500, 48 closed higher, 450 fell, and 2 were unchanged. One hundred and fifty seven stocks fell more than 3% and none increased 3% or more.

Verisign Inc led the gainers in the index with a rise of 2.7% followed by increases in Transocean of 2.46%, in Aetna of 2.36%, in Fluor of 2.34%, in Mattel of 2.1%. CIT Group led the decliners in the index with a loss of 17% followed by losses in E*Trade of 13.7%, in Countrywide Financial of 11%, in Fannie Mae of 10%, in KB Home of 9.4%, in Circuit City of 8%, in Centex of 7.9%, and in Washington Mutual of 7.7%.

In London FTSE 100 Index closed down 81.60 or 1.30% to 6,180.50, in Paris CAC 40 Index decreased 62.78 or 1.30% to close at 5,458.39, and in Frankfurt DAX index decreased 41.60 or 0.55% to close at 7,567.36. In Zurich trading SMI declined 10.67 or 0.13% to close at 8,361.16.

In Tokyo Nikkei 225 Index added 246.44 or 1.66% to close at 15,135.21, in Hong Kong Hang Seng index closed up 1,085.53 or 4.09% to 27,626.62, in Australia ASX 200 closed up 141.20 or 2.23% to close 6,471.40. India gained 2.09% or 394.67 to 19,247.54.

In South Korea Kospi Index increased 82.45 or 4.65% to close at 1,855.33, Thailand closed down 8.53 or 1.03% to 832.78, and Indonesia edged higher 63.70 or 2.46% to 2,648.04.

In Latin Markets Brazil led the decliners with a loss of 3.12% followed by losses in Mexico of 2.9%, in Chile of 1.72%, and in Argentina of 0.96%. Venezuela led the gainers with a rise of 0.16% followed by increase of 0.13% in Peru.

Bond Yields edged lower on 10-year U.S. bonds to 3.84% and 30-year bonds decreased to 4.29%.

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

Crude oil declined $0.48 to close at $97.70 per barrel for a front month contract, up 47.00% for the year, natural gas increased 2 cents to $7.72 per mBtu, and gasoline futures decreased 2.56 cents to close at 244.14 cents per gallon.

Gold edged higher $1.80 in New York trading to close at $826.50 per ounce, silver closed up 9.50 cents to $14.83 per ounce, and copper for front month delivery increased 2.10 cents to 305.05 cents per pound and in London trading closed up $150.50 to $6,690.50.

Dollar edged lower against euro to $1.4872 and lower to 107.4100 yen.


[R]1:30PM New York – U.S. market averages fell after investors focused on the credit market worries and holiday sales.[/R]

Dow Jones Industrial Average fell 27 to 12,954, Nasdaq declined 9 to 2,587, and S&P 500 lost 7 to 1,433.

Credit market worries and jitters related to housing market, and uncertainty related to holiday retail sales kept the U.S. averages in check.

Fannie Mae and Freddie Mac fell 7% after a downgrade from UBS analyst, E*Trade fell another 10% after a report in the Wall Street Journal raised questions on the quality of the mortgage portfolio. Citigroup, Bear Stearns, Goldman Sachs, and Lehman Brothers fell between 3% and 4% after the credit market worries dragged financial services companies.

Target ((TGT)) fell 3% or $1.40 to $55.77, Nordstrom declined 21 cents to $35.51, Wal-Mart lost 22 cents to $45.52, and Macy’s edged lower $1.02 to $29.00.

European markets in the region edged higher after the U.S. markets opened. Norway led the region with a rise of 1.4% followed by increases in Spain, the Netherlands, and Switzerland of 0.3%. Italy led the region with a fall of 0.4% followed by decline of 0.3% in the UK and France.

HSBC will move a large part of its off-balance sheet funded derivative investments in the structured investment on its balance sheet. The bank will also support these structured investment vehicles with $35 billion of its own funding.

Airbus and China have agreed to sign $15 billion of contract to purchase 160 commercial passenger jets on the eve of the French President Sarkozy visit to China.

Asian markets rallied across the region after better than expected start of the holiday shopping season in the U.S.

Korea led the gainers in the region with a rise of 4.65% followed by an increase of 4.1% in Hong Kong, of 2.8% in Singapore, of 2.2% in Australia and India, and of 1.2% in Philippines and Thailand.

Financial markets in the region have been volatile and directionless in the last two weeks. Markets have traded sideways and tracked the volatility in the U.S. market. On Friday, after 1.4% rise in the Dow Jones Industrial Average, indexes in Asia rebounded on the hopes that the U.S. consumer will keep spending during this holiday. Many Asian economies are linked to the U.S. economic growth and rely on the U.S. consumer spending. China, Japan, and Korean companies rely on the health of their exports to the U.S. to sustain revenue and earnings growth.

Exporters in Japan led the gainers in Tokyo trading. Sony advanced 4.5%, Sharp jumped 5%, Nintendo increased 5% on the strength in Tokyo stocks. Toyota, Nissan, and Cannon increased between 2% and 3%. Mizuho Financial jumped 3.5% as financial and realty stocks recovered after a week of volatility.

Hong Kong property stocks jumped with a general strength in the trading. Cheung Kong jumped 4% and Henderson Land increased 3%.


[R]10:00AM New York, 7:30PM Mumbai-Sensex opened the trading week firm./R

The 30-share Bombay Stock Exchange Sensex gained 2.1% or 394.67 to 19,247.54, recovering from a week of losses Asian markets recovered on the hopes that the U.S. holiday shopping may not be hurt by the ongoing housing market correction.

HDFC Bank, Bharti-Airtel and Reliance Energy, Tata Steel, ONGC and Hindalco rallied over 3% each.

Reliance Industries, BHEL and Wipro surged. Satyam, Hindustan, Unilever and Bajaj Auto gained over 2% each. The broader based S&P CNX Nifty rose 123.01 points or 2.19% to 5731.7 rupees.

As 1,820 shares advanced of the BSE, 986 shares declined, and 59 shares remained unchanged. Of the Sensex index stocks, 28 gained and 2 fell. BSE turnover was registered at 5,823 rupees and on the National Stock Exchange turnover was 14,541 crore rupees.

India would start negotiations with Malaysia next year in January for a comprehensive economic co-operation agreement. The bilateral agreement is expected to enhance trade investment between the two countries. The two countries aim to increase bilateral trade to $16 billion by 2012 from the current $6.6 billion.

On the Sensex shares, Reliance Industries surged 2.5% to 2,882.85 rupees on news that the company has sold 4.01% of the equity share in its subsidiary company Reliance Petroleum by transactions through the stock exchanges. With the sale, RIL stake in RPL is reduced to 71% from 75%. Reliance Petroleum lost 2.6% at 204.05 rupees.

Reliance Communications moved up 0.9% to 687.9 rupees on the news that the company plans to sell another 5% stake in its wireless tower business.

Steel Authority of India gained 5.3% to 265.15 rupees, Tata Steel rose 3.5% to 849 rupees, Hindalco Industries rose 3.3% to 194.32 rupees and Sterlite Industries surged 2% to 896.8 rupees.

DLF rose 2.7% to 891.9 rupees, Unitech climbed 6% to 360.5 rupees and Sobha Developer went up 7.2% to 883.1 rupees.

Software stocks recovered on the weaker rupee against the dollar. In the recent week, the IT shares have been losing ground as the rupee continued to firm against the dollar.

Infosys Technologies traded up 1.2% to 1,576.35 rupees, TCS rose 2.6% to 985 rupees, Wipro surged 2.4% to 452.7 rupees, and Satyam traded firmer at 2.3% to 426.35 rupees.

Larsen & Toubro surged 1.8% to 4,175.5 rupees, Bharat Heavy Electricals jumped 2.4% to 2,605.1 rupees, Jaiprakash Associates rose 3.2% to 1,679.35 rupees and BEML jumped 9.26% to 1,775.7 rupees.

ICICI Bank gained 1.5% to 1,157.65 rupees, HDFC Bank rose 5.2% to 1,643.7 rupees, Union Bank advanced 3.5% to 174.2 rupees, Punjab National Bank increased 2.9% to 599.6 rupees and Axis Bank traded firmer at 0.7% to 936.8 rupees. State Bank of India fell 0.40% to 2,242.25 rupees.

Reliance Energy gained 3.7% to 1,789.55 rupees on news that the company has entered into a joint venture with the country''s main transmission utility Power Grid Corporation of India to execute about 300 km transmission lines from Parbati to Koldam and from Koldam to Ludhiana. Reliance Energy will have 74% stake in the joint venture.

Power Grid Corporation of India gained 0.5% to 152 rupees on volumes of 45.46 lakh shares on the BSE. Tata Motors lost 0.6% to 710.2 rupees.

Reliance Petroleum was the most active stock with he turnover of 516.79 crore rupees on BSE.

Jindal Steel & Power, Reliance Energy, Empee Distilleries, and Jaiprakash Hydro-Power were the companies on the most active list of stocks.

[R]6:00AM New York, 7:00PM Tokyo - Tokyo rallies 1.66% on financial stocks and exporters. Minister of State for Financial Services and Administrative Reforms Yoshimi Watanabe estimated overall losses from the U.S. foreclosures to reach 300 billion yen.[/R]

Japan’s stock indexes gained buoyed by strong retail sales in U.S. and on news China Investment Corp might invest part of its $200 million holdings in Japanese stocks.

In Tokyo trading, Nikkei 225 rose 1.66% or 246.44 to 15, 135.21, while the broader Topix Index gained 29.65 to 1,467.03.

In the first section of the Tokyo Stock Exchange 8.9 billion shares worth 1.1 trillion yen were traded an in the second section 286 million shares valued at 5.1 billion yen changed hands.

Of the Nikkei 225 stocks 179 gained, 40 declined, and 6 were unchanged. Brewer Sapporo Holdings led advancers with a rise of 7.45%, followed by increases in lender Mitsubishi UFJ Nicos of 6.90% on news sub-prime losses amount to a fraction of $50million of the world’s largest financial institutions. Other financial stocks gained as well. Mitsubishi UFJ Financial Group edged up 6.79%, Mizuho Financial Group soared 5.35%, and Sumitomo Mitsui Financial Group climbed 6.89%.

Nikkei news reported that China Investment Corp, which manages over $1.4 trillion in sovereign wealth funds, is set to invest part of its holdings in Japanese equities.

Bloomberg News said today ShopperTrack RCT reported that retail sales on Black Friday, a day after Thanksgiving holiday, rose 8.3% to $10.3 billion from a year before. The news lifted exporters. Toyota Motor Corporation firmed 2.04%, Canon Incorporated firmed 2.57%, and Komatsu Limited gained 1.94%

Separately, Comscore Incorporated announced Internet purchases increased 29% on Thanksgiving and 22% the day after, notwithstanding the fact that shoppers still spent 3.5% less as retailers cut prices and offered discounts to lure back customers.

Bloomberg news also reported today Minister of State for Financial Services and Administrative Reforms Yoshimi Watanabe said banks booked combined losses of 119 billion yen in the first fiscal year, adding 107 billion-yen appraisal losses were yet to be reported.

According to Watanabe aggregate losses from foreclosures on U.S. home loans could reach 300 billion-yen.

Nikkei said today non-manufacturing businesses, including those in power, transport and real estate industries plan to spend 14.8% more in the fiscal year ending in March 2008 on rising energy costs and real estate projects. Spending by manufacturing companies is poised to climb 8.7% against 13.5% in the previous year, and at technology firms and automakers will increase by 6%.

The yen firmed to 108.28 from 108.31 against the dollar.

Sapporo Holdings led the gainers in the Nikkei 225 index with a rise of 7.45% followed by gains in Mitsubishi UFJ Nicos of 6.90%, in Sumitomo Mitsui of 6.89%, in Mitsubishi UFJ Financial Group of 6.79%, and OKI Electric Industries of 6.67%.

Electronic companies also firmed as U.S. stores offered discounts to lure back customers that had been affected by worsening economic conditions. Matsushita Electric Works gained 0.66% and Matsushita Electric Industrial Company rose 1.61%.

Nippon Soda Company led the decliners with a loss of 7.20%, followed by losses of 4.93% in Kumagai Gumi Company, of 3.60% in Taiheiyo Cement, of 3.34% in Fujitsu Limited and of 2.17% in Kawasaki Kisen.

Fujitsu Limited retreated after net income fell 62% on higher taxes in international businesses. Group net profit fell to 5.44 billion yen in the quarter ended Sept. 30 from 14.18 billion yen a year earlier on a higher tax payment on its U.K. operations.

NIS, gained on news that the U.S. buyout fund Texas Pacific Group is set to acquire as much as 40% in the company.

Nikkei news reported that Nippon Life Insurance Company plans to increase its domestic bond holdings by about 700 billion yen in the second half of the fiscal year ending in March 2008.