Foreclosure Fears, Default Notices

123jump.com Staff
06 Mar, 2008
New York City

U.S. stocks closed lower after credit market worries and rising home foreclosures dominated trading sentiment. Home foreclosures nearly doubled in the last quarter as homeowners struggled with rising monthly payments. Thornburg fell 51% after it received loan default notice from JP Morgan. February same stores sales at JC Penney, Chicos, Limited, Kohls and Gap fell. Wal-Mart sales rose 2.6%. Jobless claims fell 24,000.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – A sharp rise in foreclosure rates in the fourth quarter, elevated crude oil prices, and mixed retail same store sales dragged market averages to a low[/R]

U.S. stocks declined after credit default fear spread to stocks. Thornburg received a default notice from JP Morgan and that triggered other defaults of $320 million. Thornburg stock is now down 95% from its recent peak in July 2007. Carlyle Capital, a listed investment management company in London, controlled by Carlyle Group in Washington, received mortgage debt related default from one of its 13 lenders. Mortgage defaults at the end of the fourth quarter rose 0.83% of all loans from 0.54% in the same period a year ago. Loans that are late more than 30 days rose to a 23-year high according to Mortgage Bankers Association.

The European Central Bank and the Bank of England left their key rates unchanged as both central banks fight rising inflation in the region. The ECB left rates at 4% and the BoE left its rates at 5.25%, highest among the G7 nations. Pound and euro rallied against the dollar after the rate decision. Euro has increased nearly 20% against dollar in the last fourteen months and continues to reach new highs on rate disparities.

Hong Kong Clearing and Exchanges net income in 2007 jumped 145% to HK$6.2 billion from HK$2.52 billion in 2006. Media reports suggest that Bank of China has sold 500 million of its $7.95 billion of subprime loans linked to the international markets. Hong Kong stocks rose 1% tracking higher closings in the U.S. and Europe.

National Australia Bank led other banks in hiking its interest rates after it raised its variable home loan rate by 0.29% to 9.27%. St George is likely to follow the NAB lead with a rate hike. The Reserve Bank of Australia raised its lending rate to a 12-year high of 7.25%. Fertilizer maker, Nufarm Ltd today raised $200 million to pay for its recent acquisitions. The company placed 13.25 million shares at $15.10 per share.

Leading indicators index of the Japan economy in January declined indicating economic slowdown. Only a day ago the government had reported a decline in capital spending and consumer confidence is on the decline. Despite the gloomy economic statistics, stocks rose tracking the gains in the U.S. markets. Amgen will pay $100 million to Kyowa Hakko for the rights to inflammation in non-oncology setting. The license may be expanded with the additional payment of $420 million.

European Markets

In London FTSE 100 Index closed lower 87.10 or 1.49% to 5,766.40, in Paris CAC 40 index decreased 78.37 or 1.65% to close at 4,678.05 and in Frankfurt DAX index lower 92.40 or 1.38% to close at 6,591.31. In Zurich trading SMI decreased 68.95 or 0.94% to close at 7,269.87.

North American Markets indexes

Dow Jones Industrial Average fell 214.60 or 1.75% to a close of 12,040.99, S&P 500 closed down 29.35 or 2.20% to 1,304.35, and Nasdaq Composite Index traded down 52.31 or 2.30% to a close of 2,220.50. In Toronto TSX Composite closed lower 234.08 or 1.72% to close at 13,369.24.

Of the 30 stocks in Dow Jones Industrial Average, 1 closed higher, 29 closed lower, and none was unchanged.

Citigroup led the decliners in the index with a loss of 4.4% followed by losses in AIG of 3.9%, in Home Depot of 3.74%, in JP Morgan of 3.5%, and in Exxon Mobil of 3%. Wal-Mart Stores was the lone gainers in the index.

Of the stocks in S&P 500, 17 closed higher, 483 fell, and none were unchanged. Of the index stocks, 1 rose more than 3% and 190 stocks fell more than 3%.

CIT Group led the decliners in the index with a loss of 22% followed by losses in Ambac of 14.7%, in J C Penney of 11.1%, in Fannie Mae of 10.6%, in Countrywide Financial of 8.8%, and in SLM Corp of 8.6%. H&R Block led the gainers with a rise of 3.4% followed by increases in Oracle of 2.3%, in Fluor of 1.44%, and in Dillards of 1.3%.


South American Markets Indexes

In Latin Markets Brazil led the decliners in the region with a surge of 2.56% followed by decreases in Mexico of 1.91%, in Venezuela of 1.80%, and in Colombia of 0.98%.

Asian Markets

In Tokyo Nikkei 225 Index closed higher 243.36 or 1.88% to 13,215.42, in Hong Kong Hang Seng index increased 228.39 or 0.99% closed to 23,342.73. Australia ASX 200 index increased 58.90 or 1.10% to close 5,435.50.

In South Korea Kospi Index increased 20.34 or 1.21% to close at 1,697.44, in Thailand SET index closed higher 2.73 or 0.33% to 827.71 and Indonesia JSE Index edged increased 16.80 or 0.64% to 2,656.46. India Markets were closed today.


Bond Yields increased on 10-year U.S. bonds to 3.59% and on 30-year bonds declined to 4.56%.

Commodities, Metals, and Currencies

Crude oil increased $0.91 to close at $105.43 per barrel for a front month contract, natural gas increased 2 cent to $9.76 per mBtu, and gasoline futures increased 0.74 cents to close at 264.95 cents per gallon.

Gold decreased $11.40 in New York trading to close at $977.10 per ounce, silver closed down 56 cents to $20.225 per ounce, and copper for front month delivery decreased 7.85 cents to 390.35 per pound.

Wheat futures increased 20.00 cents in Chicago trading and closed at $11.25 per bushel. Sugar decreased 77 cent to 13.78 cents per pound. Soybean future closed down 49.750 cents to $14.28 per bushel.

Dollar edged lower and traded at a record low against euro to $1.5387 and edged lower against yen to 102.5960.