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Wall Street ends mixed on anxiety over earnings
Source: Agencies |
January 14, 2009, Wednesday
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WALL Street's growing angst about company earnings gave stocks a mixed finish yesterday, with the Dow Jones industrials suffering their fifth straight loss. The broader market indicators closed modestly higher.
The concern on the Street is that the recession will have a more severe impact on profits than investors have been anticipating. They shied away from placing big bets after aluminum giant Alcoa Inc reported late Monday that it lost US$1.19 billion during the fourth quarter. An analyst's warning about profits at General Electric Co only added to the market's uneasiness.
Questions about earnings - in particular companies' expectations for business this year - are likely to dominate trading in the coming weeks. Computer chip maker Intel Corp. and drug company Genentech Inc are among the companies reporting results this week.
The market also will get an earlier-than-expected reading on the financial sector when JPMorgan Chase & Co reports earnings on Thursday - nearly a week ahead of schedule. Investors are fearful of another year of multibillion dollar losses among financial companies, as analysts forecast mounting problems in credit card and commercial real estate portfolios.
Meanwhile, Citigroup Inc and Morgan Stanley are expected to announce a deal soon to combine their brokerage operations as Citi struggles to raise additional cash.
"We're sort of in a wait-and-see mode," said Carl Beck, partner at Harris Financial Group. "The optimism that we saw at the beginning of the year has sort of been put on hold as people await earnings reports over the next couple of weeks."
The Dow fell 25.41, or 0.30 percent, to 8,448.56. Both Alcoa and GE weighed on the blue chips.
Broader indexes advanced. The Standard & Poor's 500 index rose 1.53, or 0.18 percent, to 871.79, while the Nasdaq composite index rose 7.67, or 0.50 percent, to 1,546.46.
The Russell 2000 index of smaller companies rose 4.99, or 1.06 percent, to 473.79.
Losing stocks outnumbered gainers by about 8 to 7 on the New York Stock Exchange, where volume came to 1.31 billion shares.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.30 percent from 2.31 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.12 percent from 0.06 percent late Monday.
Stocks fell Monday on fear that corporate profit reports will signal a recovery in the economy is further off than originally anticipated. The blue chips shed 125 points, and broader stock indexes fell more than 2 percent. The market's retreat Monday followed its worst week since November. However, stocks are still up sharply from their lows of Nov. 20.
Beck said while Wall Street knows fourth-quarter earnings will be bad investors remain skittish.
"You've got the lingering shroud of doubt in people's minds, 'Is it going to be worse than already lowered expectations?"' he said.
On yesterday, Federal Reserve Chairman Ben Bernanke said the stimulus package being crafted by President-elect Barack Obama and Congress could provide a "significant boost" to the sinking economy. During a speech in London, he also said "more capital injections and guarantees may become necessary" to stabilize financial markets and spur more lending. Obama is pushing for an economic stimulus that includes big tax cuts and has an estimated price tag of about US$800 billion.
Also yesterday, the House Financial Services Committee scheduled a hearing on the financial bailout fund in advance of legislation proposed by committee Chairman Barney Frank that would place tough restrictions on recipients of the money and require spending to reduce mortgage foreclosures.
Obama on Monday asked President George W. Bush to request the money so that it can be at the ready when Obama takes office next week. Bush agreed to notify Congress. Obama said he would fundamentally change the way the remaining funds are allocated. He said some relief would be directed toward housing and small business.
Worries about earnings weighed on stocks. Alcoa fell 51 cents, or 5.1 percent, to US$9.55. GE fell 89 cents, or 5.6 percent, to US$14.94 after an analyst raised concerns about the strength of the company's fourth-quarter earnings results and attempts to maintain its top credit rating.
The market got some upbeat news that lent support to stocks early in the day before sellers re-entered the market. The Commerce Department said the trade deficit fell to its lowest level in five years. The deficit narrowed 28.7 percent to US$40.4 billion in November from US$56.7 billion in October as demand for oil dropped by a record amount.
Though demand for imports has dropped, investors are more concerned by the waning need for American products overseas as economies around the world suffer. The fear is that as companies struggle with falling global demand, it will be more difficult for the economy to rebound.
The concern on the Street is that the recession will have a more severe impact on profits than investors have been anticipating. They shied away from placing big bets after aluminum giant Alcoa Inc reported late Monday that it lost US$1.19 billion during the fourth quarter. An analyst's warning about profits at General Electric Co only added to the market's uneasiness.
Questions about earnings - in particular companies' expectations for business this year - are likely to dominate trading in the coming weeks. Computer chip maker Intel Corp. and drug company Genentech Inc are among the companies reporting results this week.
The market also will get an earlier-than-expected reading on the financial sector when JPMorgan Chase & Co reports earnings on Thursday - nearly a week ahead of schedule. Investors are fearful of another year of multibillion dollar losses among financial companies, as analysts forecast mounting problems in credit card and commercial real estate portfolios.
Meanwhile, Citigroup Inc and Morgan Stanley are expected to announce a deal soon to combine their brokerage operations as Citi struggles to raise additional cash.
"We're sort of in a wait-and-see mode," said Carl Beck, partner at Harris Financial Group. "The optimism that we saw at the beginning of the year has sort of been put on hold as people await earnings reports over the next couple of weeks."
The Dow fell 25.41, or 0.30 percent, to 8,448.56. Both Alcoa and GE weighed on the blue chips.
Broader indexes advanced. The Standard & Poor's 500 index rose 1.53, or 0.18 percent, to 871.79, while the Nasdaq composite index rose 7.67, or 0.50 percent, to 1,546.46.
The Russell 2000 index of smaller companies rose 4.99, or 1.06 percent, to 473.79.
Losing stocks outnumbered gainers by about 8 to 7 on the New York Stock Exchange, where volume came to 1.31 billion shares.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.30 percent from 2.31 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.12 percent from 0.06 percent late Monday.
Stocks fell Monday on fear that corporate profit reports will signal a recovery in the economy is further off than originally anticipated. The blue chips shed 125 points, and broader stock indexes fell more than 2 percent. The market's retreat Monday followed its worst week since November. However, stocks are still up sharply from their lows of Nov. 20.
Beck said while Wall Street knows fourth-quarter earnings will be bad investors remain skittish.
"You've got the lingering shroud of doubt in people's minds, 'Is it going to be worse than already lowered expectations?"' he said.
On yesterday, Federal Reserve Chairman Ben Bernanke said the stimulus package being crafted by President-elect Barack Obama and Congress could provide a "significant boost" to the sinking economy. During a speech in London, he also said "more capital injections and guarantees may become necessary" to stabilize financial markets and spur more lending. Obama is pushing for an economic stimulus that includes big tax cuts and has an estimated price tag of about US$800 billion.
Also yesterday, the House Financial Services Committee scheduled a hearing on the financial bailout fund in advance of legislation proposed by committee Chairman Barney Frank that would place tough restrictions on recipients of the money and require spending to reduce mortgage foreclosures.
Obama on Monday asked President George W. Bush to request the money so that it can be at the ready when Obama takes office next week. Bush agreed to notify Congress. Obama said he would fundamentally change the way the remaining funds are allocated. He said some relief would be directed toward housing and small business.
Worries about earnings weighed on stocks. Alcoa fell 51 cents, or 5.1 percent, to US$9.55. GE fell 89 cents, or 5.6 percent, to US$14.94 after an analyst raised concerns about the strength of the company's fourth-quarter earnings results and attempts to maintain its top credit rating.
The market got some upbeat news that lent support to stocks early in the day before sellers re-entered the market. The Commerce Department said the trade deficit fell to its lowest level in five years. The deficit narrowed 28.7 percent to US$40.4 billion in November from US$56.7 billion in October as demand for oil dropped by a record amount.
Though demand for imports has dropped, investors are more concerned by the waning need for American products overseas as economies around the world suffer. The fear is that as companies struggle with falling global demand, it will be more difficult for the economy to rebound.
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