The markets opened lower because of Alcoa’s not-so-hot earnings report after yesterday’s close and we remained lower all day. Advanced Micro Devices (AMD) lowered its guidance below analysts’ expectations, February pending home sales declined 1.9% (the market was only looking for a 1.0% decline), and the FOMC minutes showed the Fed expects the economy to contract the first half of 2008.
Alcoa reported a 54% drop in profit compared to the same period last year and missed analysts’ EPS estimates by 4 cents. AMD fell 5% as the company’s Q1 revenue did not meet expectations and they announced plans to cut 10% of their work force” (Source: Bloomberg.com). The chip names, including Intel, were down big off the AMD news.
Yesterday, there was talk Washington Mutual was lining up $5B worth of financing from a private equity firm, and today a $7B deal was announced. WaMu announced it expects a $1.1B loss this quarter and plans to cut 3,000 jobs. The company also cut its dividend to 1 cent from 15 cents. Shares were down 10% on the day (Source: CNBC.com).
In the FOMC minutes, the Fed officials expect “a prolonged and severe economic downturn…Many participants thought some contraction in economic activity in the first half of 2008 appeared likely” (Source: Bloomberg.com). This news caused a small sell-off, but nothing too big. Everyone is pretty much expecting no growth for the first half of the year, so this news was pretty much already baked-in to stock prices.
The International Monetary Fund (IMF) made a statement today saying “total losses, including the securities tied to commercial real estate and loans to consumers and companies, may reach $945B…The current turmoil is more than simply a liquidity event, reflecting deep-seated balance-sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper and more protracted” (Source: Bloomberg.com). This news also weighed on many of the financials names. So far, $232B of assets have been written-down to due losses stemming from mortgage-backed securities and bad loans.
- Goldman Sachs said to sell Fannie Mae and Freddie Mac
- Lehman Brothers said to buy Fannie Mae and Freddie Mac
- Apple was downgraded
- Proctor & Gamble raised its dividend, again
- Dell is in talks with
DJIA 12,576.44 -35.99 (-0.29%)
Nasdaq 2,348.76 -16.07 (-0.68%)
S&P 500 1,365.54 -7.00 (-0.51%)
NYSE Volume 3,581,998,000
2-Yr Bond 1.87% -0.08
10-Yr Bond 3.58% +0.01
30-Yr Bond 4.37% +0.01
Crude Oil (May) 108.50 -0.59
Nat Gas (May) 9.697 -0.094
Gold (June) 918.00 -8.80
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