U.S. Stocks Edge Higher, Sears Plunge 11%

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

U.S. stocks eked out a gain after a day of volatile trading. Market averages in the 2-day rally added 4% but rested today. Altrial led the gainers in Dow Jones Index with a rise of 2.6% followed by increases in AT&T and General Motors. Countrywide led the gainers in the S&P 500 index with a rise of 6.8% followed by increases in MGIC og 6%. Sears fell 11% in the index.

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

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average added 22.28 or 0.17% to a close of 13,311.72, S&P 500 increased 0.05% or 0.77 to 1,469.72, and Nasdaq Composite Index added 5.22 or 0.20% to a close of 2,668.13. In Toronto TSX Composite increased 31.74 or 0.23% to close at 13,663.89.

Of the 30 stocks in Dow Jones Industrial Average, 18 closed higher, 11 closed lower, and one was unchanged.

Altria led the gainers in the index with a rise of 2.6% followed by increases in AT&T of 1.4%, in General Motors of 1.37%, and in Alcoa of 0.94%. Home Depot led the decliners in the index with a loss of 1.4% followed by losses in Honeywell of 1.26%, in American Express of 0.91%.

Of the stocks in S&P 500, 210 closed higher, 283 fell, and 7 were unchanged. Eighteen stocks fell 3% or more and thirteen stocks rose more than 3%.

Countrywide Financial led the gainers with a rise of 6.7% followed by increases in MGIC of 6.1%, in Dillard of 5.9%, and in Ambac of 4.98%. Sears Holdings led the decliners in the index with a fall of 11% followed by losses in E*Trade of 8.7%, in CIT Group 8.5% of 8.4%, in Principal Financial of 8%, in Lehman Brothers of 4.9%, and in C B Richard Ellis of 4.3%.

In London FTSE 100 Index closed up 42.90 or 0.68% to 6,349.10, in Paris CAC 40 Index increased 36.90 or 0.66% to close at 5,598.11, and in Frankfurt DAX index advanced 41.53 or 0.54% to close at 7,765.19. In Zurich trading SMI rebounded 83.65 or 0.97% to close at 8,734.47.

In Tokyo Nikkei 225 Index gained 359.96 or 2.38% to close at 15,513.74, in Hong Kong Hang Seng index closed up 1,111.30 or 4.06% to 28,482.54, in Australia ASX 200 closed up 74.40 or 1.17% to close 6,444.50.

In South Korea Kospi Index increased 42.87 or 2.34% to close at 1,877.56, Thailand closed up 24.28 or 2.96% to 844.80, and Indonesia edged higher 27.92 or 1.05% to 2,699.82. India gained 64.39 or 0.34% to 19,003.26.

In Latin Markets Mexico led the gainers with a rise of 4.19% followed by increases in Brazil of 3.84%, in Argentina of 2.8%, in Chile of 3.4%, and in Peru of 2.2%. Venezuela jumped 1.7% and Colombia closed nearly unchanged.

Bond Yields edged higher on 10-year U.S. bonds to 3.93% and 30-year bonds increased to 4.34%.

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

Crude oil increased $0.39 to close at $91.01 per barrel for a front month contract, up 42.00% for the year, natural gas decreased 3 cents to $7.45 per mBtu, and gasoline futures decreased 8.90 cents to close at 228.39 cents per gallon.

Gold edged lower $5.00 in New York trading to close at $802.30 per ounce, silver closed down 8 cents to $14.445 per ounce, and copper for front month delivery increased 6.00 cents to 309.40 cents per pound and in London trading closed up $104.00 to $6,682.50.

Dollar edged higher against euro to $1.4747 and lower to 109.930 yen.


[R]11:00AM New York – U.S. stocks declined at the opening after a two day rally that lifted most indexes 4%.[/R]

U.S. market averages opened lower after two rally that lifted major averages more than 4%. Dow Jones fell 19 to 13,271, Nasdaq declined 2 to 2,660, and S&P 500 lost 3 to 1,465.

The Commerce Department reported revised third quarter GDP growth rate to 4.9% from 3.9%. The revised rate of growth was the fastest since 7.5% growth in the third quarter of 2003. In another report, The Labor Department reported initial claims at the end of the last week jumped 23,000 to 325,000.

Sears Holdings ((SHLD)) reported a sharp decline of fiscal third quarter profit on lower than expected same store sales and weaker margins in apparel and electronics. Sears stock declined 15%.

E*Trade ((ETFC)) jumped 5% after it agreed to sell its mortgage portfolio and also raise convertible debt of $1.75 billion yielding junk rate of 12.5%. The troubled bank and online discount broker has been struggling for the last four months since the collapse of sub-prime lending.

European markets edged higher after the U.S. market opening. Financial services edged higher after China based Ping An insurance company agreed to purchase 4.2% stake in Fortis for 1.8 billion euros. The Belgian Dutch company was recently involved in the takeover of some of the assets of ABN Amro, another Dutch bank.

UK based Alliance & Leicester surged 12% after it said that it has arranged sufficient credit line to bolster its capital base. Bradford Bingley, another UK based home lender, jumped 5% after it confirmed that the company is on track to meet its earnings estimate for the fiscal 2007.

Asian markets rallied after the U.S. and European markets closed sharply higher. Hong Kong led the region with a rise of 4.1% followed by increases in Singapore of 3.2%, in Thailand of 3%, in South Korea and Taiwan of 2.3%, and in Australia and Philippines of 1.2%. Indonesia jumped 1.1% and India edged higher 1%.

Property stocks in Hong Kong rose sharply after the comments from the U.S. Fed Vice Chairman stoked expectations of rate cut. Hong Kong dollar is linked to the U.S. dollar and interest rates in the region move in line with the U.S. rates.

In Japan stocks in retail, banking, property, and energy sector moved higher.


[R]6:00AM New York, 7:00PM Hong Kong- Gains on Wall Street lifts Hong Kong up 4.06% [/R]

Stocks in Hong Kong gained on expectations that the U.S. Federal Reserve will cut its key rate at its December 11 meeting and on comments by the vice mayor of Tiajin Cui Jindu that the “through trade” program allowing mainland individuals to trade in Hong Kong equities would proceed.

In Hong Kong Hang Seng Index surged 4.06% or 1,111.30 to 28,482.54. Only one in the 40 stocks fell in the index.

Realty stocks led the gainers on the speculation that the U.S. Federal Reserve would cut its borrowing costs, stoking expectations the Hong Kong Monetary Authority official rate would climb down as the rates are in sync with those in the U.S.

Sino Land rose 9.3% to HK$27, Hang Lung Properties gained 7.8% to HK$34.45, and Sung Hung Kai surged 4.5% to HK$159.

Vice mayor of Tianjin Cui Jindu said today at a business conference in Beijing that the northern Chinese port city would proceed with the “through trade” program that is meant to allow mainland nationals with the Bank of China Limited to buy stocks in Hong Kong as a way to divert excess funds in offshore.

China Unicom Limited rose 8.5% to HK$11.32, China Mobile Limited jumped 4.2% to HK$5.60, and China Life Insurance Company rose 6.3% to HK$42.45.

The Standard news reported today ports-to-property conglomerate Wharf Holdings said yesterday it would raise about HK$9.1 billion by issuing 305.9 million shares that will be used in the expansion of mainland property projects. The company also announced that the underlying profits, excluding revaluation surplus rose 30% to HK$4.02 billion in the first three quarters, while net profit was at HK$7.55 billion. The company traded up 6.5% at HK$ 43.10.

Bank of Communications Limited rose 5.4% to HK$12.50 after HSBC executive director Peter Wong said the company aims to increase its stake in the company from the current 18.1% equity to 19.9%.

The Hong Kong Economic Journal reported today that Hutchison Whampoa Limited might buy stakes in property projects in the northern port city of Tianjin. The company firmed 4.3% to HK$90.

Xinyi Glass Holdings Co climbed 7.4% to HK$8.91 after brokerage Macquarie Securities increased its rating on the company to “outperform”.

Fortune Telecom Holdings Limited dropped after the mobile phone concern announced today it expects a loss for the year ending December.

Bloomberg news reported today Far Eastern Group Chairman Douglas Hsu announced today that the Taiwan based Asia Cement Corp would spin off its China unit to raise $300 million in an IPO in Hong Kong in the first quarter. The company added that it plans to sell shares of Far Eastern Department Stores Company China unit in Hong Kong next year.


[R]4:30AM New York – E*Trade receives investment from private equity group. Mitch Caplan, its chief executive will step down as a part of the deal.[/R]

E*Trade Financial Corp ((ETFC)) for months have been battered on the ongoing housing market correction and falling values of mortgage securities. Suitors have been circling the company for weeks now.

E*Trade Financial has agreed to sell its portfolio of mortgage and loan securities to Citadel Investment Group at approximately $800 million. The private equity investment group will also purchase 10-year note for $1.75 billion yielding 12.5% annually. The deal supervised by the federal regulatory agency Office of Thrift Supervision, is an attempt by the regulator to prevent E*Trade from becoming the victim of the current credit market malaise.

The news first reported in the Wall Street Journal web site indicated that Citadel as a part of the deal will have a board seat and will also hold 20% of the company.

E*Trade in the last three months had received nearly 25 bids for the company as the news of its weak sub-prime lending portfolio emerged. The stock has been battered in the last four months from a high of $25 to a low of $3.46.

E*Trade at the end of the last quarter had a portfolio of home equity loans, asset backed securities, and risky loans to home buyers. The company said in the 10-Q statement filed at the end of the third quarter that the loan losses are likely to rise in the coming months.

Subsequent to September 30, 2007, E*Trade observed a significant decline in the fair value of our asset-backed securities portfolio, specifically asset backed CDO and second-lien securities. Total exposure to asset-backed CDO and second-lien securities at September 30, 2007 was approximately $450 million in amortized cost.

The declines in fair value followed a series of rating agency downgrades of securities in this sector and occurred after the end of the third quarter. At the time of filing E*Trade said that there will likely be additional downgrades by the rating agencies of securities in this sector. Overall, approximately $208 million of E*Trade asset-backed securities were downgraded during the month of October and through November 7, 2007, including approximately $50 million of “AAA” rated asset-backed CDOs that were downgraded to below investment grade.

E*Trade said in its filing, “We expect these declines will result in significant write downs to these securities during the fourth quarter; however, we cannot predict the amount for the fourth quarter as the write downs will depend on future market developments, including potential additional downgrades, and the estimated fair values of these securities on December 31, 2007.

In addition to our asset-backed CDO and second lien portfolio, we hold approximately $2.6 billion in amortized cost in other asset-backed securities, mainly securities backed by prime residential first-lien mortgages. These securities have also declined in fair value subsequent to September 30, 2007; however, the decline has not been as significant.”

In the last five years the E*Trade revenue has jumped from $1.8 billion to $3.8 billion and net earnings have jumped as well. The company lost $186 million in 2002 and increased its earnings steadily to $629 million. The earnings growth was supported by a fee income issued for high risk loans for homes, boats, and other recreational vehicles purchases.

At the end of September 30th for nine months revenue in 2007 declined 9% 1.62 billion and earnings fell to $270 million from $452 million.

[R]3:30AM New York, 5:30PM Tokyo – Stocks in Japan rallied reflecting Asia-wide rally in stocks after a U.S. rate cut hope. October industrial production rose 1.6% in Japan.[/R]

Stocks rallied in Japan as investors’ expectations rose for a rate cut in the U.S. at its policy meeting on December 11. The comments from the Fed Vice Chairman suggested that the Fed has to be ‘flexible and pragmatic’ at its next meeting while reviewing interest rate policy.

In Tokyo trading Nikkei 225 rose 2.38% or 359.96 to 15,513.74, while the broader Topix Index climbed 38.83 to 1,514.47.

In the first section of the Tokyo Stock Exchange 9.1 billion shares worth 1.1 trillion yen were traded and in the second section 445 million shares valued at 8.4 billion yen changed hands.

Of the Nikkei 225 shares, 206 gained, 15 declined, and 4 were unchanged. Meiji Dairies led advancers with a surge of 14.26%, largest jump in seven years after it suggested retail price increase of 58 types of dairy products between 3% and 10% in March 2008 The company blamed higher import cost.

Japan''s Ministry of Economy, Trade and Industry said today industrial production increased a seasonally adjusted 1.6% in October from a 1.4% decline in September, buoyed by rising production of semiconductor-making equipment and automobiles.

According to METI the index of output at mines and factories stood at 112.1.

The Federal Reserve Vice Chairman Donald Kohn comments suggested that recent financial markets volatility and economic conditions should be taken into consideration while reviewing interest rate policy. The comments reinforced investors expectations that interest rates are likely to be lowered between 25 and 50 basis points at the next meeting on Dec 11th.

Of the Nikkei 225 index shares, Meiji Dairies led the advancers with a rise of 14.26% followed by rises in Asahi Glass Co of 8.38%, in Tokai Carbon Company of 8.29%, in Nippon Sheet Glass of 7.86%, and in Fujitsu Limited of 7.66%.

Asahi Glass Company and Nippon Sheet Glass surged after the European Union charged the two glassmakers a smaller-than-projected 205 million euros fine for the price fixing.

Nippon Sheet Glass in particular had made a provision of 350 million pounds for the fines.

Exporters and financials climbed as the yen weakened to 110.31 from 108.41 yesterday against the dollar and stocks rallied and expectations that the U.S. rates may be lowered. Canon rose 3.17%, Komatsu climbed 3.93% and Toyota Motor Corporation firmed 3.17%.

Mitsubishi UFJ Financial group rose 6.11%, Mizuho Financial Group gained 4.67% and Mitsui Sumitomo Financial Group firmed 2.30%.

West Japan Railway Co. led decliners, falling 3.04%, followed by declines of 2.06% in Secom Company Limited, 1.77% in Inpex Holdings, 1.07% in East Japan Railway and 0.96% in Shionogi &Company.

[R]3:00AM New York, 7:00PM Sydney - The Australia index gained 1.2% after positive trade led by banks.[/R]

ASX 200 index gained 1.2% or 74.4 to close at 6,370.10. Australia and New Zealand Bank added 0.5% and Commonwealth Bank of Australia edged higher 1.1%.

National Australia Bank announced that it is exploring to acquire Great Western Bancorporation, for A$898.5 million. The bank, the subsidiary of the U.S. based Great Western Bank, a regional bank based in Sioux Falls, South Dakota.

The U.S. bank has a network of more than 100 branches across six states, mostly in the mid-west agricultural region and employs around 800 people with more than $3.4 billion.

Stewart said his company intended to use the acquisition as a springboard to accelerate the organic growth strategy for their agribusiness relationship-banking model into the U.S.A.

The Bank is also active in the commercial lending, wealth management distribution and insurance agency sectors. The Hamann family has owned great Western Bancorporation for more than 35 years.

Stewart said the Great Western Bank would become a part of NAB''s development and new business division managed by George Frazis.

BlueScope Steel jumped nearly 4.4% after the management made presentation to analysts.

Paul O''Malley, who took over as CEO on the November 1st outlined several new initiatives and outlined three year strategy and restructuring of businesses in China and Vietnam.

BlueScope Steel is likely to sell its underperforming metallic coating business in China and is reviewing the future of its Vietnamese operation. O''Malley said today the Suzhou metal coating facility in China was performing well but would struggle to break-even.

O''Malley said the company was committed to China, where it also operates a building division, but the company is looking to sell metal coating business. O''Malley said margins were coming under pressure from the high price of raw materials.

Elsewhere, BlueScope said it Vietnamese operation, which manufacturers coated and pre-painted products for the construction market, would also be reviewed.

BlueScope Steel also announced the appointment of Charlie Elias as Chief Financial Officer.

Rio Tinto chief executive Tom Albanese is visiting Australia where he will meet investors over the next two days. Rio has continued to fend off advances from BHP Billiton.

Rio Tinto has already knocked back a merger proposal of three BHP Billiton shares for one Rio Tinto share, which is valued at about $128 billion (or A$144.12 billion). Albanese has been engaging United Kingdom, Australia and the United States to gather support for its growth plan and stay independent.

On Monday night, Rio Tinto laid out aggressive plan to expand its iron ore operations, develop new copper and nickel mines, and increase dividend and assets sales.

Yesterday, BHP Billiton chief executive Marius Kloppers said he had met about half of both companies'' shareholders on the company''s recent investor road show and was encouraged by investors responses.

A merger between the two companies would create a world dominant player in coal, iron ore, copper, aluminum, with annual earnings of $30 billion (or A$33.78 billion).

The Australian dollar closed higher today and closed at 88 America cents during the local trading, as stronger U.S. financial markets boosted risk appetite. At the close, the Australian dollar was trading at 0.8828/34, up from yesterday''s close of 0.8757/62.

Of the ASX 200 index shares, Hills Industries led the gainers with a rise of 7.5% followed by increases in Straits Resources Limited of 7.1%, in Perilya and Macquarie Infrastructure of 6.8%, and in Spotless Group of 6%.

Of the ASX 200 index stocks SP Ausnet led the decliners with a fall of 3.3% followed by losses in Transfield Services of 3.5%, Tishman Speyer by 3.7%, in Murchison Metals by 4.7%, and 8.3% in AED Oil Limited.

Among other active stocks, BHP Billiton was up 1.7% while its takeover target Rio Tinto gained 3.2%. In the banking sector National Australia Bank was down 0.8% and Westpac lost 0.1%.

Energy stocks were mostly higher despite crude oil futures shedding 4% overnight, Santos added 1.8%, Oil Search gained 0.7%, and Woodside Petroleum declined 1%.

The retail sector closed stronger, Woolworths added 2.8%, Wesfarmers was up 0.2% and Harvey Norman gained 3.3%. Shares in luxury retailer David Jones were 1.2% stronger after the retailer pointed to a favorable profit outlook.

In other headlines today, Qantas closed down 1.4% after the news that New Zealand''s competition watchdog was investigating carriers including Qantas over allegations of price-fixing air cargo fuel surcharges.

The media sector closed stronger, News Corporation surged 2.3% or 67 cents to $23.39, Fairfax added 0.6% and Publishing and Broadcasting increased 2.9%.