Financials Pullback; Microsoft Debt Offering

123jump.com Staff
11 May, 2009
New York City

U.S. stocks declined after investors pulled back from financial stocks. Five banks took advantage of recent market strengths and filed to raise capital. Microsoft is expected to price its first debt offering of as much as $3.7 billion. Markets in Europe declined on a weakness in energy and metals.

[R]5:45PM New York, – U.S. stocks declined after investors pulled back from financial stocks. Five banks took advantage of recent market strengths and filed to raise capital. Microsoft is expected to price its first debt offering of as much as $3.7 billion. Markets in Europe declined on a weakness in energy and metals prices.[/R]

U.S. stocks closed lower after financials fell. Speculators argued that stocks and banks have recorded gains that are not sustainable and it will be years before the normal economic growth resumes. Prudential Financial, American Express, BB&T, and Capital One declined.

More banks use the current market conditions to raise additional capital and cut dividend to meet regulatory capital requirements. Capital One, KeyCorp, BB&T Corp and U.S. Bancorp filed or declared to raise capital.

Microsoft is expected to price its first ever debt offering today and raise as much as $3.7 billion. The offering may include a mix of 5-year, 10-year and 30-year debts. S&P has assigned its highest rating to Microsoft debt. Microsoft plans to use the proceeds to fund its $40 billion stock repurchase program and the company said it does not need capital for its business operations.

Market indexes in Europe declined after a weakness in banks, mining and industrial companies. Stocks in Germany fell after Commerzbank planned to sell debt and TUI AG reported weak earnings. Manufacturing in France and in Germany declined.

Stocks in UK declined after metal prices weakened and HSBC reported a rise in bad debt provisions. Lonmin plunged 10% after it offered a right issue and reported operating loss. Centrica agreed to pay £2.3 billion for 20% stake in British Energy to EDF. Traffic at UK airports declined in April.

Stocks in Tokyo edged higher and yen declined 1.3%. The commodities prices in the region remained elevated as the optimism about global economy prevailed. Financials and real estate companies led gainers. Orix surged on estimate of 37% income rise but Bridgestone dropped 7% wider loss.

Australian business conditions improve in April. Santos to raise A$3 billion for expansion in Papua New Guinea and repay $600 million of hybrid securities issued in 2004. Exxon controls 41% stake in the venture. Fortescue Metals Group may list its shares in Shanghai.

Economy in India expanded at 6.5% in the fiscal year ending in March of 2009. Stocks and rupee declined ahead of election results and weak sentiment in global markets. Hindustan Unilever dropped after it reported weak earnings rise. Industrial production in March is expected to fall.

North American Markets

Dow Jones Industrial Average declined 155.88 or 1.82% to a close of 8,418.77, S&P 500 Index fell 19.99 or 2.2% to 909.24, and Nasdaq Composite Index decreased 7.76 or 0.45% to close at 1,731.24. In Toronto TSX Composite Index closed down 143.85 or 1.4% to 10,094.14.

Of the stocks in S&P 500 index, 403 increased, 95 declined and 2 were unchanged.

Nvidia Corp led decliners in the S&P 500 index with a loss of 13.8% followed by losses in Allstate Corp of 5.4%, in Microchip Tech of 5.2%, in Broadcom Corp of 5.1% and in SanDisk Corp of 5.1%.

Fifth Third Bancorp led gainers in the S&P 500 index with a surge of 58% followed by gains in Dynegy Inc of 37%, in Huntington Bancshares of 33.7%, in Marshall & Ilsley of 27.5%, in Zions Bancorp of 27.1% and in Regions Financial of 24.9%.

South American Markets Indexes

Mexico Bolsa Index fell 142.56 or 0.6% to 23,943.02. Brazil Bovespa Stock Index declined 419.60 or 0.82% to 50,976.39.

Argentina Merval Index added 0.8%, Chile Stock Market Select index increased 0.6% and Peru Lima General Index decreased 0.1%. Colombia IGBC General Index fell back 1.4% and Venezuela Stock Market Index edged down 0.4%.

Europe Markets Review

In London FTSE 100 Index closed lower 26.59 or 0.60% to 4,435.50, in Paris CAC 40 Index decreased 63.92 or 1.93% to close at 3,248.67 and in Frankfurt DAX index lower 46.99 or 0.96% to close at 4,866.91. In Zurich trading SMI decreased 32.07 or 0.59% to close at 5,358.94.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 19.15 or 0.20% to 9,451.98, Hang Seng index in Hong Kong decreased 301.92 or 1.74% closed to 17,087.95, CSI 300 index in China lower 63.90 or 2.29% closed to 2,725.32. ASX 200 index in Australia decreased 15.70 or 0.40% closed to 3,926.00. The KL Composite index in Malaysia lower 1.28 or 0.12% closed to 1,025.50.

The Kospi Index in South Korea increased 3.03 or 0.21% to close at 1,415.16. SET index in Thailand closed higher 7.46 or 1.41% to 535.18 and JSE Index in Indonesia decreased 31.79 or 1.71% closed to 1,830.74. The Sensex index in India decreased 193.44 or 1.63% closed to 11,682.99.

Commodities, Metals, and Currencies

Crude oil decreased $0.47 to close at $58.16 a barrel for a front month contract, natural gas decreased 3 cent to $4.28 per mBtu and gasoline futures decreased 3.50 cents to close at 167.05 cents per gallon.

Wheat futures closed down 0.25 cents in Chicago trading and closed at $5.9075 a bushel. Sugar increased 0.34 cent in trading at 15.61 cents a pound. Soybean future closed up 4.50 cent to $11.16 a bushel.

Gold decreased $1.20 in New York trading to close at $913.70 per ounce, silver closed down $0.02 to $13.95 per ounce and copper for the front month delivery decreased 6.35 cents to $2.08 per pound.

Dollar edged higher against euro to $1.3584 and closed up against yen to 97.40.

Yields on 10-year U.S. bonds decreased to 3.16% and with 30-year maturities closed down at 4.18%.