Stocks opened lower on Friday after a Federal Reserve official said a recession might not be avoidable and fresh concerns arose about the outlook for bond insurers.
The Dow Jones industrial average (DJI:^DJI - News) was down 39.10 points, or 0.32 percent, at 12,207.90. The Standard & Poor's 500 Index (^SPX - News) was down 5.16 points, or 0.39 percent, at 1,331.75. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 3.29 points, or 0.14 percent, at 2,289.74.
This Is a Report By Tarek El Hewehi.
Showing posts with label Nasdaq index. Show all posts
Showing posts with label Nasdaq index. Show all posts
Friday, February 8, 2008
Monday, February 4, 2008
The Microsoft-Yahoo deal's bad numbers
Most of the analysis of Microsoft's $45 billion hostile offer for Yahoo has focused on technology and the role Yahoo could play in the Microsoft-Google wars. Today, though, let's look at what almost everyone has overlooked: the numbers. More specifically, we'll look at the way that one of Wall Street's biggest hitters, Joe Rosenberg, looks at the proposed deal.
Rosenberg, chief investment strategist at Loews Corp. (LTR), the giant conglomerate, is one of the most influential voices on Wall Street. In fact, his criticism of Microsoft in a Barron's interview two years ago, in which he criticized the firm's use of capital and suggested a $50 billion stock buyback, was a big factor in sparking the $40 billion buyback program that Microsoft (MSFT) launched in the fall of 2006.
So Rosenberg's opinion matters. And he thinks Microsoft's offer for Yahoo (YHOO) is nuts. "This is like a person who's completely lost his mind," Rosenberg told me in an interview. "It's absurd. They're not going to earn anything like a reasonable rate of return on their investment in Yahoo. It just doesn't make sense."
"This deal would do more harm to Microsoft shareholders than any of its competitors can do to it," Rosenberg said. "The company has lost sight of its principal focus, which is to produce value for shareholders."
“This deal would do more harm to Microsoft shareholders than any of its competitors can do to it.” Joe Rosenberg
Before we proceed, two disclosures. First, Rosenberg told me that Loews owns Microsoft stock. Second, Loews is one of my biggest individual holdings, which means I have money riding on Rosenberg's investment acumen.
Back to the main event. Until the Yahoo bid surfaced, Rosenberg was predicting that Microsoft would earn almost $2 a share in its current fiscal year, rising steadily to more than $4 a share in four years. (A major element in his thinking: Microsoft's sales to "developing markets" such as China, India and Eastern Europe will soar.) So at $32 - its price before news of the Yahoo offer drove its stock down sharply Friday - Microsoft looked cheap to Rosenberg. Now, he fears, Microsoft may be making the same mistake as other companies that did large, failed high-tech takeovers.
No, he's not talking about the 2000 deal that combined America Online with my employer Time Warner (TWX), which many people have cited as a cautionary tale for Microsoft-Yahoo.
Wrongly, in Rosenberg's opinion (and mine). How so? Because America Online's purchase of Time Warner turned out great for AOL shareholders, whose stock fell far less than other Internet issues when the bubble popped. The deal was disastrous for the sellers - the old Time Warner's stockholders - because the value of their shares was eviscerated.
The real parallels to Microsoft-Yahoo, says Rosenberg, citing his 47 years on Wall Street, are two largely-forgotten disasters: Xerox' $1 billion purchase of Scientific Data Systems in 1969 and AT&T's (T) $7.5 billion purchase of NCR in 1991. In both cases, the acquiring company paid top dollar for firms whose products and technology rapidly became obsolete.
Rosenberg doesn't pretend to be a tech maven, but he says it's clear that the market - which sent Yahoo's stock down 45% from October through last Thursday - is saying something negative about Yahoo's businesses and prospects. Microsoft, Rosenberg says, would be well-advised to listen.
Should Microsoft buy Yahoo, Rosenberg says, he, like other folks looking at this deal, expects Microsoft and Google to engage in price wars in the search and advertising businesses. But Rosenberg carries that thought one level further. Such a price war would hurt Yahoo's already-anemic profit margins, Rosenberg says, making a Microsoft purchase even more problematic.
Microsoft's future free cash flow per share would be substantially higher if it buys back its own shares, he said, rather than buying Yahoo by issuing about $23 billion of new stock and spending a net $15 billion or so in cash. (That cash number takes into account the approximately $8 billion of cash and marketable securities that Yahoo owns.)
Rosenberg says he's not trying to hurt Microsoft, he's trying to help. "They don't realize that by criticizing this deal, I'm trying to do them a favor," he says. And, of course, to do Loews a favor, too
Rosenberg, chief investment strategist at Loews Corp. (LTR), the giant conglomerate, is one of the most influential voices on Wall Street. In fact, his criticism of Microsoft in a Barron's interview two years ago, in which he criticized the firm's use of capital and suggested a $50 billion stock buyback, was a big factor in sparking the $40 billion buyback program that Microsoft (MSFT) launched in the fall of 2006.
So Rosenberg's opinion matters. And he thinks Microsoft's offer for Yahoo (YHOO) is nuts. "This is like a person who's completely lost his mind," Rosenberg told me in an interview. "It's absurd. They're not going to earn anything like a reasonable rate of return on their investment in Yahoo. It just doesn't make sense."
"This deal would do more harm to Microsoft shareholders than any of its competitors can do to it," Rosenberg said. "The company has lost sight of its principal focus, which is to produce value for shareholders."
“This deal would do more harm to Microsoft shareholders than any of its competitors can do to it.” Joe Rosenberg
Before we proceed, two disclosures. First, Rosenberg told me that Loews owns Microsoft stock. Second, Loews is one of my biggest individual holdings, which means I have money riding on Rosenberg's investment acumen.
Back to the main event. Until the Yahoo bid surfaced, Rosenberg was predicting that Microsoft would earn almost $2 a share in its current fiscal year, rising steadily to more than $4 a share in four years. (A major element in his thinking: Microsoft's sales to "developing markets" such as China, India and Eastern Europe will soar.) So at $32 - its price before news of the Yahoo offer drove its stock down sharply Friday - Microsoft looked cheap to Rosenberg. Now, he fears, Microsoft may be making the same mistake as other companies that did large, failed high-tech takeovers.
No, he's not talking about the 2000 deal that combined America Online with my employer Time Warner (TWX), which many people have cited as a cautionary tale for Microsoft-Yahoo.
Wrongly, in Rosenberg's opinion (and mine). How so? Because America Online's purchase of Time Warner turned out great for AOL shareholders, whose stock fell far less than other Internet issues when the bubble popped. The deal was disastrous for the sellers - the old Time Warner's stockholders - because the value of their shares was eviscerated.
The real parallels to Microsoft-Yahoo, says Rosenberg, citing his 47 years on Wall Street, are two largely-forgotten disasters: Xerox' $1 billion purchase of Scientific Data Systems in 1969 and AT&T's (T) $7.5 billion purchase of NCR in 1991. In both cases, the acquiring company paid top dollar for firms whose products and technology rapidly became obsolete.
Rosenberg doesn't pretend to be a tech maven, but he says it's clear that the market - which sent Yahoo's stock down 45% from October through last Thursday - is saying something negative about Yahoo's businesses and prospects. Microsoft, Rosenberg says, would be well-advised to listen.
Should Microsoft buy Yahoo, Rosenberg says, he, like other folks looking at this deal, expects Microsoft and Google to engage in price wars in the search and advertising businesses. But Rosenberg carries that thought one level further. Such a price war would hurt Yahoo's already-anemic profit margins, Rosenberg says, making a Microsoft purchase even more problematic.
Microsoft's future free cash flow per share would be substantially higher if it buys back its own shares, he said, rather than buying Yahoo by issuing about $23 billion of new stock and spending a net $15 billion or so in cash. (That cash number takes into account the approximately $8 billion of cash and marketable securities that Yahoo owns.)
Rosenberg says he's not trying to hurt Microsoft, he's trying to help. "They don't realize that by criticizing this deal, I'm trying to do them a favor," he says. And, of course, to do Loews a favor, too
Monday, January 28, 2008
Latest Updates
11:00 am : Stocks climb to their best levels of the session in a broad-based move. All ten sectors are in positive territory.
Financials (+1.6%) is leading the rebound with all 19 of its industry groups in the green. Industrial REITs is posting a 2.3% gain and regional banks is up 1.8%.
Even the energy sector (+1.0%) has rebounded into the green, despite a 1.4% slide in crude oil prices.DJ30 +53.36 NASDAQ +6.68 SP500 +7.61 NASDAQ Dec/Adv/Vol 1446/1271/508 mln NYSE Dec/Adv/Vol 1476/1445/322 mln
10:30 am : Stocks recover after falling to fresh session lows on the weak new home sales data. Utilities are leading the recovery effort with a gain of 1.3%. Meanwhile, telecom (-0.5%) pares most of its losses.
With regard to the new home sales data, the December seasonally adjusted annual rate of 604,000 is 4.7% less than last month's reading and is 40.7% less than last year's number. The median sales price of a new house in December was $219,200. This equates to a 10.9% price drop year-over-year, the largest decline in nearly four decades. At the current sales rate, there is a 9.6 month supply of new homes. In 2007, there were an estimated 774,000 new homes sold, down 26.4% from 2006.
This number of sales is very low, and the large supply of inventory should keep pressure on prices for some time. Homebuilders are down 2.7% this session.DJ30 +6.91 NASDAQ -2.28 SP500 +2.60 NASDAQ Dec/Adv/Vol 1632/1008/342 mln NYSE Dec/Adv/Vol 1763/1100/205 mln
10:05 am : Just hitting the wires, the U.S. Dept. of Commerce said December new home sales fell to a seasonally adjusted annual rate of 604K. Economists were expecting sales to hold at 647K. November's reading was revised downward to 634K. Stocks had climbed back to the unchanged mark, but fell back into the red after the disappointing data.
Three of the ten sectors are trending higher. Utilities is leading the way with a 0.6% advance. Telecom is the main laggard with a 1.7% drop, as it continues its poor showing this year.DJ30 -74.87 NASDAQ -13.77 SP500 -6.56 NASDAQ Dec/Adv/Vol 1624/790/120 mln
09:40 am : The stock market dips into the red after opening on a slightly higher note. Foreign markets saw another day of steep declined on fears of U.S. economic slowdown. Japan's Nikkei fell 4.0% and Hong Kong's Hang Seng fell 4.3%. Goldman Sachs said in a report dated Jan. 25 that Japan is either already in a recession or is very likely to do so in the first quarter, according to SCMP.com.
Earnings news leaned bullish. McDonald's (MCD), Corning (GLW), Sysco (SYY) and Halliburton (HAL) topped earnings expectations. Verizon (VZ) came in-line with expectations. McDonald's is trading lower though, as investors were disappointed with its flat December U.S. same-store sales.DJ30 -53.57 NASDAQ -16.76 SP500 -4.97
09:13 am : S&P futures vs fair value: -1.3. Nasdaq futures vs fair value: -2.0.
08:59 am : S&P futures vs fair value: -2.2. Nasdaq futures vs fair value: -3.0. Stock futures shed a few points and suggest a slightly lower open. The Dec. new home sales report is set for release at 10:00 ET. Economists are expected a reading of 645K.
08:30 am : S&P futures vs fair value: +0.3. Nasdaq futures vs fair value: -4.5. S&P 500 futures are now pointing to a flat open as investors respond positively to this morning's earnings
reports. McDonald’s (MCD) announced its dividends declared will now be paid on a quarterly basis. Nasdaq futures are pointing to a slightly lower open.
08:00 am : S&P futures vs fair value: -5.0. Nasdaq futures vs fair value: -10.0. Futures indicate a lower start for stock market after foreign markets fell sharply on concerns of U.S. economic slowdown. Japan closed down 4.0% and Hong Kong ended its session 4.4% lower. Earnings reports have lifted futures off their worst levels. Verizon (VZ) reported earnings in-line with expectations. Corning (GLW) topped earnings expectations by one cent and issued first quarter earnings guidance above the consensus estimate. McDonald’s (MCD) beat expectations by $0.02.
06:18 am : S&P futures vs fair value: -8.1. Nasdaq futures vs fair value: -19.3.
06:18 am : FTSE...5761.40...-107.60...-1.8%. DAX...6709.27...-107.47...-1.6%.
06:18 am : Nikkei...13087.91...-541.25...-4.0%. Hang Seng...24053.61...-1068.76...-4.3
Financials (+1.6%) is leading the rebound with all 19 of its industry groups in the green. Industrial REITs is posting a 2.3% gain and regional banks is up 1.8%.
Even the energy sector (+1.0%) has rebounded into the green, despite a 1.4% slide in crude oil prices.DJ30 +53.36 NASDAQ +6.68 SP500 +7.61 NASDAQ Dec/Adv/Vol 1446/1271/508 mln NYSE Dec/Adv/Vol 1476/1445/322 mln
10:30 am : Stocks recover after falling to fresh session lows on the weak new home sales data. Utilities are leading the recovery effort with a gain of 1.3%. Meanwhile, telecom (-0.5%) pares most of its losses.
With regard to the new home sales data, the December seasonally adjusted annual rate of 604,000 is 4.7% less than last month's reading and is 40.7% less than last year's number. The median sales price of a new house in December was $219,200. This equates to a 10.9% price drop year-over-year, the largest decline in nearly four decades. At the current sales rate, there is a 9.6 month supply of new homes. In 2007, there were an estimated 774,000 new homes sold, down 26.4% from 2006.
This number of sales is very low, and the large supply of inventory should keep pressure on prices for some time. Homebuilders are down 2.7% this session.DJ30 +6.91 NASDAQ -2.28 SP500 +2.60 NASDAQ Dec/Adv/Vol 1632/1008/342 mln NYSE Dec/Adv/Vol 1763/1100/205 mln
10:05 am : Just hitting the wires, the U.S. Dept. of Commerce said December new home sales fell to a seasonally adjusted annual rate of 604K. Economists were expecting sales to hold at 647K. November's reading was revised downward to 634K. Stocks had climbed back to the unchanged mark, but fell back into the red after the disappointing data.
Three of the ten sectors are trending higher. Utilities is leading the way with a 0.6% advance. Telecom is the main laggard with a 1.7% drop, as it continues its poor showing this year.DJ30 -74.87 NASDAQ -13.77 SP500 -6.56 NASDAQ Dec/Adv/Vol 1624/790/120 mln
09:40 am : The stock market dips into the red after opening on a slightly higher note. Foreign markets saw another day of steep declined on fears of U.S. economic slowdown. Japan's Nikkei fell 4.0% and Hong Kong's Hang Seng fell 4.3%. Goldman Sachs said in a report dated Jan. 25 that Japan is either already in a recession or is very likely to do so in the first quarter, according to SCMP.com.
Earnings news leaned bullish. McDonald's (MCD), Corning (GLW), Sysco (SYY) and Halliburton (HAL) topped earnings expectations. Verizon (VZ) came in-line with expectations. McDonald's is trading lower though, as investors were disappointed with its flat December U.S. same-store sales.DJ30 -53.57 NASDAQ -16.76 SP500 -4.97
09:13 am : S&P futures vs fair value: -1.3. Nasdaq futures vs fair value: -2.0.
08:59 am : S&P futures vs fair value: -2.2. Nasdaq futures vs fair value: -3.0. Stock futures shed a few points and suggest a slightly lower open. The Dec. new home sales report is set for release at 10:00 ET. Economists are expected a reading of 645K.
08:30 am : S&P futures vs fair value: +0.3. Nasdaq futures vs fair value: -4.5. S&P 500 futures are now pointing to a flat open as investors respond positively to this morning's earnings
reports. McDonald’s (MCD) announced its dividends declared will now be paid on a quarterly basis. Nasdaq futures are pointing to a slightly lower open.
08:00 am : S&P futures vs fair value: -5.0. Nasdaq futures vs fair value: -10.0. Futures indicate a lower start for stock market after foreign markets fell sharply on concerns of U.S. economic slowdown. Japan closed down 4.0% and Hong Kong ended its session 4.4% lower. Earnings reports have lifted futures off their worst levels. Verizon (VZ) reported earnings in-line with expectations. Corning (GLW) topped earnings expectations by one cent and issued first quarter earnings guidance above the consensus estimate. McDonald’s (MCD) beat expectations by $0.02.
06:18 am : S&P futures vs fair value: -8.1. Nasdaq futures vs fair value: -19.3.
06:18 am : FTSE...5761.40...-107.60...-1.8%. DAX...6709.27...-107.47...-1.6%.
06:18 am : Nikkei...13087.91...-541.25...-4.0%. Hang Seng...24053.61...-1068.76...-4.3
Thursday, January 17, 2008
Stocks Extend Plunge; Dow Falls 306 Thursday January 17, 6:14 pm ET
Wall Street extended its 2008 plunge Thursday, sending the Dow Jones industrials down 306 points and to their lowest level since last March after a regional Federal Reserve report showed a sharp and unexpected decline in manufacturing activity. Downgrades of key bond insurance companies added to the market's black mood, with investors fearing an escalation of months of credit market problems.
The Dow lost nearly 2.5 percent, giving the index its worst three-day percentage decline since October 2002. The Standard & Poor's 500, the index closely watched by market professionals, fell nearly 3 percent Thursday. The Dow, S&P 500 and the Nasdaq composite index have now given back all of the gains they achieved in 2007.
Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 from a revised reading of negative 1.6 in December. The latest number came in well short of what Wall Street had been expecting and underscored the seriousness of the economic worries that have gripped both Wall Street and Washington in recent weeks.
Credit concerns also dogged Wall Street after rating agency Moody's Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade. That possibility alarmed investors because it would place all bonds insured by Ambac on review as well. Wall Street are concerned that bond insurers would be unable to absorb a spike in claims.
Investors' fears of a slowing economy, the consequence of a months-long housing and credit market crisis, dominated trading, as they have since the start of the year.
The Dow, which had been up more than 50 points early in the session, closed down 306.95, or 2.46 percent, at 12,159.21.
The Dow is now off 8.33 percent for the year; there have been just 12 trading days so far in 2008, but the index's frequent triple-digit losses have now forced it to give back its 2007 gains. The Dow had its lowest close since it ended the March 16, 2007, session at 12,110.41.
The Dow's decline also left it about 150 points above 12,000, a level it hasn't closed below since November 2006.
The broader market indicators also plummeted. The S&P 500 index lost 39.95, or 2.91 percent, closing at 1,333.25, and leaving it was a year-to-date loss of 9.2 percent, while the Nasdaq dropped 47.69, or 1.99 percent, to 2,346.90, giving it a 2008 deficit of 11.51 percent.
Thursday brought the lowest close for the S&P 500 since October 2006 and the worst for the Nasdaq since March of last year.
Declining issues outnumbered advancers by more than 5 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.41 billion shares compared with 5.25 billion traded Wednesday.
Bond prices rose as stocks fell and anxious investors sought the safety of government-issued securities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.63 percent from 3.68 percent late Wednesday. The dollar was mixed against other major currencies.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped nearly 17 percent Thursday.
Light, sweet crude fell 71 cents to settle at $90.13 a barrel on the New York Mercantile Exchange after Bernanke's prediction of slower economic growth this year. Slowing growth could dampen demand for oil.
The Philadelphia manufacturing reading caught Wall Street by surprise -- igniting fears that the economy is slowing precipitously and that policymakers might be too late in contemplating aid.
Economists had expected the Philadelphia index would come in at a negative 1.5, according to Dow Jones Newswires. Instead, the negative 20.9 figure was the weakest since October 2001 when the economy was reeling from the shock of the Sept. 11 terror attacks.
Jim Herrick, manager of equity trading at Baird & Co., contends that the Philadelphia Fed reading and other recent negative economic reports indicate the economy is likely in a downturn.
Other economic reports added to investors' glum mood. The Commerce Department said housing starts plunged 14 percent to 1.01 million in December, marking the weakest pace of home building in more than 16 years. In addition, permits to build new homes dropped 8 percent last month to 1.07 million, the lowest level since 1993.
The week's steady flow of news, much of which has dented investor sentiment, has led to a growing chorus of calls for the Fed to cut rates. The Fed's monetary policy committee will meet Jan. 29-30 and is widely expected to lower its Fed funds target from the current 4.25 percent level. Bernanke on Thursday reiterated recent signals that the central bank will reduce rates for a fourth straight time.
Some on Wall Street have called for the Fed to intervene sooner with steep rate cuts.
The economic concerns come in a week in which some of Wall Street's biggest names have posted huge losses following bad bets on mortgage investments. Financial shares fell sharply Thursday after the reports have made clear that there is also increasing weakness in home equity and other consumer banking operations.
Merrill Lynch & Co. on Thursday posted a massive loss that underscored the depth of the economy's credit problems. The world's largest brokerage said it lost $9.91 billion in the fourth quarter, hurt by big write-downs from investments and trades battered by tight credit conditions.
John Thain, the new chief executive at Merrill, said he believes the red ink will constitute the bulk of the company's write-downs from its subprime mortgage exposure. But he would not speculate about what 2008 might hold in store in other areas. Earlier this week, Merrill secured a new round of capital infusions from foreign funds.
Merrill fell $5.64, or 10 percent, to $49.45.
Moody's announcement that it will review Ambac came after the insurer booked a $5.4 billion write-down on its credit derivative portfolio during the fourth quarter.
Ambac plunged $6.73, or 52 percent, to $6.24, while Ambac rival MBIA Inc. fell $4.18, or 31 percent, to $9.22. First Horizon National Corp. fell $2.43, or 13 percent, to $16.48 after Standard & Poor's Ratings Services lowered its rating on the bank's long-term credit.
The Russell 2000 index of smaller companies fell 19.34, or 2.76 percent, to 680.57.
Overseas, Japan's Nikkei stock average closed up 2.07 percent. Britain's FTSE 100 finished down 0.68 percent, Germany's DAX index fell 0.78 percent, and France's CAC-40 fell 1.31 percent.
The Dow lost nearly 2.5 percent, giving the index its worst three-day percentage decline since October 2002. The Standard & Poor's 500, the index closely watched by market professionals, fell nearly 3 percent Thursday. The Dow, S&P 500 and the Nasdaq composite index have now given back all of the gains they achieved in 2007.
Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 from a revised reading of negative 1.6 in December. The latest number came in well short of what Wall Street had been expecting and underscored the seriousness of the economic worries that have gripped both Wall Street and Washington in recent weeks.
Credit concerns also dogged Wall Street after rating agency Moody's Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade. That possibility alarmed investors because it would place all bonds insured by Ambac on review as well. Wall Street are concerned that bond insurers would be unable to absorb a spike in claims.
Investors' fears of a slowing economy, the consequence of a months-long housing and credit market crisis, dominated trading, as they have since the start of the year.
The Dow, which had been up more than 50 points early in the session, closed down 306.95, or 2.46 percent, at 12,159.21.
The Dow is now off 8.33 percent for the year; there have been just 12 trading days so far in 2008, but the index's frequent triple-digit losses have now forced it to give back its 2007 gains. The Dow had its lowest close since it ended the March 16, 2007, session at 12,110.41.
The Dow's decline also left it about 150 points above 12,000, a level it hasn't closed below since November 2006.
The broader market indicators also plummeted. The S&P 500 index lost 39.95, or 2.91 percent, closing at 1,333.25, and leaving it was a year-to-date loss of 9.2 percent, while the Nasdaq dropped 47.69, or 1.99 percent, to 2,346.90, giving it a 2008 deficit of 11.51 percent.
Thursday brought the lowest close for the S&P 500 since October 2006 and the worst for the Nasdaq since March of last year.
Declining issues outnumbered advancers by more than 5 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.41 billion shares compared with 5.25 billion traded Wednesday.
Bond prices rose as stocks fell and anxious investors sought the safety of government-issued securities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.63 percent from 3.68 percent late Wednesday. The dollar was mixed against other major currencies.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped nearly 17 percent Thursday.
Light, sweet crude fell 71 cents to settle at $90.13 a barrel on the New York Mercantile Exchange after Bernanke's prediction of slower economic growth this year. Slowing growth could dampen demand for oil.
The Philadelphia manufacturing reading caught Wall Street by surprise -- igniting fears that the economy is slowing precipitously and that policymakers might be too late in contemplating aid.
Economists had expected the Philadelphia index would come in at a negative 1.5, according to Dow Jones Newswires. Instead, the negative 20.9 figure was the weakest since October 2001 when the economy was reeling from the shock of the Sept. 11 terror attacks.
Jim Herrick, manager of equity trading at Baird & Co., contends that the Philadelphia Fed reading and other recent negative economic reports indicate the economy is likely in a downturn.
Other economic reports added to investors' glum mood. The Commerce Department said housing starts plunged 14 percent to 1.01 million in December, marking the weakest pace of home building in more than 16 years. In addition, permits to build new homes dropped 8 percent last month to 1.07 million, the lowest level since 1993.
The week's steady flow of news, much of which has dented investor sentiment, has led to a growing chorus of calls for the Fed to cut rates. The Fed's monetary policy committee will meet Jan. 29-30 and is widely expected to lower its Fed funds target from the current 4.25 percent level. Bernanke on Thursday reiterated recent signals that the central bank will reduce rates for a fourth straight time.
Some on Wall Street have called for the Fed to intervene sooner with steep rate cuts.
The economic concerns come in a week in which some of Wall Street's biggest names have posted huge losses following bad bets on mortgage investments. Financial shares fell sharply Thursday after the reports have made clear that there is also increasing weakness in home equity and other consumer banking operations.
Merrill Lynch & Co. on Thursday posted a massive loss that underscored the depth of the economy's credit problems. The world's largest brokerage said it lost $9.91 billion in the fourth quarter, hurt by big write-downs from investments and trades battered by tight credit conditions.
John Thain, the new chief executive at Merrill, said he believes the red ink will constitute the bulk of the company's write-downs from its subprime mortgage exposure. But he would not speculate about what 2008 might hold in store in other areas. Earlier this week, Merrill secured a new round of capital infusions from foreign funds.
Merrill fell $5.64, or 10 percent, to $49.45.
Moody's announcement that it will review Ambac came after the insurer booked a $5.4 billion write-down on its credit derivative portfolio during the fourth quarter.
Ambac plunged $6.73, or 52 percent, to $6.24, while Ambac rival MBIA Inc. fell $4.18, or 31 percent, to $9.22. First Horizon National Corp. fell $2.43, or 13 percent, to $16.48 after Standard & Poor's Ratings Services lowered its rating on the bank's long-term credit.
The Russell 2000 index of smaller companies fell 19.34, or 2.76 percent, to 680.57.
Overseas, Japan's Nikkei stock average closed up 2.07 percent. Britain's FTSE 100 finished down 0.68 percent, Germany's DAX index fell 0.78 percent, and France's CAC-40 fell 1.31 percent.
Subscribe to:
Posts (Atom)
