Cash infusions calm Wall Street
biz.yahoo.com
Monday August 13, 5:39 pm ET ; By Kristina Cooke
NEW YORK (Reuters) - Stocks closed little changed on Monday as concerns about subprime mortgage exposure haunted financial shares even as central banks pumped fresh cash into the global financial system.
Stocks had spent much of the session higher, led by Boeing (NYSE:BA - News) and Apple (NasdaqGS:AAPL - News), suggesting the market has stabilized after several days of high volatility on worsening lending conditions.
Still, signs that tight credit markets may curb mergers and acquisitions capped stock prices, which have benefited from private equity firms' buyout activity this year, after private equity firm Kohlberg Kravis Roberts & Co. (KKR.UL) said weak debt market conditions could hurt its profits.
A $3 billion rescue package that Goldman Sachs Group Inc. (NYSE:GS - News) organized for a hedge fund hammered by recent market turmoil initially helped support the market. The move is in contrast to other major banks, which recently shut funds.
"It's a welcome calmer day," said Eric Kuby, chief investment officer at North Star Investment Management Corp. in Chicago.
"Volatility only came in the form of financials. People are trying to figure out if they are good buys or if there is more bad news to come," Kuby said.
The Dow Jones industrial average (DJI:^DJI - News) slipped 3.01 points, or 0.02 percent, to end at 13,236.53. The Standard & Poor's 500 Index (^SPX - News) dipped 0.72 of a point, or 0.05 percent, to 1,452.92. The Nasdaq Composite Index (Nasdaq:^IXIC - News) shed 2.65 points, or 0.10 percent, to close at 2,542.24.
More subprime news plaguing the market came from Canada, where niche investment bank Coventree Inc. (Toronto:COF.TO - News) described the commercial paper market as one in which investors are eliminating their investments and in need of an immediate injection of liquidity.
Goldman Sachs shares slid 1.7 percent to $177.50 on the New York Stock Exchange, reversing earlier gains, while the S&P financials index (^GSPF - News) fell 0.8 percent.
CASH TO SPEND
Retail sales rose more than expected in July as declining gasoline prices helped household budgets, the Commerce Department said, which also revised June's figures upward to show a smaller drop.
"The retail sales numbers set the stage for early gains, presenting a little calm in terms of how nervous the consumer is getting," Kuby said.
Shortly after the opening bell, the Federal Reserve added $2 billion in temporary reserves and said it was prepared to take additional steps to inject cash. Earlier, Japanese and European central banks pumped more funds into their banking systems.
In another positive development, the outlook for earnings was raised. Second-quarter earnings are now projected to rise 8.6 percent from the year before, compared with an estimate of 7.8 percent last week, according to Reuters Estimates.
Shares of Sears Holdings Corp. (NasdaqGS:SHLD - News) rose 5.6 percent to $140.55 on the Nasdaq after it said its board approved the repurchase of up to $1.5 billion in stock and the retailer tightened its earnings outlook.
Shares of EMC Corp. (NYSE:EMC - News) rose 7.5 percent to $19.05 on the NYSE ahead of the initial public offering of its VMware unit, which sells software that companies use to manage data centers.
VMware is slated to price its IPO on Monday evening and begin trading on Tuesday. The deal is expected to be one of the strongest initial public offerings of the year despite making its debut against the backdrop of turbulence in the global financial markets.
MORE MORTGAGE MESS
Signs of trouble in the mortgage sector remained.
Accredited Home Lenders Holding Co. (NasdaqGS:LEND - News) said on Monday it had sued private equity firm Lone Star Funds, seeking to force it to complete the $400 million takeover of the money-losing subprime mortgage lender.
Shares of Accredited tumbled 34.6 percent to $5.82 and topped the list of the Nasdaq's biggest percentage losers.
The pummeling of home building stocks also continued. The Dow Jones home builder index (DJI:^DJUSHB - News) fell 5,73 percent.
Beazer Homes USA Inc. (NYSE:BZH - News) dropped 18.8 percent to $12.34 on the NYSE. On Friday, the home builder said an audit committee found incorrect accounting.
Trading was moderate on the NYSE, with about 1.72 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.23 billion shares traded, ahead of last year's daily average of 2.02 billion.
Declining stocks outnumbered advancing ones by a ratio of about 17 to 16 on the NYSE and by 17 to 14 on Nasdaq. |
