Tech Stocks Lead U.S. Averages

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

U.S. stocks managed to close higher after a day of volatile tradig. Nasdaq led the gainers with a rise of 1.5%. U.S. third quarter GDP was unrevised at 4.9%, higher than 3.8% in the second quarter. Jobless claims at the end of the last week rose 12,000. Inventories of crude oil and distillate fuel fell at the end of the last week. The bond insurance company MBIA plunged 25% after it reported surprise exposure of $8 billion of CDO debts. Oracle, Accenture, and Nike rose after earnings.

[R]4:30PM New York, 10:30PM Frankfurt, 8:30AM Sydney[/R]

[R]Global Markets Indexes[/R]

Dow Jones Industrial Average closed up 38.37 or 0.29% to a close of 13,245.64, S&P 500 edged higher 7.12 or 0.49% to 1,460.12, and Nasdaq Composite Index traded up 39.85 or 1.53% to a close of 2,640.86. In Toronto TSX Composite gained 31.68 or 0.24% to close at 13,421.50.

Of the 30 stocks in Dow Jones Industrial Average, 12 closed higher, 17 closed lower, and one was unchanged.

American Express led the decliners in the index with a loss of 2.4% followed by losses in JP Morgan of 1.6%, in Merck of 1.5%, in Citigroup of 1.3%, and in Coca-Cola of 1%. Du Pont led the gainers in the index with a rise of 3.65% followed by increases of 2.4% in Microsoft, in Alcoa of 2.10%, in IBM of 1.55%, and in Altria Group of 0.7%.

Of the stocks in S&P 500, 273 closed higher, 222 fell, and 5 were unchanged.

Sixteen stocks fell more than 3% and twenty three stocks rose more than 3%.

MBIA led the decliners in the index with a plunge of 25% after it reported a surprise disclosure of $8.1 billion to risky CDO debts. The other losers in the index were followed by a loss of 10% in SLM Corp, in XL Capital of 7.1%, in Leggett & Platt of 5.8%, in Darden Restaurant of 5.7%, and in MGIC Investment of 5.2%.

Oracle Corp led the gainers in the index with a rise of 7.3% followed by increases in Eaton Corp of 6%, in EBay of 5.3%, in Radioshack Corp of 5.3%, and in cognizant and Cummins of 4.9%.

In London FTSE 100 Index up by 61.10 or 0.97% to 6,345.60, in Paris CAC 40 Index increased 14.03 or 0.26% to close at 5,511.45, and in Frankfurt DAX index increased 31.87 or 0.38% to close at 7,869.19. In Zurich trading SMI closed up 7.88 or 0.09% to close at 8,402.84.

In Tokyo Nikkei 225 Index closed higher 1.09 or 0.01% to close at 15,031.60, in Hong Kong Hang Seng index closed down 12.17 or 0.05% to close at 27,017.09, in Australia ASX 200 closed lower by 36.00 or 0.57% to close at 6,244.80.

In South Korea Kospi Index decreased 17.10 or 0.92% to close at 1,844.37, Thailand closed down 13.27 or 1.65% to 791.71, and Indonesia edged up by 11.75 or 0.44% to 2,657.98. India increased by 70.61 or 0.37% to close at 19,162.57.

In Latin Markets Chile led the gainers with a rise of 2.7% followed by increases in Peru of 1.2%, in Colombia of 1.1%, in Venezuela of 1.06%, in Argentina of 0.5%, and in Mexico of 0.15%. Brazil, the lone decliner, lost 0.01%.


Bond Yields increased on 10-year U.S. bonds to 4.05% and 30-year bonds to 4.47%.

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

Crude oil fell $0.03 to close at $91.21 per barrel for a front month contract, natural gas decreased 4 cents to $7.14 per mBtu, and gasoline futures increased 0.26 cents to close at 233.45 cents per gallon.

Gold edged lower $2.20 in New York trading to close at $803.20 per ounce, silver closed up 11 cents to $14.34 per ounce, and copper for front month delivery gained 0.75 cents to 296.55 per pound and in London futures fell $136.75 to $6,485.00.

Dollar edged higher against euro to $1.4324 and higher to 113.4052 yen.


[R]3:00PM New York – MBIA, the bond insurer plunged 27% after it disclosed exposure of $8.1 billion to subprime collaterized debt obligations.[/R]

MBIA Inc ((MBI)) plunged 25% or $6.88 to $20.22 after it disclosed surprised exposure to risk collaterized debt obligation bonds popularly known as CDOs.

MBIA, part of the S&P 500 index led the decliners in the widely followed index.

The bond insurer reported on its web site total of $30.606 billion exposure in coverage to multi-sector CDOs of which $8.14 billion are in the CDOs of multi-sector high grade collateral, $1.068 billion are in CDOs of mezzanine U.S. asset backed securities containing RMBS collateral, $16.126 billion are in CDOs of high grade U.S. ABS containing RMBS collateral.

Yesterday the rating agency S&P affirmed its AAA insurance financial strength rating for MBIA Insurance Corporation, however, the rating agency has changed its outlook on the company and insurance subsidiary to negative from stable.

Last week Moody’s changed its outlook on the company to negative from stable pending $1 billion investment from Warburg Pincus.

Even though stock plunged on the news analysts believe that stock the degree of the sell-off is not warranted. Warburg Pincus, venture capital and risk management investment house is agreed to invest $500 million in the company on Dec 10th at $31 and has right to invest additional $500 million under certain conditions.


[R]12:30PM New York – U.S. stocks traded sideways after losses from Bear Stearns, lower earnings from FedEx, and higher earnings from Oracle, Nike, and Accenture.[/R]

Dow Jones Industrial Average fell 20.48 to 13,186.38, Nasdaq added 9.00 to 2,610.01, and S&P 500 declined 3.89 to 1,449.11.

The Commerce Department final read on the gross domestic product for the third quarter was 4.9%. The economy had record growth of 3.8% in the second quarter. The Labor Department reported weekly claims of unemployment rose 12,000 at the end of the last week 346,000.

Bear Stearns reported first quarterly loss on $1.9 billion in mortgage securities related losses and write-downs. The capital market business and prime brokerage business also seem to suffer from the client worries of the capital adequacy at the brokerage firm.

FedEx ((FDX)) earnings for the fiscal second quarter declined to $1.54 from $1.64 a year ago on higher fuel prices and weak domestic economic growth. The chairman Frederick W. Smith said that the international growth is solid but the domestic industrial production related shipment remains soft.

Second quarter revenue rose 6% to $9.45 billion and but income decreased 6% to $479 million. Operating margin declined to 8.3% from 9.4% and operating income fell 7% to $783 million from a year ago.

Oracle ((ORCL)) reported fiscal second quarter 2008 earnings per share increased 36% to 25 cents on net income increase of 35% to $1.3 billion on revenue rise of 28% to $5.3 billion. Total software revenues were up 29% to $4.2 billion with new software license revenues up 38% to $1.7 billion. Database and middleware new license revenues were up 28% and applications new license revenues were up 63%. Services revenues were up 22% to $1.2 billion, compared to the same quarter last year.

Oracle jumped 7% or $1.45 to $22.21 in the morning trading.

Separately Oracle founder Larry Ellison controlled Netsuite priced its initial public offering of 6.2 million shares at $26 per share and raised $114 million. The initial filing range for the offering was between $19 and $22 per share. At mid-day nearly 1.05 million shares changed hands and Netsuite stock traded between $23.86 and $27.65 price range.

Orion Energy Systems ((OESX)) priced its initial public offering of 7.6 million shares at $13 per share and raised $123.80 million. The energy management company stock opened at $17 and jumped to $21 on its first day of trading, yesterday. Today the stock has traded between $22.15 and $19.98.

Gushan Environmental Energy Limited ((GU)) priced its offering of 18 million shares at $10 yesterday. The stock traded as high as $10.48 before settling just under the initial offer price. Today the stock of the bio-diesel maker traded between $10.05 and $9.62.


Nike ((NKE)) fiscal second quarter revenue increased 14% to $4.3 billion and revenue increased 10% when adjusted for constant currency. Net income in the quarter increased 10% to $359.4 million and earnings per share rose 11% to 71 cents.

During the second quarter, U.S. revenues increased 7 percent to $1.5 billion versus $1.4 billion for the second quarter of fiscal 2007. U.S. athletic footwear revenues increased 12 percent to $983.3 million; apparel revenues decreased 3 percent to $461.4 million; and equipment revenues increased 9 percent to $68.7 million. U.S. pre-tax income increased 9 percent to $306.6 million from $282.1 million a year ago.

Accenture Ltd ((ACN)) fiscal first quarter 2008 revenue rose 19% to $5.67 billion and earnings per share increased 30% to 60 cents, and net income increased to $381.3 million from $284.2 million from a year ago. The company also raised its EPS outlook for the full fiscal year by $0.15, to a range of $2.36 to $2.41.

In Asian markets Taiwan, Thailand, Korea, and Australia declined but Japan managed to close fractionally higher.

In Asia Japan left the rates unchanged at 0.5% by a unanimous decision and the People’s Bank of China raised interest rate to 7.47% from 7.29%.

European markets traded higher led by a rise of nearly 1% in the UK. Most other markets in the region closed fractionally higher.


[R]10:30AM New York – Bear Stearns swung to a net loss in the fourth quarter and annual profit fell 90% from a year ago.[/R]

Bear Stearns ((BSC)) reported its first quarterly loss as a public company after taking losses in its sub-prime mortgage business.

“We are obviously upset with our 2007 results, particularly in light of the fact that weakness in fixed income more than offset strong and, in some areas, record-setting performance in other businesses,” said James E. Cayne.

In early November the company announced that it anticipated write-downs of approximately $1.2 billion in mortgage inventory net of hedges. At November 30, total net inventory write-downs were $1.9 billion.

These write-downs served to reduce fourth quarter diluted earnings per share by $8.21. Including these write-downs the company reported a loss for the fourth quarter ended November 30, 2007 of $6.90 per share compared to profit of $4.00.

The net loss for the fourth quarter of 2007 was $854 million as compared with net income of $563 million for the fourth quarter of 2006. Net revenues for the 2007 fourth quarter were a loss of $379 million down from revenues of $2.4 billion for the 2006 fourth quarter.

For the fiscal year the company reported $1.52 diluted earnings per share, compared with $14.27 for fiscal 2006. Net income for the fiscal year was $233 million compared with $2.1 billion earned in fiscal year ended November 30, 2006.

Net revenues for the 2007 fiscal year were $5.9 billion, compared with $9.2 billion in the prior fiscal year. The after-tax return on common stockholders’ equity was 1.8% for fiscal 2007.


[R]5:00AM New York, 7:00PM Tokyo - Japan’s exports falls to 9.7% in November. Bank of Japan keeps borrowing rate at 0.5%.[/R]

Stock averages in Japan rose for the first time in seven days as financial stocks edged higher on reports that the country’s three biggest lenders would reject a request to contribute about $15 billion to the subprime asset bailout fund.

In Tokyo trading Nikkei 225 declined from the peak of 0.7% gain by mid-day to close up 0.01% or 1.09 to 15,031.60, while the broader Topix Index firmed 0.77 to 1,457.56.

In the first section of the Tokyo Stock Exchange 7.9 billion shares valued at 927 billion yen were traded and 367 million shares worth 11 billion yen were traded in the second section.

Of the Nikkei 225 stocks 93 gained, 123 declined, and 9 were unchanged.

Sumitomo Metal Industries led risers with a gain of 4.68% on reports that the company and its competitors will increase their shareholding in each other.

Japan’s Ministry of Finance reported today that exports rose 9.7% in November below the 10.5% forecasted by economists. Imports also rose 13.2% in November compared to 8.6% in October, prompting surplus to decline 12.2% to 797.4 billion yen.

Shipments to the U.S. fell for the third month to 6% compared to 1.5% in October, while exports to China grew at the slowest pace since February to 13.7%. Similarly, shipments to the EU rose the slowest since April 2006 to record a 8.2% gain.

Separately, the Ministry of Finance said that Japan’s expenditure will increase 0.2% to 83.1 trillion yen in them fiscal year starting in April. About 25.3 trillion yen of new debt would be sold to fund the widening deficit.

However the proposed general account budget is 0.2% bigger than the fiscal 2007 budget due to increases in social security tax and local tax grants.

Japan plans to cut public works spending by 3.1% to 6.7 trillion yen, defense by 0.5% to 4.8 trillion yen and foreign aid by 4% to 700.2 billion yen. But social security costs would increase by 3% to 27.8 trillion yen.

It is estimated that debt at central and local governments would reach 776 trillion yen by March 2009, which translates to 147.2% of GDP. Furthermore tax gains and subsidies to local government would also increase by 4.6% next year.

According to the finance ministry, tax revenue is projected to slow by 0.2% to 53.6 trillion yen next year compared to the gain of 16.5% realised in the current fiscal year.

A supplementary 895.4 billion yen is proposed for the current fiscal year. The budget would be approved by Cabinet on December 24th and submitted to parliament in January.

The Bank of Japan today unanimously elected to keep the key interest rate at 0.5% as the Atsushi Mizuno, the lone dissenter in the previous meetings, also joined in to support to hold the rate as business conditions continue to deteriorate.

Of the Nikkei 225 index shares Sumitomo Metal Industries led gainers with a rise of 4.68% followed by gains in Sumitomo Mitsui Financial of 3.62%, in Mitsui Sumitomo of 3.47%, in Millea Holdings of 3.39%, and in Fast Retailing of 3.33%.

Sumitomo Metal Industries gained on the Nikkei news reports that the company, Nippon Steel Corp, and Kobe Steel Ltd, each will spend 260 billion yen to double the current cross shareholding.

Financial stocks also gained after the Nikkei online edition reported that the country’s three biggest lenders are likely to reject a request by the U.S. banks to contribute about $15 billion yen towards the subprime asset bail out fund.

Mitsubishi UFJ Financial Group climbed 2.23%, Mizuho Financial Group spiked 1.89% and Resona Holdings increased 2.60%.

Nippon Kayaku led the decliners in the Nikkei 225 stocks with a fall of 10.86% followed by losses of 5.79% in Clarion Company Limited, in Sumco Corporation of 5.1%, in Taiheiyo Cement of 3.8%, and in Konica Minolta Holdings 3.73%.

Hino Motors announced today that the company aims to increase sales of tucks and buses to 118,200 in the next fiscal year and increase overseas sales to 71,700 units. Sales in Japan are however projected to decline 2.3% to 46,500 units. Global production is estimated to increase 10% to 117,500 vehicles next year.

Bloomberg news reported today that Japan’s Real Estate Investment Trusts face acquisitions or privatization as 75% of the listed REITs are trading below their net asset value. The REIT Index is headed for its first decline since 2004.

[R]5:00AM New York, 9:00PM Sydney - The Australia index declined by 0.6% after loses in mining and financial stocks.[/R]

ASX 200 index declined 0.6% or 39.5 to close at 6,176.90.

BHP Billiton closed down 1.4%, Rio Tinto declined 1.8%, and Commonwealth Bank of Australia declined 1.2%.

The Preliminary market turnover was 2.18 billion shares worth $11.83 billion, with 523 stocks higher, 715 lower and 345 unchanged.

Centro Properties was the most actively traded stock with 114.95 million shares worth $157.17 million changed hands.

Australia''s largest steel maker, BlueScope Steel today announced that it will acquire the outstanding shares of IMSA Steel Corp for $730 million from Ternium S.A listed on NYSE. After the acquisition BlueScope will be the second largest supplier of pre-engineered buildings used for barns, aircraft hangers, and schools behind Houston based NCI Buildings Systems Inc. The company expects to realize annual savings of US$40 million after the merger.

The company announced that its latest consolidated sales for the year ended December 31 2006 were approximately US$1.2 billion with Earnings Before Interest, Taxes, Depreciation and Amortization of US$86 million.

According to the release the acquisition will be funded by a 364-day bridge loan facility and BlueScope will also assume approximately US$20 million in under-funded pension liabilities.

The purchase will double BlueScope''s sales in the $157 billion U.S. commercial and industrial building market, adding 23 plants from California to North Carolina.

BlueScope closed up 2.9%.

Herald Resources Ltd today announced that it is in the preliminary discussions with companies that had expressed interest in merger. The latest development comes barely a week after the company told its shareholders not to take action following a $455 million (US$391 million) takeover bid by Indonesia''s largest coal producer PT Bumi Resources at A$2.25 per share.

Herald Resources is planning a zinc and lead mine in Indonesia. Takeovers and mergers in the industries are rising as companies hope to meet growing demand from China and rising commodity prices in the last five years.

PT Bumi had indicated to Herald that it could assist Herald to acquire the Indonesian government''s approval for $192 million Dairi mine project. Herald has been waiting for the approval for the past two years. Herald added 3.1% by close of the trade.

Western Plains Resources Ltd said it will continue talking to OneSteel on port access following its decision to block Western plans to export iron ore through the Port of Whyalla. OneSteel, which owns the port, said today, it is unlikely to approve a Western Plains'' plan to build a rail loop, barge loader and storage shed at Whyalla in South Australia State.

OneSteel''s spokesman was reported to have said that it plans to export 4 million tons of iron ore through its port in fiscal 2008. Western Plains was down 39 percent, while Onesteel was up 0.5%.

Of the ASX 200 index shares, Centro properties led the gainers with a rise of 9.5% followed by increases in Centro Retail Group of 9.3%, in Tishman Speyer by 7%, in Allco Finance Group by 5.7%, and in Paperlinx Limited by 5.2%.

Of the ASX 200 index stocks IOOF Holdings led the decliners with a loss of 5.2% followed by losses in Newcrest mining by 5.1%, in Macmahon Holdings and Nexus Energy Limited of 4.8%, and in Mount Gibson Iron of 4.5%.

In other stocks, National Australia Bank lost 0.7%, Westpac dropped 1.8% and St George Bank shed 1.9%.

In the energy sector, Oil Search was up 0.9%, Woodside Petroleum dropped 0.9% and Santos shed 0.9%. Gold miner Lihir added 1.6%.

The retailers were mixed with Woolworths adding 0.5%, Wesfarmers dropping 1.6%, Harvey Norman losing 2.1%, and David Jones declining 0.2%.

The stocks in media sector were mixed. News Corp gained 0.3% but Fairfax Media shed 0.9%.

Insurance Australia Group looks set to report a fall in its fiscal 2007 annual profit of between 13% and 18%, according to three different brokers. IAG declined 1.2%.

Rail and ports operator Asciano is planning to sell its stake in pallet provider Brambles lowering its stock by 1.6%.