Decline in Banks Drag U.S. Stocks

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

U.S. stocks trended downwards after a weker than anticipated November durable goods orders. Orders in the month rose 0.1% on weak transportation and defense orders. Weekly jobless claims rose at the end of the last week. Oil jumped above $97 after weekly report showed another decline in inventories. Pakistan was thrown in turmoil after suicide attack killed Benazir Bhutto, the front-runner in the upcoming election. Musharraf is increasingly perceived as weak and ineffective.

[R]12:00PM New York – U.S. stocks declined after Bhutto in Pakistan was killed and November durable goods orders declined.[/R]

U.S. stocks declined in the first hour of trading on weaker than expected durable goods order data, weekly jobless report, and death of Bhutto in Pakistan from suicide attack.

Dow Jones Industrial Average dropped 102.75 to 13,448.94, Nasdaq declined 2,704.77, S&P 500 fell 10.08 to 1,487.58.

Pakistan entered into another chaotic period with the killing of the only viable candidate in the next election scheduled on January 8th. Benazir Bhutto, former prime minister, and a leading contender in the next election, was killed by a suicide attacker. The barbaric attack was carried out in Rawalpindi after she had finished addressing a campaign rally.

Ms Bhutto, 54 years was rushed to hospital but died from multiple injuries from gun attack in head and neck. At least 20 other people have been killed in the attack.

The killing is expected to lash out a wave of anti-government sentiment for not protecting the leader of Pakistan’s Peoples Party and perception that President Musharraf is acting in the interest of America and not in the interest of the people of Pakistan.

The Commerce Department reported that November durable goods orders rose 1% to a seasonally adjusted $214.6 billion. The orders fell 0.7% excluding transportation orders.

Initial claims of jobless benefits rose at the end of the last week by 1,000 to 349,000 and total number of people claiming benefits in the period rose to 2.713 million according to the Department of Labor.

U.S. commercial crude oil inventories dropped by 3.3 million barrels compared to the previous week. At 293.6 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 0.7 million barrels last week, but are in the lower half of the average range. Finished gasoline inventories fell last week while gasoline blending components inventories increased during this same period.

Oil jumped $1.46 to $97.43 on the report.

SLM Corp ((SLM)) fell 6% or $1.552 to $20.06 after it said that it plans to issue common and preferred stocks worth $2.5 billion to cover the stock buyback contract.

Banks declined after the durable goods orders report and bearish report from Goldman Sachs on banks.

Goldman issued a research report with an estimate of $35 billion in write-downs in the fourth quarter largely related to CDO debts and weakening values of the mortgage securities.

William Tanona nearly doubled his estimate of losses at Citi, Merrill, and JP Morgan. His new estimate for losses at Citigroup in the fourth quarter is near $18.7 billion, for Merrill Lynch is $11.5 billion, and for JP Morgan of $1.7 billion.

JP Morgan Chase ((JPM)) fell 45 cents to $44.50, Citigroup ((C)) fell 71 cents to $29.75, and Wachovia Bank ((WB)) dropped 57 cents to $38.50.

Tanona also hinted that Citigroup may need another capital infusion between $5 billion and $10 billion and may have to cut its dividend by 40%.

[R]5:00AM New York, 7:00PM Tokyo-Housing starts fell to 27% in November.[/R]

In Tokyo trading Nikkei 225 shed 0.57% or 88.85 to 15,564.69, while the broader Topix Index plunged 8.53 to 1,499.94.

In the first section of the Tokyo Stock Exchange 6.9 billion shares valued at 723 billion yen were traded and in the in the second section 284 million shares worth 4.8 billion yen changed hands.

Of the Nikkei 225 stocks 56 gained, 158 declined, and 11 were unchanged. Clarion Company Limited led advancers with a rise of 5.15% followed by Tokyu Corporation firming 3.63%.

Construction companies gained as Japan’s shipments of construction equipment rose 10.4% in November. Komatsu Limited jumped 1.65% and Hitachi Zosen soared 1.29%.

Crude oil prices rose 2% to $95.97 per barrel yesterday. Inpex rose 0.81% as a result.

The Ministry of Land, Infrastructure and Transported reported today that housing starts for new condominiums and new homes fell to 84,252 in November, 27% decline from a year ago, and 35% from October.

New dwellings started for owned and rented properties slumped 7.6% to 26,604 and 23.4% at 38,859 respectively.

New buildings for collective housing fell 63.9% to 8,331, while detached houses retreated 14.9% to 10,054.

The Land Ministry further stated that building construction starts for public investors slumped 45.3% to 377 and private investors slipped 19.2% to 12,440. Land dwellings plunged 26.7% to 7,337 units, with non-dwellings falling 9.6% at 5,439.

Building construction for mining tumbled 66.2% in November to 53 and manufacturing declined 22.4% to 983. However, wholesale and retail constructions rose 75.3% at 2,141, while real estate climbed 25.3% to 211.

Separately, the Ministry of Land, Infrastructure and Transport said today total construction orders from the 50 big domestic contractors declined 3.8% from a year earlier to 915.5 billion yen.

Japan’s Construction Equipment Manufacturers Association reported today that shipments of construction equipment rose 10.4% to 219 billion yen in November buoyed by rising demand in Russia, China and Southeast Asia.

CEMA further revealed domestic shipments climbed 4.3% to 86.4 billion yen and exports rising 14.8% to 132.7 billion yen.

Japan’s Automobile Association said today the country’s twelve largest manufacturers built in November 1.07 million cars, mini-cars, trucks and buses, an increase of 3.8% from a year ago. Exports rose 8.1% to 600,422.

The yen soared 0.06% from 114.27 to 114.25 at the close of trade.

Of the Nikkei 225 index shares Clarion Company Limited led gainers with a rise of 5.15% followed by gains in Tokyu Corporation of 3.64%, in NEC Corporation of 2.98%, in Japan Airlines of 2.66%, and Sumitomo Chemical Company of 2.56%.

Sanyo Electric led the decliners in the Nikkei 225 stocks with a retreat of 6.59% followed by losses in Marubeni Corporation of 3.12%, in Chugai Pharmaceuticals of 3%, and Dowa Holdings of 2.99%.

Sanyo Electric Company fell after the Tokyo Stock Exchange placed a special monitoring status on the company’s shares with a possible delisting. The company reported Tuesday that it will review its earnings as back as 2000 and will report 6 billion yen in losses from April 2000 through to September 2007.

In addition, the Mainichi news, an online edition, reported that Japan’s Securities and Exchange Surveillance Commission has accused Sanyo of fraudulent earnings and urged the Financial Services Agency to impose 8.3 billion yen fine.

Financial stocks also fell on Nikkei news reports Japan’s five largest lenders paid customers 260 billion yen in the year to November for excessive interest rates, adding the figure might rise to 300 billion yen by the end of the year.

Also S&P/Case Shiller home price index reported yesterday that home prices fell 6.1% in October in twenty U.S. metropolitan areas. The narrow index includes cities like Las Vegas, Miami, and San Diego that have recently seen excessive speculation in housing market. Broader indexes that measure home prices across the nation have declined but not that sharply. Mitsubishi UFJ Financial Group plunged 1.28%, Mizuho Financial Group tumbled 1.43% and Sumitomo Mitsui Financial Group dropped 0.69%.

Kyodo news reported on Tuesday that subscribers of Softbank’s discount White Plan for mobile telephone services has crossed 10 million, which accounts for 60% of the company’s subscriber base.

Bloomberg news reported today that Samsung Electronics is suing Sharp Corporation for the alleged infringement of four U.S. patents for technology used in television and computer monitors.

[R]3:50AM New York, 7:50PM Sydney – Mining stocks closed higher on takeover talks and rising demand from China.[/R]


ASX 200 index gained 0.4% or 27.3 to close at 6,350.90.


The preliminary market turnover in today’s session was 368.1 million shares worth $1.193 billion with 506 stocks rising, 423 closing lower, and 254 unchanged. Flinders Diamonds was the most active stocks with 21 million shares worth $2.04 million changing hands.

BHP Billiton added 1.4% and Rio Tinto rose 2.2%.

Australia''s second-largest medical centers operator, Primary Health Care Ltd extended its two weeks extension of its $2.1 billion ($1.8 billion) takeover bid for Symbion Health Ltd.

According to the company''s website the offer will now expire on January 21, 2008 instead of January 7. Primary holds a 35% stake in Symbion and a successful bid will see it becoming the largest health-care company in the country. Primary had in November offered $4.10 for each of the 80% of Symbion.

Symbion has 92 medical centers and 130 diagnostic imaging sites. Early this month, Healthscope, another shareholder said it is considering takeover bid for Symbion.

The announcement came two weeks after it scrapped its $2.8 billion cash and stock offer because of a tax ruling that reduced its value. Healthscope rose 0.2% and Symbion fell 0.3%.

Iron miner, Fortescue Metals Group Ltd''s ten-for-one share split, has to pay off for the company which has continued to dominate as the best performing member of the S&P/ASX 200 Index this year.

The iron-ore mining company has gained 19% since the split. On December 17, Chairman Herb Elliot said the split would improve liquidity and affordability.

Chief Executive Officer Andrew Forrest said the rise of the company''s stock by more than fivefold this year had boosted the fortune of largest shareholder.

Fortescue however said today that it is not aware of any information that may account for recent gains in the share price. The remark was in response to a query from the exchange.

Fortescue, which is due to start output in May, is building a $2.7 billion iron-ore operation in Western Australia. The company plans to quadruple output from the project from the initial 45 million tons. The stock added 8.9%, giving it a value of $19.9 billion ($17.4 billion.)

Rio Tinto chairman Paul Skinner informed shareholders that he is pleased that a deadline has been set for BHP Billiton to set the timetable for the proposed merger offer. In his letters to shareholders today, Skinner highlighted the group''s growth outlook and reiterated the board''s rejection of BHP Billiton''s $149 billion ($130 billion) proposal.

The UK Takeover Panel last week set a deadline of February 6th for BHP Billton to announce its intention to make a firm and formal offer for Rio Tinto or drop the offer. If BHP does not meet the deadline, it will be prohibited from making any offer for six months after February 6, unless it has the consent of the UK Takeover Panel.

BHP Billiton has unsuccessfully conducted talks with Rio Tinto for its merger plan of three BHP shares for one Rio Tinto stock.

The dollar closed stronger today as poor news on US home prices weighed down the American currency. At the close the dollar was trading at Australian $0.8764/69, up from Monday''s close of $0.8691/96.

Of the ASX 200 index shares, Compass Resource led the gainers with a rise of 8.2% followed by increases in Fortescue metals of 8.1%, in Coeut D''Alen of 7.8%, in Nexus Energy of 7.8%, and in Mincor Resources of 6.4% .

Of the ASX 200 index stocks Valad Property led the decliners with a fall of 6.5% followed by losses in DB Trust of 5.3%, Centro Reatil Group of 4.2%, in Envestra Limited of 4.1%, and 2.8% in Emeco Holdings of 2.8%.

In the energy sector was mixed. Woodside added 4%, Santos increased 3.7% and Oil Search gained 1.1%.

The gold miners were up with Newcrest adding 2.9% and Lihir putting on 2.1%.

The banking sector was mixed, with ANZ gaining 0.5%, the National Australia Bank putting on 0.5%, Commonwealth Bank of Australia up 0.7% and Westpac shed 0.3%.

The retailers were mixed, with David Jones adding 1.1% and Harvey Norman adding 0.9%, Wesfarmers down 0.5%, Woolworths shed 0.6%.

The media sector was also mixed, with Fairfax adding 0.9%, News Corp losing 0.1% and its non-voting scrip was down eleven cents to $23.96. Fairfax rose four cents to $4.69. Consolidated Media Holdings added 0.2% and Crown shed 0.2%.