Lehman Falls 40%, Merrill Drops 13%

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

U.S. stocks edged lower after analysts lowered their views on Lehman Brothers. The troubled broker lost 40% after it fell 45% in the previous session. Trade deficit in July increased as exports and imports both increased. The elevated crude oil imports and persistent deficit with Asian nations contributed to the high deficit. Initial jobless claims for the week ended Sept 6 declined to 445,000 from a revised 451,000 at the end of the prior week.

[R]9:45AM New York – U.S. stocks fell after analysts lowered rating on Lehman Brothers. Lehman Brothers dropped 40% after losing nearly 50% of its value in the previous session. Asian markets closed sharply lower with Shanghai closing down to 18-month low.[/R]

Global financial markets were on the decline dragged by continued uncertainty with the U.S. financial system. On-going worries related to health of one of the largest mortgage securities firm Lehman Brothers dragged financial markets in Asia and in Europe. The benchmark index in Shanghai dropped 3.3%, the lowest level in the last eighteen months. The index has fallen nearly 70% in the period.

The Commerce Department reported July traded deficit increased 5.7% $62.2 billion from the revised $58.8 billion in June.

Initial jobless claims for the week ended Sept 6 declined to 445,000 from a revised 451,000 at the end of the prior week with the total number of unemployed people claiming unemployment rose 122,000 to 3.53 million, a five-year high.

Lehman Brothers ((LEH)) dropped nearly 45% in the morning trading after analysts and rating agencies expressed their negative views on the company. Citigroup and Goldman Sachs lowered their ratings on the brokerage firm and expressed their concerns that the current initiatives to attract capital may not be adequate to halt the decline in stock price and bolster investors’ confidence. Oppenheimer & Company raised its full-year loss forecast to $10.24 from $6.67 a share after the company reported record quarterly loss yesterday. The news of analysts downgrade was first reported on Bloomberg News.

Lehman Brothers fell $2.91 or 40% to $4.28 and Merrill Lynch ((MER)) declined $2.56 or 11.55% to $20.57. Visa Inc ((V)) dropped $1.53 to $67.50 and MasterCard Inc ((MA)) dropped $5.53 to $207.60.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 244.13 or 1.98% to 12,102.50, Hang Seng index in Hong Kong decreased 611.06 or 3.06% closed to 19,388.72.ASX 200 index in Australia decreased 91.20 or 1.86% to close 4,814.30. The KL Composite index in Malaysia decreased 21.04 or 2.04% closed to 1,041.07.

The Kospi Index in South Korea decreased 21.74 or 1.48% to close at 1,443.24, SET index in Thailand closed lower 8.74 or 1.33% to 646.80 and JSE Index in Indonesia decreased 14.91 or 0.79% to 1,870.13. The Sensex index in India decreased 338.32 or 2.31% closed to 14,324.29.

Europe Markets Review

In London FTSE 100 Index traded lower 45.60 or 0.85% to 5,320.60, in Paris CAC 40 Index decreased 34.82 or 0.81% to 4,248.84 and in Frankfurt DAX index traded lower 68.61 or 1.10% to 6,141.71. In Zurich trading SMI decreased 95.49 or 1.34% to 7,025.94.

Earnings Review

Spartech Corporation, an intermediary processor of engineered thermoplastics said third quarter revenues fell 3% to $350.3 million from $361.1 million a year ago. Net income in the quarter fell 100% to $4.4 million or 15 cents per diluted share compared to net income of $8.8 million or 27 cents per share, a year ago.

Spartech Corporation ((SEH)) in the last one year traded as high as $19.84 in September 2007 and as low as $7.51 in March 2008. Based on the yesterday’s closing price the company has a market cap of $302.23 million.