From Briefing.com: 4:25 pm : Wednesday marked an ugly session on Wall Street, with the S&P 500 and Nasdaq tumbling to their lowest levels in five years and the Dow dropping to a five-year closing low. Concerns over the fate of U.S. automakers, disappointing economic data, a dour outlook from the Fed and the market's inability to hold its lows fueled the selling interest.
The major indices ended the session at their worst levels, in above average volume. The Dow, Nasdaq and S&P 500 fell 5.1%, 6.5% and 6.1%, respectively.
October CPI fell by the largest amount on record, which is good news in terms of the inflation outlook, but also represents the weakness of the economy. Specifically, CPI fell 1.0% month-over-month as energy prices plummeted 8.6%. Prices also declined outside of energy, indicating weak demand -- core CPI fell 0.1% as used car prices dropped 2.4% and apparel prices fell 1.0%.
The latest new residential construction data fell to the lowest levels on record, and provide another weak point for fourth quarter GDP calculations. October housing starts declined 4.5% month-over-month to a seasonally adjusted annual rate of 791,000, which was slightly higher than the consensus estimate of 780,000. Building permits dropped 12% to a seasonally adjusted annual rate of 708,000, which was worse than the consensus estimate of 774,000.
The Federal Reserve's 2008 and 2009 projections, released today in the FOMC Oct. 29 meeting minutes, mirrored the latest economic data, with the Fed reducing forecasts for GDP growth and inflation. For 2008, the Fed expects the economy will grow between 0.0% and 0.3%, down sharply from its previous forecast of 1.0% to 1.6%. The 2009 forecast now calls for growth between -0.2% and 1.1%, down from the previous forecast of 2.0% to 2.8%. The Fed also raised its unemployment forecast.
The minutes hinted at the likelihood of further monetary easing, as some FOMC members saw potential for further rate cuts.
Although weakness was broad-based with losses posted by all ten sectors and 492 of the 500 components within the S&P 500, the financial sector got hit the hardest with a decline of 11.5%.
Citigroup (C 6.45, -1.91) tumbled 23% to its lowest level since 1995. Citi said it will buy the remaining $17.4 billion in structure investment vehicles it advised.
Automakers (-21.2%) got clipped as executives from General Motors (GM 2.77, -0.32), Ford (F 1.27, -0.41) and Chrysler, and the head of the UAW testified before the House Financial Services Committee in an attempt to secure a government loan. There were plenty of opponents in the House, which was similar to views that were expressed by Senate Banking Committee members yesterday. GM's CEO said on CNBC that the company is doing everything it can to avoid bankruptcy, as he sees a high risk that a Chapter 11 filing (restructuring) could turn into a Chapter 7 (liquidation). Reports that Toyota Motor (TM 59.64, -3.61) is going to cut North America production also weighed on automakers.
A risk aversion trade lifted Treasuries, with the 30-year bound rallying 3 points to yield 3.94% -- marking the lowest yield since the 30-year bond was introduced in 1977. The 10-year note rose 44 ticks to send its yield down to 3.36%.
In commodity trading, crude prices fell 2.4% to $53.10 per barrel. The government's weekly energy inventory showed a larger-than-expected build in crude and gasoline stockpiles, indicating decreased demand.DJ30 -427.47 NASDAQ -96.85 NQ100 -5.9% R2K -7.9% SP400 -7.4% SP500 -52.54 NASDAQ Adv/Vol/Dec 2519/2.36 bln/298 NYSE Adv/Vol/Dec 187/1.63 bln/2998
4:33PM Semtech reports EPS in-line, revs in-line; guides Q4 EPS below consensus, revs below consensus (SMTC) 8.82 -0.36 : Reports Q3 (Oct) earnings of $0.24 per share, excluding non-recurring items, in-line with the First Call consensus of $0.24; revenues rose 1.4% year/year to $79.7 mln vs the $79.3 mln consensus. Co issues downside guidance for Q4, sees EPS of $0.15-0.20, excluding non-recurring items, vs. $0.23 consensus; sees Q4 revs of $64-72 mln vs. $75.95 mln consensus.
07:49 am First Solar target lowered to $120 at Friedman Billings: . Friedman Billings lowers their FSLR tgt to $120 from $170. Recent checks suggest that FSLR's new strategy in the U.S. market is already facing headwinds. Although projects such as Sampra are proceeding well and actually expected to be scaled up to 30 MW-plus, they believe that the distributed segment is where the levelized cost using FSLR's modules does not offer better economics when compared to crystalline modules. They view FSLR as the best in the business to maximize the return on assets (a key differentiating factor in a commodity-type industry such as solar manufacturing), but this does not imply that customers have no choice! They expect FSLR, along with the rest of the solar stocks, to remain under pressure, and they would encourage profit-taking on any rally.
09:28 am Toyota Motor (TM)
Asset and home prices are down, credit is tight, and the economy is on shaky ground. As a result, U.S. auto sales are flagging.
Responding to the trend, Toyota Motor Corp (TM 63.25) will reduce output of its Sienna minivan at one of its manufacturing plants and slow down a production of its Camry Avalon line at another site. Toyota will also eliminate one shift making the Tacoma pickup truck at a third plant, which is actually run as a joint venture with General Motors (GM 3.09), according to The Wall Street Journal.
The Japanese auto maker also stated it will stop production at its plants in the U.S. and Canada for two extra days in December and will cut 250 temporary workers, according to The Wall Street Journal. The article emphasized that Toyota says it will not lay off any full-time employees as part of the changes.
According to the article, the U.S. represents Toyota's largest and most profitable market. With U.S. auto sales continuing to slump and no turn of fortune on the immediate horizon, Toyota cut its full-year profit forecast by more than half.
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