Fed Talk on Inflation Lifts Dollar, Stocks Lower

123jump.com Staff
10 Jun, 2008
New York City

U.S. stocks edged lower as the Fed Chairman Bernanke talked of fighting inflation. Investors see a possible rise in interest rate if food and energy prices remain high. Stocks in resources, fertilizer and energy sectors fell. Banks and financial sector stocks declined led by a drop in Lehman and Morgan Stanley. Australian currency dropped sharply on the worries that the U.S. may intervene in the currency market to protect the dollar. Japan, India and Australian market indexes closed lower.

[R]10:15AM New York – U.S. stocks edged lower on inflation worries and a prospect of rising interest rates.[/R]

U.S. stocks in fell in the first hour of trading as inflation worries intensified and international markets closed lower. In Asia, Japan, India and Australia fell sharply. Australian currency dropped after the comments from the Treasury Secretary Hank Paulson suggested that intervention in the currency markets to protect the U.S. dollar can not be ruled out. Australian dollar dropped nearly 1%.

Stocks on the move

In the morning trading in New York, Lehman Brothers, Goldman Sachs and Morgan Stanley traded lower.

Lehman Brothers ((LEH)) dropped $1.88 to $27.60 as more analysts lower rating on the stock. Several optimistic analysts were looking for the company to report at least break even earnings in the latest quarter earnings. Credit Suisse and Wachovia lowered the ratings on the stock.

Other brokerages edged lower as well after the comments from the Fed Chairman Bernanke suggested that the Fed may be ready to fight inflation. Morgan Stanley fell $1.04 to $38.35 and Merrill Lynch declined 18 cents to $37.57.

Resource stocks declined on the Fed comments and U.S. steel Corp ((X)) stock fell $4.65 to $179.61 and Potash dropped $4.11 to $217.61. Monsanto Company ((MON)) dropped $3.57 to $134.88.

In the tech sector, Google Inc ((GOOG)) stock fell $7.00 to $550.97, Apple Inc ((AAPL)) rose $1.80 to $183.41 and Research in Motion Limited ((RIMM)) declined $1.27 to $132.78.

Earnings review

CorVel Corporation, provider of information-technology solutions for insurers and government reported fourth quarter revenues rose 8.39% to $77.4 million from $70.9 million a year ago. Net income in the quarter increased 17% to $6.2 million or 44 cents per diluted share compared to net income of $5.3 million or 37 cents per share, a year ago.

For the fiscal year ended March 31, 2008, revenues were $302 million representing a 10% increase from $275 million in revenues a year ago. For the fiscal year ended March 31, 2008 earnings were $1.67 per share compared to earnings of $1.30 per share a year ago.

CorVel Corporation ((CRVL)) in the last one year traded as high as $36.86 in June 2008 and as low as $21.38 in November 2007.

Stewart Enterprises, Inc, which operates funeral homes and cemeteries reported second quarter revenues, decreased 0.1% to $136.8 million from $137.1 million a year ago. Net income in the quarter increased 15% to $13.9 million or 15 cents per diluted share compared to net income of $13.8 million or 13 cents per share, a year ago.

Stewart Enterprises, Inc ((STEI)) in the last one year traded as high as $9.13 in October 2007 and as low as $5.37 in March 2008.

The Pep Boys-Manny, Moe & Jack, the nation''s leading automotive aftermarket retail and service chain reported first quarter sales decreased 8.35% to $498.0 million from $539.6 million a year ago. Net income in the quarter increased 41.50% to $5.3 million or 10 cents per diluted share compared to net income of $3.1 million or 6 cents per share, a year ago. Comparable Sales decreased 5.6% including 6.2% comparable merchandise sales decrease and a 2.9% comparable service revenue decrease.

The Pep Boys-Manny, Moe & Jack, ((PBY)), in the last one year traded as high as $22.49 in June 2007 and as low as $8.25 in January of 2008.

World markets review

In Tokyo Nikkei 225 Index closed lower 160.21 or 1.13% to 14,021.17, in Hong Kong Hang Seng index decreased 1026.66 or 4.21% closed to 23,375.52. In Australia ASX 200 index lower 154.60 or 2.76% to close 5,437.50. In Malaysia KL Composite index decreased 0.02 or 0.00% closed to 1,230.96.

In South Korea Kospi Index decreased 34.58 or 1.91% to close at 1,774.38, in Thailand SET index closed lower 13.64 or 1.69% to 791.94 and Indonesia JSE Index edged decreased 36.26 or 1.50% to 2,373.82. Sensex index in India decreased 176.85 or 1.17% to 14,889.25.