Accredited Home Lenders Holding, a subprime lender

Mortgage ills deter Wall Street jump

Friday, August 03, 2007


US stocks rose slightly yesterday, but gains were limited as investors weighed further signs of distress in the mortgage market against a fresh crop of strong earnings.
Accredited Home Lenders Holding, a subprime lender in the process of being sold, raised concern about its ability to stay in business and its shares plunged nearly 50 percent.

But shares of CVS Caremark Corp rose 2.4 percent after the pharmacy chain posted profit that topped Wall Street's expectations.

The Dow Jones Industrial Average was up 0.19 percent at 13,388.14 in mid-morning trade.

Stocks trimmed gains after a government report showed new orders at US factories rose less than expected in June.

Orders increased a less-than-forecast 0.6 percent, following a 0.5 percent drop in May, the Commerce Department said in Washington. Excluding transportation equipment, bookings fell 0.5 percent after rising 0.7 percent in May.

An increase in orders for Boeing aircraft offset declining demand for computers and communications gear that has raised concern business investment may not strengthen as much as economists forecast. Manufacturing may be increasingly dependent on growing exports and inventory rebuilding to keep expanding.

"It's still a moderately good outlook for manufacturing, but capital spending has flattened,' said Peter Kretzmer, a senior economist at Banc of America Securities in New York. "Businesses are cautious and I don't see any reason for that to change" as profits level off and borrowing becomes more difficult.

New applications for US jobless benefits rose by 4,000 last week, underscoring continued strength in the labor market.

First-time filings for state unemployment insurance benefits, a rough guide to the pace of layoffs, rose to a seasonally adjusted 307,000 in the week ended July 28, from an upwardly revised 303,000 in the prior week, the Labor Department said.

Across the Atlantic, European Central Bank president Jean-Claude Trichet signaled the bank is ready to raise its benchmark interest rate from a six-year high next month after leaving it unchanged at 4 percent yesterday.

"Strong vigilance" is needed to ensure inflation risks did not materialize, Trichet said at a press briefing in Frankfurt. "Strong vigilance" is a phrase he has used to signal each of the bank's eight rate increases since late 2005.

The Bank of England left its benchmark interest rate unchanged at 5.75 percent, the highest since April 2001.

The euro and sterling edged higher against the US dollar.

The euro bought US$1.3666 in afternoon European trading, slightly more than the US$1.3656 it bought in late New York trading on Wednesday.

The British pound rose to US$2.0322, compared with Wednesday's US$2.0280. The dollar was up to 119.10 Japanese yen from 118.55 yen.

OPEC said global oil markets are adequately supplied even though prices hit a new record this week and there is no need for the oil cartel to increase supply in the fourth quarter.

US Energy Secretary Sam Bodman said the Organization of the Petroleum Exporting Countries should raise production when it meets on September 11.

"There is adequate oil in the market. OPEC doesn't need to do anything," an OPEC official said, asking not to be named.

Oil prices yesterday steadied near US$77 (HK$600.60).

US crude rose 40 US cents to trade at US$76.93 a barrel mid-morning trade after earlier falling more than US$1 to US$75.52.

It had fallen 2.15 percent on Wednesday shortly after reaching a new record of US$78.77 a barrel.

London Brent crude was up 25 US cents at US$75.60.

Oil prices are headed "straight to US$100" per barrel, Venezuelan President Hugo Chavez said.

Chavez said the price of natural gas will also increase.

AGENCIES