Market Update 080115 http://biz.yahoo.com/mu/update.html 4:25 pm : It didn't take long for Monday's rally to be unwound as a dismal fourth quarter report from Citigroup (C 26.94, -2.12) and a weaker than expected retail sales report for December triggered a host of sell orders that led to material losses for the major indices.
As far as Citigroup is concerned, it reported a large write-down as expected - $18.1 billion to be exact - yet some critics felt that write-down still wasn't large enough to serve as an inflection point that suggested the worst is over for the investment bank.
Altogether Citigroup reported a net loss of $9.83 billion, or $1.99 per share, on a 70% decline in revenues. Analysts had expected the company to record a loss of $1.03 per share.
In addition to posting its operating results, Citigroup said it slashed its dividend by 41% to $0.32 per share and that it raised $12.5 billion in new capital from outside investors that include Saudi Prince Alwaleed bin Talal and former CEO Sanford Weill's family foundation.
The market didn't find anything to cheer about in the report, which also contained the unsettling admission that credit costs for its U.S. Consumer business increased by $4.1 billion due to increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards and auto loans. This revelation triggered concern about the deteriorating state of debtors in the U.S. that weighed heavily on other banks in Tuesday's trading.
Fellow Dow component JPMorgan Chase (JPM 39.17, -2.19), which reports before Wednesday's open, was among the hardest hit with investors cognizant that its card services business accounted for 24% of its net revenues last year and 25% of its operating income.
Separately, Merrill Lynch (MER 53.01, -2.96) languished after announcing it raised $6.6 billion in new capital through the issuance of convertible preferred stock that carried a 9.0% coupon.
The financial sector, which dropped 3.7%, led Tuesday's retreat that saw the indices close near their lows for the day. The energy sector, which fell 3.5%, the materials sector, which shed 3.0%, and the technology sector, which lost 2.4%, were the other big laggards as slowdown concerns permeated the market.
Every economic sector, in fact, closed the session with a loss that exceeded 1.0%. In turn, there wasn't a single stock in the Dow that closed higher.
A report from the Dept. of Commerce that total retail sales and retail sales, excluding autos, declined 0.4% in December contributed to the slowdown concerns. Economists had forecast a flat reading for retail sales and a 0.1% decline excluding autos.
The December weakness followed an otherwise robust November when retail sales increased 1.0%, so the December data wasn't as bad as it was made out to be. Nonetheless, a number that was off the mark, combined with a fourth quarter earnings warning from Williams-Sonoma (WSM 20.01, -2.19), exacerbated the negative sentiment that was rooted in large part in Citigroup's woeful report.
In typical fashion, the Treasury market advanced in the face of the stock market's weakness. Gains were registered across the yield curve with the strongest performance at the back end. The benchmark 10-year note jumped 22 ticks and its yield fell to 3.68%.DJ30 -277.04 NASDAQ -60.71 NQ100 -2.8% R2K -2.1% SP400 -2.4% SP500 -35.30 NASDAQ Dec/Adv/Vol 2277/724/2.42 bln NYSE Dec/Adv/Vol 2347/815/1.82 bln
3:30 pm : The major indices hit fresh session lows and then recover a bit. The slight recovery has been broad-based, although there is relative strength within the financial sector (-3.1%). The stock market continues to post a steep loss.
Boeing (BA 77.74, -3.93) is now the main Dow laggard. The stock sharply declined after a Wall Street Journal report indicated the 787 Dreamliner will face further delays.DJ30 -216.23 NASDAQ -48.08 SP500 -27.29 NASDAQ Dec/Adv/Vol 2555/713/1.84 bln NYSE Dec/Adv/Vol 2375/766/1.26 bln
3:00 pm : Losses remain steep as buyers stay on the sidelines. Treasuries continue to make gains. The 10-year note is now up 16 ticks, pushing its yield down to 3.7%.
Boeing (BA 79.49, -2.18) will soon announce additional delays in its 787 Dreamliner jet program, according to The Wall Street Journal. The delays could hurt its ability to deliver as many airplanes as promised, which may cost Boeing millions of dollars in penalty payments.
On the earnings calendar, Intel (INTC 22.73, -0.35) is scheduled to report after the close today. JP Morgan Chase (JPM 39.16, -2.20) and Wells Fargo (WFC 26.90, -1.32) are set to report before the open on Wednesday.DJ30 -242.16 NASDAQ -56.53 SP500 -31.58 NASDAQ Dec/Adv/Vol 2216/744/1.68 bln NYSE Dec/Adv/Vol 2340/797/1.14 bln
2:30 pm : The major indices are trading near their session lows. The S&P and Nasdaq are down more than 2%.
Home furnishing store Williams-Sonoma (WSM 19.92, -2.28) has been clipped in today's trade. The retailer issued a fourth quarter earnings warning, well below the consensus expectation. Its stock is down 46% from its 52-week high, and hit a fresh 52-week low this session.DJ30 -227.94 NASDAQ -57.62 SP500 -30.62 NASDAQ Dec/Adv/Vol 2210/733/1.55 bln NYSE Dec/Adv/Vol 2345/779/1.05 bln
2:00 pm : Buyers are not showing much interest as the stock market hit a minor new low in the last half-hour of trading.
The decline this session is broad-based, with only seven of the 147 S&P 500 industry groups in positive territory. The healthcare facilities group (+3.5%) is posting the largest gain, although the advance is misleading as the group only contains one stock, Tenet Healthcare (THC 4.45, +0.15). Tenet was upgraded to Buy from Hold at Deutsche Bank.
The worst performing group is oil & gas refining & marketing (-6.0%). Oppenheimer downgraded the group to Underperform from Perform.DJ30 -220.87 NASDAQ -57.45 SP500 -30.13 NASDAQ Dec/Adv/Vol 2235/693/1.39 bln NYSE Dec/Adv/Vol 2375/729/956 mln
1:30 pm : The major indices remain range-bound near their session lows. 2008 continues to be a disappointing year for the bulls, with the S&P 500 down more than 5%.
One beaten down group is posting hefty gains today despite fears of a consumer slow-down and continued financial woes. The Amex Airline Index is up 2.8% after the Wall Street Journal reported Delta Air Lines (DAL 15.90, +0.60) is aiming for a swift merger with either Northwest Airlines (NWA 17.15, +1.14) or UAL (UAUA 34.72, +1.79). The 3.3% drop in crude oil prices is also benefiting airlines in today's trade. As a whole, the Dow Jones Transportation Average is modestly outperforming the broader market on a relative basis this session.DJ30 -213.55 DJTA -1.0% NASDAQ -50.19 SP500 -28.72 NASDAQ Dec/Adv/Vol 2148/749/1.28 bln NYSE Dec/Adv/Vol 2359/725/880 mln
1:00 pm : The stock market has been unable to maintain momentum as it trades in a range-bound fashion near its session lows. There has been a bearish bias throughout the session.
Decliners outpace advancers by nearly a 4-to-1 margin on the NYSE and Nasdaq. New 52 week lows outpace new highs by 21-to-1 on the NYSE, and by 34-to-1 on the Nasdaq.
Apple (AAPL 170.07, -8.71) CEO Steve Jobs is discussing Apple's new products during his key note address. Investors have apparently not been impressed, sending the company's shares to their session lows.DJ30 -208.92 NASDAQ -53.00 SP500 -29.33 NASDAQ Dec/Adv/Vol 2285/602/1.08 bln NYSE Dec/Adv/Vol 2424/646/758 mln
12:30 pm : The major indices are off their lows after a broad-based pickup in buying interest. Losses remain steep.
The Dow Jones is modestly outperforming the broader market today, although all 30 of its components are in the red. Citigroup (C 27.14, -1.92) and JPMorgan Chase (JPM 39.65, -1.71) are the main laggards as investors sour on financials (-3.1%). Exxon Mobil (XOM 89.27, -1.56) is also a laggard as crude oil falls 3.1%.DJ30 -201.68 NASDAQ -48.82 SP500 -27.58 NASDAQ Dec/Adv/Vol 2291/570/997 mln NYSE Dec/Adv/Vol 2464/595/687 mln
12:00 pm : It has been a disappointing day of trade up to the midday point, as dismal results from Citigroup (C 26.83, -2.23) fuel concerns that the financial sector has further to fall. The major indices are currently posting steep losses, at their worst levels of the session.
Citi reported a loss of $1.99 per share, which was larger than the consensus expectation that called for a loss of $1.03. The loss was led by an $18.1 billion write-down in subprime exposure and fixed income markets as well as a $4.1 billion increase in credit cost, primarily due to "higher current and estimated losses on consumer loans." On top of first and second mortgages, these increased delinquencies include unsecured personal loans, credit cards, and auto loans, which is raising concerns that the subprime turmoil is spreading outside of the housing market.
In an effort to enhance its capital base, Citi is cutting its dividend by 41%, raising $12.5 billion in convertible preferred securities and offering public investors $2 billion in newly issued convertible securities.
Citi had $37.3 billion net CDO Super Senior exposures and gross Lending & Structuring Exposures at the end of the fourth quarter. Therefore, it is possible that Citi may face further write-downs if market conditions worsen.
On a related note, Merrill Lynch (MER 54.13, -1.84) announced a $6.6 billion cash infusion from several investors. The mandatory convertible preferred stock yields 9%, with a conversion premium of 17% that matures in 33 months.
Meanwhile institutional money manager State Street (STT 79.08, -5.78) missed earnings expectations, while US Bancorp (USB 29.38, -0.34) topped its earnings expectations.
The financial sector (-3.4%) is posting the largest loss this session, with Citi shedding 8%. All ten sectors are trading lower.
On the economic front, December retail spending unexpectedly dropped 0.4%. Economists expected sales to be flat. Excluding autos, sales drooped 0.4%, compared to the expected decline of 0.1%. The report has weighed on the S&P 500 Retailing Index (-2.8%).
December PPI slipped 0.1%, led by an unexpected 1.9% drop in energy prices. Economists expected PPI to increase 0.2%. Core PPI rose 0.2%, which was in-line with expectations. These numbers are good news as it gives the Fed some room to cut rates.
The January NY Empire State Index, a manufacturing survey, was slightly lower than expected at 9.0 (consensus 10.0). It still indicates growth. DJ30 -220.70 NASDAQ -50.54 SP500 -29.87 NASDAQ Dec/Adv/Vol 2262/580/864 mln NYSE Dec/Adv/Vol 2468/561/601 mln
11:30 am : After paring a small portion of this session's losses, the stock market is back on the decline. Treasuries have seen buying interest. The 10-year note is up 13 ticks, dropping its yield to 3.72%.
In currency trading, the yen is up a steep 1.1% against the dollar.
DJ30 -215.66 NASDAQ -48.88 SP500 -28.84 NASDAQ Dec/Adv/Vol 554/2233/727 mln NYSE Dec/Adv/Vol 528/2449/487 mln
11:00 am : Stocks continue to slide, as all sectors extend their losses. The Dow is now down over 200 points. Fitch Ratings said Citigroup's (C 27.21, -1.85) rating outlook will remain negative until profitability is restored, exposure to topical areas is reduced and asset quality stabilizes.
Not all news out of the financial sector was negative this morning. US Bancorp (USB 29.71, -0.61) managed to top expectations, reporting earnings of $0.66 per share-ex items, compared to the consensus estimate of $0.59. The stock is down 2% despite the better than expected results, but it is outperforming its financial peers.DJ30 -203.15 NASDAQ -49.59 SP500 -27.98 NASDAQ Dec/Adv/Vol 2221/526/572 mln NYSE Dec/Adv/Vol 2390/549/379 mln
10:30 am : The major indices are facing selling pressure as the financial sector (-3.1%) extends its losses. Financials are seeing the most selling pressure, although the declines are broad-based. Nine of the ten sectors are posting a loss in excess of 1%.
Citigroup's (C 27.36, -1.70) credit rating was cut to AA- at Standard & Poor's in the wake of Citi's fourth quarter loss, according to Bloomberg.
Oil is also under selling pressure, shedding 2.5% to $91.90.DJ30 -185.51 NASDAQ -44.30 SP500 -25.06 NASDAQ Dec/Adv/Vol 2089/564/383 mln NYSE Dec/Adv/Vol 2297/540/248 mln
10:00 am : The stock market continues to trade with significant losses with financials (-2.0%) leading the way lower.
All 19 of the sector's industry groups are in the red, led by a 2.6% drop in diversified financial services. Citigroup (C 28.23, -0.83) is down 2.9%. Merrill Lynch (MER 54.30, -1.67) also made headlines this morning after announcing a $6.6 billion cash infusion from several investors. The mandatory convertible preferred stock yields 9%, with a conversion premium of 17% that matures in 33 months.
Only the utilities sector (+0.5%) is posting a gain. Utilities are considered a defensive oriented sector.DJ30 -112.43 NASDAQ -16.79 SP500 -29.37 NASDAQ Dec/Adv/Vol 552/1875/166 mln
09:50 am : Stocks open sharply lower as the S&P 500 gives up yesterday's gains.
The stock market was pointing to a lower open, and then Citigroup (C) reported dismal results, which eventually added to the selling pressure. Citi reported a loss of $1.99 per share, well below the consensus estimate that called for a loss of $1.03. The loss was led by a $18.1 billion write-down in subprime exposure and fixed income markets as well as a $4.1 billion increase in credit cost, primarily due to "higher current and estimated losses on consumer loans." In an effort to enhance its capital base, Citi is cutting its dividend by 40%, raising $12.5 billion in convertible preferred securities and offering public investors $2 billion in newly issued convertible securities.
Economic news was mixed. The Dec. Producer Price Index (PPI) slipped 0.1% thanks to an unexpected decline in energy products prices. Core PPI (Ex food & energy), rose 0.2%, which was in-line with expectations. On the negative side, retail spending slipped and the NY Empire State Index was lower than expected.DJ30 -95.87 NASDAQ -25.48 SP500 -15.25
09:16 am : S&P futures vs fair value: -18.4. Nasdaq futures vs fair value: -25.0.
08:58 am : S&P futures vs fair value: -18.5. Nasdaq futures vs fair value: -27.5. It is shaping up to be a poor start to the trading day as stock futures continue to shed points. Crude oil is down 1.1% to $93.17 per barrel.
08:32 am : S&P futures vs fair value: -16.8. Nasdaq futures vs fair value: -24.8. Futures dip a few points on a handful of economic releases. Dec. PPI fell 0.1% month over month (consensus +0.2%), down from November’s reading when PPI rose 3.2%. PPI Ex Food & energy rose 0.2% (consensus +0.2%). Separately, Dec. retail sales fell 0.4%, and without autos sales also fell 0.4%. Economists expected flat retail sales, and for sales to dip 0.1% without autos. The NY empire index came in at 9.0, compared to the expected reading of 10.0. On the earnings front, US Bancorp (USB) reporting fourth quarter earnings of $0.66 per share, topping the consensus estimate by $0.07.
08:00 am : S&P futures vs fair value: -12.7. Nasdaq futures vs fair value: -21.8. Current indications suggest a sharply lower open, with the S&P 500 set to give up most of yesterday’s gains. Citigroup (C) reported poor fourth quarter earnings, missing analysts’ expectations by a large margin. Citi reported a loss of $1.99 per share, larger than the consensus estimate that called for a loss of $1.03. The loss includes an $18.1 bln pre-tax write down on its subprime exposure and a $4.1 billion increase in credit costs for its U.S. consumer division. Citi is cutting its dividend 40% and is raising $12.5 bln in new capital. It stock is currently lower in pre-market trading after trading higher immediately following the release. Meanwhile, Merrill Lynch (MER) has raised $6.6 bln in new capital. December retail sales and PPI are due out at 8:30 ET.
06:21 am : FTSE...6150.10...-65.60...-1.1%. DAX...7681.62...-50.40...-0.7%.
06:21 am : S&P futures vs fair value: -9.3. Nasdaq futures vs fair value: -16.3.
06:21 am : Nikkei...13972.63...-138.16...-1.0%. Hang Seng...25837.78...-630.35...-2.4%.
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