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Strategies & Market Trends : Technical analysis for shorts & longs
SPY 694.07-0.2%4:00 PM EST
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To: Johnny Canuck who wrote (41085)4/19/2004 12:04:07 PM
From: Johnny Canuck  Read Replies (1) of 70226
 
7:53 Interest rate raise concerns highlighted in WSJ's column

The WSJ's "Tracking the Numbers" column discusses interest rate concerns and financial co's profits possibly being pressured. There are four pure-play financial firms in the DJIA index, but there's plenty of financial exposure among other component co's in the 30-stock index. Caterpillar's financial-products division accounted for 23% of overall profits last year. IBM derived 11% of its 2003 pretax earnings from its financing division. About half of General Electric's profits came from its General Electric Capital division. Nearly three-quarters of General Motors's came from its financing and insurance operations. Deere & Co.'s financial-services group accounted for 51% of its overall profits in 2003. Harley-Davidson's financial-services division accounted for 16% of the co's 2003 operating profit. Ford Motor would have shown a loss in 2003 if it not for the earnings of Ford Credit. If the Federal Reserve were to begin raising its Fed-funds target rate, and short-term rates were to climb faster than long-term rates, the yield curve would flatten and trouble could be in the offing. Deutsche Bank estimates that if the Fed were to raise its target rate to 2% from the current 1%, the move would cut earnings at Ford Credit by $153 mln. William Gross, managing director at Pacific Investment Management Co., says, higher rates mean the product nonfinancial co's sell -- "whether it's a car or a house -- gets more expensive."
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