U.S. Stocks Rebound; Builders, Financials Up

Mukesh Buch
12 Aug, 2009
New York City

U.S. stocks rebounded after Fed left rates unchanged. Home builders and financials closed higher. U.S. trade deficit grows 4%. The Bank of England is prepared to pump liquidity until inflation rebounds to its target rate of 2%. Japan Price indexes of corporate goods, imports and exports fell.

[R]4:30 PM New York, 9:30 PM London, 6:30 AM Sydney – U.S. stocks reclaimed losses in the previous session after Fed left rates unchanged. Home builders and financials closed higher. The Bank of England will continue to pump liquidity until the inflation rises to its target range of 2%. Prices index of corporate goods in Japan dropped in July and consumer price index in France fell. European production index fell.[/R]

The Fed left its lending rate range unrevised and cited improving but weak conditions. Federal Reserve will purchase a total of up to $1.25 trillion of agency securities and up to $200 billion of agency debt by the end of the year. In addition, the Fed will purchase $300 billion of Treasuries by October.

U.S. stocks advance ahead of Fed statement on interest rate later this afternoon. Toll Brothers surged after it retired debt and backlog fell 47%. Starwood Property lifted its offer size for initial public offering. JA Solar declined after it reported quarterly loss.

Starwood Property Trust declines on the first day of trading after it completed 40.5 million public offering that priced shares at $20 each. The deal was managed by Merrill Lynch, Citi and Deutsche Bank. The company plans to invest in commercial mortgage debts and securities.

Home builders surged after Toll Brothers net new home orders increased in the third quarter. Applied Materials quarterly loss was better than expected. Sara Lee plunged more than 8% after it reported quarterly loss. E-House China surged 20% after quarterly net soared 65%.

European markets edged higher after consumer prices in France fell and output in 16-nations euro area decreased 0.6% in June. Thomson credit default swaps will be settled after the vote in favor of the settlement. E.ON increased on better than expected adjusted earnings. Nestle drops on earning.

The Bank of England plans to add liquidity to the financial system as the pace of money supply growth falters and inflation is likely 2% target. The BoE estimated that pace of economic recovery to be highly uncertain and households, banks and public sector need to adjust their balance sheet. Jobless claims increased 24,900 in July. TUI Travel drops on pandemic flu worries and Balfour Beatty surges.

Stocks in Japan edged lower on weak commodities prices and stronger yen. In broader trading stocks declined after a rally that lifted the benchmark index more than 40% in ten weeks.

Output at factories, mines and electric utilities surged 7.8% in June. Swine flu worries forces Mumbai to close schools and malls. Generic drug makers surged for the second day in a row. Tata Steel rolls back recent price increase in select steel categories.

North American Markets

Dow Jones Industrial Average increased 120.16 or 1.3% to a close of 9,361.61, S&P 500 Index increased 11.46 or 1.2% to 1,005.81, and Nasdaq Composite Index edged higher 28.99 or 1.5% to close at 1,998.72. Toronto TSX Composite Index increased 30.40 or 0.3% to 10,659.87.

Of the stocks in S&P 500 index, 410 increased, 86 declined and 4 were unchanged.

Sara Lee Corp led the decliners in the S&P 500 index with a loss of 10% followed by losses in SLM Corp of 2.2%, in Eli Lilly & Company of 2.2%, in Duke Energy Corp of 2.1% and in Lowe’s Cos Inc of 1.8%.

Citigroup Inc led gainers in the S&P 500 index with a rise of 7.8% followed by gains in Salesforce.com 7.4%, in Wynn Resorts Ltd of 7.4% and Hartford Financial Services of 7.1%.

South American Markets Indexes

Mexico Bolsa Index increased 295.22 or 1.1% to 28,096.02 Brazil Bovespa Stock Index increased 827.10 or 1.5% to 56,588.26.

Argentina Merval Index decreased 1.9%. Chile Stock Market Select index edged lower 0.9%, Peru Lima General Index fell 0.02% and Colombia IGBC General Index decreased 0.8%.

Europe Markets Review

In London FTSE 100 Index closed higher 45.42 or 0.97% to 4,716.76, in Paris CAC 40 Index increased 51.06 or 1.48% to close at 3,507.24 and in Frankfurt DAX index higher 64.28 or 1.22% to close at 5,350.09. In Zurich trading SMI increased 12.51 or 0.21% to close at 5,962.49.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 150.46 or 1.42% to 10,435.00, Hang Seng index in Hong Kong decreased 638.97 or 3.03% to 20,435.24 and CSI 300 index in China lower 158.98 or 4.47% to 3,397.40. ASX 200 index in Australia increased 11.10 or 0.26% to 4,343.10. The FTSE Bursa KL Composite index in Malaysia closed lower 5.74 or 0.48% to 1,180.54.

The Kospi Index in South Korea decreased 13.86 or 0.88% to close at 1,565.35 JSE Index in Indonesia decreased 51.92 or 2.16% to 2,347.36. The Sensex index in India decreased 54.43 or 0.36% to 15,020.16. The Thailand Market was closed today.

Commodities, Metals, and Currencies

Crude oil increased $0.77 to close at $70.22 a barrel for a front month contract, natural gas decreased 5 cents to $3.49 per mBtu and gasoline decreased 1.41 cents to 202.81 cents.

Wheat futures closed up 5.25 cents in Chicago trading to $5.17 a bushel. Sugar increased 1.05 cent in trading at 22.97 cents a pound. Soybean future closed up 5.50 cent to $10.44 a bushel.

Gold increased $0.70 in New York trading to close at $948.30 per ounce, silver closed up $0.15 to $14.52 per ounce and copper for the front month delivery increased 9.05 cents to $2.82 per pound.

Dollar edged higher against euro to $1.419 and closed up against the Japanese yen to 96.09.

Yield on 10-year U.S. bonds were unchanged to 3.71% and with 30-year maturities increased to 4.54%.