Stocks Stable on Subprime News
Stocks showed little movement Monday as further cracks appeared in the subprime lending sector, stirring concerns that a blowup among companies making loans to consumers with poor credit will spill over into other industries.
A warning from New Century Financial Corp. early Monday about its financial woes overshadowed merger news, which often gives a boost to enthusiasm on Wall Street.
The renewed concerns about subprime lenders follow a relatively successful week on Wall Street. Stocks etched out gains last week U.S. and overseas markets managed to regain some sense of stability following a sharp pullback that began Feb. 27. Even amid the gains seen last week, however, concerns about subprime lenders weighed on investors.
"We've had fairly flat trading given the continuing meltdown in New Century," said Frederic Dickson, market strategist and director of retail research at D.A. Davidson & Co. "The market appears to have handled this latest piece of news in a fairly decent and orderly way, almost as if had anticipated it happening at the end of last week."
In late morning trading, the Dow Jones industrial average fell 9.69, or 0.08 percent, to 12,266.63.
Broader stock indicators slipped. The Standard & Poor's 500 index fell 3.44, or 0.25 percent, to 1,399.41, and the Nasdaq composite index fell 0.80, or 0.03 percent, to 2,386.75.
Bonds rose amid the concerns about subprime lenders; the yield on the benchmark 10-year Treasury note falling to 4.54 percent from 4.59 percent late Friday. The dollar was mixed against other major currencies, while gold prices were little changed.
Light, sweet crude fell $1.17 to $58.88 per barrel on the New York Mercantile Exchange.
In corporate news, New Century warned in a filing with the Securities and Exchange Commission that all its lenders had cut off short-term funding or announced plans to do so after the subprime mortgage lender wasn't able to make payments. New Century, which relies on short-term borrowings to finance mortgage loan originations and purchases, said it would need about $8.4 billion should it be forced to repurchase all outstanding mortgage loans. The company said it doesn't have sufficient liquidity to meet its obligations for repurchasing mortgages.
Trading in New Century shares remained halted with news pending, as it had been before the opening bell.
Other subprime lenders fell sharply. Fremont General fell 86 cents, or 10.7 percent, to $7.17, while Novastar Financial Inc. fell 67 cents, or 12.8 percent, to $4.57.
Investors have grown uneasy about the subprime market amid fresh concerns about the ability of some homeowners with spotty credit to continue to make mortgage payments. Many of the mortgages came with low teaser rates and a cooling housing market has made it more difficult for people to extract cash from equity in their homes by refinancing.
Amid the din over subprime lenders, buyout news offered some support for stocks. Word that private-equity company Kohlberg Kravis Roberts & Co. struck a deal to acquire Dollar General Corp. for about $6.87 billion sent the discount retailer sharply higher. Dollar General jumped $4.38, or 26.1 percent, to $21.16 -- well past the stock's 52 week high of $18.32.
As often occurs when a company announces an acquisition, Schering-Plough Inc. fell 22 cents to $23.63 after agreeing to purchase the Organon BioSciences BV pharmaceuticals business of Akzo Nobel NV, the Dutch maker of chemicals and coatings, for $14.5 billion. Akzo rose $9.94, or 16.4 percent, to $70.75.
UnitedHealth Group Inc., the health insurer, announced plans to acquire health care services provider Sierra Health Services Inc. for about $2.6 billion. Sierra Health rose $5.66, or 15.8 percent, to $41.56, while UnitedHealth advanced 28 cents to $53.28.
Boeing Co., one of the 30 stocks that make up the Dow industrials, said Kuwait-based Alafco Aviation Lease and Finance Co. agreed to purchase 18 airplanes with a list value of $2.26 billion. The deal includes 12 787-8 Dreamliner airplanes and six 737-800s. Boeing rose 97 cents to $90.48.
Procter & Gamble Co., the consumer products company, said it struck a deal to sell its Western European tissue and towel business to SCA, which makes paper and other products, for about $671.9 million. P&G, also a Dow component, advanced 11cents to $62.27.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 469.6 million shares.
The Russell 2000 index of smaller companies fell 1.29, or 0.16 percent, to 783.83.
Overseas, Japan's Nikkei stock average rose 0.75 percent, Hong Kong's Hang Seng index added 1.61 percent and the Shanghai Composite Index added 0.58 percent. In afternoon trading, Britain's FTSE 100 fell 0.29 percent, Germany's DAX index slipped 0.08 percent, and France's CAC-40 fell 1.02 percent.
A warning from New Century Financial Corp. early Monday about its financial woes overshadowed merger news, which often gives a boost to enthusiasm on Wall Street.
The renewed concerns about subprime lenders follow a relatively successful week on Wall Street. Stocks etched out gains last week U.S. and overseas markets managed to regain some sense of stability following a sharp pullback that began Feb. 27. Even amid the gains seen last week, however, concerns about subprime lenders weighed on investors.
"We've had fairly flat trading given the continuing meltdown in New Century," said Frederic Dickson, market strategist and director of retail research at D.A. Davidson & Co. "The market appears to have handled this latest piece of news in a fairly decent and orderly way, almost as if had anticipated it happening at the end of last week."
In late morning trading, the Dow Jones industrial average fell 9.69, or 0.08 percent, to 12,266.63.
Broader stock indicators slipped. The Standard & Poor's 500 index fell 3.44, or 0.25 percent, to 1,399.41, and the Nasdaq composite index fell 0.80, or 0.03 percent, to 2,386.75.
Bonds rose amid the concerns about subprime lenders; the yield on the benchmark 10-year Treasury note falling to 4.54 percent from 4.59 percent late Friday. The dollar was mixed against other major currencies, while gold prices were little changed.
Light, sweet crude fell $1.17 to $58.88 per barrel on the New York Mercantile Exchange.
In corporate news, New Century warned in a filing with the Securities and Exchange Commission that all its lenders had cut off short-term funding or announced plans to do so after the subprime mortgage lender wasn't able to make payments. New Century, which relies on short-term borrowings to finance mortgage loan originations and purchases, said it would need about $8.4 billion should it be forced to repurchase all outstanding mortgage loans. The company said it doesn't have sufficient liquidity to meet its obligations for repurchasing mortgages.
Trading in New Century shares remained halted with news pending, as it had been before the opening bell.
Other subprime lenders fell sharply. Fremont General fell 86 cents, or 10.7 percent, to $7.17, while Novastar Financial Inc. fell 67 cents, or 12.8 percent, to $4.57.
Investors have grown uneasy about the subprime market amid fresh concerns about the ability of some homeowners with spotty credit to continue to make mortgage payments. Many of the mortgages came with low teaser rates and a cooling housing market has made it more difficult for people to extract cash from equity in their homes by refinancing.
Amid the din over subprime lenders, buyout news offered some support for stocks. Word that private-equity company Kohlberg Kravis Roberts & Co. struck a deal to acquire Dollar General Corp. for about $6.87 billion sent the discount retailer sharply higher. Dollar General jumped $4.38, or 26.1 percent, to $21.16 -- well past the stock's 52 week high of $18.32.
As often occurs when a company announces an acquisition, Schering-Plough Inc. fell 22 cents to $23.63 after agreeing to purchase the Organon BioSciences BV pharmaceuticals business of Akzo Nobel NV, the Dutch maker of chemicals and coatings, for $14.5 billion. Akzo rose $9.94, or 16.4 percent, to $70.75.
UnitedHealth Group Inc., the health insurer, announced plans to acquire health care services provider Sierra Health Services Inc. for about $2.6 billion. Sierra Health rose $5.66, or 15.8 percent, to $41.56, while UnitedHealth advanced 28 cents to $53.28.
Boeing Co., one of the 30 stocks that make up the Dow industrials, said Kuwait-based Alafco Aviation Lease and Finance Co. agreed to purchase 18 airplanes with a list value of $2.26 billion. The deal includes 12 787-8 Dreamliner airplanes and six 737-800s. Boeing rose 97 cents to $90.48.
Procter & Gamble Co., the consumer products company, said it struck a deal to sell its Western European tissue and towel business to SCA, which makes paper and other products, for about $671.9 million. P&G, also a Dow component, advanced 11cents to $62.27.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 469.6 million shares.
The Russell 2000 index of smaller companies fell 1.29, or 0.16 percent, to 783.83.
Overseas, Japan's Nikkei stock average rose 0.75 percent, Hong Kong's Hang Seng index added 1.61 percent and the Shanghai Composite Index added 0.58 percent. In afternoon trading, Britain's FTSE 100 fell 0.29 percent, Germany's DAX index slipped 0.08 percent, and France's CAC-40 fell 1.02 percent.
posted by Stock Administrator @ 1:04 PM
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