From Briefing.com: 4:30 pm : The stock market's six-session streak of gains ended in dramatic fashion as the S&P 500 suffered its worst percentage loss in two months following news that the Securities Exchange Commission (SEC) has levied a charge against Goldman Sachs.
Moderate weakness in the early going became something much worse with midmorning news that the SEC has charged Goldman Sachs (GS 160.70, -23.57) and one of the company's vice presidents with fraud related to subprime securities. Goldman Sachs saw some $12 billion, or 13%, of its market cap evaporate. Concern that other investment banks and brokerages may be implicated led the group to a 9.4% loss. That undercut the broader financial sector, which fell 3.8% in its worst slide since February.
While selling was the worst among financials, more than 90% of the stocks in the S&P 500 retreated into the red. Most market participants wanted to lock in profits after they had watched the S&P 500 climb nearly 4% over the course of the previous 10 sessions, 7 of which marked improved 52-week highs.
Not even better-than-expected earnings from blue chips Google (GOOG 550.15, -45.15), Bank of America (BAC 18.41, -1.07), and General Electric (GE 18.97, -0.53) could keep sellers at bay this session. Participants initially responded to reports from the trio with mixed interest as many believed plenty good news had already been built in to the share prices. Some wanted more in the way of improved outlooks.
Economic data was split between positive and negative. Housing starts for March hit an annualized rate of 626,000, which was more than the rate of 610,000 that had been expected and the highest rate in more than one year. Building permits for March came in at an annualized rate of 685,000, which was above the rate of 625,000 that had been expected and was also the highest rate in more than one year.
On the other side of things, the preliminary Consumer Sentiment Survey for April from the University of Michigan came in at 69.5, which was not only below the 75.0 that had been widely expected, but it was also the worst reading since November.
The drastically soured tone turned some to Treasuries. In turn, the benchmark 10-year Note saw its yield slip to 3.76%, which is roughly 25 basis points below where it sat about two weeks ago.
Volatility also spiked in response to this session's selling. The Volatility Index, often euphemistically dubbed the Fear Index, spiked approximately 15%. Amid such action, many have come to question whether the stage has been set for a larger correction or if money will start to move in from the sidelines.
Trading volume surged to its highest level in nearly one month, but it is unclear how much of that is owed to this session's negative headlines since this was an options expiration session.
Advancing Sectors: (None)
Declining Sectors: Financials (-3.8%), Materials (-1.8%), Industrials (-1.6%), Energy (-1.5%), Consumer Discretionary (-1.4%), Tech (-1.4%), Utilities (-1.1%), Telecom (-0.8%), Health Care (-0.6%), Consumer Staples (-0.3%) DJ30 -125.91 NASDAQ -34.43 NQ100 -1.3% R2K -1.3% SP400 -1.2% SP500 -19.54 NASDAQ Adv/Vol/Dec 726/2.85 bln/1962 NYSE Adv/Vol/Dec 571/1.75 bln/2465
10:17 am BAC Beats Wall Street's Q1 Expectations
Bank of America (BAC 19.20, -0.28) reported its first quarter earnings and revenue results earlier this morning, which were better than Wall Street expectations.
The company reported first quarter earnings of $0.28 per share, $0.19 better than the Thomson Reuters consensus of $0.09. Revenues fell 10.6% year-over-year to $31.97 billion, but were higher than the $27.97 billion consensus.
Revenue declines were driven by the absence of year-earlier credit-related gains on Merrill Lynch structured notes, the sale of an equity investment and lower mortgage banking volume and income. Revenue declines were driven by the absence of year-earlier credit-related gains on Merrill Lynch structured notes, the sale of an equity investment and lower mortgage banking volume and income. Credit quality continued to improve during the quarter, with net losses declining in most consumer portfolios.
Credit costs, however, remain high amid relatively weak global economic conditions. Credit quality across most commercial portfolios showed signs of improvement with criticized and nonperforming loans decreasing from the prior quarter. Net charge-offs in the commercial portfolios declined across a broad range of borrowers and industries. Net charge-offs in the first quarter of $10.8 billion, or 4.44%, which reflect the new accounting guidance, are comparable with managed net losses of $11.3 billion, or 4.54%, in the prior quarter.
Nonperforming loans, leases and foreclosed properties were $35.9 billion, compared with $35.7 billion at December 31, 2009. The provision for credit losses was $9.8 billion, $305 million lower than the fourth quarter of 2009 ($992 million lower ex-acctg changes) and $3.6 billion lower than the same period a year earlier.
Looking at the company's balance sheet, BAC reported a tier 1 capital ratio of 10.23% versus 10.4% in the fourth quarter and 10.09% in its first quarter of 2009. The company's tangible common equity ratio was reported as 5.24% versus 5.57% in the fourth quarter and 3.13% in its first quarter of 2009.
In its global card services segment, net income was reported at $952 million as credit costs declined, reflecting continued improvement in the U.S. economy. Net revenue declined 9% to $6.8 billion due to lower net interest income from the decline in average loans and lower fee income resulting from the implementation of the CARD Act. Provision for credit losses decreased $4.7 billion to $3.5 billion from a year ago as lower delinquencies and lower expected losses from the improved economic outlook drove reserve reductions during the quarter.
Global Banking and Markets net income increased $709 million to $3.2 billion, driven by record performance in sales and trading. Revenue increased by $795 million as market conditions improved and the impact of writedowns on legacy assets decreased from a year earlier. Fixed Income, Currency and Commodities revenue of $5.8 billion was primarily driven by sales and trading revenues. Revenue rose on improved market conditions, increased liquidity, tighter credit spreads and the reduced impact of writedowns on legacy assets.
10:03 am GE Beats Q1 Expectations by $0.05
General Electric (GE 18.89, -0.61) reported first quarter earnings this morning, which were better than Wall Street expectations.
The company reported first quarter earnings of $0.21 per share, excluding $0.05 in non-recurring items, $0.05 better than the Thomson Reuters consensus of $0.16. Revenues fell 4.8% year-over-year to $36.6 billion versus the $37.1 billion consensus.
GE Capital Services' (GECS) revenues fell 9% versus the first quarter of last year to $13.2 billion. Industrial sales were $23.5 billion, down 2% from the first quarter of 2009. Segment profit fell 16% compared with the first quarter of 2009, as 12% growth at Energy Infrastructure was more than offset by earnings declines of 41% at GE Capital, 18% at Technology Infrastructure and 49% at NBC Universal. Total company orders were $17.1 billion, or down 8%, while total backlog was stable at $174 billion.
The company said, "GE's environment continued to improve in the first quarter of 2010. We saw encouraging economic signs, including increases in airline passenger miles and freight loadings, declines in receivables delinquencies, and growth in local advertising markets. Total co backlog of equipment and services held steady from the prior quarter at $174 billion. Our Healthcare and Oil & Gas businesses experienced solid orders growth and our equipment and services backlog remains strong. We are seeing solid signs of stabilization. Losses, delinquencies and non-earning assets (ex-FAS 167) declined in the quarter. At the same time, reserve coverage increased. We are originating new business at attractive margins and our funding costs have declined. GE Capital losses seem to have peaked. Commercial real estate continues to be challenging, but the risks are understood and we expect them to be manageable. We have strengthened the GE Capital franchise and are on track for solid earnings growth."
09:49 am GOOG Tops Q1 Expectations
Google (GOOG 563.19, -32.11) reported first quarter results after the close yesterday, which beat expectations.
The company reported fiscal first quarter earnings of $6.76 per share, $0.16 better than the Thomson Reuters consensus of $6.60. Revenues ex-TAC rose 24% year-over-year to $5.06 billion versus the $4.95 billion consensus.
Google-owned sites generated revenues of $4.44 billion, or 66% of total revenues, in the first quarter of 2010. This represents a 20% increase over first quarter 2009 revenues of $3.69 billion. Google's partner sites generated revenues, through AdSense programs, of $2.04 billion, or 30% of total revenues, in the first quarter of 2010. This represents a 24% increase from first quarter 2009 network revenues of $1.64 billion.
Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 15% over the first quarter of 2009 and increased approximately 5% over the fourth quarter of 2009. Operating expenses, other than cost of revenues, were $1.84 billion in the first quarter of 2010, or 27% of revenues, compared to $1.52 billion in the first quarter of 2009, or 28% of revenues.
Non-GAAP operating income in the first quarter of 2010 was $2.78 billion, or 41% of revenues. This compares to non-GAAP operating income of $2.16 billion, or 39% of revenues, in the first quarter of 2009. Net cash provided by operating activities in the first quarter of 2010 totaled $2.58 billion, compared to $2.25 billion in the first quarter of 2009. The company said, "We expect to continue to make significant capital expenditures."
09:42 am AMD Beats Q1 Expectations
AMD (AMD 9.81, -0.35) reported fiscal first quarter results after the close yesterday, which easily topped Wall Street expectations.
The company reported first quarter Non-GAAP earnings of $0.09 per share, excluding non-recurring items, $0.16 better than the Thomson Reuters consensus of ($0.07).
Revenues rose 33.7% year-over-year to $1.57 billion versus the $1.54 billion consensus. Non-GAAP gross margin was 43%, a sequential increase of two percentage points.
For the second quarter, the company said it sees revenues "down seasonally" versus $1.52 billion Thomson Reuters consensus.
Computing Solutions segment revenue decreased 5% sequentially and increased 23% year-over-year. The sequential decrease was driven by lower microprocessor unit shipments, partially offset by an increase in microprocessor average selling price (ASP). The year-over-year increase was driven by an increase in microprocessor unit shipments.
Graphics segment revenue decreased 3% sequentially and increased 88% year-over-year. The sequential decrease was driven primarily by a seasonal decline in royalties received in connection with the sale of game console systems, largely offset by an increase in graphics processor unit (GPU) revenue. The year-over-year increase was driven primarily by an increase in GPU shipments.
09:32 am Housing Starts Show Marked Improvement
Residential construction expenditures received a nice boost as February's housing starts level was revised up to 616,000 from 575,000. March's level rose to an even greater height of 626,000 and outperformed expectations by 16,000.
This was the best housing report since October 2008.
After languishing roughly at or below 500,000 since October 2008, single-family starts have finally moved upward. They rose to 536,000 in the revised February data and held at that level in March.
Multifamily units remained below 100,000 for the sixth time in the last seven months.
Building permits increased by 48,000 to 685,000 in March. They are at their highest level since October 2008.
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