Market Summary ~ Stocks bounce back from steep losses
The Dow, once down 205 points, closes up 12 points, ending a 6-day losing streak. Bank of America sags on news it may need more federal aid; JPMorgan's results are better than expected. Apple dips on Steve Jobs' health problems.
By Charley Blaine and Elizabeth Strott
Stocks looked like they were going to set new lows today but rebounded instead.
At the close, the Dow Jones industrials were up 12 points to 8,212, ending its recent losing streak at six. The blue chips had been down as much as 205 points and briefly dropped below 8,000 for the first time since Nov. 21. Then it recovered and was up as much as 86 points shortly after 3 p.m.
The Standard & Poor's 500 Index was up 1 point to 844. The Nasdaq Composite Index was up 22 points to 1,512.
It wasn't clear what prompted the rebound. The best explanation was that short sellers were booking profits after the market's recent swoon. And technical traders started to buy stocks in the S&P 500 after it had dropped to 818, which was an important support level.
The Dow was weighed down all day by weakness in shares of Bank of America (BAC, news, msgs). The banking giant is negotiating more federal aid to help it digest brokerage giant Merrill Lynch. Shares, which had been down as much as 28% early in the day, were down 18.4% to $8.32 and subtracted 14 points from the Dow.
Chip giant Intel (INTC, news, msgs) was up 1.2% to $13.24. The company reported fourth-quarter earnings of 4 cents a share on revenue of $8.2 billion. A year ago, Intel earned 38 cents a share on revenue of $10.7 billion. The results were in line with analyst estimates; Intel had warned what the results might be.
Shares of US Airways (LCC, news, msgs) were up 2.2% to $7.55 after a passenger plane bound for Charlotte, N.C., carrying 152 people ditched into the Hudson River after taking off from New York's LaGuardia Airport. There were reports that the plane had hit a flock of geese.
News reports said all passengers and crew safely got off the plane. The stock rose an additional 3.3% to $7.80 in after-hours trading.
Crude oil in New York dropped to as low as $33.20 but rebounded to $35.23, off 5.5% from Wednesday, by 2 p.m. That helped energy shares move higher. Exxon Mobil (XOM, news, msgs) was up 2.1% to $76.66. Chevron (CVX, news, msgs) rose 1.6% to $70.77.
Apple (AAPL, news, msgs) shares were off 2.3% to $83.38 after CEO Steve Jobs' decision to take a medical leave of absence to deal with medical problems.
Economic worries drove shares down in Asia today. The Nikkei 225 Index ($JP:N225) fell 4.9%, the MSCI Asia Pacific Index was up 1.2%, and Hong Kong's Hang Seng Index ($HSIX) lost 3.4%.
The European Central Bank lowered its benchmark rate by half a percentage point to 2% this morning. Investors in Europe seemed unimpressed, as major indices were little changed. The Dow Jones Stoxx 600 Index lost 0.2%, the FTSE Eurofirst Index was down 0.1%, and London's FTSE 100 Index ($GB:UKX) fell 1.4%. Germany's Xetra Dax Index ($DE:DAX) fell 1.9%.
Energy prices -- New York close Wed. Tues. Chg. Month chg. YTD chg. Crude oil (NYMEX) (per barrel) $35.40 $37.28 -$1.88 -20.63% -20.63% Heating oil (per gallon) $1.4871 $1.4631 $0.0240 5.79% 5.79% Natural gas (per million BTU) $4.8430 $4.9700 -$0.1270 -13.86% -13.86% Unleaded gasoline (per gallon) $1.1742 $1.1677 $0.0065 16.46% 16.46%
Merrill's big losses are dragging on B of A Bank of America, which has already received $25 billion from the Treasury Department's Troubled Assets Relief Program, needs the assistance to deal with an ugly quarterly report from Merrill, The Wall Street Journal reported. B of A closed its purchase of Merrill on Jan. 1.
The Amex Securities Broker/Dealer Index ($XBD.X) had been down as much as 4% before the loss was trimmed to 0.6% at 72. The KBW Bank Index ($BKX), which had been down nearly 10%, was off 7.6% to 33.
Analysts were skeptical about Bank of America's moves.
"Bank of America has all kinds of problems with its acquisitions," Gary Townsend, president of Hill-Townsend Capital, told Bloomberg News. "They've been so acquisitive, they find themselves with very little in tangible equity."
* Top Stocks blog: Billions more for Bank of America?
Even with government help, Bank of America's capital levels are so low compared with its competitors' that it will need to cut its dividend and or raise equity capital in the coming months, Standard & Poor's analyst Stuart Plesser told MarketWatch.com.
The bank's dividend is 32 cents a quarter and is now yielding 12.2%. The company reports fourth-quarter earnings on Tuesday. JPMorgan beats the Street JPMorgan Chase (JPM, news, msgs) managed to eke out a profit in the fourth quarter, surprising Wall Street. While the market was getting slammed, JPMorgan shares fell 6.1% to $24.34.
The bank's profit fell 76% to $702 million, or 7 cents per share. A year earlier, JPMorgan earned $2.97 billion, or 86 cents per share.
Analysts had expected a break-even quarter.
In a statement, CEO Jamie Dimon called the results "very disappointing," adding that further economic deterioration would hurt the company's businesses and financial position.
The company said revenue fell 1% to $17.2 billion, short of the $18.8 billion the Street had been expecting.
Analysts expect that other financials may have worse news as they report over the next few weeks.
Citigroup (C, news, msgs) is expected to report a big loss -- perhaps as much as $10 billion -- on Friday. The stock fell 15.5% to $3.83. Apple CEO to take leave The big question about Apple was how much it would miss Steve Jobs during his medical leave. After Wednesday's close, Jobs said Chief Operating Officer Tim Cook would take over day-to-day operations until he returns at the end of June.Analysts worried about the impact of the news.
"The uniqueness that Steve has brought to the company, and the fact that there really is no successor" is worrisome, analyst Mike Abramsky of RBC Capital Markets, told CNBC this morning. A post-Jobs Apple "will impact the level of unique innovation that the company has received a premium for, and therefore impact valuation."
In an e-mail to employees, Jobs called the curiosity about his health "a distraction" for himself, his family and the company. He previously tried to quell worries about his gaunt figure, though his weight loss has fueled speculation that his pancreatic cancer has returned.
* Top Stocks blog: Apple shares show resilience
Microsoft to cut jobs? Microsoft (MSFT, news, msgs) is considering a move to eliminate jobs across all of its divisions, a rare move for the company, The Wall Street Journal reported. (Microsoft is the publisher of MSN Money.)
But it's likely that the cuts, if they do take place, won't amount to the 15,000 number that has been circulating recently, the report said. Deep cuts are "not our company culture," CEO Steve Ballmer told the Journal in an interview last week.
Microsoft employs more than 91,000. Microsoft is scheduled to release its second-quarter earnings after the close on Jan. 22.In related news, Yahoo's (YHOO, news, msgs) newly appointed CEO Carol Bartz reportedly said late Wednesday that her "gut" told her that she wouldn't sell the company's search business.
And investors quickly started selling the stock today. Shares were down 9.2% to $11.27 this afternoon.
"We view Ms. Bartz's appointment as clearing of the last hurdle before Microsoft could submit a possible search deal proposal to Yahoo," wrote Collins Stewart analyst Sandeep Aggarwal in a note on Wednesday. Microsoft walked away from a deal to buy Yahoo for $47.5 billion in May. Since then, there has been talk about a possible search deal between the two companies.
Microsoft was up 0.8% to $19.24.
* Top stocks blog: Google grows up in a tough economy
Mortgage rate falls below 5% There's good news for would-be homeowners and refinancers: The benchmark 30-year mortgage fell below 5% for the first time ever, Freddie Mac (FRE, news, msgs) said today. The rate fell to 4.96% for the week ending today, down from 5.01% the previous week. Freddie Mac started tracking the weekly rate moves in 1971.
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But the housing mess slammed homeowners last year. U.S. foreclosure filings jumped by more than 81% in 2008, according to a report released today by RealtyTrac.
Foreclosures are up 225% compared with 2006.
More than 3.1 million families lost their homes because they couldn't pay the mortgages; about 1 in 54 households received a foreclosure notice in 2008.
December was the worst month last year, with foreclosure filings up 41% over the previous year. More weak economic data Investors have several reports to sort through this morning to determine just how bad the economy is right now.
First-time claims for unemployment benefits for the past week rose by 54,000 to 524,000, and the four-week moving average of new claims fell by 8,000 to 518,500. Still, the four-week moving average is 55% higher than a year ago.
The Producer Price Index for December fell for the fifth straight month, down 1.9%, in line with expectations. Energy prices, which contributed to the overall decline, plunged 9.3% last month. The November PPI fell 2.2%.
The core PPI, which excludes food and energy prices, rose by 0.2%.
The economic index of the New York Fed, which gives a picture of the regional economy, came in at a reading of negative 22.2 in January, a slight improvement from the December reading of negative 27.9.
Still, negative readings indicate contraction in the regional economy.
The Philadelphia Federal Reserve's manufacturing index also showed continued contraction. The index came in at minus 24.3 for January. December's reading was revised lower, to negative 36.1.
Anything less than zero on that index shows that the economy is shrinking.
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