Financials, Home Builders Fall; Mexico Down 2%

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

U.S. stocks fell sharply on more than 23% decline in Freddie Mac and 21% loss in Fannie Mae. Benchmark indexes fell 1.5% after financials, home builders and consumer stocks fell. A prospect of the U.S. bailout of Fannie and Freddie may happen at the expense of shareholders. Of the S&P 500 index stocks, 90% fell. Home improvement retailer Lowes earnings declined 8% but at mining giant BHP Billiton annual earnings rose 15%.

4:30PM New York, 10:30PM Frankfurt, 6:30AM Sydney[R]– Talks of possible disaster for shareholders of Fannie Mae and Freddie Mac dragged two stocks to their lows in the last two decades. Home builders fell as well. Mexico and Brazil dropped sharply. European markets closed mixed.[/R]

Global Markets Update

U.S. stocks fell on the worries that the two mortgage lending government agencies, Fannie and Freddie may need capital infusion and may wipe out shareholders. Merrill Lynch lowered its price target on Freddie Mac below $6. Financials and home builders fell sharply. Fannie and Freddie dropped more than 18%. Lennar, DR Horton and Toll Brothers declined more than 5%. Lowes, the second largest home-improvement retailer net quarterly income declined 8% and sales rose 2.4%.

Stocks in London fell sharply after house prices fell 4.8% in August and a report by the British Chambers of Commerce indicated that economic growth will fall to negative or zero in the next three quarters. Bradford & Bingley said 72% of its shareholders rejected offer to participate in rights offering and appointed new chief executive. Woolworths rejected bid from Iceland Foods that involved complex restructuring.

Stocks in Mumbai fell as investors face tighter monetary policy in the country on the prospect of elevated inflation for the rest of the year. Rupee declined against dollar as the U.S. currency climbed from its low on the expectations of interest cuts in the euro zone. Mahindra & Mahindra acquired a majority stake in the third largest tractor company in China. Former dictator of Pakistan, President Musharraf was forced to resign to avoid as President to avoid impeachment charges.

Markets in overnight trading in Asia closed mixed with Japan index trading up 1% but index in Hong Kong fell more than 1%. In the UK trading, commodities and energy stocks traded higher with a slight pickup in crude oil and metals prices. BHP Billiton increased its dividend by 49% after it reported annual earnings rise of 15% and revenue gain of 25%.

North American Markets indexes

Dow Jones Industrial Average decreased 180.51 or 1.55% to a close of 11,479.39, S&P 500 Index closed down 19.60 or 1.51% to 1,278.20, and Nasdaq Composite Index decreased 35.54 or 1.45% to close at 2,416.98. In Toronto TSX Composite closed up 22.67 or 0.17% to 13,119.37.

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

General Motors led decliners in Dow Jones Industrial Average with a loss of 7.33% followed by losses in AIG of 6.06%, in Citigroup Inc of 5.01%, in Bank of America of 4.56%, in JP Morgan Chase of 3.49% and in American Express of 2.76%.

Of the stocks in S&P 500 index, 55 increased, 444 declined and 1 were unchanged. Of the index stocks, 2 rose more than 3% and 91 fell more than 3%.

MBIA Inc led the gainers in the S&P 500 index with a rise of 5.4% followed by gains in ADM of 4.8%, in Fluor Corp of 2.45%, in GameStop Corp of 2.24%, in Nvidia Corp of 2.01% and in PG&E Corp of 1.9%.

Freddie Mac led decliners in the S&P 500 index with a loss of 25% followed by losses in Fannie Mae of 22.25%, in SanDisk Corp of 10.20%, in Hershey company of 9.4%, in Sunoco Inc of 8.90%, in Huntington Bancorp of 8.3% and in Harman International of 8.13%.

South American Markets Indexes

Mexico led decliners in the Latin American markets with a fall of 2.06% followed by decreases in Brazil of 1.69% and in Chile of 0.78%. Peru gained 0.97% and markets in Venezuela, Argentina and Colombia were closed.

Europe Markets Review

In London FTSE 100 Index closed lower 4.60 or 0.08% to 5,450.20, in Paris CAC 40 Index decreased 4.78 or 0.11% to close at 4,448.84 and in Frankfurt DAX index lower 13.14 or 0.20% to close at 6,432.88. In Zurich trading SMI decreased 4.53 or 0.06% to close at 7,231.40.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 146.04 or 1.12% to 13,165.45, Hang Seng index in Hong Kong decreased 229.91 or 1.09% closed to 20,930.67. ASX 200 index in Australia increased 3.30 or 0.07% to close 4,985.00. The KL Composite index in Malaysia decreased 10.69 or 0.98% closed to 1,084.36.

The Kospi Index in South Korea decreased 4.48 or 0.28% to close at 1,567.71, SET index in Thailand closed lower 10.25 or 1.45% to 697.23 The Sensex index in India decreased 78.52 or 0.53% closed to 14,645.66. Markets of Indonesia were closed today.

Commodities, Metals, and Currencies

Crude oil decreased $0.87 to close at $112.90 a barrel for a front month contract, natural gas closed down 24 cents to $7.85 per mBtu and gasoline futures decreased 4.50 cents to close at 281.51 cents per gallon.

Gold increased $12.50 in New York trading to close at $804.60 per ounce, silver closed down $0.25 cents to $13.18 per ounce and copper for the front month delivery decreased 1.20 cent to $3.3025 per pound.

Wheat futures closed down 40.25 cents in Chicago trading and closed at $8.49 a bushel. Sugar decreased 0.27 cent to 13.12 cents a pound. Soybean future closed down 55.00 cents to $12.19 a bushel.

Dollar edged lower and traded near record low against euro to $1.4698 and edged lower against yen to 110.08.

Yields on U.S. bonds decreased to 3.81% with 10 years of maturities and decreased to 4.43% with 30-year of maturities.