Retailers, Banks Decline; Japan GDP Shrank

123jump.com Staff
13 Aug, 2008
New York City

Financials and retailers fell after weak earnings and cautious outlook on these sectors. Macys fell after quarterly sales declined and Liz Claiborne dropped the most in S&P 500 index after it reported a loss. Bank of America led the decline in financial sector after a cautious outlook from Merrill Lynch. Deere & Company dropped 3% after it missed earnings estimates. Crude oil rose after the weekly inventories dropped more than expected.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– U.S. stocks fell after weak earnings and fall in retail and banking stocks. Crude oil rose. Japan economy shrank at 2.4% in the first fiscal quarter. Chile fell 1% but most Latin American markets rose. Canada added 1.6% but most European markets lost between 1.5% and 2.8%.[/R]

Global Markets Update

U.S. stocks fell after weaker than expected earnings from Deere & Company and Macys. Deere reported earnings of $1.32 a share compared to $1.18 a share on the revenue rise of 17% to $7.7 billion. Macy’s net income in the second quarter fell 3% and on higher integration cost earnings rose to 17 cents a share compared to 16 cents a share. Bank of America and other banks fell after cautious comments from Merrill Lynch. CVS Caremark agreed to buy Longs Drug Stores for $2.7 billion.

The Bank of England lowered its economic growth estimate for UK economy to 0.1% from 1% in the first quarter of 2009. The lowered economic expectations dragged British pound to the lowest level in nearly two years. Interest rates are likely to fall in the coming months as economy falters. Financials fell after ING reported earnings fall of 28%. Barclays, Royal Bank of Scotland and HSBC declined.

Stocks in Japan dropped 2% after economy contracted at the end of the first fiscal quarter and current account surplus fell. Exports declined in the quarter along with the rising food and energy prices kept consumer spending in check. GDP in the quarter to June contracted at 2.4% as exports fell 2.3% and imports declined 2.8% with the consumer spending weakening by 0.5%. Mitsubishi UFJ commences its tender offer to acquire UnionBanCal and may have to raise it above the current $3 billion offer.

Retail sales in China rose at 23.3% in July after gaining at 23% rate in June. In addition, real estate prices rose 7% in the month, but at the slowest pace in the year so far from a year ago. The price rise has steadily declined from a rise of 11.3% in January to 9.2% in May. The report also notes that prices of existing homes advanced 6% year-on-year during the period, which is 1.5 percentage points higher than June.

Mumbai stocks declined after advisory panel to the prime minister indicated a need for a tighter monetary policy. Inflation is likely to persist at or above 11% for the rest of the year before dropping below 9% in the first quarter of the next year. Separately, the finance minister indicated economic growth in the current fiscal year to be at 8%, higher than estimated by private economists. Tata Steel and Vietnam form a joint venture to build 4.5 million ton steel plant with $5 billion investment.

North American Markets indexes

Dow Jones Industrial Average decreased 109.51 or 0.94% to a close of 11,532.47, S&P 500 Index closed down 3.76 or 0.29% to 1,285.83, and Nasdaq Composite Index decreased 1.99 or 0.08% to close at 2,428.62. In Toronto TSX Composite closed up 210.22 or 1.60% to 13,377.22.

Of the 30 stocks in Dow Jones Industrial Average 5 stocks gained, 25 declined and none was unchanged.

Alcoa Inc led gainers in the Dow Jones Industrial Average with a rise of 4.1% followed by increases in Chevron Corp of 3.1%, in Exxon Mobil of 1.61%, in Coca-Cola Company of 0.93% and in IBM of 0.71%.

General Motors led decliners in Dow Jones Industrial Average with a loss of 7.5% followed by losses in Bank of America of 6.8%, in Citigroup Inc of 3.5%, in Home Depot of 3.2%, in AIG of 3.15% and in American Express of 2.8%.

Of the stocks in S&P 500 index, 175 increased, 322 declined and 3 were unchanged. Of the index stocks, 48 rose more than 3% and 56 fell more than 3%.

Nvidia Corp led the gainers in the S&P 500 index with a rise of 10.7% followed by gains in Peabody Energy of 8.3%, in Massey Energy of 7.8%, in Consol Energy of 7.52%, in Southwestern Energy of 7.54% and in Apache Corp of 6.3%.

Liz Claiborne led decliners in the S&P 500 index with a loss of 11.6% followed by losses in Regions Financial of 7.7%, in General Motors of 7.5%, in Wachovia Corp of 7.4%, in Bank of America of 7.30%, in SunTrust Banks of 6.9% and in Goodyear Tire of 6.33%.

South American Markets Indexes

Argentina led gainers in the Latin American markets with a rise of 2.72% followed by increases in Peru of 1.67%, in Colombia of 1.05%, in Brazil of 0.13% and in Venezuela of 0.11%. Chile closed lower 1.11%.

Europe Markets Review

In London FTSE 100 Index closed lower 85.90 or 1.55% to 5,448.60, in Paris CAC 40 Index decreased 115.51 or 2.56% to close at 4,402.97 and in Frankfurt DAX index lower 163.68 or 2.49% to close at 6,422.19. In Zurich trading SMI decreased 108.34 or 1.48% to close at 7,193.50.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 280.55 or 2.11% to 13,023.05, Hang Seng index in Hong Kong decreased 347.57 or 1.61% closed to 21,293.32. ASX 200 index in Australia decreased 102.00 or 2.02% to close 4,951.60. The KL Composite index in Malaysia decreased 6.25 or 0.56% closed to 1,112.53.

The Kospi Index in South Korea decreased 14.40 or 0.91% to close at 1,562.72, SET index in Thailand closed lower 1.33 or 0.19% to 701.60 and JSE Index in Indonesia increased 5.94 or 0.29% to 2,063.52. The Sensex index in India decreased 119.01 or 0.78% closed to 15,093.12.

Commodities, Metals, and Currencies

Crude oil increased $3.43 to close at $116.44 a barrel for a front month contract, natural gas closed up 14 cents to $8.48 per mBtu and gasoline futures increased 9.46 cents to close at 293.77 cents per gallon.

Gold increased $19.40 in New York trading to close at $834.00 per ounce, silver closed up 39 cents to $14.88 per ounce and copper for the front month delivery increased 12.50 cent to $3.3525 per pound.

Wheat futures closed up 60.25 cents in Chicago trading and closed at $8.75 a bushel. Sugar increased 0.24 cent to 13.85 cents a pound. Soybean future closed up 70.00 cents to $12.84 a bushel.

Dollar edged lower and traded near record low against euro to $1.4928 and edged lower against yen to 109.54.

Yields on U.S. bonds decreased to 3.94% with 10 years of maturities and increased to 4.57% with 30-year of maturities.