Nervous Investors, Ambac Downgrade

123jump.com Staff
18 Jan, 2008
New York City

U.S. stocks fell at close after volatile session. Worries related to bond insurers were added to credit market jitters, housing market worries, and declining consumer spending. Three popular averages fell. The President Bush plan to stimulate economy with $150 billion of fiscal measures did not impress investors. General Electric and IBM rose after reporting higher earnings largely on the strength in international markets. Ambac, bond insurer, dropped after Fitch lowered its rating to AA.

[R]11:00PM Frankfurt, 5:00PM New York, 9:00AM next day Sydney[/R]

North American Markets indexes

Dow Jones Industrial Average lost 59.91 or 0.49% to a close of 12,099.30, S&P 500 closed down 8.06 or 0.60% to 1,325.19, and Nasdaq Composite Index traded down 6.88 or 0.29% to a close of 2,340.02.

In Toronto TSX Composite closed down 58.51 or 0.46% to close at 12,737.12.

Of the 30 stocks in Dow Jones Industrial Average, 11 closed higher, 19 closed lower, and none was unchanged.

Verizon led the decliners in the index with a fall of 4.5% followed by losses in AIG of 4%, in AT&T of 3.2%, in Merck of 2.8%, and in Johnson & Johnson of 2.3%. General Electric led the gainers in the index with a rise of 3.3% followed by increases in General Motors of 3%, in IBM of 2.3%, and in American Express of 2.2%.


Of the stocks in S&P 500, 207 closed higher, 289 fell, and 4 were unchanged.

Forty Eight stocks fell more than 3% and thirty five stocks rose more than 3%.

Sprint Nextel led the decliners in the index with a fall of 24.9% followed by losses in XL Capital of 11%, in Countywide of 4.96%, in Fannie Mae of 8.2%, and in MBIA of 7.2%. Xilinx led the gainers in the index with a rise of 12.5% followed by increases in Advanced Micro Devices of 11.51%, in Washington Mutual of 8.8%, in Tesoro 8.5%.


South American Markets Indexes

In Latin Markets Colombia led the decliners in the region with a loss of 3.17% followed by decreases in Venezuela of 1.79%, in Chile of 1.23%, and in Argentina of 0.44%. Brazil gained 0.82% and Mexico added 0.06%.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 77.84 or 0.56% to 13,861.29, in Hong Kong Hang Seng index increased 86.89 or 0.35% closed to 25,201.87, in Australia ASX 200 index lower 48.80 or 0.84% to close 5,747.30.

In South Korea Kospi Index increased 11.17 or 0.65% to close at 1,734.72, in Thailand SET index closed lower 1.58 or 0.20% to 789.67, and Indonesia JSE Index edged decreased 38.15 or 1.44% to 2,611.13. Sensex index in India decreased 687.12 or 3.49% to 19,013.70.

European Markets

In London FTSE 100 Index closed lower 0.70 or 0.01% to 5,901.70, in Paris CAC 40 Index decreased 64.69 or 1.25% to close at 5,092.40 and in Frankfurt DAX index lower 99.36 or 1.34% to close at 7,314.17. In Zurich trading SMI declined 96.08 or 1.23% to close at 7,691.98.


Bond Yields decreased on 10-year U.S. bonds to 3.63% and 30-year bonds were unchanged at 4.28%.

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

Crude oil rose $0.70 to close at $90.83 per barrel for a front month contract, natural gas decreased 12 cents to $7.96 per mBtu, and gasoline futures increased 3.62 cents to close at 230.30 cents per gallon.

Gold increased $3.20 in New York trading to close at $883.70 per ounce, silver closed up 23 cents to $16.24 per ounce, and copper for front month delivery increased 4.90 cents to 323.10 per pound and in London copper futures increased $1.50 to $6,996.00.

Dollar edged higher against euro to $1.4622 and nearly unchanged against yen at 106.860.


[R]1:00PM New York, 6:00PM London – A fall in retail sales in December prompted a decline in pound on the speculation that rates may lowered.[/R]

Stocks in London gained after commodity stocks and retailers helped snap a four-day decline.

In London trading FTSE 100 stocks rose fractionally by 0.01% or 0.7 to 5,901.70.

Of the 102 FTSE 100 stocks 55 gained, 41 declined, and 6 were unchanged. Xstrata led gainers with a rise of 8.59% on speculation BHP Billiton had renewed its bid for Rio Tinto Plc.

Other commodity stocks gained as well. Rio Tinto soared 4.93% and BHP Billiton surged 2.15%.

The Office of National Statistics reported today that sales volume in the quarter to December rose 0.4% from the previous quarter. Sales in the three months to November had climbed 0.1%.

Three-monthly sales volume jumped 0.3% for food stores, while it remained unchanged for non-food stores.

According to the ONS, each sector of retailing rose except for non-specialized stores such as department stores which declined the most since July 2005 by 1.6%.

However sales in non-store retailing and repair gained the most since October 2006 by 4.4%.

Total sales volume in the three months to December increased by 3.6% from a year earlier, while sales volume for predominantly non-food stores surged 4.4%.

Sales volume for textile, clothing and footwear stores was the lowest since February 1999 at 1.0% and sales volume for predominantly food stores edged up 0.9%.

Total sales volume declined by 0.4 % between November and December, with sales volume for non-food stores fell by 0.9% and volumes for non-specialized stores declined 4.3%, the largest decline since February 1994 when it fell 4.8%.

Non-seasonally adjusted value of retail sales for the quarter to December was 2.3% higher than in the same period a year earlier. The average weekly value of sales in December was 1.4% higher than a year ago at 6.8 billion pounds.

Of the FTSE index shares Xstrata led advancers with a rise of 8.59% followed by rises of 6.03% in Sage Group, of 4.93% in Rio Tinto Plc, of 4.88% in Home Retail Group, and of 4.34% in Kingfisher Plc.

Rio Tinto advanced on the speculation that BHP Billiton is prepared to offer 3.5 shares and A$16 per share Rio from the earlier offer of three-for-one offer.

Retailers also rose on speculation that the Bank of England will cut interest rate after sales unexpectedly slipped by 0.4% in the three months to December. Marks & Spencer gained 3.82%, Sainsbury Plc increased 2.70% and Next advanced 2.22%.

Homebuilders gained as well. Taylor Wimpey climbed 3.31% and Persimmon edged up 2.06%.

Standard Life led declining FTSE 100 index shares with a drop of 6.31% followed by losses of 5.84% in Prudential Plc, of 5.56% in Schroders Plc, of 5.23% in Icap, and of 4.32% in Old Mutual.

Financial stocks fell on the lingering worries related to ongoing correction in the housing market in the U.S. Barclays plunged 3.43%, Royal Bank of Scotland shed 3.30%, and Standard Chartered fell 1.84%.

RAB Capital Plc reported today net income rose less than 2% last year to 135 billion pounds. Also assets under management rose 38% from a year ago to $72 billion, while management and performance fees climbed 3.3% to 123 million pounds.



[R]12:00PM New York – Financial stocks weakness dragged markets U.S. market averages lower.[/R]

U.S. stocks rebounded in the morning but quickly lost ground after earnings release from IBM, General Electric, and Schlumberger.

Conference Board index of leading indicators fell 0.2% in December, third monthly decline indicating that economy may be heading for a slow-down. Investors were also disappointed after President Bush plan of $145 billion to stimulate economy. Investors are hoping a larger package of monetary and fiscal stimulus.

General Electric ((GE)) reported fourth quarter earnings from continuing operations of $6.82 billion or 68 cents per share on revenue rise of 18%. Earnings in the quarter jumped 15% and earnings per share increased 17% from a year ago.

GE stock added $1.19 or 3.5% to $34.37 at mid-day trading.

For the full year revenue rose 14% organic revenue in 2007 increased 9%. GE reported return on total capital rose 18.9% in 2007.

General Electric reaffirmed its earnings guidance for the year 2008 of at least $2.42 per share an increase of 10% from 2007.

Fourth-quarter revenue reached $6.25 billion versus $5.93 billion in the third quarter of 2007, and $5.35 billion in the fourth quarter of 2006.

Net income in the fourth quarter, excluding a $17 million after-tax gain on the sale of certain rigs in the quarter, increased 21% to $1.37 billion from a year ago or 1% from the third quarter.

Diluted earnings-per-share, excluding this gain, were $1.11 versus $1.09 in the previous quarter, and $0.92 in the fourth quarter of 2006.

In the fourth quarter strong sequential revenue growth contributed significantly to overall performance, but a less favorable Oilfield Services revenue mix, lower pricing in U.S. land operations, and a number of seasonal weather effects led to less than satisfactory margins.

The company said in the press release that high utilization rates of rigs will affect the land and offshore drilling in the U.S. however, growth in land activity in the international markets will be robust.

Spring ((S)) fell $3.12 or 27% to $8.44 after it reported that it lost 683,000 subscribers on contract and 202,000 pre-paid customers in the fourth quarter. The company plans to eliminate 4,000 jobs in the first half of 2008 and close 8% of its stores.

[R]10:00AM New York, 7:30PM Mumbai - Sensex plunged, India''s annual economic growth may be lowered.[/R]

Stocks in Mumbai trading fell for the fifth day in a row on a decline in large companies including Reliance Industries, DLF, and ICICI Bank.

The 30-share BSE benchmark index declined 3.5% or 687.12 to 19,013.70. The broader CNX S&P Nifty lost 3.5% or 207.90 to 5705.30.

Of the BSE shares, 2,505 shares fell, 362 shares surged, and 23 remained unchanged. Among the 30-benchmark index shares, 25 stocks slipped and the rest climbed.

Trading turnover on the BSE was recorded at 8,753 crore rupees and turnover on the National Stock Exchange stood at.19,884 crore rupees.

Reliance Industries was the most active stock with a turnover of 493.87 crore rupees on the BSE. Housing Development Finance Corporation, Reliance Natural Resources, Reliance Energy and ICICI Bank were other companies on the most active list.

Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, warned on Friday that India''s annual economic growth rate could be lowered by 0.5% if global economic growth slows.

Last year, the commission projected an annual average growth rate of 9% for the next five years.

On Thursday, Finance Minister Palaniappan Chidambaram said India cannot remain immune to U.S. recession.

Wholesale price index leapt 3.8% in the week ended January 4, 2008 compared to 3.5% during the week ended December 29 2007.

Of the BSE shares, Reliance Industries fell 6.6% to 2,799.5 rupees. Reliance Natural Resources fell 5.2% to 205.75 rupees. Reliance Energy dropped 4.01% to 2,124.05 rupees, Reliance Communications lost 3.7% to 702.15 rupees.

ICICI Bank fell 5.8% to 1245.45.rupees and State Bank of India lost 2.08% to 2,368.3 rupees.

Indian Oil Corporation slid 7.6% to 607 rupees.

Larsen & Toubro declined 3.6% to 3,930.1 rupees, Mahindra & Mahindra dropped 3.2% to 728.4 rupees.

Tata Steel slipped 3.5% to 781.9 rupees and Tata Motors slipped 3.4% to 712.2 rupees.

Grasim Industries gained 1.03% to 3340.7 rupees, Ambuja Cements rose 0.9% to 131.95 rupees, ACC gained 0.5% to 864.6 rupees, Bharti Airtel surged 0.2% to 973.9 rupees and Satyam Computers climbed 0.04% to 372.6 rupees.

Ranbaxy Laboratories jumped 5.1% to 386.65 rupees. The company reportedly said its profit may rise 25% in the current fiscal year on higher sales of treatments for infections, diabetes and AIDS in emerging markets.

On Thursday Ranbaxy reported flat result for the quarter ended in December 2007 with profits after tax at 188 crore rupees, on a consolidated basis. Consolidated net sales for the quarter increased 5% to 1,784 crore rupees.

ITC rose 2.1 to 212.6 rupees after reporting 15.79% rise in net profit to 830.72 crore rupees on 12.90% increase in sales to 3595.39 crore rupees.

Housing Development Finance Corporation lost 1.05% to 2,819 rupees after reporting net profit of 83% rise to 648.93 crore rupees.

HDFC’s capital adequacy ratio stood at 17.6% of the risk weighted assets, as against the minimum requirement of 12%. Tier 1 capital adequacy was 15.3% as against a minimum requirement of 6%.


[R]6:00AM New York, 6:00PM Hong Kong – Stocks recover from a morning loss of 4% to close fractionally higher.

Hong Kong Stock indexes closed in positive territory after a rally in financial stocks in volatile trading.

In Hong Kong trading Hang Seng Index recovered from a 4% dip in morning trading to rise 0.4% or 86.89 at 25,201.87, down 6.2% for the week. The China Enterprises index of H-shares, or Hong Kong-listed shares in mainland companies, gained 0.6% or 79.91 to 14,561.32, a decline of near 8% for the week.

Daily main-board turnover was HK$127.4 billion compared to HK$138.3 billion yesterday.

Industrial & Commercial Bank of China led financial stocks higher after it forecasted net profit to grow by 60% in 2007.

According to CSRC chairman Shang Fulin companies in China raised Rmb772.8 billion on the domestic market last year, adding that the aggregate capitalization of companies listed on mainland exchanges topped Rmb32.71 trillion.

China biggest lender ICBC rose 5.4% to HK$5.27 after reporting yesterday it expects its net profit to grow more than 60% in 2007 on rising fees.

Bank of China soared 4.7% to HK$3.60. China Construction Bank climbed 1.5% to HK$6.13 after saying it expects to post a 48% year-on-year rise in its 2007 net profit.

However HSBC Holdings plc edged 0.5% lower to HK$118.40 as worries related to unknown level of exposure to the U.S. subprime losses swirled in the market.

Cement company Sinoma surged 15.4% to HK$8.86, while construction contractor China Railway rose 5.2% percent to HK$10.18.

Yue Yuen Industrial Holdings slumped 6.8% to HK$24.6 as the U.S. economic outlook deteriorated after it reported fiscal 2007 net profit increase of 1.65%


[R]5:00AM New York, 7:00PM Tokyo - Japan consumer confidence falls four year low at 38 in December.[/R]

Stocks in Japan edged higher on the expectations that U.S. economy may respond to potential stimulus package from the U.S. government.

In Tokyo trading Nikkei 225 stocks rose 0.56% or 77.84 to 13,861.29, while the broader Topix Index increased 11.06 to 1,341.50.

In the first section of the Tokyo Stock Exchange 10.3 billion shares worth 1.1 trillion yen were traded and in the second section 346 million shares worth 3.8 billion changed hands.

Of the Nikkei 225 stocks 136 gained, 81 declined, and 8 were unchanged.

The Cabinet Office’s Economic and Research Institute said today that Japan’s consumer confidence index slumped from 39.8 in November to 38 in December, while the index gauging overall livelihood slid to 34.9 from 37.0 in November.

Income growth index fell to 39.6 in December from 40.7 a month ago and employment plummeted from 43.1 in November to 40.6 in December.

The index measuring the willingness to buy durable goods slipped from 38.4 recorded in November to 37 in December.

Of the Nikkei 225 index stocks Sumco Corp led advancers with a gain of 9.42% followed by gains in Mitsui Engineering and Shipbuilding of 9.23%, in Sumitomo Realty of 8.02%, in Comsys Holdings of 7.86%, and in Sumitomo Heavy of 6.89%.

Financial stocks also gained as well. Mitsubishi UFJ Financial Group climbed 0.31%, Mizuho Financial Group gained 1.04% and Resona Holdings jumped 3.53%.

Nippon Paper Group led declining Nikkei 225 index shares with a drop of 10.40% followed by losses in Sumitomo Electric Industries of 5.47%, in OJI Paper Co Limited of 4.69%, in Kikkoman Corporation of 4.64%, and in Millea Holdings of 4.34%.

Paper and pulp makers declined after OJI Paper Company Limited became latest company to announce today it had falsified the amount of recycled materials used to produce printer and photocopier paper.

However President of OJI Paper Company Kazuhisa Shinoda said that the prior use of less recycled materials will not affect earnings.

This week Nippon Paper Group said it had falsified data on paper products since 1996 to make it look as if it was complying with the mandatory recycled volume requirements.

Nippon Paper President Masatomo Nakamura also added that he will step down as a result.

Nissin Seifun Group, the parent company of Nisshin Foods, said today it will increase wholesale prices by 40%.

Bloomberg news reported today that Morgan Stanley has raised 50.2 billion yen from the sale of yen denominated bond sale to strengthen its balance sheet.