Stockwatch ― November 2007
Wall Street Stages Rally
After a turbulent August, investors liked the half-point rate cut by the Fed in mid-September. The move sent stocks on a sustained rally as our session ended Sept. 28, 2007. The central bankers lowered the rate to 4.75 percent to ease the pressures brought on by the subprime mortgage crisis. The decrease is the first in four years. Though volatile food and energy numbers are up, the core inflation rate is currently under the Fed’s radar. “A second Fed cut will go a long way in reassuring the stock market that the worst is over,” said Janna Sampson, director of portfolio management at Oakbrook Investments. “The focus going forward will be whether the Fed is going to lower rates to shore this up, or decide the risk of inflation is too high.”
The PCI Manufacturers’ Index followed the rally, adding 31.09 points, or 2.24 percent, and ended at 1419.97. However, advancing issues inched past declining issues at a 5-to-4 count.
BASF topped the gainers and carried much of the forward momentum of the manufacturers this session. In August, BASF reported an 11.3 percent gain in its second-quarter net income. BASF earned net income of €1.02 billion, compared with €920 million in the same quarter last year. Analysts had predicted that BASF would earn €977 million. BASF cited high prices for its products and robust demand. Its chemicals division was especially strong and was boosted by BASF’s acquisition of Englehard. BASF also won a $170 million award against U.S. supplier Lyondell for overpricing. BASF jumped 8.20 points, or 6.33 percent, and was the top dollar and percentage gainer. BASF closed at 137.65.
Shares of Masco were off 4.04 points, or 14.85 percent and ended at 23.17. Masco lowered its full-year guidance to range between $1.55 per share and $1.65 per share, citing fewer new housing starts and the overall weakness in the housing sector. Masco had earlier said it would earn between $1.60 per share and $1.70 per share. Analysts surveyed by Thomson Financial were expecting earnings of $1.73 per share, on average. Masco shares also hit a 52-week low on Sept. 11 after Merrill Lynch cut its rating on the stock to “sell” from “neutral,” saying that weaker demand would overcome previous cost-cutting measures. Masco was the top dollar and percentage loser this session.
DuPont was up by 2.83 points, or 6.06 percent after DuPont and China’s top refiner, Sinopec, formed a joint venture to produce ethyl vinyl acetate (EVA). DuPont also affirmed its 2007 forecast of $3.15 per share, excluding a 6-cent-per share charge. Analysts polled by Thomson Financial forecast earnings of $3.16 per share. DuPont closed at 49.56.
Shares of Sherwin-Williams slipped 3.98 points, or 5.71 percent, and closed at 65.71. Sherwin-Williams and Spokane, WA-based Columbia Paint & Coatings said they will merge and Columbia will become a subsidiary of Sherwin-Williams. Terms of the transaction were not disclosed. The deal will be final after all regulatory hurdles are completed.