Lehman Plunges 45%, S&P500 Down 3.9%

123jump.com Staff
09 Sep, 2008
New York City

Lehman Brothers stock lost nearly half its value after it failed to strike a deal with Korea based bank. The financial service firm is struggling to attract investors or sell assets at a price it deemed they are worth. Investors sold financial stocks and the U.S. benchmark indexes declined between 2.4% and 3.6%. A sharp sell-off in natural resource stocks also dragged metals, mining and energy stocks lower. Silver and lead dropped more than 4% and gold and zinc lost more than 2%.

10:00PM New York, 4:00AM Frankfurt, 12:00PM Sydney[R]– The ongoing talks between Lehman Brothers and Korea based banks declined with no conclusion. Lehman plunged 45% and dragged financials and markets averages lower.[/R]

Global Markets Update

U.S. stocks fell sharply after Lehman Brothers ended its talks with Korea Development Bank for a capital infusion or asset sale. Crude oil, natural gas, metals and agriculture commodities declined. The dollar rose against euro and British pound. Natural resource stocks led the decliners. Coal miners, specialty chemicals, metals miners and steelmakers fell sharply. Potash Corp, Peabody Energy, U.S. Steel dropped more than 4%.

UK manufacturing index declined to the lowest level in eighteen months after factory output fell 0.2% in July from a month ago. For the three months ending in July manufacturing index fell 1.1%. Average property sales per surveyor fell to the lowest level in 20 years as tight mortgage market dampen home prices and sales. BG Group abandoned its pursuit of Origin Energy based in Australia after the company attracted $8 billion from ConocoPhillips.

Stocks in Mumbai declined with weak trading in metals and commodities related stocks. Sterlite Industries dropped 8% after the parent Vedanta separated its copper and zinc, iron ore and aluminum and power businesses in three separate entities. The company also announced plans to invest as much as $10 billion in the next three years and increase alumina mining and aluminum refining capacity in Orissa.

Stocks in Shanghai rose but in Hong Kong fell. Cautious investors looked for bargains after stocks in Shanghai fell more than 60% from the beginning of the year. Airlines rose after the crude oil prices declined. Realtors fell after China Vanke reported third monthly sales decline in new homes sales. Sales in August fell 35% after dropping in June and July. China passenger car sales in August dropped 6%, first decline in three years.

Stocks in Japan fell as steelmakers, financials and commodities related stocks fell. Brazil based world’s largest iron miner is seeking additional 12% price increase from steelmakers in Japan and China. The latest hike comes on top of 65% price increase that the miners in Australia and Brazil sought and received for shipments beginning in April. Shipping lines fell between 4% and 7% after the freight index dropped 3%.

North American Markets

Dow Jones Industrial Average decreased 280.01 or 2.43% to a close of 11,230.73, S&P 500 Index closed down 43.28 or 3.41% to 1,224.51, and Nasdaq Composite Index decreased 59.95 or 2.64% to close at 2,209.81. In Toronto TSX Composite closed down 487.88 or 3.86% to 12,146.76.

Of the 30 stocks in Dow Jones Industrial Average 5 stocks gained, 24 declined and one was unchanged.

McDonalds Corp led gainers in the Dow Jones Industrial Average with a rise of 1.2% followed by increases in Coca-Cola Company of 0.9%, Hewlett Packard 0.6%, Verizon Communications of 0.3% and Boeing Company of 0.17%.

AIG led decliners in Dow Jones Industrial Average with a fall of 19.3% followed by gains in Citigroup Inc of 7.1%, in Bank of America of 6.4%, in American Express of 5.63%, in JP Morgan Chase of 5.1% and in Caterpillar Inc of 4.94%.

Of the stocks in S&P 500 index, 39 increased, 458 declined and 3 were unchanged. Of the index stocks, 2 rose more than 3% and 252 fell more than 3%.

Fannie Mae led the gainers in the S&P 500 index with a rise of 35.62% followed by gains in Liz Claiborne of 3.18%, in Kroger Company of 2.38%, in Kimberly-Clark 2.08%, in Molson Coors of 1.96% and in Celgene Corp of 1.73%.

Lehman Brothers led decliners in the S&P 500 index with a plunge of 44.95% followed by losses in WaMu Inc of 19.90%, in Massey Energy of 19.4%, in AIG of 19.20%, in AK Steel Holdings of 16.24%, in MEMC Electric Material of 16.2% and in MGIC Investment Corp of 15.7%.

South American Markets Indexes

Venezuela gained 0.16% and Colombia increased 0.04%.

Brazil led decliners in the region with a fall of 4.50% followed by decreases in Argentina of 4.4%, in Peru of 2.7%, in Mexico of 2.3% and in Chile of 1.7%.

Europe Markets Review

In London FTSE 100 Index closed lower 30.70 or 0.56% to 5,415.60, in Paris CAC 40 Index decreased 46.84 or 1.08% to close at 4,293.34 and in Frankfurt DAX index lower 30.33 or 0.48% to close at 6,233.41. In Zurich trading SMI increased 12.03 or 0.17% to close at 7,189.45.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 223.81 or 1.77% to 12,400.65, Hang Seng index in Hong Kong decreased 303.16 or 1.46% closed to 20,491.11.ASX 200 index in Australia decreased 87.40 or 1.72% to close 4,980.10. The KL Composite index in Malaysia decreased 7.38 or 0.69% closed to 1,068.55.

The Kospi Index in South Korea decreased 22.15 or 1.50% to close at 1,454.50, SET index in Thailand closed lower 2.05 or 0.31% to 663.61 and JSE Index in Indonesia decreased 79.25 or 3.89% to 1,958.75. The Sensex index in India decreased 44.21 or 0.30% closed to 14,900.76.


Commodities, Metals, and Currencies

Crude oil decreased $0.29 to close at $103.55 a barrel for a front month contract, natural gas increased 1 cent to $7.54 per mBtu and gasoline futures increased 2.21 cents to close at 267.00 cents per gallon.

Gold decreased $18.50 in New York trading to close at $773.50 per ounce, silver closed down $0.49 cents to $11.22 per ounce and copper for the front month delivery decreased 1.20 cent to $3.07 per pound.

Wheat futures closed down 1.25 cents in Chicago trading and closed at $7.29 a bushel. Sugar decreased 0.15 cent to 13.85 cents a pound. Soybean future closed down 7.25 cents to $11.93 a bushel.

Dollar edged higher against euro to $1.4138 and edged higher against yen to 107.265.

Yields on U.S. bonds decreased to 3.61% with 10 years of maturities and decreased to 4.20% with 30-year of maturities.