Markets Implode on Lending Concerns

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Wall Street crumbled this session after investors saw indications that the subprime meltdown is bleeding into the larger lending market.

August 01, 2007

Wall Street crumbled this session after investors saw indications that the subprime meltdown is bleeding into the larger lending market. Even though consumer confidence numbers hit a six-year high at the close of our trading session ending July 31, that positive data and a brief rally was not enough to keep markets from plummeting.

The news that American Home Mortgage might become insolvent was too much for the broader market to bear. As this issue went to press, American Home Mortgage announced plans to lay off more than 6,000 people and stop taking mortgage applications.

The Housing Giants Builders' Index shed 121.01 points, or 13.24 percent, closing at 793.15. Declining issues raced ahead of advancing issues at a 33-to-2 count. Thanks to a positive turn by GE, the Product Manufacturers' Index fared much better, and added 0.20 points, or 0.02 percent to close in the black at 1,056.65. However, declining issues still outpaced advancing issues by a 5-to-1 margin.

On the Product Manufacturers' end, Sherwin-Williams gained 3.22 points, or 4.84 percent. SHW reported net income of $202.6 million, or $1.52 per share, compared with net income of $184.6 million, or $1.33 per share, earned in the same quarter last year. Analysts polled by Reuters Estimates were expecting earnings of $1.44 per share. Sherwin-Williams closed at 69.69, and was the top dollar and percentage gainer.

Mohawk stumbled this session after falling profits marred second quarter results. Mohawk earned $115.3 million, or $1.68 per share, down from $119.5 million, or $1.76 per share, in the same quarter a year ago. Analysts surveyed by Thomson Financial were expecting earnings of $1.58 per share. Mohawk lost 10.78 points, or 10.7 percent, and was the top dollar loser.

On the Builders' side, Champion reported earnings that bested analysts' expectations. Although Champion net income fell to $7.5 million, or $0.10 per share, compared with $112.1 million, or $1.44 earned in the comparable year-ago period, it was still more than the $0.07 per share profit expected by analysts surveyed by Thomson Financial. Revenue was down 11 percent, to $330.4 million. Champion added 1.89 points, or 19.23 percent, and was the top dollar and percentage gainer. Champion closed at 11.72.

Camden Property Trust lost 12.01 points, or 17.93 percent, this session after UBS analyst James Feldman cut his rating on the apartment real-estate sector. Feldman cut his rating on Camden and two other companies to "neutral" from "buy." Feldman cut his price target on Camden to $73, from $80. Camden closed at 54.96.

Shares of Tarragon Corp. were off by 4.41 points, or 52.13 percent, this session. After unusual volatility surfaced, Tarragon representatives said although its policy is not to comment on speculation, there was no material reason for the stock's movement. Tarragon Corp. closed at 4.05 and was the top percentage loser this month.


Author Information
Margot Crabtree is president of Trade Trends, a financial services company.

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