AIG, Banks New Lows; Oil Down $6

123jump.com Staff
15 Jul, 2008
New York City

Investors continue to sell financial stocks and stocks of Fannie and Freddie. Both lenders dropped 27% and led the decliners in the S&P 500 index. Kimberly Clark lowered its annual earnings outlook. State Street Corp rose after earnings increase more than 50%. UK inflation rose in June to 3.8% and the Bank of Japan left its key rate unchanged at 0.5%. Markets in Shanghai and Hong Kong dropped more than 4% and in India plunged 5%. Intel profit rises 25% on 9% sales increase.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– Investors continue to sell stocks in Fannie and Freddie, two U.S. government sponsored lenders. Retail sales rose less than expected in the U.S. UK inflation rose in June. The Bank of Japan left its key rate unchanged at 0.5%. Benchmark indexes in Hong Kong, China fell 4% and in India dropped 5%.[/R]

Global Markets

U.S. stocks continued to slide as investors fear more losses at troubled banks. Fannie and Freddie led the decliners in the S&P 500 index stocks with a loss of 27% after investors feared that the U.S. Treasury rescue plan is not going to include shareholders. Bond holders may be safe for now, but value of the securities issued by Fannie and Freddie may come under fire if two agencies are not able to attract more capital.

Unhappy investors are increasingly distrustful of the U.S. government bailout plan of Fannie and Freddie that includes bond holders and excludes stock holders. Fannie and Freddie dipped to another low with a loss of more than 20% today and dragged stocks of banks and financial companies. Citigroup, SunTrust, Wachovia and Bank of America declined to their new lows not seen at least in the last ten years. General Motors cut its dividend.

Retailers fell after retail sales increase failed to meet expectations and crude oil fell after Bernanke comments suggested a slowdown in the U.S. economy.

After the U.S. markets close Intel reported second quarter net income increase of 25% to $1.6 billion or 28 cents per share on 9.1% rise in sales to $9.47 billion.

Stocks in London fell after the inflation in June rose at a rate of 3.8% and investors sold stocks of banks. Burberry, the luxury retailer confirmed its earnings guidance and expects to push its stock buyback to the second half of the year. The largest UK food maker, Premier Foods expects to meet annual earnings guidance as it passes on price increase to customers. Rio Tinto Group is expected to release trading update tomorrow.

Benchmark index in Mumbai, India fell nearly 5% as global markets sold off. Expectations of higher inflation, impending confidence vote in parliament and net outflow of foreign investors kept stocks falling. Banks and realty stocks led the decliners. Banks are trading at one year low on the expectations of rising inflation and slowing economic growth. Latest data on industrial production lowered expectations of economic growth.

The Bank of Japan left its key rate unchanged at 0.5%. The central bank cited rising inflation pressure and weak economy. Financial institutions in Japan estimated exposure to debt issued by Fannie and Freddie of $44 billion. Sumitomo Realty led the decliners in Nikkei 225 index with a loss of 6.5% followed by declines in Sumitomo Mitsui, Tokyu Land Corp, and Mitsubishi UFJ Financial Group.

Stocks in China fell with a decline in regional markets, tracking losses in the U.S. and Europe. Benchmark indexes in Hong Kong and Shanghai fell 3.8% and 4.2% respectively. Chinese smelters of lead and zinc will lower production by 10% between July and September. China hopes to lift metal prices with lower supply and also divert electricity to support the Olympic Games. Foreign exchange reserve rose to $1.8 trillion at the end of June, increase of 36% from a year ago.

North American Markets indexes

Dow Jones Industrial Average decreased 92.65 or 0.84% to a close of 10,962.54, S&P 500 closed down 13.39 or 1.09% to 1,214.91, and Nasdaq Composite Index increased 2.84 or 0.13% to close at 2,215.71. In Toronto TSX Composite closed down 383.73 or 2.8% to 13,357.56.

Of the 30 stocks in Dow Jones Industrial Average 12 stocks gained and 18 declined.

AIG led the decliners in the Dow Jones Index with a fall of 8.4% followed by decreases in Bank of America of 8.1%, in Citigroup of 4.4%, in ExxonMobil of 3.8%, in Caterpillar of 3.8% and in Chevron of 3.6%.

General Motors led the gainers in the Dow Jones Index with a rise of 4.9% followed by increases in Microsoft Corp of 4.0%, in Johnson & Johnson of 1.94%, in Coca-Cola of 1.63% and in IBM of 1.37%.

Of the stocks in S&P 500 index, 202 increased, 292 declined and 6 were unchanged. Of the index stocks 31 stocks rose more than 3% and 91 fell more than 3%.

Fannie Mae led the decliners in the S&P 500 index with a loss of 27% followed by declines in Freddie Mac of 26%, in Office Depot of 9.2%, in AIG of 8.5%, in Bank of America of 8.1%, in ACE Limited of 7.9% and in American Capital of 7.7%

First Horizon led the gainers in the S&P 500 index with a rise of 17% followed by gains in WaMu of 5.4%, in Sprint Nextel of 9.5%, in State Street of 7.1%, in Lehman Brothers of 6.6% and in Harman international of 6%.

South American Markets Indexes

Peru led the decliners in the Latin American markets with a rise of 2.65% followed by decreases in Argentina of 2.3%, in Chile of 1.52%, in Colombia of 1.49% and Mexico lost more than 0.3%.

Venezuela and Brazil gained 0.5%.

Europe Markets Review

In London FTSE 100 Index closed lower 124.20 or 2.34% to 5,176.20, in Paris CAC 40 Index decreased 100.75 or 2.43% to close at 4,041.78 and in Frankfurt DAX index lower 190.05 or 3.07% to close at 6,010.20. In Zurich trading SMI decreased 175.09 or 2.62% to close at 6,500.17.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 255.60 or 1.96% to 12,754.56, Hang Seng index in Hong Kong decreased 839.69 or 3.81% closed to 21,174.77. ASX 200 index in Australia decreased 105.30 or 2.14% to close 4,815.70. The KL Composite index in Malaysia decreased 16.40 or 1.43% closed to 1,127.60.

The Kospi Index in South Korea decreased 49.29 or 3.16% to close at 1,509.33, SET index in Thailand closed lower 23.65 or 3.30% to 693.41 and JSE Index in Indonesia decreased 44.69 or 1.98% to 2,214.85. The Sensex index in India decreased 654.32 or 4.91% to 12,676.19.

Commodities, Metals, and Currencies

Crude oil decreased $6.46 to close at $138.72 a barrel for a front month contract, natural gas closed down 52 cents to $11.44 per mBtu and gasoline futures decreased 17.76 cents to close at 338.05 cents per gallon.

Gold increased $5.00 in New York trading to close at $978.70 per ounce, silver closed down 23 cents to $19.01 per ounce and copper for front month delivery decreased 5.20 cent to $3.70 per pound.

Wheat futures decreased 7.0 cent in Chicago trading and closed at $8.11 per bushel. Sugar increased 34 cent to $13.93 per pound. Soybean future closed down 43.00 cents to $15.16 a bushel.

Dollar edged lower and traded near record low against euro to $1.5904 and fell against yen to 104.68.

Yields on U.S. bonds decreased to 3.83% with 10 years of maturities and increased to 4.47% with 30-year of maturities.