Tuesday, November 18, 2008

Stocks headed for a drop

U.S. stocks appeared set for an opening decline Tuesday, as investors remained worried about the fate of the Big Three automakers and awaited testimony from Treasury Secretary Henry Paulson about the government's $700 billion financial bailout plan.

At 8:47 a.m. ET, Dow Jones industrial average, Standard & Poor's 500 and Nasdaq 100 futures were all lower.

U.S. stocks were volatile Monday, with the major gauges all ending the session down more than 2%.

The slump sparked losses overseas. Asian markets finished in negative territory and European shares fell in morning trading.

"Hopefully, we can bounce off the lows," said Peter Cardillo, analyst for Avalon Partners.

But Cardillo said the continually weak stock market could have a tough time pulling out of its slump so long as the question of a bailout for the Big Three is left unanswered.

"It's certainly going to give the market the jitters," said Cardillo, referring to the debate over an automaker rescue package.

Big Three: The CEOs of automakers Ford (F, Fortune 500), General Motors (GM, Fortune 500) and Chrysler are all headed to Capitol Hill to testify before the Senate Banking Committee.

The hearing comes as Congress is debating whether to bail out the hard-hit industry with an additional $25 billion in support on top of the $25 billion the Big Three have already received.

Wall Street bailout: The money for the automakers would come from the $700 billion bank bailout plan, which is also in focus Tuesday as the House Financial Services Committee holds a hearing regarding oversight of the plan.

Paulson, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair are among the speakers scheduled to testify.

Paulson is expected to face tough questions after announcing last week that the reach of plan would be broadened to support non-bank financial institutions that provide consumer credit, such as credit cards and auto loans.

In an interview Monday, Paulson told the Wall Street Journal that the financial system is stabilizing, and that he doesn't plan to use what remains of the rescue fund to launch new programs.

Home Depot: In another sign of consumer weakness and an abysmal housing market, home improvement retail giant Home Depot (HD, Fortune 500) said its third-quarter profit fell by nearly one-third, to $756 million, or 45 cents per share, from nearly $1.1 billion, or 60 cents per share, during the same period in 2007.

The company still managed to beat expectations. Analysts had expected a profit of 38 cents per share, according to a consensus of projections from Thomson Reuters.

The medical device maker Medtronic (MDT, Fortune 500) reported that profit fell in its most recent quarter to $571 million, or 51 cents per share, from $666 million, or 58 cents per share, in the year-ago quarter. The company blamed a charge from a patent dispute with Johnson & Johnson (JNJ, Fortune 500) for the fall in profit.

Yahoo: Jerry Yang is stepping down as chief executive of Yahoo (YHOO, Fortune 500), the company said late Monday. The company said a search for a new CEO is being led by its chairman, Roy Bostock, and the executive recruitment firm Heidrick & Struggles.

Deflation: The Labor Department released its monthly Producer Price Index, which showed that the wholesale price of goods fell 2.8% in October, a steeper fall than expected.

Prices were expected to decrease by 1.8% in October, according to a consensus of economist projections from Briefing.com, after declining 0.4% in September.

The core PPI, which does not include volatile food and energy prices, increased by 0.4% in October, after increasing 0.4% the prior month. Economist consensus from Briefing.com was calling for an increase of only 0.1% in core PPI. Energy prices plunged 12.8% in October.

On Wednesday, the Labor Department will release its monthly report on the Consumer Price Index and the Commerce Department will release its report on housing starts.

Oil and money: The dollar rose against the yen, but fell versus the euro and the British pound. Oil prices were virtually flat, edging up 16 cents a barrel to $55.11 in electronic trading.

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