From Briefing.com: 4:40 pm : The stock market posted its eighth consecutive loss in an extremely volatile session, which marked a fitting end to one of the most tumultuous weeks ever. The S&P 500 settled with a loss of 1.2%, which was actually a pretty decent result considering how far it was down at session lows.
The S&P 500 plunged 7.7% on the open with global economic fears driving the selling interest. The index then quickly bounced back into positive territory, only to retreat toward session lows in afternoon trade. Then, in the final hour of the session, the S&P 500 rebounded from a loss of 7.3% to a gain of 2.9%, and eventually ended the day with a loss of 1.2%. Trading volume on the NYSE was one the third heaviest on record, with 2.95 billion shares exchanging hands.
Eight of the ten economic sectors posted a loss. Small-cap stocks outperformed, with the Russell 2000 surging 4.7%.
Continued tightness of credit markets and uncertainty regarding the economic outlook fueled the volatility. The TED spread, which is the difference between what banks charge each other for three-month dollar loans (three-month Libor) and what the government pays (three-month T-Bill) rose 40 basis points to 4.64%. For comparison, the TED spread averaged 0.36% in 2006. The volatility index, which is considered to reflect market fear, spiked to its highest level on record.
Overseas stock markets, which closed before the U.S. stock market rebounded, saw some of their worst sessions in decades. In Asian trading, Japan's Nikkei fell 9.6% and Hong Kong's Hang Seng dropped 7.2%. In Europe, London's FTSE fell 8.9%, Germany's DAX dropped 7.0% and France's CAC declined 7.7%.
In corporate news, Lehman Brothers bonds were priced at 8.63 cents on the dollar during an auction by credit default swap (CDS) sellers, according to Creditfixings.com. In other words, firms that sold protection against Lehman defaulting on its debt, known as CDS, will be forced to pay 91.37 cents on the dollar to reimburse those who bought the protection -- resulting in steep losses for the firms that sold CDS.
Separately, Morgan Stanley (MS 9.68, -2.77) and Goldman Sachs (GS 88.80, -12.55) tumbled 22.3% and 12.4%, respectively, after the long-term credit ratings of both companies were put on review for a downgrade at Moody's.
Still, the financial sector (7.0%) outperformed, as traders scooped up the recently beaten up shares of real estate investment trusts, regional banks (+9.5%) and large diversified firms (+10.2%), such as JPMorgan Chase (JPM 41.64, +4.96) and Citigroup (C 14.11, +1.18).
In earnings news, General Electric (GE 21.50, +2.49) posted a 10% year-over-year drop in third quarter earnings per share to $0.45, which met estimates. The company also said it is on track to meet its full year guidance and will maintain its dividend for the full year. Shares of GE rallied 13%, helping the industrial sector outperform with a gain of 1.8%.
Commodities plunged 6.7% and oil prices fell 6.9% to $80.61 per barrel as traders speculated a global economic slowdown will crimp consumption. The dollar advanced 1.6%, which also played a role in some of the decline in commodities.
The drop in oil prices weighed on energy stocks, which fell 8.1%.
For the week, the Dow, Nasdaq and S&P 500 declined 18.2%, 15.3% and 18.2%, respectively. For the year, the Dow, Nasdaq and S&P 500 are down 36.3%, 37.8% and 38.8%, respectively. DJ30 -128.00 NASDAQ +4.39 NQ100 -0.4% R2K +4.7% SP400 +0.2% SP500 -10.70 NASDAQ Adv/Vol/Dec 1356/4.17 bln/1393 NYSE Adv/Vol/Dec 1122/2.95 bln/2284
8:01AM SiRF Technology says International Trade Commission to review ITC judge's initial ruling in SiRF-Broadcom case (SIRF) 1.20 : Co announces that the International Trade Commission has issued a notice for review in part of the Initial Determination by the I.T.C Administrative Law Judge that certain SiRF products infringed upon six patents held by Global Locate, a wholly-owned subsidiary of Broadcom (BRCM). Specifically the Commission has determined to review claims on three out of the six patents.
6:38AM General Electric reports EPS in-line, revs in-line; on track to meet full yr guidance; maintains dividend at $1.24 per share (GE) 19.01 : Reports Q3 (Sep) earnings of $0.45 per share, in-line with the First Call consensus of $0.45; revenues rose 11.1% year/year to $47.23 bln vs the $47.34 bln consensus. Co announced that it will maintain dividend at $1.24 per share through 2009 . Co said,"We are on track to meet our September 25 revised guidance for the full year". GE says to maintain dividend at $1.24 per share through 2009. Co said, "Our financial services business generated $2 billion of earnings, consistent with our revised expectations. While GE Capital is not immune from the current environment, we continued to outperform our financial services peers. We are improving our margins and focusing these businesses on the right products and markets. GE Capital is on track to earn over $9 billion for the year".
6:32AM Broadcom announces U.S. international trade commission affirms infringement ruling against SiRF on three GPS-related patents (BRCM) : Co announces that the U.S. International Trade Commission has affirmed an Initial Determination that SiRF Technology Holdings, (SIRF) infringes three GPS-related patents held by Global Locate, Inc., a wholly-owned subsidiary of Broadcom. The I.T.C also said that it would review the findings regarding three additional patents that SiRF was found to infringe.
6:26AM Asyst confirms Aquest is unable to submit indicative proposal to Asyst (ASYT) 1.25 : Co confirmed today that Aquest Systems has been unable to assemble and submit a transaction proposal to purchase the outstanding Common Stock of Asyst. As a result, Asyst has ended discussions regarding a potential transaction with Aquest. As previously reported by the company, Aquest Systems in July 2008 expressed an interest in acquiring Asyst. Since late August, Asyst provided Aquest and its potential financial partners with due diligence pursuant to a confidentiality and stand still agreement dated August 20, 2008. However, Aquest has indicated that it is unable to submit an indicative proposal to acquire Asyst as contemplated by the agreement. The co also announced that in its fiscal second quarter ended Sept. 30, 2008, it booked new orders totaling approx $110 mln, up from $63 mln in the prior sequential quarter. During the first week of its fiscal third quarter, Asyst received additional orders totaling approx $30 mln related to the first phase of a new semiconductor fab in Asia. In addition, the company announced that it has reached agreement to amend its credit facility with Key Bank, to modify certain terms, including covenants related to minimum EBITDA, minimum interest coverage, and minimum liquidity, and to increase scheduled principal payments on its term loan during calendar 2009.
09:37 am Broadcom tgt cut to $22 at RBC; expects the co to emerge stronger post downturn: . RBC is adjusting their model to the new economic reality and lowering ests, multiple and price target. Firm continues to expect BRCM to win market share in multiple sub-segments and outgrow peers. They believe that current stock level discounts below seasonal growth in most sub-segments. Firm expects multiples to expand when the market returns to trading on fundamental rather than fear. Assuming a CY09 PE multiple range from 10X to 18X, they see 15% downside and 50% upside. Firm expects BRCM to emerge stronger as it uses the downturn to rein in operating expenses, make opportunistic acquisitions at attractive valuations and gain market share. Firms cuts tgt to $22 from $36.
09:35 am Apple tgt cut to $145 at Oppenheimer; believes there is considerable value: . Oppenheimer notes AAPL is now trading at a FY08 unlevered free cash flow yield of 10%. Firm says you no longer even need faith in Apple's growth--just in its survival--to see considerable value here. Assuming a WACC of 13%, the current share price implies that Apple will have a perpetual growth rate of merely 3% (i.e., matching inflation) from 2008 till the end of time. Even with all the fear and uncertainty gripping the global economy, firm is willing to invest on the thesis that Apple can and will do a fair bit better, even near term. Firm's new price target of $145 (down from $213) is based on 17x FY08E unlevered free cash flow plus $23 bln in cash. Firm reiterates their Outperform rating.
08:56 am Citigroup (C)
Citigroup (C 12.93) said last night that it is seeking damages against Wachovia (WB 3.60) and Wells Fargo (WFC 27.25) after not being able to reach an agreement over Wachovia. Citi will no longer try to stop the Wells Fargo-Wachovia merger, and Wells Fargo said it will proceed with the transaction.
On Sept. 29, Citi reached an agreement in principle to purchase Wachovia's banking operations for $2.2 billion in stock in an FDIC-backed transaction to avoid the collapse of Wachovia.
On Oct. 3, Wells Fargo and Wachovia announced they had reached a definitive merger agreement, where Wells Fargo would acquire all of Wachovia for an all-stock transaction valued at $15.1 billion at the time.
Citi claimed Wachovia violated an exclusivity agreement, prompting it to bring a $60 billion lawsuit against Wachovia and Wells Fargo.
The parties then agreed to halt litigation so they could work things out, with reports indicating Wells Fargo and Citi were working on a deal to split Wachovia's branches.
The banks were unable to reach an agreement, however, with Citi citing dramatic differences in the parties' transaction structures and views of risk. Citi feels it has strong legal claims against Wachovia and Wells Fargo and will pursue damages.
Wells Fargo said it expects the merger with Wachovia will be competed by the end of fourth quarter 2008.
08:32 am General Electric (GE)
Dow component General Electric (GE 19.01) reported third quarter earnings of $0.45 per share, in-line with the First Call consensus of $0.45. Revenues rose 11.1% year-over-year to $47.23 billion versus the $47.34 billion consensus estimate.
GE announced that it will maintain its dividend at $1.24 per share through 2009 and said it is on track to meet the revised guidance for the full year it provided Sept. 25.
In its release, GE noted its financial services business generated $2 billion of earnings, consistent with its revised expectations, and that its infrastructure and media businesses continued to see signs of strength. The company reminded investors that GE Capital is not immune from the current environment, but that it continued to outperform its financial services peers. GE Capital, reportedly, is on track to earn over $9 billion for the year.
Separately, the company expects overall industrial growth to continue based on solid orders. GE's total orders backlog stands at $170 billion, which is up 20% from the year-ago period.
Caught up with concerns about the economic outlook, the market is still questioning whether GE will be able to live up to earnings expectations for the fourth quarter and next year. Accordingly, despite its in-line report, shares of GE are currently indicated 3% lower in premarket action. |
