HOUSTON ,May 25-Several US chemical stocks recovered from steep losses and even rose after the Dow Jones Industrial Average staged a comeback in the final hours of trading, limiting an initial 292 point drop to 23 points.
The last-minute run brought the Dow Jones down to 10,044. Early in the day, the index fell to 9,774 down nearly 3%.
By the end of trading, several chemical companies posted gains, including Arch Chemicals, Celanese, Eastman, Solutia and Westlake.
Huntsman posted the biggest gains, rising 7.4%.
Among the majors, Dow Chemical rose 3.6% and DuPont rose 0.2%.
Praxair rose 0.3% and Potash Corp of Saskatchewan (PotashCorp) fell 1.1%.
Agrium fell by 3.0%, the biggest drop.
Before the rebound in stock markets, the Dow Jones had spent much of the day down by at least 200 points. At several times, every North American chemical stock followed by ICIS had dropped.
The Dow Jones has fallen substantially from its 52-week high of 11,258, reached only a month ago.
The decline in US markets followed sell-offs in Europe and Asia.
Most North American chemical stocks had performed worse than the stock indices, as their performance was connected to GDP growth and the early stages of an economic recovery.
Earlier in the year, stocks for several petrochemical companies rallied on the prospects that the world economy was improving, said Hassan Ahmed, head of research for Alembic Global Advisors.
Hassan made his comments early in the day, when the stock market had posted some of its steepest losses.
"All of a sudden, a lot of people are questioning the viability of global growth," he said. "Any name that has been outperforming over the last couple of months has been massively underperforming."
As such, chemical stocks and other strong performers have taken the brunt of the recent sell-off, Ahmed said. "Most names are looking extremely cheap now."
Investors are expecting cuts in earnings estimates for chemical companies, said Jefferies & Co analyst Laurence Alexander.
Investors are ratcheting up the risk premium applied to equities, and the market already appears to be discounting 15%-plus cuts to 2011-2012 EPS [earnings per share] estimates, Alexander said.
Even companies with solid balance sheets and free cash flow have come under pressure, and for most companies, dividend levels are too low to provide material support, he added.
Slower growth in the EU could trim global GDP growth by 0.50-0.75 of a percentage point in 2010, according to some estimates, Alexander said.
However, chemical companies with specialty positions and pricing power could outperform if the growth of the emerging-market middle class continues, particularly if raw materials pull back this summer as well , Alexander said.
Stocks fell as worries persisted about the European debt crisis and the standoff between North and South Korea.
On 24 May, the International Monetary Fund (IMF) said the Spanish economy needed "far-reaching and comprehensive reforms".
Spain had a dysfunctional labour market, a deflating property bubble, a large deficit, weak growth and a banking sector riddled with weakness, the IMF said. The nation's recovery will be weak and fragile.
Earlier, Spain's central bank said it would replace the management of the lender CajaSur with administrators from the nation's Orderly Bank Restructuring Fund (FROB).
The central bank said the move would guarantee that CajaSur could continue operating normally.
The problems in Spain followed concerns about Greece, which was struggling with massive deficits and debt, according to the IMF.
On 9 May, the IMF approved a ?0bn ($37bn) three-year loan for Greece, it said. The loan is part of a ?10bn financing package that the IMF and the European Union was offering Greece to help the country ride out its debt crisis, revive growth and overhaul its economy.
On the other side of the world, North and South Korea are at a standoff following the 26 March sinking of a South Korean warship, according to media reports. South Korea has accused a northern submarine of firing a torpedo that sank the warship.
South Korea has declared its northern neighbour its main enemy. North Korea said it would cut all ties with South Korea.
($1 = ?.81)
The last-minute run brought the Dow Jones down to 10,044. Early in the day, the index fell to 9,774 down nearly 3%.
By the end of trading, several chemical companies posted gains, including Arch Chemicals, Celanese, Eastman, Solutia and Westlake.
Huntsman posted the biggest gains, rising 7.4%.
Among the majors, Dow Chemical rose 3.6% and DuPont rose 0.2%.
Praxair rose 0.3% and Potash Corp of Saskatchewan (PotashCorp) fell 1.1%.
Agrium fell by 3.0%, the biggest drop.
Before the rebound in stock markets, the Dow Jones had spent much of the day down by at least 200 points. At several times, every North American chemical stock followed by ICIS had dropped.
The Dow Jones has fallen substantially from its 52-week high of 11,258, reached only a month ago.
The decline in US markets followed sell-offs in Europe and Asia.
Most North American chemical stocks had performed worse than the stock indices, as their performance was connected to GDP growth and the early stages of an economic recovery.
Earlier in the year, stocks for several petrochemical companies rallied on the prospects that the world economy was improving, said Hassan Ahmed, head of research for Alembic Global Advisors.
Hassan made his comments early in the day, when the stock market had posted some of its steepest losses.
"All of a sudden, a lot of people are questioning the viability of global growth," he said. "Any name that has been outperforming over the last couple of months has been massively underperforming."
As such, chemical stocks and other strong performers have taken the brunt of the recent sell-off, Ahmed said. "Most names are looking extremely cheap now."
Investors are expecting cuts in earnings estimates for chemical companies, said Jefferies & Co analyst Laurence Alexander.
Investors are ratcheting up the risk premium applied to equities, and the market already appears to be discounting 15%-plus cuts to 2011-2012 EPS [earnings per share] estimates, Alexander said.
Even companies with solid balance sheets and free cash flow have come under pressure, and for most companies, dividend levels are too low to provide material support, he added.
Slower growth in the EU could trim global GDP growth by 0.50-0.75 of a percentage point in 2010, according to some estimates, Alexander said.
However, chemical companies with specialty positions and pricing power could outperform if the growth of the emerging-market middle class continues, particularly if raw materials pull back this summer as well , Alexander said.
Stocks fell as worries persisted about the European debt crisis and the standoff between North and South Korea.
On 24 May, the International Monetary Fund (IMF) said the Spanish economy needed "far-reaching and comprehensive reforms".
Spain had a dysfunctional labour market, a deflating property bubble, a large deficit, weak growth and a banking sector riddled with weakness, the IMF said. The nation's recovery will be weak and fragile.
Earlier, Spain's central bank said it would replace the management of the lender CajaSur with administrators from the nation's Orderly Bank Restructuring Fund (FROB).
The central bank said the move would guarantee that CajaSur could continue operating normally.
The problems in Spain followed concerns about Greece, which was struggling with massive deficits and debt, according to the IMF.
On 9 May, the IMF approved a ?0bn ($37bn) three-year loan for Greece, it said. The loan is part of a ?10bn financing package that the IMF and the European Union was offering Greece to help the country ride out its debt crisis, revive growth and overhaul its economy.
On the other side of the world, North and South Korea are at a standoff following the 26 March sinking of a South Korean warship, according to media reports. South Korea has accused a northern submarine of firing a torpedo that sank the warship.
South Korea has declared its northern neighbour its main enemy. North Korea said it would cut all ties with South Korea.
($1 = ?.81)
