Stocks staged a late-session rally at the end of a turbulent day, influenced by a weak housing market report, a mix of corporate results and the latest for the automakers.
The Dow Jones industrial average (INDU) added 70 points, or 0.9%. The S&P 500 (SPX) index gained 8 points or 1%. The Nasdaq composite (COMP) gained 6 points, or 0.4%.
After the close, Microsoft (MSFT, Fortune 500) reported lower-than-expected quarterly sales on weaker earnings that met estimates.
Dow component American Express (AXP, Fortune 500) reported weaker quarterly earnings that topped estimates, sending shares almost 7% higher in extended-hours trading.
Biotech Amgen (AMGN, Fortune 500) reported weaker-than-expected quarterly sales and earnings after the close. Amazon.com (AMZN, Fortune 500) reported higher quarterly sales and earnings that topped estimates.
Dow component 3M (MMM, Fortune 500) is due to report results before the start of trade Friday. Honeywell (HON, Fortune 500), Schlumberger (SLB) and Xerox (XRX, Fortune 500) are also due to report.
Also Friday, the Commerce Department releases the March durable goods orders report and the Census Bureau releases the March new home sales report.
Stocks are down for the week as investors have retreated after a six-week advance that propelled the S&P 500 nearly 29%. Stocks zigzagged Thursday as investors sorted through the profit reports and economic news.
"The market is trying to determine whether we've come too far, too fast and it's been getting some mixed signals," said Christopher Colarik, portfolio manager at Glendmede.
"Incrementally, we are getting some economic and earnings reports that are less bad, if not good," he said. "But it might be a two-steps-forward, one-step-back kind of thing, like with the housing data."
Automakers: General Motors (GM, Fortune 500) said in the afternoon that it plans to temporarily shut down 13 of 20 North American plants this summer in order to reduce its inventory. The company has been hit hard by the recession and slowdown in auto demand and has until June 1 to cut its debt and labor costs or face Chapter 11 bankruptcy protection. Shares fell 4%.
Chrysler is reportedly set to enter Chapter 11 as soon as next week, The New York Times reported Thursday. The Treasury Department is overseeing the process, which will reportedly protect union members' pensions and retiree health care benefits.
Italian carmaker Fiat will complete its acquisition of a 20% stake in the company while it is under bankruptcy protection.
Housing: March existing home sales fell to a 4.57 million unit annual rate from a 4.71 million rate in February, the National Association of Realtors said. Economists surveyed by Briefing.com thought sales would fall to a 4.65 million unit annual rate.
The report countered bets that the housing market is nearing a bottom. Such bets were sparked by February housing market reports that showed smaller-than-expected declines in sales and productions.
Movers: Chevron, Exxon Mobil and McDonald's were among the Dow advancers. IBM (IBM, Fortune 500), Home Depot (HD, Fortune 500) and DuPont (DD, Fortune 500) were among the losers.
Chipmakers Intel (INTC, Fortune 500), Applied Materials (AMAT, Fortune 500) and Xilinx (XLNX) dragged on the Nasdaq, while eBay and Fifth Third Bancorp were among the advancers.
Market breadth was mixed. On the New York Stock Exchange, winners topped losers three to two on volume of 1.57 billion shares. On the Nasdaq, decliners topped advancers eight to five on volume of 2.49 billion shares.
Results: Among the companies reporting results Thursday, regional bank Fifth Third Bancorp (FITB, Fortune 500) reported a narrower-than-expected quarterly loss. Shares gained 3.5%.
PNC (PNC, Fortune 500) reported higher quarterly profit due partly to its purchase of National City. Shares gained 7.5%.
eBay (EBAY, Fortune 500) reported lower quarterly sales and earnings that topped forecasts Wednesday, sending shares 12.5% higher Thursday.
Apple (AAPL, Fortune 500) reported higher quarterly sales and earnings that topped estimates late Wednesday, sending shares 3% higher Thursday.
On the downside, UPS (UPS, Fortune 500) reported earnings and revenue that slumped versus a year ago due to the recession. Shares missed analysts' estimates. The stock fell 2.8%.
Jobs: The number of Americans filing new claims for unemployment rose last week to 640,000 from a revised 613,000 the previous week, topping economists' estimates.
Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.91% from 2.94% Wednesday. Treasury prices and yields move in opposite directions.
Lending rates were mixed. The 3-month Libor rate fell to 1.09% from 1.10% Wednesday, according to Bloomberg.com. The overnight Libor rate dipped to 0.20% from 0.21% Wednesday.
0:00 /02:39Life in the pits
Other markets: In global trading, Asian markets ended higher and European markets ended lower.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for June delivery settled up 77 cents to $49.62 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $14.10 to settle at $906.60 an ounce.
Thursday, April 23, 2009
Pressure builds on BofA's Ken Lewis
Questions about whether Bank of America breached its duties to shareholders come at an inconvenient time for embattled CEO Ken Lewis.
According to documents released Thursday by a top state prosecutor, the BofA (BAC, Fortune 500) chief met repeatedly late last year with federal regulators and the bank's board to discuss the deteriorating condition of Merrill Lynch, the struggling brokerage BofA had agreed to acquire in September.
At one point, according to an account released by New York Attorney General Andrew Cuomo, Lewis told then Treasury Secretary Henry Paulson that BofA was considering backing out of the Merrill deal -- only to relent when Paulson said regulators, fearing a financial sector collapse, might respond by removing Lewis and his directors.
The Cuomo report certainly won't go down as a shining moment for a government that has twisted itself in knots claiming it wasn't pulling the strings at financial firms it invested in.
But worse, to some observers, is BofA's failure to disclose any of this information to its shareholders -- regardless of Lewis's claim he was being leaned on by Paulson.
The report could increase the pressure on Lewis as he and some members of the BofA board face re-election next week at the company's annual shareholder meeting.
"It's hard for me to believe the Treasury and the Federal Reserve would tell Ken Lewis to violate securities laws," said Jonathan Finger, a longtime BofA investor who has been critical of Lewis' penchant for empire building at shareholder expense. "Regardless of the pressure he may have felt, Ken Lewis still had a duty to protect shareholders and disclose relevant information."
Cuomo wrote in a letter to congressional leaders and other top federal officials Thursday that facts unearthed in his investigation raise questions about "corporate governance and disclosure practices at Bank of America."
BofA dismisses questions about its handling of the deal.
"We believe we acted legally and appropriately in the Merrill Lynch transaction," spokesman Scott Silvestri said.
0:00 /4:30BofA's 'shotgun wedding' regret
But some observers aren't bowled over by Lewis' claim that he was strong-armed by regulators.
Neil Barofsky, the special inspector general of Paulson's Troubled Asset Relief Program, cautions that reports of the discussions among Lewis, Paulson and Fed chief Ben Bernanke may overstate the pressure that was applied to Lewis.
"You need to talk to all the participants in the conversation before you can come up with a conclusion of 100% of what happened," he told CNNMoney.com Thursday.
Paulson generally confirmed Lewis's account, the Cuomo report said.
"Their discussions centered on the Fed lawyers' opinion that the merger contract was binding, and the U.S. Treasury's commitment to ensuring that no systemically important financial institution would be allowed to fail," Paulson's office added in a statement Thursday.
The Federal Reserve said it did not ask Lewis to stay quiet about his concerns.
"No one at the Federal Reserve advised Ken Lewis or Bank of America on any questions of disclosure," said Michelle Smith, a spokeswoman for the Fed. "It has long been the Federal Reserve's view that questions of this nature are best addressed by individual institutions and their legal counsel."
Angry shareholders to grill Lewis
Lewis is due to address BofA's investors -- who have seen the value of their holdings plunge over the past year, as the bank has been buffeted by collapsing asset values and a pair of questionable acquisitions -- next Wednesday at the bank's annual shareholder meeting in Charlotte, N.C.
Finger, a longtime BofA shareholder who is trying to unseat Lewis and some board members at the meeting, said the allegations in the Cuomo report chip away at the already impaired credibility of Lewis and his board.
Finger and other big investors, including giant pension plan operator TIAA-CREF, have said they won't vote for Lewis at the meeting.
"The key issue here is transparency, and shareholders' right to know crucial facts about the acquisition of Merrill Lynch," said Connecticut treasurer Denise Nappier, who runs the $20 billion state retirement fund and has demanded Lewis's resignation. "Our right to transparency trumps any concern Lewis may have had about saving his job or keeping the current board in place."
Gary Lutin, who runs the Shareholder Forum investor advocacy group in New York, says the most damning allegations in the Cuomo report come from the minutes of the BofA board meetings Dec. 22 and 30 of last year.
These minutes describe the "detailed oral assurances" federal regulators supposedly made to BofA executives. The Federal Reserve and Treasury agreed to provide financial support to the bank after it completed its acquisition of Merrill Lynch and before the bank's scheduled Jan. 20 earnings release, the minutes said.
On Jan. 16, the bank and regulators announced that the government did cough up $20 billion in new capital and $118 billion in asset guarantees for Bank of America. BofA had received $25 billion, counting Merrill's allocation, in the first round of TARP funding.
But in late December, before the deal's Jan. 1 completion, regulators couldn't make those promises in writing, according to the minutes, "because any written assurances would require formal action by the Fed and Treasury -- which formal action would require public disclosure."
The lack of formal written agreements at the time BofA decided to go through with the deal suggests neither party was faithful to its own decision making processes and disclosure duties, said Lutin, whose forum has been questioning the reliability of corporate disclosures since the dot-com insanity a decade ago.
An oral promise might be tougher to enforce in a legal dispute -- but if it was made in good faith, Lutin wondered why the bank wouldn't disclose it.
"Secretary Paulson said he could not provide a letter because there was not yet a specific action plan and he believed that Treasury releasing a vague letter reiterating Treasury's public commitment to prevent systemically important institutions from failing would not help Bank of America but would instead rattle markets by creating more questions than it answered," Paulson's statement said. "Questions of BofA's disclosures were left up to Bank of America."
Cynics might venture that BofA didn't disclose the information because it didn't want to further stress out shareholders. The bank lost two-thirds of its market value between October and the middle of December.
Regardless of the ramifications, corporate officers are duty bound to disclose material information. So if the Cuomo report's account is accurate, Lutin said, "it would mean Lewis is a wimp as well as a liar."
According to documents released Thursday by a top state prosecutor, the BofA (BAC, Fortune 500) chief met repeatedly late last year with federal regulators and the bank's board to discuss the deteriorating condition of Merrill Lynch, the struggling brokerage BofA had agreed to acquire in September.
At one point, according to an account released by New York Attorney General Andrew Cuomo, Lewis told then Treasury Secretary Henry Paulson that BofA was considering backing out of the Merrill deal -- only to relent when Paulson said regulators, fearing a financial sector collapse, might respond by removing Lewis and his directors.
The Cuomo report certainly won't go down as a shining moment for a government that has twisted itself in knots claiming it wasn't pulling the strings at financial firms it invested in.
But worse, to some observers, is BofA's failure to disclose any of this information to its shareholders -- regardless of Lewis's claim he was being leaned on by Paulson.
The report could increase the pressure on Lewis as he and some members of the BofA board face re-election next week at the company's annual shareholder meeting.
"It's hard for me to believe the Treasury and the Federal Reserve would tell Ken Lewis to violate securities laws," said Jonathan Finger, a longtime BofA investor who has been critical of Lewis' penchant for empire building at shareholder expense. "Regardless of the pressure he may have felt, Ken Lewis still had a duty to protect shareholders and disclose relevant information."
Cuomo wrote in a letter to congressional leaders and other top federal officials Thursday that facts unearthed in his investigation raise questions about "corporate governance and disclosure practices at Bank of America."
BofA dismisses questions about its handling of the deal.
"We believe we acted legally and appropriately in the Merrill Lynch transaction," spokesman Scott Silvestri said.
0:00 /4:30BofA's 'shotgun wedding' regret
But some observers aren't bowled over by Lewis' claim that he was strong-armed by regulators.
Neil Barofsky, the special inspector general of Paulson's Troubled Asset Relief Program, cautions that reports of the discussions among Lewis, Paulson and Fed chief Ben Bernanke may overstate the pressure that was applied to Lewis.
"You need to talk to all the participants in the conversation before you can come up with a conclusion of 100% of what happened," he told CNNMoney.com Thursday.
Paulson generally confirmed Lewis's account, the Cuomo report said.
"Their discussions centered on the Fed lawyers' opinion that the merger contract was binding, and the U.S. Treasury's commitment to ensuring that no systemically important financial institution would be allowed to fail," Paulson's office added in a statement Thursday.
The Federal Reserve said it did not ask Lewis to stay quiet about his concerns.
"No one at the Federal Reserve advised Ken Lewis or Bank of America on any questions of disclosure," said Michelle Smith, a spokeswoman for the Fed. "It has long been the Federal Reserve's view that questions of this nature are best addressed by individual institutions and their legal counsel."
Angry shareholders to grill Lewis
Lewis is due to address BofA's investors -- who have seen the value of their holdings plunge over the past year, as the bank has been buffeted by collapsing asset values and a pair of questionable acquisitions -- next Wednesday at the bank's annual shareholder meeting in Charlotte, N.C.
Finger, a longtime BofA shareholder who is trying to unseat Lewis and some board members at the meeting, said the allegations in the Cuomo report chip away at the already impaired credibility of Lewis and his board.
Finger and other big investors, including giant pension plan operator TIAA-CREF, have said they won't vote for Lewis at the meeting.
"The key issue here is transparency, and shareholders' right to know crucial facts about the acquisition of Merrill Lynch," said Connecticut treasurer Denise Nappier, who runs the $20 billion state retirement fund and has demanded Lewis's resignation. "Our right to transparency trumps any concern Lewis may have had about saving his job or keeping the current board in place."
Gary Lutin, who runs the Shareholder Forum investor advocacy group in New York, says the most damning allegations in the Cuomo report come from the minutes of the BofA board meetings Dec. 22 and 30 of last year.
These minutes describe the "detailed oral assurances" federal regulators supposedly made to BofA executives. The Federal Reserve and Treasury agreed to provide financial support to the bank after it completed its acquisition of Merrill Lynch and before the bank's scheduled Jan. 20 earnings release, the minutes said.
On Jan. 16, the bank and regulators announced that the government did cough up $20 billion in new capital and $118 billion in asset guarantees for Bank of America. BofA had received $25 billion, counting Merrill's allocation, in the first round of TARP funding.
But in late December, before the deal's Jan. 1 completion, regulators couldn't make those promises in writing, according to the minutes, "because any written assurances would require formal action by the Fed and Treasury -- which formal action would require public disclosure."
The lack of formal written agreements at the time BofA decided to go through with the deal suggests neither party was faithful to its own decision making processes and disclosure duties, said Lutin, whose forum has been questioning the reliability of corporate disclosures since the dot-com insanity a decade ago.
An oral promise might be tougher to enforce in a legal dispute -- but if it was made in good faith, Lutin wondered why the bank wouldn't disclose it.
"Secretary Paulson said he could not provide a letter because there was not yet a specific action plan and he believed that Treasury releasing a vague letter reiterating Treasury's public commitment to prevent systemically important institutions from failing would not help Bank of America but would instead rattle markets by creating more questions than it answered," Paulson's statement said. "Questions of BofA's disclosures were left up to Bank of America."
Cynics might venture that BofA didn't disclose the information because it didn't want to further stress out shareholders. The bank lost two-thirds of its market value between October and the middle of December.
Regardless of the ramifications, corporate officers are duty bound to disclose material information. So if the Cuomo report's account is accurate, Lutin said, "it would mean Lewis is a wimp as well as a liar."
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Through blogtelevision.net you find TV, high-definition TV programs allow the viewer a better experience sounds and images of watching television. High-definition TV has a thousand and eighty vertical lines of resolution, people are becoming more demanding in television programs, they want the program that is not only fun but is also useful at the same time, and only through the DirecTV you will find the best option for all types of channels.
You have a lot of variety to your choice, such as family, movies, HD programs, sports, international, business and news, this site offers the best Direct TV packages and special offers If you are looking for the place to get Directtv services, you can go blogtelevision.net, you will find the DirectTV package of more than 150 channels for only $ 34.99 per month, without doubt is the best option for you to learn more and know the covenants available visit now the blogtelevision.net.
Wednesday, April 22, 2009
Stocks weaken at the start
Stocks inched lower Wednesday morning after Morgan Stanley's weaker-than-expected quarterly results revived concerns about banking sector profits.
The results overshadowed better-than-expected results from Dow components AT&T, McDonald's and others.
The Dow Jones industrial average (INDU) lost 45 points, or 0.6% in the early going. The S&P 500 (SPX) index gained 6 points, or 0.7%. The Nasdaq composite (COMP) gained 4 points, or 0.3%.
U.S. stock markets advanced Tuesday, staging a late-session rally. The major gauges all gained about 2%.
Despite Tuesday's gains, investors are still wary about the financial sector's results, according to Richard Yamarone, director of economic research at Argus Research.
"The markets are taking their cue from how well the banking situation plays out," he said.
0:00 /2:58Morgan Stanley's bank hunt
Quarterly results: As concerns about the banking sector persist, Morgan Stanley (MS, Fortune 500) reported a bigger-than-expected quarterly loss of $177 million, or 57 cents a share, and cut its dividend. Wells Fargo (WFC, Fortune 500) posted better-than-expected results.
Dow components AT&T (T, Fortune 500), McDonald's (MCD, Fortune 500) and Boeing (BA, Fortune 500) all posted lower first-quarter earnings before the bell. AT&T and McDonald's beat estimates, while Boeing missed by 5 cents a share.
Continental Airlines (CAL, Fortune 500) announced a loss for the first quarter, but results were better than expected. Health insurer WellPoint (WLP, Fortune 500) posted disappointing results.
Other stocks to watch include Yahoo (YHOO, Fortune 500), which announced late Tuesday that it was cutting 5% of its workforce. The company also reported a sharp fall in profit for its latest quarter.
Economy: Treasury Secretary Tim Geithner, speaking Wednesday morning, talked about the need for global cooperation in the face of the unprecedented economic crisis. Geithner spoke at the Economic Club of Washington D.C.
Autos: The White House has spurned a plan put forth by Chrysler's lenders as the deadline for the automaker's restructuring approaches.
Lenders have agreed to write off 35% of the $7 billion they are owed. But in exchange, they reportedly want a stake in the restructured automaker
World markets: Stocks in Asia mostly fell, although Japan's Nikkei ended the session a shade higher. In afternoon trading, European markets tumbled.
Oil and money: Oil prices edged down 25 cents a barrel to $48.30 ahead of the Energy Information Agency's weekly inventory report. The dollar was lower versus the euro and the yen.
The results overshadowed better-than-expected results from Dow components AT&T, McDonald's and others.
The Dow Jones industrial average (INDU) lost 45 points, or 0.6% in the early going. The S&P 500 (SPX) index gained 6 points, or 0.7%. The Nasdaq composite (COMP) gained 4 points, or 0.3%.
U.S. stock markets advanced Tuesday, staging a late-session rally. The major gauges all gained about 2%.
Despite Tuesday's gains, investors are still wary about the financial sector's results, according to Richard Yamarone, director of economic research at Argus Research.
"The markets are taking their cue from how well the banking situation plays out," he said.
0:00 /2:58Morgan Stanley's bank hunt
Quarterly results: As concerns about the banking sector persist, Morgan Stanley (MS, Fortune 500) reported a bigger-than-expected quarterly loss of $177 million, or 57 cents a share, and cut its dividend. Wells Fargo (WFC, Fortune 500) posted better-than-expected results.
Dow components AT&T (T, Fortune 500), McDonald's (MCD, Fortune 500) and Boeing (BA, Fortune 500) all posted lower first-quarter earnings before the bell. AT&T and McDonald's beat estimates, while Boeing missed by 5 cents a share.
Continental Airlines (CAL, Fortune 500) announced a loss for the first quarter, but results were better than expected. Health insurer WellPoint (WLP, Fortune 500) posted disappointing results.
Other stocks to watch include Yahoo (YHOO, Fortune 500), which announced late Tuesday that it was cutting 5% of its workforce. The company also reported a sharp fall in profit for its latest quarter.
Economy: Treasury Secretary Tim Geithner, speaking Wednesday morning, talked about the need for global cooperation in the face of the unprecedented economic crisis. Geithner spoke at the Economic Club of Washington D.C.
Autos: The White House has spurned a plan put forth by Chrysler's lenders as the deadline for the automaker's restructuring approaches.
Lenders have agreed to write off 35% of the $7 billion they are owed. But in exchange, they reportedly want a stake in the restructured automaker
World markets: Stocks in Asia mostly fell, although Japan's Nikkei ended the session a shade higher. In afternoon trading, European markets tumbled.
Oil and money: Oil prices edged down 25 cents a barrel to $48.30 ahead of the Energy Information Agency's weekly inventory report. The dollar was lower versus the euro and the yen.
Morgan Stanley suffers another loss
Morgan Stanley reported a much bigger-than-anticipated loss in the first quarter Wednesday, as the revenue at the bank's bread-and-butter equity sales and trading business plunged 74% from a year ago.
The firm was also hit by its exposure to the tanking commercial real estate market. Morgan Stanley (MS, Fortune 500) shares tumbled 6% in early morning trading on the news.
The Wall Street investment bank said it lost $177 million, or 57 cents per share, in the quarter ended March 31. Analysts were expecting a loss of 8 cents a share, according to Thomson Reuters.
Including the payment of $401 million in preferred dividends tied to the government investing in Morgan Stanley last year as part of the bank bailout, the company reported a net loss to common shareholders of $578 million.
The company also slashed its quarterly dividend by 81%, to 5 cents from 27 cents, in a bid to conserve $1 billion in cash annually.
The latest results extend the firm's losing streak, and stand out from the rest of the major banks' earnings, which have been generally better than expected -- if sometimes of questionable quality. Last quarter, Morgan Stanley posted a $2.3 billion loss.
In a statement, CEO John Mack focused on strong performances in Morgan Stanley's fixed-income trading and investment banking businesses.
He said the bank was the top performer in the merger-and-acquisition rankings during the quarter, and like its peers Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), made significant sums trading plain vanilla fixed income products in the interest rate, commodity and credit arenas.
But those gains were offset by $1 billion in losses on real estate investments, and $1.5 billion of lost revenue tied to changes in the value of the bank's liabilities.
Meanwhile, Morgan Stanley said revenue in its equity sales and trading group plunged to just $900 million from $3.4 billion a year earlier.
Those setbacks help to explain part of the huge decline in Morgan Stanley's first-quarter revenue, which plunged 62% from a year ago to $3 billion.
The commercial real estate loss is particularly notable, for analysts have been warning that big banks could take a big hit this year in that once-hot market.
Goldman Sachs analysts wrote earlier this year that they expect commercial real estate to be the biggest problem asset class for banks in 2009. Analyst James Fotheringham forecast a 21%-26% price decline, which he said would lead to tens of billions of dollars of loan losses for banks and brokerage houses.
The results and the dividend cut reflect a decline in the profitability of Morgan's core business. Though Morgan Stanley's capital ratios remain strong - the bank said its Tier 1 capital, a measure favored by regulators, is 16% - it seems clear Morgan Stanley won't be joining the rush to repay the funds it got last fall under the Treasury's Troubled Asset Relief Program.
Mack told Morgan Stanley employees in a conference call last month that he didn't think now is the time for the bank to give back the $10 billion it got in October under TARP. Rivals such as Goldman and JPMorgan have indicated they hope to repay the funds soon.
Morgan Stanley said its Tier 1 capital ratio, excluding the TARP funds, is 13%. That's double the 6% ratio that allows regulators to deem a firm well capitalized.
Mack also said the latest-quarter loss was partly attributable to something that would normally count as good news.
He said Morgan Stanley would actually have reported a first-quarter profit if not for "the dramatic improvement in our credit spreads -- which is a significant positive development."
Tighter credit spreads reflect reduced investor anxiety over the prospect that the company might default on its obligations, and result in lower borrowing costs for the company.
But they also obligate the company to write up the value of those liabilities, in light of the increased amount Morgan Stanley would have to pay to repurchase those debts.
In last year's first quarter, Morgan Stanley posted $1 billion in gains by writing down the value of its obligations as credit spreads widened.
The disappointing first-quarter report comes as investors puzzle over what course Mack will chart in the coming year. Like Goldman, Morgan Stanley became a Federal Reserve-regulated bank holding company last year to ease worries about its access to funding.
But unlike Goldman, which has said it intends to stay focused on its investment business, Mack has said Morgan Stanley might seek to buy a regional bank to expand its deposit base.
The firm was also hit by its exposure to the tanking commercial real estate market. Morgan Stanley (MS, Fortune 500) shares tumbled 6% in early morning trading on the news.
The Wall Street investment bank said it lost $177 million, or 57 cents per share, in the quarter ended March 31. Analysts were expecting a loss of 8 cents a share, according to Thomson Reuters.
Including the payment of $401 million in preferred dividends tied to the government investing in Morgan Stanley last year as part of the bank bailout, the company reported a net loss to common shareholders of $578 million.
The company also slashed its quarterly dividend by 81%, to 5 cents from 27 cents, in a bid to conserve $1 billion in cash annually.
The latest results extend the firm's losing streak, and stand out from the rest of the major banks' earnings, which have been generally better than expected -- if sometimes of questionable quality. Last quarter, Morgan Stanley posted a $2.3 billion loss.
In a statement, CEO John Mack focused on strong performances in Morgan Stanley's fixed-income trading and investment banking businesses.
He said the bank was the top performer in the merger-and-acquisition rankings during the quarter, and like its peers Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), made significant sums trading plain vanilla fixed income products in the interest rate, commodity and credit arenas.
But those gains were offset by $1 billion in losses on real estate investments, and $1.5 billion of lost revenue tied to changes in the value of the bank's liabilities.
Meanwhile, Morgan Stanley said revenue in its equity sales and trading group plunged to just $900 million from $3.4 billion a year earlier.
Those setbacks help to explain part of the huge decline in Morgan Stanley's first-quarter revenue, which plunged 62% from a year ago to $3 billion.
The commercial real estate loss is particularly notable, for analysts have been warning that big banks could take a big hit this year in that once-hot market.
Goldman Sachs analysts wrote earlier this year that they expect commercial real estate to be the biggest problem asset class for banks in 2009. Analyst James Fotheringham forecast a 21%-26% price decline, which he said would lead to tens of billions of dollars of loan losses for banks and brokerage houses.
The results and the dividend cut reflect a decline in the profitability of Morgan's core business. Though Morgan Stanley's capital ratios remain strong - the bank said its Tier 1 capital, a measure favored by regulators, is 16% - it seems clear Morgan Stanley won't be joining the rush to repay the funds it got last fall under the Treasury's Troubled Asset Relief Program.
Mack told Morgan Stanley employees in a conference call last month that he didn't think now is the time for the bank to give back the $10 billion it got in October under TARP. Rivals such as Goldman and JPMorgan have indicated they hope to repay the funds soon.
Morgan Stanley said its Tier 1 capital ratio, excluding the TARP funds, is 13%. That's double the 6% ratio that allows regulators to deem a firm well capitalized.
Mack also said the latest-quarter loss was partly attributable to something that would normally count as good news.
He said Morgan Stanley would actually have reported a first-quarter profit if not for "the dramatic improvement in our credit spreads -- which is a significant positive development."
Tighter credit spreads reflect reduced investor anxiety over the prospect that the company might default on its obligations, and result in lower borrowing costs for the company.
But they also obligate the company to write up the value of those liabilities, in light of the increased amount Morgan Stanley would have to pay to repurchase those debts.
In last year's first quarter, Morgan Stanley posted $1 billion in gains by writing down the value of its obligations as credit spreads widened.
The disappointing first-quarter report comes as investors puzzle over what course Mack will chart in the coming year. Like Goldman, Morgan Stanley became a Federal Reserve-regulated bank holding company last year to ease worries about its access to funding.
But unlike Goldman, which has said it intends to stay focused on its investment business, Mack has said Morgan Stanley might seek to buy a regional bank to expand its deposit base.
Acobay
I have found a new social network, called Acobay. Acobay is a place where people can share all the stuff that they want.
From Automobiles to Software, it is possible to talk about everything. There are a lot of networks inside Acobay, if you like animals and have pets you can join the Pet Network, but if you are interested in Movies, than the perfect network to you, is the Movie Network.
Friday, April 17, 2009
Stocks extend advance
Stocks inched higher Friday as better-than-expected earnings from Citigroup, General Electric and Google, helped stretch the recent advance to a sixth straight week.
The Dow Jones industrial average (INDU) added 6 points or less than 0.1%. The S&P 500 (SPX) index rose 4 points or 0.5%. Both ended at more than two-month highs.
The Nasdaq composite (COMP) gained 2 points or 0.2%, ending at a more than five-month high.
Stocks, as represented by the S&P 500, have gained 28.5% in the past six weeks, on bets that the economy is closer to stabilizing. The gains followed a selloff that left the S&P 500 at a 12 1/2 year low. A rash of better-than-expected profit reports has helped sentiment this week.
The six week run is the market's best since May 2007, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
"No matter what is thrown at the market, it seems to want to chug higher, which is a big change in psychology from last fall or even earlier this year," Detrick said.
However, he noted that even if the rally proves to be more than a bear market bounce, at six weeks old, it's starting to look ripe for a pullback on a technical basis.
Quarterly results: Citigroup (C, Fortune 500) reported a quarterly profit Friday morning, due to strength in its investment banking division. But after paying out preferred dividends, results amounted to a per-share loss of 18 cents. Nonetheless, that was smaller than the 34-cent per share loss analysts expected. Shares of the Dow component fell 9%.
JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500) both reported weaker quarterly profit that beat estimates earlier this week. Last week, Wells Fargo (WFC, Fortune 500) forecast that it would report a $3 billion profit.
Regional Bank BB&T (BBT, Fortune 500) reported a weaker quarterly profit that nonetheless handily topped analysts' forecasts. The company also said loan losses are lessening. Shares gained 11%.
Dow component General Electric (GE, Fortune 500) reported weaker quarterly earnings that beat estimates on weaker quarterly sales that missed forecasts. Weakness in the company's finance unit countered mixed results at other divisions. Shares gained 1%.
After the close Thursday, Google (GOOG, Fortune 500) posted quarterly earnings that rose from a year ago and topped estimates on revenue that rose from a year ago but was shy of forecasts. Shares rose 1% Friday morning.
In other company news, General Motors (GM, Fortune 500) CEO Fritz Henderson said that the company will announce more job cuts and plant closings in the next few weeks. The company has until June 1 to reach agreements with its creditors and unions if it wants to avoid a government-mandated bankruptcy. Shares fell 4%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers two to one on volume of 1.95 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.43 billion shares.
Economy: The April consumer sentiment index from the University of Michigan rose to 61.9 from 57.3 in March. Economists surveyed by Briefing.com thought the index would rise to 58.5.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.94% from 2.83% Thursday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian and European markets ended higher.
In currency trading, the dollar gained versus the euro and fell against the yen.
U.S. light crude oil for May delivery rose 35 cents to settle at $50.33 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $11.90 to settle at $867.90 an ounce.
The Dow Jones industrial average (INDU) added 6 points or less than 0.1%. The S&P 500 (SPX) index rose 4 points or 0.5%. Both ended at more than two-month highs.
The Nasdaq composite (COMP) gained 2 points or 0.2%, ending at a more than five-month high.
Stocks, as represented by the S&P 500, have gained 28.5% in the past six weeks, on bets that the economy is closer to stabilizing. The gains followed a selloff that left the S&P 500 at a 12 1/2 year low. A rash of better-than-expected profit reports has helped sentiment this week.
The six week run is the market's best since May 2007, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
"No matter what is thrown at the market, it seems to want to chug higher, which is a big change in psychology from last fall or even earlier this year," Detrick said.
However, he noted that even if the rally proves to be more than a bear market bounce, at six weeks old, it's starting to look ripe for a pullback on a technical basis.
Quarterly results: Citigroup (C, Fortune 500) reported a quarterly profit Friday morning, due to strength in its investment banking division. But after paying out preferred dividends, results amounted to a per-share loss of 18 cents. Nonetheless, that was smaller than the 34-cent per share loss analysts expected. Shares of the Dow component fell 9%.
JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500) both reported weaker quarterly profit that beat estimates earlier this week. Last week, Wells Fargo (WFC, Fortune 500) forecast that it would report a $3 billion profit.
Regional Bank BB&T (BBT, Fortune 500) reported a weaker quarterly profit that nonetheless handily topped analysts' forecasts. The company also said loan losses are lessening. Shares gained 11%.
Dow component General Electric (GE, Fortune 500) reported weaker quarterly earnings that beat estimates on weaker quarterly sales that missed forecasts. Weakness in the company's finance unit countered mixed results at other divisions. Shares gained 1%.
After the close Thursday, Google (GOOG, Fortune 500) posted quarterly earnings that rose from a year ago and topped estimates on revenue that rose from a year ago but was shy of forecasts. Shares rose 1% Friday morning.
In other company news, General Motors (GM, Fortune 500) CEO Fritz Henderson said that the company will announce more job cuts and plant closings in the next few weeks. The company has until June 1 to reach agreements with its creditors and unions if it wants to avoid a government-mandated bankruptcy. Shares fell 4%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers two to one on volume of 1.95 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.43 billion shares.
Economy: The April consumer sentiment index from the University of Michigan rose to 61.9 from 57.3 in March. Economists surveyed by Briefing.com thought the index would rise to 58.5.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.94% from 2.83% Thursday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian and European markets ended higher.
In currency trading, the dollar gained versus the euro and fell against the yen.
U.S. light crude oil for May delivery rose 35 cents to settle at $50.33 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $11.90 to settle at $867.90 an ounce.
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