U.S. Stocks Rebound, Buffett Says Buy

123jump.com Staff
17 Oct, 2008
New York City

U.S. stocks rebounded from the morning descent on weak existing home sales data confirmed the broad trend in the economy. Investors returned to the market in the early afternoon to cover the expiring options. Home builders fell. Google shot up on stronger than expected earnings.

[R]2:30PM New York – U.S. stocks rose in a volatile trading as expiration of options drive volume gains. Home builders fall. Crude oil and commodities prices fall.[/R]

U.S. stocks rebounded from their morning descent on weak existing home sales data confirmed the broad trend in the economy. Investors returned to the market in the early afternoon to cover the expiring options. Home builders fell.

September new home construction dropped to a new low in the last three year reaching to 26-year decline. D.R. Horton ((DHI)) fell 8.4% to $6.75, Lennar Corp rose 3% to $9.25 and Toll Brothers gained 3.7% to $20.04.

Single family homes construction in the U.S. dropped 12% to 544,000 annual rate and housing starts on all homes including apartments and condominium declined to 817,000 according to the Commerce Department. August total new homes construction was revised lower to 872,000 from 895,000. New homes permits fell 8.3% to 786,000 in the month.

Total new homes construction starts has fallen nearly two third from the record in January 2006 and the sale of existing and new homes are down 34% from the record in second half of 2005.

Warren Buffett, the chairman of Berkshire Hathaway said in a column in New York Times said that his personal portfolio will have American stocks.

He noted in the piece, “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.”

Advanced Micro Devices, Inc ((AMD)) gained 10.9% or 45 cents to $4.57 after the global semiconductor company said third quarter revenues rose 14% to $1.78 billion from $1.56 billion a year ago. Net loss in the quarter was $67 million or 11 cents per diluted share compared to net loss of $396 million or 71 cents per share, a year ago.

Google Inc ((GOOG)) surged 10.4% or $36.97 to $389.99 after the Internet search engine leader said third quarter revenues rose 31% to $5.54 billion from $4.23 billion a year ago. Net income in the quarter rose 26% to $1.35 billion or $4.24 per diluted share compared to net income of $1.07 billion or $3.38 per share a year ago.

Honeywell International Inc ((HON)) dropped 3.6% or $1.13 to $29.80, the world''s largest maker of aviation electronics reported third quarter revenues rose 6.2% to $9.28 billion from $8.74 billion a year ago. Net income in the quarter rose 16.3% to $719 million or 97 cents per diluted share compared to net income of $618 million or 81 cents per share, a year ago.

Schlumberger Limited ((SLB)) fell 10.1% or $5.56 to $47.64, the world''s largest oilfield services company reported third quarter revenues rose 22% to $7.26 billion from $5.93 billion a year ago. Net income in the quarter rose 13% to $1.53 billion or $1.25 per diluted share compared to net income of $1.35 billion or $1.09 per share, a year ago.

In European trading, Ericsson and Nokia rose. Ericsson added 2.2% in Stockholm trading after the company’s venture with Sony, Sony Ericsson reported lower than expected third quarter loss. The mobile phone handsets were healthy and average selling price of the units were little better than expected. Nokia jumped 6.5% after WestLB raised its rating on the company.

ING Groep NV dropped 21% to 7.9 euros as investors continue to speculate that the bank lacks sufficient capital to survive. The Dutch bank is still reviewing the possibilities of tapping the 20 billion euros fund set up by the national government.

Energy companies in Europe traded higher on positive comments from Goldman Sachs and a rise in crude oil futures prices. Total, Eni, Royal Dutch Shell, Stat Oil and BP plc traded above 3%.

World markets remain hostage to the vagaries of the U.S. market index movements. European financial markets are caught between weakening environment for banks that are already reeling from losses linked to the U.S. mortgages and falling commodities and crude oil prices. Strong euro has trimmed export growth.

Asian markets are trading at 40% to 52% loss and European markets are at least 22% lower for the year. U.S. indexes are down at least 36% for the year and Latin markets that were immune till the middle of the year have suffered worst two-month decline in decades. Brazil and Peru has lost nearly 40% in the period.

The falling commodities, crude oil and natural gas prices have dragged markets linked to natural resources such as Canada, Peru, Chile and Brazil to new lows.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 235.37 or 2.78% to 8,693.82, Hang Seng index in Hong Kong decreased 676.31 or 4.44% closed to 14,554.21. CSI 300 index in China higher 12.36 or 0.68% closed to 1,833.26. ASX 200 index in Australia decreased 42.60 or 1.06% to close 3,970.80. The KL Composite index in Malaysia lower 14.79 or 1.61% closed to 905.23.

The Kospi Index in South Korea decreased 33.11 or 2.73% to close at 1,180.67. SET index in Thailand closed lower 6.42 or 1.34% to 471.31, and JSE Index in Indonesia decreased 63.83 or 4.36% to 1,399.42. The Sensex index in India decreased 606.14 or 5.73% closed to 9,975.35.

Europe Markets Review
In London FTSE 100 Index closed lower 201.62 or 5.22% to 4,063.01, in Paris CAC 40 Index increased 148.92 or 4.68% to close at 3,329.92 and in Frankfurt DAX index higher 158.52 or 3.43% to close at 4,781.33. In Zurich trading SMI increased 381.09 or 6.66% to close at 6,099.62.