AI
Tuesday, September 16, 2008 7:36:29 PM
Market Update 080916
http://biz.yahoo.com/mu/update.html
4:20 pm : Tuesday was a roller coaster session as market participants considered the fate of AIG (AIG 4.00, -0.76) and other struggling financial companies. The market also digested an FOMC decision to keep rates unchanged, an in-line CPI report and discouraging comments from Dell (DELL 16.01, -1.98).
The S&P fell 2.0% shortly after the bell, only to rebound to settle with a gain of 1.8% on a late session report that AIG may indeed receive a bailout.
AIG was at the center of the volatility after the insurance giant had its credit rating downgraded at the major rating agencies, sparking speculation that the company would have to file for bankruptcy if it could not get ahold of cash. AIG fell as much as 74% as various reports said a private deal to help AIG is not going to happen, and the Fed was not going to lend money. AIG closed with a loss of 16%, however, after a late-session Bloomberg.com report said that the Fed may end up giving the company a loan package.
Lehman Brothers (LEH 0.19, -0.02), which filed for bankruptcy yesterday, sold its investment banking segment to Barclays (BCS 23.15, +1.67) according to the Wall Street Journal. The sale will reportedly save 9,000 jobs.
Goldman Sachs (GS 134.04, -1.46) fell to a fresh 52-week low after reporting a 72% year-over-year drop in earnings per share. Revenue declined 40% in investment banking and 67% in trading and investments.
The financial market turmoil yesterday prompted a doubling in the overnight interest rate banks charge to lend dollars, also known as Libor. This led the Fed and overseas central banks to use repurchase agreements -- secured short-term lending agreements -- to pump liquidity into the system.
The Fed was willing to add liquidity, but decided not to cut interest rates at this session’s FOMC meeting, leaving the fed funds rate at 2.00% and the discount rate at 2.25%. The FOMC’s directive was very similar to the wording from August 5, although downside risks to economic growth received additional attention. Inflation risks remain a significant concern to the Fed.
In corporate news, Dell said it is seeing a slowdown in global end user demand, sending the computer maker’s stock down 11% to its lowest intraday level in 10.5 years. Hewlett-Packard (HPQ 48.28, +2.95) is laying off 7.5%, or 24,600, of its workforce and is taking a charge of $1.7 billion related to its EDS acquisition. Once the plan is completed, HP expects to save $1.8 billion a year.
Best Buy (BBY 42.43, -1.27) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Despite a revenue increase of 12% year-over-year, earnings per share fell 14% due to increased spending related to store labor and the roll out of Best Buy Mobile.
August CPI was in-line with expectations, showing a welcomed 0.1% month-over-month decline thanks to a decrease in fuel costs. The core rate, which excludes fuel and food, rose 0.2%.
Crude prices tumbled for the second day in a row, falling 3.0% to $92.89 per barrel. Commodities as a whole slid 2.0%
In the end, eight of the ten economic sectors posted a gain, although six hit fresh 52-week lows in intraday trade. The financial sector climbed 6.2% and the energy sector gained 3.9% despite the drop in energy prices.
The utilities sector (-1.1%) underperformed after Constellation Energy (CEG 30.90, -17.09) plummeted 36% on debt fears.
Treasuries also had a wild day, with the 10-year note trading up more than a point in early trade, and then ending the session down 43 ticks.DJ30 +141.51 NASDAQ +27.99 NQ100 +1.1% R2K +3.0% SP400 +2.1% SP500 +20.90 NASDAQ Adv/Vol/Dec 1651/3.21 bln/1200 NYSE Adv/Vol/Dec 1454/2.17 bln/1741
3:30 pm : Shares of Lehman Brothers (LEH 0.19, -0.02) are halted news pending, with the Wall Street Journal reporting that Barclays (BCS 22.49, +1.00) is buying Lehman's investment bank, which will save 9,000 jobs. The stock market climbs to session highs on the share halting, and then gives back some gains on the Journal report, apparently due to disappointment that Barclays is not buying more of Lehman.
The financial sector is up 3.5% and the energy sector is up 2.4%.
Six of the ten economic sectors hit fresh 52-week lows this session, including energy, materials, industrials, telecom, utilities and tech. Interestingly, the financial sector, which has been at the center of the recent downturn, is up 18% from its 52-week low that was reached July 15.DJ30 +62.53 NASDAQ +18.15 SP500 +11.43 NASDAQ Adv/Vol/Dec 1489/2.74 bln/1340 NYSE Adv/Vol/Dec 1289/1.67 bln/1904
3:00 pm : The major indices rebound after Bloomberg.com reports its sources said the Fed is reconsidering its stance on helping AIG (AIG 5.09, +0.33), and the company may get a loan package from the Federal Reserve.
Shares of AIG are now posting a gain on the day, after trading down as much as 73.7% to $1.25.
FDIC Chairwoman Blair said banks are safe and sound, according to Reuters. Blair added that insurance funds for deposits will be adequate to absorb any losses.
The S&P 500, Dow and Nasdaq hit fresh session highs. Eight of the ten sectors are posting a gain, with the financial sector up 4.1%.DJ30 +112.65 NASDAQ +14.61 SP500 +13.35 NASDAQ Adv/Vol/Dec 1375/2.47 bln/1426 NYSE Adv/Vol/Dec 1234/1.52 bln/1953
2:35 pm : The stock market is in negative territory following the FOMC's decision to leave the fed funds rate unchanged at 2.00%, although stocks have halted their decline. The Fed left the discount rate unchanged at 2.25%.
The current FOMC announcement and the August release are very similar, although there is now more emphasis on risks to growth.
The August release said, "Although downside risks to growth remain, the upside risk to inflation are also of significant concern to the Committee." The release now states, "The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee."
In addition, the FOMC said strains in the financial markets have "increased significantly", compared to its previous statement that financial markets remain under "considerable stress."
The vote to leave rates unchanged was unanimous, including Dallas Fed President Fisher. Fisher dissented during the two previous meetings when rates were left unchanged, as he preferred a rate increase given the inflation risks.DJ30 -39.96 NASDAQ -11.51 SP500 -5.23 NASDAQ Adv/Vol/Dec 1090/2.17 bln/1702 NYSE Adv/Vol/Dec 794/1.34 bln/2389
2:15 pm : The FOMC stood pat on the fed funds rate for the third straight meeting, leaving the rate at 2.00%. The decision was unanimous, noting that market strains have increased significantly. Inflation has been high, and the outlook is uncertain.
The stock market traded near the unchanged mark prior to the announcement and falls sharply upon the release. The futures market forecasted an 88% chance of a 25 basis point cut, although most economists expected the Fed to leave rates unchanged.DJ30 -53.90 NASDAQ -18.77 SP500 -8.82 NASDAQ Adv/Vol/Dec 1269/1.97 bln/1504 NYSE Adv/Vol/Dec 961/1.22 bln/2225
2:00 pm : The market's attention turns to the FOMC policy announcement, slated for release around 2:15 ET. Fed funds futures suggest an 82% chance of a 25 basis point rate cut, with the remaining odds suggesting no change.
At the FOMC's Aug. 5 meeting, the fed funds rate was left unchanged at 2.00%, with Dallas Fed President Fisher dissenting, preferring a rate increase due to inflation risks.
At the time, the Fed noted both downside risks to growth and "significant" concern regarding upside risks to inflation. Since the meeting, oil prices have fallen 24.8% and commodities as a whole have declined 14.0%. The stock market has declined 4.7% during that time.DJ30 +19.80 NASDAQ -1.63 SP500 +0.31 NASDAQ Adv/Vol/Dec 1266/1.90 bln/1504 NYSE Adv/Vol/Dec 922/1.18 bln/2261
1:30 pm : The stock market posts a slight gain. The only sector making a significant advance is financials (+3.4%).
The utility sector (-3.2%), normally considered a defensive investment, is the main laggard. Constellation Energy (CEG 32.72, -15.27) is down 32% on debt fears. The cost to protect the company's debt, measured by credit default swaps, rose 60% to $478,000 per year to insure $10 million for five years, Reuters reported, citing Markit Intraday
Crude prices are posting a loss of 5.0% at $90.95 per barrel, which is close to this session's low. All 19 commodities within the CRB Index (-2.1%) are posting a loss. Nickel (-6.0%), Corn (-4.9%) and Gasoline (-4.9%) are down the most.DJ30 +50.40 NASDAQ -0.39 SP500 +4.05 NASDAQ Adv/Vol/Dec 1310/1.81 bln/1457 NYSE Adv/Vol/Dec 1011/1.16 bln/2159
1:00 pm : Stocks are oscillating along the unchanged mark as participants continue to look for direction.
Traders await the latest rate decision from the Federal Open Market Committee (FOMC). Earlier, fed funds futures were fully pricing in a 25 basis point cut, but have eased back a bit. Fed funds futures currently indicate a 78% chance of a 25 basis point cut.
Cutting the interest rate can pressure the dollar. The dollar index is currently up 0.1% this session. It is now up 3.0% year-to-date. While the dollar's 10.5% rebound from its March low has softened the price of such imports as crude oil (-4.3%), it is still down 35% from July 2001.DJ30 +43.15 NASDAQ +5.34 SP500 +4.28 NASDAQ Adv/Vol/Dec 1280/1.69 bln/1456 NYSE Adv/Vol/Dec 981/1.05 bln/2180
12:25 pm : The major indices trade with modest gains as the financial sector (+2.9%) provides leadership.
Within financials, 63 of the 87 components are posting a gain. Merrill Lynch (MER 20.25, +3.19), Washington Mutual (WM 2.24, +0.24) and Wachovia (WB 12.09, +1.38) are among the biggest percent gainers. AIG (AIG 2.92, -1.84) and Morgan Stanley (MS 26.53, -5.65) are among the biggest percent decliners.
The energy sector has made a nice rebound, even as oil prices post a 4.0% loss. The sector is up 0.4% after falling as much as 3.6% in earlier trade.
Airlines are getting a nice 7.3% boost from lower energy prices.DJ30 +27.52 NASDAQ +5.13 SP500 +2.78 NASDAQ Adv/Vol/Dec 1257/1.53 bln/1461 NYSE Adv/Vol/Dec 962/952 mln/2176
12:00 pm : Financial market turmoil sparked volatility Tuesday, with concerns regarding the future of AIG (AIG 2.83, -1.93) at the center of attention.
The S&P 500 opened with a loss of 2.0%, rebounded to a gain of 1.0% and at midday is posting a slight advance.
AIG had its credit rating downgraded at Standard & Poor’s, Fitch and Moody’s, prompting some to speculate that the company would soon face bankruptcy unless bailed out. CNBC reported that a private sector solution to AIG’s problems is definitively dead, and sources say the most likely outcome is bankruptcy.
Goldman Sachs (GS 131.24, -4.26) fell to a fresh 52-week low after reporting a 72% year-over-year drop in earnings per share. Revenue declined 40% in investment banking and 67% in trading and investments.
The financial market problems yesterday, which included Lehman Brothers (LEH 0.22, +0.01) filing for bankruptcy, spurred a doubling in the overnight interest rate banks charge to lend dollars, also known as the Libor. This led the Fed and overseas central banks to pump liquidity into the system.
The FOMC makes its policy announcement at 2:15 ET. Fed funds futures are fully pricing in a 25 basis point rate cut to 1.75%, and even suggest a slight 10% chance of a 50 basis point cut. Last week there was no probability of a rate cut.
Despite these developments, the financial sector is posting a 2.4% gain midday, with leadership seen in big banks such as Wells Fargo (WFC 34.42, +3.40).
In corporate news, Dell (DELL 16.31, -1.67) said it is seeing a slowdown in global end user demand. Hewlett-Packard (HPQ 47.45, +2.12) is laying off 7.5%, or 24,600, of its workforce and is taking a charge of $1.7 billion related to its EDS acquisition.
Best Buy (BBY 41.95, -1.75) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Despite a revenue increase of 12% year-over-year, earnings per share fell 14% due to increased spending related to store labor and the roll out of Best Buy Mobile.
On a more positive note, August CPI was in-line with expectations, showing a welcomed 0.1% month-over-month decline thanks to a decrease in fuel costs. The core rate, which excludes fuel and food, rose 0.2%.
Crude prices are tumbling for the second day in a row, falling 3.5% to $92.33 per barrel. Commodities as a whole are down 0.8%.DJ30 -3.26 NASDAQ +4.82 SP500 +0.73 NASDAQ Adv/Vol/Dec 1243/1.38 bln/1475 NYSE Adv/Vol/Dec 966/876 mln/2167
11:30 am : The stock market gives up gains from the CNBC report of AIG (AIG 2.39, -2.36) bailout talks after CNBC's David Faber said the private sector solution to AIG is definitively dead, and sources say the most likely outcome is bankruptcy.
The major indices are posting losses, but are well above their session lows.
The financial sector is up 0.7% after briefly climbing to a gain of 4.6%. The remaining nine sectors are posting a loss.
Separately, Reuters reports the federal funds rate is at 4.0% in market trade, which is well above the 2% target rate of the Fed.DJ30 -49.91 NASDAQ -11.14 SP500 -7.37 NASDAQ Adv/Vol/Dec 1064/1.22 bln/1627 NYSE Adv/Vol/Dec 756/784 mln/2369
11:00 am : The S&P 500 spikes to positive territory after CNBC reported that a government-led bailout of AIG (AIG 3.94, -0.82) is a possiblity. The S&P 500 is currently up 0.3%, which is a large recovery from its loss of 2.0% that was reached shortly after the opening bell.
CNBC's sources said the Fed is in talks with AIG, and some sort of goverment assistance in bailing out the struggling insurance giant is now on the table.
The financial sector has seen massive swings this session, going from a loss of 3.7% at its low to a gain of 4.1% at its high. The sector is currently up 3.4%.
Treasuries give up gains as stocks recover. The 10-year note is only up two ticks, after being up a full point in early trade.
In overseas trading, Russia's most liquid stock exchange, MICEX, suspended trade following a 17% one day decline. Bank stocks fell the most.DJ30 +32.90 NASDAQ +7.18 SP500 +3.09 NASDAQ Adv/Vol/Dec 1248/949 mln/1378 NYSE Adv/Vol/Dec 991/616 mln/2123
10:30 am : The major indices climb to their session highs as the financial sector (+2.6%) extends its gains. The stock market is in the red, but its decline is only modest.
Lehman Brothers (LEH 0.25, +0.04) reached a deal to sell some of its business to London-based Barclays (BCS 21.76, +0.28), according to the Financial Times. The exact parts of the deal are not known, although Financial Times sources say it is likely to center around Lehman's U.S. broker-dealer operations.DJ30 -27.03 NASDAQ -7.59 SP500 -5.77 NASDAQ Adv/Vol/Dec 1008/667 mln/1570 NYSE Adv/Vol/Dec 728/454 mln/2353
10:05 am : The major indices post steep declines with nine of the ten economic sectors in the red. The energy sector is down 3.0% as crude prices tumble 4.4% and gasoline prices fall 3.8%.
Strikingly, the financial sector (+1.0%) is outperforming the broader market. Strength in industrial REITs (+3.9%) and diversified banks (+4.8%), such as Wells Fargo (WFC 33.91, +2.91), is helping to offset the 13.6% decline in multi-line insurance companies and a 6.6% decline in investment banks & brokerages.
In earnings news, Best Buy (BBY 39.59, -4.11) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Despite a revenue increase of 12% year-over-year, earnings per share fell 14% due to increased spending related to roll out of Best Buy Mobile and store labor.DJ30 -77.18 NASDAQ -19.85 SP500 -13.72 NASDAQ Adv/Vol/Dec 722/422 mln/1759 NYSE Adv/Vol/Dec 430/298 mln/2572
09:45 am : The stock market tumbles at the open extending the previous session's massive loss -- which was the S&P 500's largest loss in seven years. Once again financial market turmoil is sparking the selling interest.
AIG (AIG 2.00, -2.76) is down 58% after having its credit ratings cut at Standard & Poor's and Moody's. Goldman Sachs (GS 121.15, -14.23) fell to a fresh 52-week low after reporting a 72% year-over-year drop in earnings per share. Washington Mutual (WM 1.70, -0.30) had its outlook downgraded at Standard & Poor's and had its counterparty credit rating lowered to junk.
The overnight dollar libor, the interest rate banks charge to lend dollars overnight, doubled following yesterday's developments, leading the Fed and overseas central banks to pump liquidity into the system.
The FOMC makes its policy announcement at 2:15 ET. Fed funds futures are fully pricing in a 25 basis point rate cut to 1.75%, and even suggest a modest chance of a 50 basis point cut. Last week there was no chance of a rate cut.
As a result, Treasuries are rallying, with the 10-year note up a 25 ticks , sending its yield down to 3.29% -- the lowest yield since 2003
In news outside financials, Hewlett-Packard (HPQ 44.97, -0.36) will take a $1.7 billion charge related to its EDS acquisition, which includes cutting 7.5% of its workforce, or 24,600 employees. Dell (DELL 16.40, -1.59) said it is seeing further softening in global end-user demand.
On the positive side, CPI decreased 0.1% in August due to a drop in fuel costs. Core CPI rose 0.2%.
Crude prices are tumbling once again, down 4.5% to $91.40 per barrel.DJ30 -72.72 NASDAQ -23.08 SP500 -12.53
09:17 am : S&P futures vs fair value: -25.50. Nasdaq futures vs fair value: -24.80. Futures trade near recently reached session lows and suggest a sharply lower open. Agriculture chemical company Monsanto (MON) raised its fiscal year 2008 guidance to between $3.58 and $3.60 per share, from $3.37. Wall Street forecast earnings of $3.45 per share. Oil is now down 5.1% to $90.78 per barrel -- its lowest level since February.
09:01 am : S&P futures vs fair value: -21.20. Nasdaq futures vs fair value: -18.30. S&P 500 and Nasdaq 100 futures hit session lows. Stock markets in Japan and Hong Kong, which were closed yesterday for a holiday, saw a steep sell off on the financial market turmoil. Japan's Nikkei fell 5.0% and Hong Kong's Hang Seng dropped 5.4%. In Europe, London's FTSE is down 3.6%, German's DAX is down 2.0% and France's CAC 40 is down 2.3%. In economic news, net foreign purchases declined to $6.1 billion in July from $53.4 billion in June.
08:35 am : S&P futures vs fair value: -15.90. Nasdaq futures vs fair value: -4.80. A lower open is expected, with a barrage of reports not doing much to help sentiment. The New York Fed accepted a $50 billion overnight repo in an effort to improve liquidity following the doubling of the overnight Libor rate and an increase in the fed funds rate above the target rate. Overseas central banks also injected liquidity into the system, according to CNBC. Fed funds futures for today's meeting now indicate a 96% chance of a 25 basis points cut to 1.75% and a 4% chance of a 50 basis point cut. There was no chance of rate cut just one week ago. Best Buy (BBY) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Goldman Sachs (GS) earned $1.81 per share, which topped the average estimate of $1.71, but marked year-over-year decrease of 72%. GS fell 8% to a fresh 52-week low in premarket trading. In economic news, CPI fell 0.1% in August, matching expectations due to a drop in fuel costs. CPI excluding food and energy rose 0.2%, also in line with expectations. In commodity trading, oil prices are plunging once again, down 4.1% to $91.79 per barrel.
08:05 am : S&P futures vs fair value: -11.70. Nasdaq futures vs fair value: -3.30. Futures indicate the stock market will extend the previous session's sharp losses on what is poised to be a busy session. AIG (AIG) is once again in focus after having its credit rating downgraded at Standard & Poor's and Fitch Ratings. AIG is down 58% in premarket trading. Washington Mutual (WM) had its outlook downgraded at Standard & Poor's and had its counterparty credit rating lowered to junk. There are reports that Barclays (BCS) is near a deal to buy some assets from Lehman Brothers (LEH).The overnight dollar Libor rate, which is the interest rate banks charge each other to borrow in dollars overnight, spiked to 6.43% from 3.10% following the collapse of Lehman Brothers. In news outside financials, Hewlett-Packard (HPQ) will take a $1.7 billion charge related to its EDS acquisition, which includes cutting 7.5% of its workforce, or 24,600 employees. Dell (DELL) said it is seeing further softening in global end-user demand. Several market-moving items are still to come, including CPI (8:30 ET) earnings from Goldman Sachs (GS) and the FOMC policy announcement at 2:15 ET.
06:48 am : S&P futures vs fair value: -0.60. Nasdaq futures vs fair value: -1.80.
06:35 am : Nikkei...11609.72...-605.00...-5.00%. Hang Seng...18300.31...-1052.30...-5.40%.
06:35 am : FTSE...5080.10...-124.10...-2.40%. DAX...5967.11...-97.10...-1.60%.
http://biz.yahoo.com/mu/update.html
4:20 pm : Tuesday was a roller coaster session as market participants considered the fate of AIG (AIG 4.00, -0.76) and other struggling financial companies. The market also digested an FOMC decision to keep rates unchanged, an in-line CPI report and discouraging comments from Dell (DELL 16.01, -1.98).
The S&P fell 2.0% shortly after the bell, only to rebound to settle with a gain of 1.8% on a late session report that AIG may indeed receive a bailout.
AIG was at the center of the volatility after the insurance giant had its credit rating downgraded at the major rating agencies, sparking speculation that the company would have to file for bankruptcy if it could not get ahold of cash. AIG fell as much as 74% as various reports said a private deal to help AIG is not going to happen, and the Fed was not going to lend money. AIG closed with a loss of 16%, however, after a late-session Bloomberg.com report said that the Fed may end up giving the company a loan package.
Lehman Brothers (LEH 0.19, -0.02), which filed for bankruptcy yesterday, sold its investment banking segment to Barclays (BCS 23.15, +1.67) according to the Wall Street Journal. The sale will reportedly save 9,000 jobs.
Goldman Sachs (GS 134.04, -1.46) fell to a fresh 52-week low after reporting a 72% year-over-year drop in earnings per share. Revenue declined 40% in investment banking and 67% in trading and investments.
The financial market turmoil yesterday prompted a doubling in the overnight interest rate banks charge to lend dollars, also known as Libor. This led the Fed and overseas central banks to use repurchase agreements -- secured short-term lending agreements -- to pump liquidity into the system.
The Fed was willing to add liquidity, but decided not to cut interest rates at this session’s FOMC meeting, leaving the fed funds rate at 2.00% and the discount rate at 2.25%. The FOMC’s directive was very similar to the wording from August 5, although downside risks to economic growth received additional attention. Inflation risks remain a significant concern to the Fed.
In corporate news, Dell said it is seeing a slowdown in global end user demand, sending the computer maker’s stock down 11% to its lowest intraday level in 10.5 years. Hewlett-Packard (HPQ 48.28, +2.95) is laying off 7.5%, or 24,600, of its workforce and is taking a charge of $1.7 billion related to its EDS acquisition. Once the plan is completed, HP expects to save $1.8 billion a year.
Best Buy (BBY 42.43, -1.27) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Despite a revenue increase of 12% year-over-year, earnings per share fell 14% due to increased spending related to store labor and the roll out of Best Buy Mobile.
August CPI was in-line with expectations, showing a welcomed 0.1% month-over-month decline thanks to a decrease in fuel costs. The core rate, which excludes fuel and food, rose 0.2%.
Crude prices tumbled for the second day in a row, falling 3.0% to $92.89 per barrel. Commodities as a whole slid 2.0%
In the end, eight of the ten economic sectors posted a gain, although six hit fresh 52-week lows in intraday trade. The financial sector climbed 6.2% and the energy sector gained 3.9% despite the drop in energy prices.
The utilities sector (-1.1%) underperformed after Constellation Energy (CEG 30.90, -17.09) plummeted 36% on debt fears.
Treasuries also had a wild day, with the 10-year note trading up more than a point in early trade, and then ending the session down 43 ticks.DJ30 +141.51 NASDAQ +27.99 NQ100 +1.1% R2K +3.0% SP400 +2.1% SP500 +20.90 NASDAQ Adv/Vol/Dec 1651/3.21 bln/1200 NYSE Adv/Vol/Dec 1454/2.17 bln/1741
3:30 pm : Shares of Lehman Brothers (LEH 0.19, -0.02) are halted news pending, with the Wall Street Journal reporting that Barclays (BCS 22.49, +1.00) is buying Lehman's investment bank, which will save 9,000 jobs. The stock market climbs to session highs on the share halting, and then gives back some gains on the Journal report, apparently due to disappointment that Barclays is not buying more of Lehman.
The financial sector is up 3.5% and the energy sector is up 2.4%.
Six of the ten economic sectors hit fresh 52-week lows this session, including energy, materials, industrials, telecom, utilities and tech. Interestingly, the financial sector, which has been at the center of the recent downturn, is up 18% from its 52-week low that was reached July 15.DJ30 +62.53 NASDAQ +18.15 SP500 +11.43 NASDAQ Adv/Vol/Dec 1489/2.74 bln/1340 NYSE Adv/Vol/Dec 1289/1.67 bln/1904
3:00 pm : The major indices rebound after Bloomberg.com reports its sources said the Fed is reconsidering its stance on helping AIG (AIG 5.09, +0.33), and the company may get a loan package from the Federal Reserve.
Shares of AIG are now posting a gain on the day, after trading down as much as 73.7% to $1.25.
FDIC Chairwoman Blair said banks are safe and sound, according to Reuters. Blair added that insurance funds for deposits will be adequate to absorb any losses.
The S&P 500, Dow and Nasdaq hit fresh session highs. Eight of the ten sectors are posting a gain, with the financial sector up 4.1%.DJ30 +112.65 NASDAQ +14.61 SP500 +13.35 NASDAQ Adv/Vol/Dec 1375/2.47 bln/1426 NYSE Adv/Vol/Dec 1234/1.52 bln/1953
2:35 pm : The stock market is in negative territory following the FOMC's decision to leave the fed funds rate unchanged at 2.00%, although stocks have halted their decline. The Fed left the discount rate unchanged at 2.25%.
The current FOMC announcement and the August release are very similar, although there is now more emphasis on risks to growth.
The August release said, "Although downside risks to growth remain, the upside risk to inflation are also of significant concern to the Committee." The release now states, "The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee."
In addition, the FOMC said strains in the financial markets have "increased significantly", compared to its previous statement that financial markets remain under "considerable stress."
The vote to leave rates unchanged was unanimous, including Dallas Fed President Fisher. Fisher dissented during the two previous meetings when rates were left unchanged, as he preferred a rate increase given the inflation risks.DJ30 -39.96 NASDAQ -11.51 SP500 -5.23 NASDAQ Adv/Vol/Dec 1090/2.17 bln/1702 NYSE Adv/Vol/Dec 794/1.34 bln/2389
2:15 pm : The FOMC stood pat on the fed funds rate for the third straight meeting, leaving the rate at 2.00%. The decision was unanimous, noting that market strains have increased significantly. Inflation has been high, and the outlook is uncertain.
The stock market traded near the unchanged mark prior to the announcement and falls sharply upon the release. The futures market forecasted an 88% chance of a 25 basis point cut, although most economists expected the Fed to leave rates unchanged.DJ30 -53.90 NASDAQ -18.77 SP500 -8.82 NASDAQ Adv/Vol/Dec 1269/1.97 bln/1504 NYSE Adv/Vol/Dec 961/1.22 bln/2225
2:00 pm : The market's attention turns to the FOMC policy announcement, slated for release around 2:15 ET. Fed funds futures suggest an 82% chance of a 25 basis point rate cut, with the remaining odds suggesting no change.
At the FOMC's Aug. 5 meeting, the fed funds rate was left unchanged at 2.00%, with Dallas Fed President Fisher dissenting, preferring a rate increase due to inflation risks.
At the time, the Fed noted both downside risks to growth and "significant" concern regarding upside risks to inflation. Since the meeting, oil prices have fallen 24.8% and commodities as a whole have declined 14.0%. The stock market has declined 4.7% during that time.DJ30 +19.80 NASDAQ -1.63 SP500 +0.31 NASDAQ Adv/Vol/Dec 1266/1.90 bln/1504 NYSE Adv/Vol/Dec 922/1.18 bln/2261
1:30 pm : The stock market posts a slight gain. The only sector making a significant advance is financials (+3.4%).
The utility sector (-3.2%), normally considered a defensive investment, is the main laggard. Constellation Energy (CEG 32.72, -15.27) is down 32% on debt fears. The cost to protect the company's debt, measured by credit default swaps, rose 60% to $478,000 per year to insure $10 million for five years, Reuters reported, citing Markit Intraday
Crude prices are posting a loss of 5.0% at $90.95 per barrel, which is close to this session's low. All 19 commodities within the CRB Index (-2.1%) are posting a loss. Nickel (-6.0%), Corn (-4.9%) and Gasoline (-4.9%) are down the most.DJ30 +50.40 NASDAQ -0.39 SP500 +4.05 NASDAQ Adv/Vol/Dec 1310/1.81 bln/1457 NYSE Adv/Vol/Dec 1011/1.16 bln/2159
1:00 pm : Stocks are oscillating along the unchanged mark as participants continue to look for direction.
Traders await the latest rate decision from the Federal Open Market Committee (FOMC). Earlier, fed funds futures were fully pricing in a 25 basis point cut, but have eased back a bit. Fed funds futures currently indicate a 78% chance of a 25 basis point cut.
Cutting the interest rate can pressure the dollar. The dollar index is currently up 0.1% this session. It is now up 3.0% year-to-date. While the dollar's 10.5% rebound from its March low has softened the price of such imports as crude oil (-4.3%), it is still down 35% from July 2001.DJ30 +43.15 NASDAQ +5.34 SP500 +4.28 NASDAQ Adv/Vol/Dec 1280/1.69 bln/1456 NYSE Adv/Vol/Dec 981/1.05 bln/2180
12:25 pm : The major indices trade with modest gains as the financial sector (+2.9%) provides leadership.
Within financials, 63 of the 87 components are posting a gain. Merrill Lynch (MER 20.25, +3.19), Washington Mutual (WM 2.24, +0.24) and Wachovia (WB 12.09, +1.38) are among the biggest percent gainers. AIG (AIG 2.92, -1.84) and Morgan Stanley (MS 26.53, -5.65) are among the biggest percent decliners.
The energy sector has made a nice rebound, even as oil prices post a 4.0% loss. The sector is up 0.4% after falling as much as 3.6% in earlier trade.
Airlines are getting a nice 7.3% boost from lower energy prices.DJ30 +27.52 NASDAQ +5.13 SP500 +2.78 NASDAQ Adv/Vol/Dec 1257/1.53 bln/1461 NYSE Adv/Vol/Dec 962/952 mln/2176
12:00 pm : Financial market turmoil sparked volatility Tuesday, with concerns regarding the future of AIG (AIG 2.83, -1.93) at the center of attention.
The S&P 500 opened with a loss of 2.0%, rebounded to a gain of 1.0% and at midday is posting a slight advance.
AIG had its credit rating downgraded at Standard & Poor’s, Fitch and Moody’s, prompting some to speculate that the company would soon face bankruptcy unless bailed out. CNBC reported that a private sector solution to AIG’s problems is definitively dead, and sources say the most likely outcome is bankruptcy.
Goldman Sachs (GS 131.24, -4.26) fell to a fresh 52-week low after reporting a 72% year-over-year drop in earnings per share. Revenue declined 40% in investment banking and 67% in trading and investments.
The financial market problems yesterday, which included Lehman Brothers (LEH 0.22, +0.01) filing for bankruptcy, spurred a doubling in the overnight interest rate banks charge to lend dollars, also known as the Libor. This led the Fed and overseas central banks to pump liquidity into the system.
The FOMC makes its policy announcement at 2:15 ET. Fed funds futures are fully pricing in a 25 basis point rate cut to 1.75%, and even suggest a slight 10% chance of a 50 basis point cut. Last week there was no probability of a rate cut.
Despite these developments, the financial sector is posting a 2.4% gain midday, with leadership seen in big banks such as Wells Fargo (WFC 34.42, +3.40).
In corporate news, Dell (DELL 16.31, -1.67) said it is seeing a slowdown in global end user demand. Hewlett-Packard (HPQ 47.45, +2.12) is laying off 7.5%, or 24,600, of its workforce and is taking a charge of $1.7 billion related to its EDS acquisition.
Best Buy (BBY 41.95, -1.75) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Despite a revenue increase of 12% year-over-year, earnings per share fell 14% due to increased spending related to store labor and the roll out of Best Buy Mobile.
On a more positive note, August CPI was in-line with expectations, showing a welcomed 0.1% month-over-month decline thanks to a decrease in fuel costs. The core rate, which excludes fuel and food, rose 0.2%.
Crude prices are tumbling for the second day in a row, falling 3.5% to $92.33 per barrel. Commodities as a whole are down 0.8%.DJ30 -3.26 NASDAQ +4.82 SP500 +0.73 NASDAQ Adv/Vol/Dec 1243/1.38 bln/1475 NYSE Adv/Vol/Dec 966/876 mln/2167
11:30 am : The stock market gives up gains from the CNBC report of AIG (AIG 2.39, -2.36) bailout talks after CNBC's David Faber said the private sector solution to AIG is definitively dead, and sources say the most likely outcome is bankruptcy.
The major indices are posting losses, but are well above their session lows.
The financial sector is up 0.7% after briefly climbing to a gain of 4.6%. The remaining nine sectors are posting a loss.
Separately, Reuters reports the federal funds rate is at 4.0% in market trade, which is well above the 2% target rate of the Fed.DJ30 -49.91 NASDAQ -11.14 SP500 -7.37 NASDAQ Adv/Vol/Dec 1064/1.22 bln/1627 NYSE Adv/Vol/Dec 756/784 mln/2369
11:00 am : The S&P 500 spikes to positive territory after CNBC reported that a government-led bailout of AIG (AIG 3.94, -0.82) is a possiblity. The S&P 500 is currently up 0.3%, which is a large recovery from its loss of 2.0% that was reached shortly after the opening bell.
CNBC's sources said the Fed is in talks with AIG, and some sort of goverment assistance in bailing out the struggling insurance giant is now on the table.
The financial sector has seen massive swings this session, going from a loss of 3.7% at its low to a gain of 4.1% at its high. The sector is currently up 3.4%.
Treasuries give up gains as stocks recover. The 10-year note is only up two ticks, after being up a full point in early trade.
In overseas trading, Russia's most liquid stock exchange, MICEX, suspended trade following a 17% one day decline. Bank stocks fell the most.DJ30 +32.90 NASDAQ +7.18 SP500 +3.09 NASDAQ Adv/Vol/Dec 1248/949 mln/1378 NYSE Adv/Vol/Dec 991/616 mln/2123
10:30 am : The major indices climb to their session highs as the financial sector (+2.6%) extends its gains. The stock market is in the red, but its decline is only modest.
Lehman Brothers (LEH 0.25, +0.04) reached a deal to sell some of its business to London-based Barclays (BCS 21.76, +0.28), according to the Financial Times. The exact parts of the deal are not known, although Financial Times sources say it is likely to center around Lehman's U.S. broker-dealer operations.DJ30 -27.03 NASDAQ -7.59 SP500 -5.77 NASDAQ Adv/Vol/Dec 1008/667 mln/1570 NYSE Adv/Vol/Dec 728/454 mln/2353
10:05 am : The major indices post steep declines with nine of the ten economic sectors in the red. The energy sector is down 3.0% as crude prices tumble 4.4% and gasoline prices fall 3.8%.
Strikingly, the financial sector (+1.0%) is outperforming the broader market. Strength in industrial REITs (+3.9%) and diversified banks (+4.8%), such as Wells Fargo (WFC 33.91, +2.91), is helping to offset the 13.6% decline in multi-line insurance companies and a 6.6% decline in investment banks & brokerages.
In earnings news, Best Buy (BBY 39.59, -4.11) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Despite a revenue increase of 12% year-over-year, earnings per share fell 14% due to increased spending related to roll out of Best Buy Mobile and store labor.DJ30 -77.18 NASDAQ -19.85 SP500 -13.72 NASDAQ Adv/Vol/Dec 722/422 mln/1759 NYSE Adv/Vol/Dec 430/298 mln/2572
09:45 am : The stock market tumbles at the open extending the previous session's massive loss -- which was the S&P 500's largest loss in seven years. Once again financial market turmoil is sparking the selling interest.
AIG (AIG 2.00, -2.76) is down 58% after having its credit ratings cut at Standard & Poor's and Moody's. Goldman Sachs (GS 121.15, -14.23) fell to a fresh 52-week low after reporting a 72% year-over-year drop in earnings per share. Washington Mutual (WM 1.70, -0.30) had its outlook downgraded at Standard & Poor's and had its counterparty credit rating lowered to junk.
The overnight dollar libor, the interest rate banks charge to lend dollars overnight, doubled following yesterday's developments, leading the Fed and overseas central banks to pump liquidity into the system.
The FOMC makes its policy announcement at 2:15 ET. Fed funds futures are fully pricing in a 25 basis point rate cut to 1.75%, and even suggest a modest chance of a 50 basis point cut. Last week there was no chance of a rate cut.
As a result, Treasuries are rallying, with the 10-year note up a 25 ticks , sending its yield down to 3.29% -- the lowest yield since 2003
In news outside financials, Hewlett-Packard (HPQ 44.97, -0.36) will take a $1.7 billion charge related to its EDS acquisition, which includes cutting 7.5% of its workforce, or 24,600 employees. Dell (DELL 16.40, -1.59) said it is seeing further softening in global end-user demand.
On the positive side, CPI decreased 0.1% in August due to a drop in fuel costs. Core CPI rose 0.2%.
Crude prices are tumbling once again, down 4.5% to $91.40 per barrel.DJ30 -72.72 NASDAQ -23.08 SP500 -12.53
09:17 am : S&P futures vs fair value: -25.50. Nasdaq futures vs fair value: -24.80. Futures trade near recently reached session lows and suggest a sharply lower open. Agriculture chemical company Monsanto (MON) raised its fiscal year 2008 guidance to between $3.58 and $3.60 per share, from $3.37. Wall Street forecast earnings of $3.45 per share. Oil is now down 5.1% to $90.78 per barrel -- its lowest level since February.
09:01 am : S&P futures vs fair value: -21.20. Nasdaq futures vs fair value: -18.30. S&P 500 and Nasdaq 100 futures hit session lows. Stock markets in Japan and Hong Kong, which were closed yesterday for a holiday, saw a steep sell off on the financial market turmoil. Japan's Nikkei fell 5.0% and Hong Kong's Hang Seng dropped 5.4%. In Europe, London's FTSE is down 3.6%, German's DAX is down 2.0% and France's CAC 40 is down 2.3%. In economic news, net foreign purchases declined to $6.1 billion in July from $53.4 billion in June.
08:35 am : S&P futures vs fair value: -15.90. Nasdaq futures vs fair value: -4.80. A lower open is expected, with a barrage of reports not doing much to help sentiment. The New York Fed accepted a $50 billion overnight repo in an effort to improve liquidity following the doubling of the overnight Libor rate and an increase in the fed funds rate above the target rate. Overseas central banks also injected liquidity into the system, according to CNBC. Fed funds futures for today's meeting now indicate a 96% chance of a 25 basis points cut to 1.75% and a 4% chance of a 50 basis point cut. There was no chance of rate cut just one week ago. Best Buy (BBY) reported second quarter earnings of $0.48 per share, which is $0.09 worse than the average analyst estimate of $0.57. Goldman Sachs (GS) earned $1.81 per share, which topped the average estimate of $1.71, but marked year-over-year decrease of 72%. GS fell 8% to a fresh 52-week low in premarket trading. In economic news, CPI fell 0.1% in August, matching expectations due to a drop in fuel costs. CPI excluding food and energy rose 0.2%, also in line with expectations. In commodity trading, oil prices are plunging once again, down 4.1% to $91.79 per barrel.
08:05 am : S&P futures vs fair value: -11.70. Nasdaq futures vs fair value: -3.30. Futures indicate the stock market will extend the previous session's sharp losses on what is poised to be a busy session. AIG (AIG) is once again in focus after having its credit rating downgraded at Standard & Poor's and Fitch Ratings. AIG is down 58% in premarket trading. Washington Mutual (WM) had its outlook downgraded at Standard & Poor's and had its counterparty credit rating lowered to junk. There are reports that Barclays (BCS) is near a deal to buy some assets from Lehman Brothers (LEH).The overnight dollar Libor rate, which is the interest rate banks charge each other to borrow in dollars overnight, spiked to 6.43% from 3.10% following the collapse of Lehman Brothers. In news outside financials, Hewlett-Packard (HPQ) will take a $1.7 billion charge related to its EDS acquisition, which includes cutting 7.5% of its workforce, or 24,600 employees. Dell (DELL) said it is seeing further softening in global end-user demand. Several market-moving items are still to come, including CPI (8:30 ET) earnings from Goldman Sachs (GS) and the FOMC policy announcement at 2:15 ET.
06:48 am : S&P futures vs fair value: -0.60. Nasdaq futures vs fair value: -1.80.
06:35 am : Nikkei...11609.72...-605.00...-5.00%. Hang Seng...18300.31...-1052.30...-5.40%.
06:35 am : FTSE...5080.10...-124.10...-2.40%. DAX...5967.11...-97.10...-1.60%.
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