From Briefing.com: 4:20 pm : Tuesday marked another ugly session for stock investors as a weak outlook from Bank of America (BAC 23.77, -8.45) and cautious comments from Fed Chairman Ben Bernanke overshadowed a Federal Reserve plan to improve liquidity in short-term corporate borrowing.
Stocks rose 1.5% at the open on the Fed's plan to shore up short-term corporate borrowing, but overall economic concerns quickly sank stocks. In the end, the S&P 500 plunged 5.7%, settling at its worst levels, to a new five-year low in broad-based weakness. All ten economic sectors posted a loss, with notable declines in financials (-11.5%), tech (-6.1%) and consumer discretionary (-5.7%).
Fed Chairman Bernanke gave the market little to cheer about in a speech at the National Association for Business Economics annual meeting. He said that economic activity is likely to be subdued through this year and into 2009 and increases in financial market turmoil may extend the period of weak economic performance.
He did leave the door open for a FOMC rate cut on Oct. 29, although fed funds futures had already priced in a cut of at least 50 basis points.
Bank of America, the second largest U.S. financial firm by market cap after JPMorgan Chase (JPM 39.86, -4.14), fell 26% after preannouncing disappointing third quarter earnings and giving a dour outlook regarding the state of the economy. In an attempt to shore up capital in the face of current economic conditions, BofA is cutting its quarterly dividend by 50% to $0.32 and plans to raise $10 billion in a common stock offering.
CNBC reported the common stock offering was likely to be priced at less than $25 per share. The notion that BofA would have to sell stock at a more than 22% discount added to overall investor unease, especially in the financial sector.
The commercial paper market, which many U.S. companies rely on for short-term borrowing, has been under pressure as investors flocked to the safety of Treasuries and away from money market funds. As a result, many companies found it difficult to issue commercial paper, or had to pay a high cost.
In an attempt to bring down the cost of commercial paper costs and improve liquidity, the Fed announced this morning that it created a Commercial Paper Funding Facility, which will provide a liquidity backstop for the strained commercial paper market. The Fed will purchase three-month unsecured and asset-backed commercial paper from eligible issuers. The Fed said it has no limit to how much commercial paper it can buy.
Separately, commodities (+1.0%) staged a modest recovery effort from Monday's 5.0% drop, aided by a 0.8% decline in the dollar. Crude prices rose 2.3% to $89.80 per barrel.
The S&P 500's loss marked its fifth consecutive decline -- its longest losing streak since January. The index has fallen 14.5% over the past five sessions and is down 32.2% this year.DJ30 -508.39 NASDAQ -108.08 NQ100 -5.8% R2K -6.2% SP400 -5.4% SP500 -60.66 NASDAQ Dec/Adv/Vol 2370/434/2.82 bln NYSE Dec/Adv/Vol 2815/386/1.73 bln
4:20PM Micrel Board increases amount authorized under share repurchase plan (MCRL) 7.06 -0.59 : Co reported that its Board of Directors has approved an increase to the amount authorized for the repurchase of the Company's common stock. The new authorization supersedes the Company's previously approved stock repurchase authorization and increases the amount authorized for share repurchase for calendar year 2008 to $60 million, from the previously authorized amount of $50 million.
8:48AM Corning to reaffirm Q3 EPS of $0.43-0.45 ($0.44 First Call Consensus) at Conference (GLW) 13.95 : The co's Vice Chairman and Chief Financial Officer James Flaws will provide an update on the co's Display Technologies segment and Corning's outlook for the 2009 display glass market during the Maxim Group Growth Conference. Third-quarter glass volume shipments for the company's wholly owned business and Samsung Corning Precision Glass grew 2% sequentially, which was lower than expected. Flaws will explain that there was a more pronounced shift in glass demand to Corning's equity venture. "SCP's volume was up 12% in the third quarter, while volume at Corning's wholly owned business was down 10%, which was lower than expected," he will note. Despite the lower than expected volume at the company's wholly owned business, Corning still anticipates that its third-quarter earnings per share will be in line with the September revised guidance of $0.43 to $0.45, before special items. The company believes that inventory levels in the supply chain have declined, noting that Taiwanese panel makers reported improved panel shipments for August, while panel price declines have moderated. Flaws will note that Corning's glass pricing came in as expected in the third quarter and that the company currently intends to continue its pricing strategy in the fourth quarter... "Given this economic uncertainty, we are prepared to adjust our production capacity to match end market demand," Flaws will tell attendees.
8:01AM Rambus: US Supreme Court denies Samsung appeal in Rambus case (RMBS) 9.63 : The co announces that the United States Supreme Court has denied Samsung's request for review in the case stemming from the Federal District Court for the Eastern District of Virginia. In previous rulings, EDVA Judge Robert E. Payne held that the case with Samsung was "exceptional" and attempted to make certain factual findings against Rambus relating to alleged destruction of documents. In April, the Court of Appeals for the Federal Circuit issued a ruling vacating the order instructing that Samsung's claims against Rambus be dismissed. With today's Supreme Court order, all appeals have been exhausted and the matter is now closed.
6:10AM AMD and Advanced Technology Investment Co of Abu Dhabi to create semiconductor manufacturing co (AMD) 4.23 : Co and the Advanced Technology Investment Co of Abu Dhabi confirm the creation of a U.S.-headquartered, semiconductor manufacturing co to address foundry production capabilities. The new co will temporarily be called "The Foundry Company". At the same time, the Mubadala Development will increase its current investment in AMD to 19.3% on a fully diluted basis. AMD will contribute to The Foundry Co its manufacturing facilities, including two fabrication facilities in Dresden, Germany, as well as related assets and intellectual property rights. ATIC will invest $2.1 bln to purchase its stake in The Foundry Co, of which it will invest $1.4 bln directly in the new entity and the remainder will be paid to AMD to purchase additional shares in The Foundry Co. Foundry Co will also assume approx $1.2 bln of AMD's existing debt.
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