US Stocks: Wall St Jumps On Data, Commodities

New York: U.S. stocks rose on Wednesday as evidence the services sector may not be as weak as feared allayed investors' concerns about a recession and soaring commodity prices lifted energy and mining companies' shares.

Data on the U.S. services sector, which makes up roughly 80 per cent of the economy, shrank less than expected, overshadowing a surprising decline in private-sector employment for February.

A startling drop in U.S. oil supplies lifted crude futures to a record in New York, boosting shares of oil companies, including Chevron Corp, whose stock jumped 2.4 per cent.

Surging metal prices lifted shares of mining companies, including Freeport McMoRan Copper & Gold Inc whose stock finished up 5.2 per cent.

Data from the Institute for Supply Management showing less deterioration in the vast services sector in February underpinned the market.

"It certainly is nice to see a bit of a bounce for a change," said Peter Jankovskis, director of research at OakBrook Investments LLC, in Lisle, Illinois,

The report on the vast services sector from the Institute for Supply Management "would suggest that there is some strength out there and, hopefully, the economy is beginning to re-accelerate," he said.

The Dow Jones industrial average ended up 41.19 points, or 0.34 per cent, at 12,254.99 -- snapping a four-day losing streak. The Standard & Poor's 500 Index finished up 6.95 points, or 0.52 per cent, at 1,333.70. The Nasdaq Composite Index closed up 12.53 points, or 0.55 per cent, at 2,272.81.

Chevron shares ended at $88.79 on the New York Stock Exchange, and contributed the most to the gains of both the Dow and the S&P 500.

Shares of mining company Freeport McMoRan closed at $104.08, while those of oil services company Schlumberger Ltd advanced 3.9 per cent to $87.85.

U.S. crude gained after Tuesday's sharp drop and OPEC oil ministers left output unchanged, as expected. A report showed a large and unexpected drop in U.S. supplies of crude. Crude oil futures for April delivery settled at a record $104.52 per barrel, up $5, or 5 per cent, on the New York Mercantile Exchange.

On the Nasdaq, shares of software maker Microsoft Corp led the session's advancers to finish up 1.9 per cent at $28.1199.

Jefferies & Co, a brokerage, started coverage of Microsoft with a "buy" rating, saying the company's bid to take over Internet media company Yahoo Inc was likely to go through. Yahoo shares climbed 2.2 per cent to $28.67.

Ambac disappoints

But trading was volatile and at one point, the market briefly succumbed to pressure from a sell-off in financial stocks that came from disappointment in a plan to shore up the No. 2 bond insurer's balance sheet.

Ambac Financial Group Inc, facing billions of dollars of expected losses from guaranteeing repackaged subprime mortgages, said it will sell at least $1.5 billion of stock and equity-linked securities to help boost capital.

Analysts said the cash won't be enough to stabilize the company's credit-worthiness in the long run.

"If things continue to deteriorate, the circumstances could be different in three to six months and they may have to raise more money," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Ambac shares sank 18.8 per cent to $8.70 on the NYSE.

Among banks, shares of Bank of America Corp, the No 2 U.S. bank by assets, declined 1.6 per cent to $37.55.

Thornburg's late plunge

After the bell, shares of Thornburg Mortgage Inc, a high-profile mortgage lender, plummeted more than 40 per cent to $1.95 as the company announced that it had received a letter from JPMorgan Chase & Co notifying it of an event of default after it failed to meet a margin call of about $28 million.

In regular trading, volume was moderate on the New York Stock Exchange, where about 1.62 billion shares changed hands, below last year's estimated daily average of 1.9 billion shares. On the Nasdaq, about 2.27 billion shares traded, above last year's daily average of 2.17 billion.

Advancing shares outnumbered declining shares on the NYSE by a ration of about 3 to 2 and about 15 to 14 on the Nasdaq.

Rail Budget: No Fare Hike But New Trains Likely

NEW DELHI: Railway minister Lalu Prasad, who will be presenting his fifth and last budget of this Lok Sabha on Tuesday, will in all likelihood invoke the usual lusty applause for not raising passenger fares, crossing the revenue surplus target and for announcing new trains and new sops like concession to students from rural areas.

But the broad philosophy will remain the same, with officials pointing out that there was still sufficient slack in the system to exploit without having to resort to tariff hikes. With elections ahead, Lalu is likely to be selective in hiking freight rates with commodities like iron ore, whose price is shooting up in global markets, among those which will see an increase.

Though there could be tinkering with rates in other commodities including the likes of oil too, the changes would be made knowing fully well that it’s difficult to take away traffic from pipelines, which have much lower operating cost.

But you can expect some smart schemes from the RJD boss to wean away traffic from roads. So, there will be a scheme to enable people to merely fill wagons with a mix of commodities without having to bother about which item attracts the maximum tariff. “Do truckers bother about what commodity you carry?

They just offer you the vehicle and leave it to you to fill it up,” said an official. With freight and passenger traffic on course, Lalu could well beat its own projections with a cash surplus (before dividend) in excess of the budgeted Rs 21,578 crore thanks to savings under some heads. For instance , with the sixth pay commission report yet to be finalised, he will save around Rs 3,000 crore which had been budgeted for higher wage outgo. Similarly, there will be savings on fuel too.

Though he may be required to budget around Rs 9,000 crore in 2008-09 since the pay commission’s report will be implemented, he will save a little on dividend payment, which was budgeted at Rs 4,572.54 crore in 2007-08 .

This fiscal’s dividend outgo included a deferred liability of Rs 664 crore. But euphoria aside, the fact remains that the railways are still not fully out of the red on many counts, say the critics of the widely-acclaimed turnaround story.

To begin with freight earnings, which account for two-thirds of railways’ earnings, continue to subsidise to a great extent the passenger segment. Over 40% of the railway budget money is spent on payments to over 15 lakh railway staff.

Of the remaining amount, about 20% is spent on fuel. After removing all other expenditure like payment of dividend, depreciation reserve fund etc, only 7% is left for capital fund and 4% for development work, while safety gets about 1% of the cake. Of the barely 4% development fund, 7% capital fund and 8% miscellaneous, the railways are required to carry out the formidable task of dealing with building infrastructure.

Asian Stocks Up On Rate Cut Hopes; Commodities Hot

Stocks rallied on Thursday as solid earnings and expectations of further US interest rate cuts outweighed worries about inflation even as oil hit a record high above $101 a barrel. Gold also hit a record above $945 an ounce, and silver touched a 27-year high, as funds poured into a wide range of commodities, betting they will outperform in an environment where growth is slowing and prices are rising.

Data on Wednesday showed a faster-than-expected rise in US consumer prices last month and further weakness in the housing market there.

"The US is entirely focused on the economic data that is coming out and we're getting revised forecasts for their economic growth in the downward trend," said Savanth Sebastian, equities economist at CommSec in Sydney. "(The Federal Reserve) will have to cut rates and the possibility of that is boosting sentiment."

The weak housing market and problems in the credit market prompted the Fed to lower its 2008 US economic growth forecasts on Wednesday, with analysts interpreting comments as paving the way for further reductions in borrowing costs. Japan's benchmark Nikkei rose 2.1 per cent, trimming most of Wednesday's losses, while MSCI's index of other Asian stocks gained 1.2 per cent by 0247 GMT.

Since tumbling more than 10 per cent in January, Asia stocks have endured choppy, volatile trade and investors are wary of calling an end to that. "It's like a Japanese saying about a winter season around this time; three cold days and four warm days," said Katsuhiko Kodama, senior strategist at Toyo Securities.

Taiwan stocks rose 1.6 per cent, in line with Hong Kong, but Shanghai fell more than 2 per cent on concerns about further new share issues flooding the market. Australian stocks added 1 per cent, helped by solid earnings from phone company Telstra, pallet maker Brambles and national carrier Qantas.

CREDIT CONCERNS

While equities have been running hot and cold, commodity markets have blazed higher.

"There's been a movement of investment funds from other asset classes to commodities again, and I think gold has benefited from that move," said Darren Heathcote of Investec Australia. Crude oil hit a peak of $101.32, near its all-time inflation adjusted high of $101.70 hit in April 1980, according to the International Energy Agency.

Gold's rise lifted silver to $17.90 an ounce, its highest since December 1980, and Malaysian palm oil futures also hit a record high. Asian technology companies led the way up after a strong profit outlook from computer and printer maker Hewlett-Packard Co , which lifted Wall Street indexes by nearly 1 per cent.

"HP's forecast-beating profits indicated tech product demand in the U.S. market has not been hit by the subprime crisis as hard as investors had worried," said James Wang, chief investment officer of Capital Securities Investment Trust in Taiwan.

But credit markets highlighted the ongoing risks from the crisis, which has hammered earnings of financial companies, dried up funding for deals and dragged down US house prices. Indexes of US and European corporate bonds widened to record levels above safe-haven government paper on Wednesday, further limiting the availability of credit.

Concerns were that traders were unwinding some of their complex structured credit trades and seeking greater protection on others, further pressuring spreads.

BONDS FALL

Government bond prices were also under pressure with Japanese government bond futures falling half a point as the rise in equity markets and better-than expected Japanese trade data weighed. "JGBs took a hit as the trade data was surprisingly good, showing that exports to Europe and Asia stayed firmer than previously thought," said Tetsuya Miura, a bond strategist at Shinko Securities.

Currency markets were locked in trading ranges, with the dollar giving up gains made in the wake of the strong inflation data after the Fed's weaker assessment of the economy.

The dollar was buying 108.17 yen while the euro was at $1.4720 Worries about the weak US outlook pushed the dollar to a more than two-year low versus the yen last month.