Wall Street Breakfast: Must-Know News 17 comments
-
Font Size:
-
Print
- TweetThis
- Bear market bounce. In a stunning turnaround, markets recovered from an early drop on Thursday and rallied to a strong close as bargain hunters got back into the market. The Dow Jones Industrial Average, which fell below 8,000 at its intraday low, gained 552.59 points and closed up 6.7% to 8,835.25. The S&P 500 and Nasdaq, both of which touched five-year lows during the trading session, closed up 6.9% and 6.5% respectively. Many investors hope yesterday's rally will prove late-October's stock market lows to be the trough of the bear market.
- Euro area enters recession. Euro area GPD fell by 0.2% in Q3, in line with expectations, sending the eurozone into recession. Germany, Italy and the UK led the way down with 0.5% contractions. France (+0.1%), Czech Republic (+1%) and Slovakia (+1.5%) were gainers. (.pdf) Euro area inflation fell to 3.2% in October from 3.6% in September. Germany (2.5%) was among the lowest, while Latvia (13.7%) led the pack. (.pdf) Some euro area policy makers fear the region's strict budget rules will prevent governments from responding adequately to the downturn, prolonging the effects of the financial crisis on the broader economy. "This is a severe constraint which may cause the real effects of the financial crisis to persist much longer than in the U.S., or for that matter the U.K.," Greek Finance Minister George Alogoskoufis said Thursday.
- Limited expectations from G-20 summit. G-20 leaders head to Washington today for a much-heralded summit aimed at finding solutions to the financial crisis, but few expect the weekend to produce any new initiatives. European leaders, who blame flawed U.S. regulation for the current financial maelstrom, will push for strong regulatory reforms, and U.K.'s Brown is calling for globally coordinated fiscal stimulus efforts. President Bush, who favors only modest reforms, made his position very clear Thursday night, telling an audience "the crisis was not a failure of the free market system... [The greater threat is] not too little government involvement, it is too much government involvement in the market." If anything, the summit may show how much the crisis is reshaping the economic map as the financial wherewithal of China and Saudi Arabia put them in the spotlight.
- OPEC fights falling oil. OPEC will meet later this month in an attempt to put a floor beneath falling oil prices, and another substantial production cut is expected. Near-term demand for oil has been sharply curbed by the global slowdown, pushing oil prices to a 22-month low, and the International Energy Agency slashed its global oil demand forecasts just yesterday to 0.1% growth this year, down from +1.1% in 2007. A growing number of traders are betting OPEC will be unsuccessful in controlling oil's fall and expect to see prices below $30/barrel. Crude oil closed up 3.7% to $58.24 on Thursday in anticipation of an OPEC cut.
- Return to growth in 2009? The U.S. economy is in the midst of the worst part of the downturn, but growth may return by the second half of 2009, economists polled by the WSJ say. On average, economists expect a 3%/year decline in GDP growth in Q4, on the heels of Q3's 0.3% drop. Q1 2009 will bring another negative reading, they say, followed by flat growth in Q2, and reaching 2.1% growth by Q4. "By the third quarter of next year, a recovery will be under way," said John Lonski of Moody's Investors Service. Others were more cautious: "We're not only in an economic downturn, but a serious banking crisis. The idea that you can just have a couple of quarters of negative growth and then we're off to the races is just too optimistic," Paul Ashworth of Capital Economics said.
- GM breakdown could wreak havoc. Contrary to the opinion of hedge-fund manager Bill Ackman and former GE CEO Jack Welch, Wilbur Ross says a GM (GM) bankruptcy filing would be a disaster, toppling its peers and driving suppliers out of business. "It doesn't add up that they are letting GE (GE) and American Express (AXP) to become banks to get aid, but they won't save the car industry." Meanwhile the European Commission said it will take action at the World Trade Organistion if it determines that the U.S.'s $25B auto industry aid package is 'illegal,' not to speak of Pelosi's proposed bailout package. European new passenger-car registrations fell 14.5% in October to 1.13M, the sixth straight monthly decrease, ACEA said. GM (GM) was the worst performer, down 25%, as consumers continue to delay big-ticket purchases.
- Banks battle on deposit rates. As U.S. banks try to shore up their funding sources by securing deposits, an 'unprecedented' level of competition has created a national rate war. Across the board, from giant Citigroup (C) to tiny S&T Bancorp (STBA), banks are sharply increasing interest rates on deposits. The bump up is good news for investors seeking higher returns, but puts banks in a lose-lose situation. Institutions that don't raise rates will find it harder to attract customers. Those who do raise rates will cut into their own profit margins at a time when many are already struggling with rising defaults and a weak economy. As a result, banks face a hit to their earnings and a slowdown in the recapitalization process. Since May, the average rate on a one-year CD has risen to 2.6% from 2%. Certain regions are seeing 6-month CDs as high as 4.0-4.5%.
- Boeing faces more union problems. Boeing (BA) may be facing another strike as tensions escalate in talks with union leaders representing around 21,000 of the company's white-collar engineers and technical workers. Boeing has been working with the Society of Professional Engineering Employees in Aerospace, or SPEEA, since late October to finalize a work agreement but progress has been far slower than either side expected. SPEEA officials say a 'great deal of progress' has been made but accuse Boeing of stalling and decided to seek strike authorization 'after two days of non-productive and discouraging dialog.' Boeing officials said talks will resume today with the help of a federal mediator who has been present throughout the negotiations.
- Job cuts, I. Citigroup (C) is launching another major round of layoffs as it struggles to return to profitability, and will also raise credit card interest rates for millions of customers. Sources say the company, which has posted over $20B in net losses over the past year, will fire at least 10,000 employees in its investment bank and other divisions worldwide. According to people familiar with the matter, officials have been told to slash their employee compensation budget by at least 25%, and can minimize the number of jobs lost by firing higher-paid traders and bankers. In a sign of confidence in the company, CEO Vikram Pandit bought 750,000 shares of the company's stock yesterday, which is trading under $10.
- Job cuts, II. Royal Bank of Scotland (RBS) will cut 3,000 jobs worldwide in the coming weeks, according to a BBC report. Earlier this month, RBS warned it faces additional write-downs and rising bad debts this quarter, and could potentially see its first ever full-year loss this year, as the global financial crisis grinds on. An RBS spokeswoman refused to confirm or deny the cuts. Shares +4.4% in London trading.
- International Trade. September's trade balance of -$56.5B was in-line with estimates. Exports totalled $155.4B, down $9.9B from August. Imports were $211.9B, down $12.5B.
- Jobless claims jump. Initial jobless claims of 516,000 were substantially worse than the 480,000 economists had expected. Last week's numbers were revised to 484,000 from 481,000. The 4-week average of 491,000 was up 13,250. "The labor market is only reinforcing a very pessimistic picture," economist Linda Barrington said. "When you start to see the downward pressure on wages as well as the credit crunch, that's only going to make consumers much more nervous."
Earnings: Friday Before Open
- Abercrombie & Fitch (ANF): Q3 EPS of $0.72 beats by $0.01. Revenue of $896M (-1.9%) vs. $909M. Sees Q4 EPS of $1.00-1.05 vs. $1.57 and comparable-store sales down 26%. (PR)
- Hewitt Associates (HEW): FQ4 EPS of $0.50 in-line. Revenue of $807M (+7.5%) vs. $792M. (PR)
- Telefonica (TEF): Q3 net profit of €2B vs. consensus of €2.1B. Ebitda of €5.9B vs. €5.87B. Revenue of €14.99B vs. €14.84B. Shares +3.3% in Madrid. (.pdf)
Earnings: Thursday After Close
- Kohl's (KSS): Q3 EPS of $0.52 beats by $0.01. Revenue of $3.8B (-0.6%) in-line. Sees Q4 EPS of $0.90-1.05 vs. $1.22. Shares -4.1%. (PR)
- Nordstrom (JWN): Q3 EPS of $0.30 misses by $0.01. Revenue of $1.81B (-84%) in-line. Sees Q4 EPS of $0.30-0.45 vs. $0.70. Shares -5.2%. (PR)
Today's Markets
- Asia markets closed mostly up. Nikkei +2.7% to 8,462. Hang Seng +2.4% to 13,543. Shanghai +3.0% to 1,986. BSE -1.6% to 9,385.
- In Europe at midday, London +3.9%. Paris +2.5%. Frankfurt +3.7%.
- U.S. stock futures are lower ahead of today's retail data. Dow -0.9%. S&P -0.9%. Nasdaq -0.4%. Crude -0.8% to $57.75. Gold +3.5% to $729.40.
Friday's Economic Calendar
- 8:30 Bernanke speaks about central bank policy coordination
8:30 Import/Export Prices
8:30 Retail Sales
10:00 Business Inventories
10:00 University of Michigan Consumer Sentiment
10:35 EIA Natural Gas - Notable earnings before Friday's open: A, ANF, JCP
- Notable earnings after Friday's close: GOL
Seeking Alpha editor Eli Hoffmann contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 17 comments:
it will be as effective as UN resolutions condemning Israel's occupation or of Senate resolutions honoring mother's day
Who control Congress ?
Bush has no way of getting bailout approved
without the Congress OK first. Don't be naive, please.
Right on.
Obama will save us with change.....
They stay in power by offering the less intelligent and informed a range of totally unrelated, divisive issues that have little to do with governance and encourage us to "take sides" against one another while they go merrily on their way, selling off the nation to their corporate masters.
The Fed and the federal government have now thrown approximately $3 - 5 Trillion at the mess and nothing has improved on main street. It has just gotten worse. And Wall Street's $71 Billion in end-of-year bonuses is already being processed.
Folks, PLEASE don't get sucked into the partisan finger-pointing program. The only us vs. them that counts is the American people vs. the two ruling parties and the corporate interests that control them.
Your "bear market bounce" comment is very correct. We will rally (rather than bounce) when investors start to regain confidence in corporate balance sheets and anticipate that the bottom of the recession is within six months. Neither is close at this time. There is strong support in the DJIA 7100 - 7300 area (7286.77 bottom on 10/9/2008 and 7161.15 bottom on 10/27/1997). If we go below 7000 on the Dow, there is no quide to where the bottom will be, because the next chart support is at 2365.1 (bottom of 10/11/1990). Collapse of markets to 1990 lows can only happen in the event of a depression that would not be called "The Great Depression", but would be "The Greatest Depression".
I think that fiscal and monetary policy will succeed in preventing "The Greatest Depression". Thus, nominal DJIA in the 2000's is very unlikely. However, if we ultimately inflate our way out of the trough, how low will the Dow go in inflation adjusted terms?
Bailing them out is a must do situation. At least there is something to show for it. Bailing out the finance firms is throwing good money away. All it is doing is temporarily staving off the coming "Greater Depression."
They have to pay back. Banks will turn around
and do well.
The Big 3 is just a Big Black Hole.
It will Suck the whole country to no return.