From Briefing.com: 4:30 pm : Sellers had their way with stocks for the entire session, causing the stock market to finish at session lows with its worst loss by percent in more than one month.
While all 10 major sectors in the S&P 500 suffered sharp losses, the selling effort was rooted in the financial sector. Financials finished 11.4% lower after Bank of America (BAC 8.02, -2.58) reported that its first quarter credit loss provisions totaled $13.4 billion, up almost $5 billion from the fourth quarter. The announcement provided an excuse for participants to sell bank stocks after watching them rally in recent weeks. Just last week bank stocks spiked after BB&T (BBT 19.79, -3.63) stated banks could still post profits while building reserves. To that point, Bank of America actually generated pretax, preprovision income of $19 billion, which exceeded expectations. Diversified banks finished 15.6% lower and diversified services stocks sank 15.9%.
Credit card companies were also out of favor. Their weakness stemmed from fear that tighter regulation may be in order. Consumer finance stocks dropped 15.0%.
Sun Microsystems (JAVA 9.15, +2.46) managed to make a gain amid the session's declines. The stock soared after Oracle (ORCL 18.82, -0.24) announced it will acquire the company for $9.50 per share, which marked a premium of more than 40% above JAVA's closing price last week.
The announcement comes after talks between IBM (IBM 100.43, -0.84) and Sun Microsystems faltered. IBM stated it has no intention to return to discussions with Sun Microsystems, according to reports.
PepsiCo (PEP 49.86, -2.27) announced it is doing some buying as well. PepsiCo will purchase remaining stakes in Pepsi Bottling Group (PBG 30.73, +5.53) for $29.50 per share and PepsiAmericas (PAS 25.04, +5.16) for $23.27 per share, which translates to respective premiums of roughly 17% over last week's closing prices. PepsiCo also announced better-than-expected first quarter adjusted earnings per share results.
With stocks dropping, investors sought the safety of gold. Gold prices closed at $887.50 per ounce, up 2.3%. Interest in gold was strong enough to help gold prices overcome a resurgent dollar, which climbed roughly 0.8%, according to the Dollar Index.
The dollar's bounce came about after ECB President indicated that more rate cuts may be in order for the European economy, though such cuts would come in measures of 25 basis points.
The stronger dollar weighed heavily on crude oil prices. May contracts finished 8.8% lower at $45.90 per barrel. DJ30 -289.60 NASDAQ -64.86 NQ100 -3.3% R2K -5.6% SP400 -5.4% SP500 -37.21 NASDAQ Adv/Vol/Dec 444/2.92 bln/2257 NYSE Adv/Vol/Dec 295/1.76 bln/2800
4:35PM Texas Instruments beats by $0.04, beats on revs; guides Q2 in-line (TXN) 17.32 -0.65 : Reports Q1 (Mar) earnings of $0.01 per share, $0.04 better than the First Call consensus of ($0.03) (consensus includes restructuring charges); revenues fell 36.2% year/year to $2.09 bln vs the $1.9 bln consensus. Co reports Q1 gross margin of 38.6% vs 39.29% consensus. Co issues in-line guidance for Q2, sees EPS of 0.01-0.15, includes restructuring charges, vs. $0.02 consensus; sees Q2 revs of 1.95-2.40 vs. $1.94 bln consensus. Co said, "Demand for our products has begun to stabilize after sharp drops in the past two quarters. Many customers have increased orders for TI products as they have begun to slow down their inventory reductions. However, we remain sensitive to continuing weakness in the global economy, and we have yet to see signs of a broad-based recovery in our business. In this environment, we will keep our operations flexible so that we can respond quickly to any shifts in demand, whether up or down... We reduced our own inventory by $277 million, and at the same time worked with distributors to reduce channel inventory by $132 million. Our inventory reductions are essentially complete, and we expect to moderately increase production levels in our factories during the second quarter".
4:16PM IBM beats by $0.04, misses on revs; reaffirms 2009 guidance, ahead of pace for 2010 roadmap (IBM) 100.43 -0.84 : Reports Q1 (Mar) earnings of $1.70 per share, $0.04 better than the First Call consensus of $1.66; revenues fell 11.4% year/year to $21.71 bln vs the $22.51 bln consensus. Reports Q1 gross margin 43.4% vs 42.4% consensus. IBM reaffirms prior 2009 EPS guidance for "at least $9.20", consensus is for $9.03. IBM says ahead of pace for 2010 roadmap of $10.00-11.00; consensus is for $9.78. Co said revs were impacted by strong U.S. dollar, down 11% YoY, down 4% adjusting for currency. "IBM continued to perform well in a very difficult economic environment. This was due to our long-term strategic focus: shifting into software and services, divesting of commodity businesses, and creating solutions that help clients reduce cost and conserve capital. At the same time we have a disciplined approach to cost and expense management giving us a strong financial position." IBM's tax rate in the first-quarter 2009 was 26.5% compared with 27.5% in 1Q08, a decline of 1.0 point. IBM ended the first quarter of 2009 with $12.3 bln of cash on hand and generated free cash flow of $1.0 bln, up $450 mln year over year, excluding Global Financing receivables. The balance sheet remains strong, and the company is well positioned to take advantage of opportunities.
4:06PM Volterra Semi beats by $0.03, beats on revs (VLTR) 10.37 +0.10 : Reports Q1 (Mar) earnings of $0.03 per share, excluding non-recurring items, $0.03 better than the First Call consensus of ($0.00); revenues fell 20.6% year/year to $18.3 mln vs the $17.4 mln consensus.
9:44AM KLA-Tencor: Looking positive into earnings - Barclays (KLAC) 24.06 -0.80 : Barclays expects KLAC shares to outshine other front-end stocks this week due to consensus ests likely heading higher, results that are approaching breakeven, and recent strength in June orders that only started tracking higher recently. Firm is looking for a generally in-line March qtr (revs/EPS of $301 mln/-$0.25 vs cons $300 mln/-$0.26) with mgmt guiding to June revs of $300 mln +/- $20 mln. Firm is positive on KLAC shares going into earnings but maintain our long-term Equal Rate rating and $25 tgt.
8:11AM Trina Solar announces three new sales agreements in Germany (TSL) 12.38 : Co announces that it has entered into three sales agreements totaling approximately 42 MW of PV modules for delivery in 2009 with customers in Germany, including 12 MW with Bull Solar GmbH. These sales agreements, which were signed in the first quarter of 2009, reflect continued demand for Trina Solar's quality products from established customers in Germany and their commitment to new solar projects despite uncertain economic conditions.
09:33 am Cymer upgraded to Above Average at Caris & Company; tgt raised to $32: . Caris & Company upgrades CYMI to Above Average from Average and raises their tgt to $32 from $21. The firm notes that they are not making a call on the quarter, but they believe that CYMI has the best chance for sustained recovery of revs and earnings due to their higher contribution of service revenues and a rebound in the stepper market. The firm believes that market share losses have bottomed and CYMI is in better shape to gain share going forward. The firm notes that CYMI has also been very aggressive in cutting costs and they expect the leverage in the current cycle will be higher than previous cycles.
09:01 am Oracle (ORCL)
Oracle (ORCL 19.06) said Monday that it will buy Sun Microsystems (JAVA 6.69) for $9.50 per share in cash, a 42% premium to Friday's closing price.
The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun's cash and debt.
Oracle said it expects the acquisition to be accretive to earnings by at least $0.15 per share on a non-GAAP basis in the first full year after closing. Oracle estimates that Sun will contribute over $1.5 billion to operating profit in the first year, increasing to over $2 billion in the second year.
Sun's board unanimously approved the deal, which is expected to close this summer.
News of the acquisition comes two weeks after merger talks between IBM (IBM 101.27) and Sun broke down. Reports at the time indicated IBM had offered up to $9.40 per share for Sun.
Shares of JAVA are soaring 36.5% higher in premarket trade.
08:47 am Bank of America (BAC)
Bank of America (BAC 10.60) reported first quarter net income of $4.2 billion, but the bank added to its loss reserves and said credit quality deteriorated further across all lines of business.
After preferred dividends, including $402 million paid to the U.S. government, diluted earnings were $0.44 per share. The figure may not compare to the First Call consensus that expected $0.04.
Revenues rose 111.7% year-over-year to $36 billion; the consensus called for $27.13 billion.
Results for the quarter include Merrill Lynch and Countrywide Financial. Merrill Lynch contributed $3.7 billion to net income, excluding certain merger costs, on strong capital markets revenue. Countrywide also added to net income as mortgage lending and refinancing volume increased.
Bank of America said that credit quality deteriorated further across all lines of business as housing prices continued to fall and the economic environment weakened. The bank said the provision for credit losses of $13.4 billion rose from $8.5 billion in the fourth quarter and included a $6.4 billion net addition to the allowance for loan and lease losses.
Nonperforming assets were $25.7 billion compared with $18.2 billion at Dec. 31, 2008 and $7.8 billion at March 31, 2008, reflecting the continued deterioration in portfolios tied to housing.
Shares of BAC are more than 6% lower in premarket trading.
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