Measured Inflation Falls; E*Trade Plunges

Darlington Musarurwa
17 Jun, 2009
New York City

U.S. stocks edge lower after the release of consumer price index data. European markets tracked lower after the release of construction and UK unemployment data. E*Trade propose $1 billion of debt exchange and $400 million stock offering. FedEx estimates lower than expected first quarter earnings.

[R]10:45 AM New York – U.S. stocks edge lower after the release of consumer price index data. European markets tracked lower after the release of construction and UK unemployment data. E*Trade propose $1 billion of debt exchange and $400 million stock offering. FedEx estimates lower than expected first quarter earnings.[/R]

The U.S. stocks traded lower after the release of inflation data and weaker than expected earnings from FedEx. European markets edged lower in the late afternoon after the release of construction data and UK unemployment measure.

The U.S. Consumer Price Index after adjusting for seasonality increased 0.1% in May after being unchanged in April.

On unadjusted basis the index increased 0.3% and in the last twelve months the index has declined 1.3%. According to the Bureau of Labor Statistics the index has declined the most in the period since 1950 on a sharp fall in energy prices of 27.3%.

European Construction Rebounds

Across the euro zone of 16 nations, seasonally adjusted construction activities in April increased 0.6% after gaining 0.6% in March.

Across the wider euro are of 27 nations, the activities increased 0.7% in the month after edging 0.1% in March.

Compared to a year ago output dropped 4.7% in the euro area and by 5.1% in the wider euro region.

UK Unemployment Rises

The UK unemployment rate was 7.2% for the three months to April 2009, up 0.7 percentage point over the previous quarter and up 1.9 percentage point over the year. The number of unemployed people increased 232,000 over the quarter and by 605,000 from a year ago, to reach 2.26 million.

Gainers & Losers

Of the stocks in the S&P 500 index, 236 increased, 258 declined and 6 were unchanged.

E*Trade Financial plunged 13.9% and led the decliners in the index followed by losses in KeyCorp of 6.6%, in Fifth Third Bancorp of 6.2%, in Marshall & Ilsley of 5.8% and in Tenet Healthcare of 5.6%.

Watson Pharmaceuticals led gainers with a rise of 5% followed by increase in Reynolds America of 3.9%, Davita Inc of 3.6%, in Coventry Healthcare of 3.4% and in CR Bard inc of 3.3%.

E*Trade ((ETFC)) launched $1 billion debt exchange plan and $400 million stock offering to lower its interest cost and recapitalize the company. The newly issues zero coupon convertible debt will be exchanged for 8% senior notes due in 2011 and 12.5% line notes due in 2017.

The largest stockholder Citadel has agreed to participate between $50 million and $100 million in stock offering and $200 million in debt offering.

FedEx Corporation ((FDX)) declined 2.7% to $50.06 after it estimated first quarter fiscal 2010 earnings per share between 30 cents and 45 cents. For the fourth quarter ending in May, the logistics company reported a loss of $2.82 a share on one time charges of $3.46 a share. The charges stem from the goodwill impairment of $1.2 billion arising from the acquisition of Kinko’s Inc Watkins Moto Lines.

Europe Markets Review

In London FTSE 100 Index traded lower 30.90 or 0.71% to 4,297.67, in Paris CAC 40 Index decreased 22.38 or 0.70% to 3,191.57 and in Frankfurt DAX index traded lower 36.98 or 0.76% to 4,853.74.In Zurich trading SMI decreased 36.09 or 0.67% to 5,341.01.

Asian Markets Review]

The Nikkei 225 Index in Tokyo closed higher 87.97 or 0.90% to 9,840.85, Hang Seng index in Hong Kong decreased 80.90 or 0.45% to 18,084.60, CSI 300 index in China increased 49.37 or 1.67% to 3,010.59. ASX 200 index in Australia decreased 58.40 or 1.47% to 3,904.10. The KL Composite index in Malaysia decreased 3.22 or 0.30% to 1,070.90.

The Kospi Index in South Korea decreased 7.98 or 0.57% to close at 1,391.17.SET index in Thailand closed lower 10.40 or 1.74% to 586.14 and JSE Index in Indonesia decreased 5.40 or 0.27% closed to 2,024.96. The Sensex index in India decreased 435.07 or 2.91% closed to 14,522.84.