Merrill Leads Rebound in Financials, Indexes

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

U.S. benchmark indexes staged a sharp reversal and closed 2.4% higher on a drop in oil, better than expected earnings and Merrill Lynch plan to raise capital. Crude oil dropped $2.54 a barrel dragging energy stocks lower with it. Financials closed higher after Merrill Lynch planned to raise $8.5 billion and sell $30 billion of troubled loans at a steep discount. McGraw Hill, U.S. Steel and Hartford Financial Services were few of the companies reported better than expected earnings.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– U.S. stocks staged a reversal and closed higher after Merrill Lynch planned to raise $8.5 billion and sell $30 billion in mortgage assets.[/R]

Global Markets Update

Teck Cominco increases its stake in Fording Canadian Coal Trust after it acquires the rest of 60% stake in the metallurgical coal miner that it does not own. The deal values the company at $14 billion and will be financed with a short term debt of $9.8 billion and $1.5 billion in equity offering. The merger of two mining companies is expected to be accretive by the end of the year and increase operating earnings by 50% in 2009.

U.S. stocks closed higher after earnings from U.S. Steel and Amgen beat expectations. U.S. Steel surged nearly 10% after it reported second quarter earnings surge of 55% to $668 million or $5.65 per share. Amgen reported earnings of $1.14 a share. Valero, the largest crude oil refiner reported earnings decline of 67% to $734 million or $1.37 a share.

Home prices in May fell 0.9% from April in twenty largest metropolitan areas and fell 16% from a year ago. In the top ten largest urban markets home prices fell 17% from a year ago and 1% from April. The controversial S&P/Case-Shiller home-price index showed for the second month in a row a drop in home prices in every metropolitan area tracked.

UK home loans and mortgage loans fell to an eight-year low in June and below last six month average. Tight credit market conditions played a key role in the weak lending. UK retail sales in July fell and further weakness is expected in August according to a trade report. In London trading banks continued to decline and British Air entered in merger talks with Iberia of Spain. Vedanta Resources first quarter profit rose 6.3% on higher iron ore output.

Stocks in Japan fell sharply after June unemployment rose to 4.1% and retail sales in the month edged up only 0.3%. The weak employment and retail sales data dragged market averages lower. In addition, Sony first quarter net income fell 47% to 35 billion yen and Kansai Electric estimated full-year loss of 55 billion yen. Nomura Holdings in the first quarter lost 76.6 billion yen after it set aside 63.1 billion yen.

Stocks in Hong Kong and Shanghai dropped as investors worried that U.S. credit market crisis may last longer than estimated. A surprise write down at Merrill Lynch and a gloomy outlook from IMF dragged financials and bench mark indexes lower. In earnings, China Coal Energy reported 59% rise in first half profit on 33% rise in coal prices and 15% rise in production volume. Separately, Yunnan Aluminium net income fell 44% on higher raw materials costs.

North American Markets indexes

Dow Jones Industrial Average increased 266.48 or 2.39% to a close of 11,397.56, S&P 500 closed up 28.83 or 2.34% to 1,263.20, and Nasdaq Composite Index increased 55.40 or 2.45% to close at 2,319.62. In Toronto TSX Composite closed up 42.08 or 0.32% to 13,346.04.

Of the 30 stocks in Dow Jones Industrial Average 28 stocks gained, 1 declined and 1 was unchanged.

Bank of America led the gainers in the Dow Jones Index with a rise of 12.7% followed by increases in JP Morgan Chase of 7.3%, in General Motors of 6.7%, in AIG of 6.4%, in Citigroup of 6.3% and in American Express of 5.5%. Johnson & Johnson was the lone decliner in the Dow Jones Index with a fall of 0.06%.

Of the stocks in S&P 500 index, 428 increased, 71 declined and 1 was unchanged. Of the index stocks 201 stocks rose more than 3% and 13 fell more than 3%. Twenty stocks closed above 10%.

Questar Corp led the decliners in the S&P 500 index with a loss of 7.3% followed by declines in Manitowoc of 5.11%, in Nabor Industries of 4.8%, in XTO Energy of 4.7%, in Range Resources of 4.65%, in Chesapeake Energy of 4.05% and in Halliburton Co. of 3.97%.

MGIC Investment Corp led the gainers in the S&P 500 index with a rise of 19.4% followed by gains in MBIA Inc of 15.69%, in Wachovia Corp of 14.8%, in AK Steel of 13.5%, in U.S. Steel of 13.13% and in Bank of America of 12.7%.

South American Markets Indexes

Mexico led gainers in the Latin American markets with a rise of 2.2% followed by increases in Brazil of 2.06%, in Chile of 1.7% and in Peru of 0.6%. Venezuela led the decliners in the region with a fall of 0.9% and Colombia was unchanged.

Europe Markets Review

In London FTSE 100 Index closed higher 6.60 or 0.12% to 5,319.20, in Paris CAC 40 Index decreased 3.96 or 0.09% to close at 4,320.49 and in Frankfurt DAX index higher 47.65 or 0.75% to close at 6,398.80. In Zurich trading SMI increased 24.37 or 0.35% to close at 6,993.30.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 194.33 or 1.46% to 13,159.45, Hang Seng index in Hong Kong decreased 429.21 or 1.89% closed to 22,258.00. ASX 200 index in Australia decreased 74.70 or 1.52% to close 4,847.40. The KL Composite index in Malaysia decreased 3.29 or 0.29% closed to 1,150.80.

The Kospi Index in South Korea decreased 31.09 or 1.95% to close at 1,567.20, SET index in Thailand closed lower 8.80 or 1.28% to 676.73 and JSE Index in Indonesia increased 3.01 or 0.13% to 2,278.68. The Sensex index in India decreased 557.57 or 3.89% to 13,791.54.

Commodities, Metals, and Currencies

Crude oil decreased $2.54 to close at $122.19 a barrel for a front month contract, natural gas closed up 5 cents to $9.22 per mBtu and gasoline futures decreased 6.08 cents to close at 300.92 cents per gallon.

Gold decreased $9.60 in New York trading to close at $928.20 per ounce, silver closed down 6.50 cents to $17.40 per ounce and copper for front month delivery decreased 2.40 cent to $3.58 per pound.

Wheat futures decreased 5.75 cent in Chicago trading and closed at $7.92 per bushel. Sugar increased 0.50 cent to 12.82 cents per pound. Soybean future closed down 5.00 cents to $13.91 a bushel.

Dollar edged higher and traded near record low against euro to $1.5585 and rose against yen to 108.145.

Yields on U.S. bonds increased to 4.07% with 10 years of maturities and increased to 4.64% with 30-year of maturities.