From Briefing.com: 4:30 pm : Stocks finished the session near their lows Thursday, despite beginning the trading day with healthy gains. A late-session sell-off took the Dow to its lowest level in more than five years and a long-time Dow component to its worst point since 1950.
Trading was upbeat early on when tech bellwether IBM (IBM 89.00, -1.55) preannounced a third quarter earnings surprise, central banks in the Far East cut interest rates, and investors assessed comments from the Treasury that indicated it may inject capital directly into banks.
Dow component IBM gave investors some temporary reassurance that the tech sector hasn't turned over. IBM said that third quarter earnings would total $2.05 per share, which is more than analysts were expecting. On the downside, the company did fall short of the consensus revenue forecast, but stated it remains confident it will hit its full-year earnings forecast of $8.75 per share.
Tech posted a gain for much of the session, but finished 3.4% lower.
Central banks in South Korea, Hong Kong and Taiwan all moved to cut target interest rates, according to Financial Times. The move came just one day after the Federal Reserve and several other major central banks slashed interest rates in a coordinated effort to mitigate economic risks.
Investors reacted to a speech made yesterday by Treasury Secretary Paulson that the recently approved $700 billion emergency financial rescue plan would permit direct capital infusions into banks. Reuters reported injections could start as soon as the end of the month.
Despite the plan's intent to help shore up balance sheets at financial companies, the sector was hit with heavy selling pressure. It was up 3.6% early on, but closed 11.7% lower as every one of its industry groups floundered. Losses were most significant among regional banks (-15.2%), investment banks and brokers (-15.7%), and insurance companies (-16.8%).
Part of the ongoing efforts to shore up the financial system have the New York Fed entering into an agreement with subsidiaries of AIG (AIG 2.39, -0.80). Their agreement calls for the subsidiaries to exchange investment grade fixed income securities for up to $37.8 billion in cash.
The energy sector (-11.4%) also posted deep losses. The downturn is generally owed to fear of demand destruction for oil amid slower economic activity.
In turn, oil futures were recently indicated below $85 per barrel, down nearly 12% year-to-date. That has OPEC calling for an emergency meeting Nov. 18. It is being presumed that OPEC will agree to cut production.
Thursday marked the first session after the ban on short-selling certain financial stocks expired. The ban was originally limited to 799 financial stocks, but was later expanded to include some nonfinancial companies, such as Dow component General Motors (GM 4.76 -2.15).
Shares of GM have been consistently listed on the Dow since 1925, but slumped to their lowest level since 1950 as participants assess the challenges facing the company. GM was placed on CreditWatch Negative at Standard & Poor's as the firm assessed the weakening state of global automotive markets, along with capital market conditions that remain challenging.
Heavy selling pressure pushed the Dow well below 9000. The index has not been that low since mid-2003. The session's action also had the volatility index, VIX, above 60 for the first time ever.
The latest initial claims report was generally relegated to the back burner since it didn't bring any surprises. Claims for the week ended Oct. 4 fell 20,000 to 478,000, which is generally in-line with the consensus estimate of 475,000. The four-week moving average bumped up to 482,500 and continuing claims hit 3.66 million from 3.60 million the week before. DJ30 -678.91 NASDAQ -95.21 SP500 -75.02 NASDAQ Adv/Vol/Dec 470/2.99 bln/2515 NYSE Adv/Vol/Dec 205/2.00 bln/2859
4:02PM Catalyst Semiconductor stockholders approve acquisition of Catalyst Semiconductor by ON Semiconductor (CATS) 3.19 -0.05 : Co announces that its stockholders voted in favor of the definitive merger agreement providing for the acquisition of CATS by ON Semiconductor (ONNN) in an all-stock transaction during its stockholders meeting today. Under terms of the merger agreement, CATS shareholders will receive 0.706 shares of ONNN common stock for each share of CATS common stock they own at the closing of the merger.
11:30AM Micron announces a restructuring of its memory operations. (MU) 3.93 +0.06 : Co says in response to a challenging global environment for technology products, it announced a restructuring of its memory operations. The combination of declining customer demand and product oversupply in the marketplace has driven selling prices for NAND flash memory significantly below manufacturing costs, particularly for 200 millimeter manufacturing lines. As a result, IM Flash Technologies, a joint venture between Micron and Intel Corporation (INTC), will discontinue the supply of NAND flash memory from Micron's Boise facility. The NAND operation shutdown will reduce IMFT's NAND flash production by approx 35,000 wafers per month. As part of the restructuring, Micron plans to reduce its global workforce by approx 15% during the next two years. Cash restructuring and other related expenses are anticipated to be approx $60 mln, and the next year's cash operating margin benefit is expected to exceed $175 mln
8:35AM On The Wires (WIRES) : Ultratech (UTEK) announces that it has acquired the rights to a collection of patents from IBM (IBM) these include fundamental patents around the area of rapid thermal annealing...
8:01AM Canadian Solar signs 2009 sales contract with Systaic of Germany and announces European Sales to date (CSIQ) 12.76 : "The co announces that it has signed a sales contract with Systaic of Germany. Systaic will purchase 60 MW of regular solar modules for delivery in 2009. To date, CSI's sales contracts in Europe stipulate minimum shipments of approximately 226 MW. These contracts have options for up to an additional 80 MW of purchases for total European sales in the range of 226 - 306 MW out of our planned capacity of 500 - 550 MW. All these contracts were signed in the past month and primarily reflect the demand from large, long-standing customers in Germany. We have also signed sales contracts in Italy, the Czech Republic, Spain, and France, and are on track to increase sales in these countries. We are satisfied with the order booking level we achieved so far and predict it to increase significantly once our many on-going discussions with Spanish and Italian customers conclude in the next a couple of months. Our North American and Asian sales are also on track, which the Company will issue separate update later this Fall. Prices reflect market conditions and are in principle fixed for the first two quarters. Our cost-effective e-Modules are selling at a small discount to the regular high-efficiency polysilicon module. The order books for both products are strong."
6:36AM Intl Rectifier reaffirms Q109 revenue guidance (IRF) 16.41 : Co reaffirms its revenue guidance for Q109 ending September 30, 2008 of 7% to 9% sequential growth, and stated that it expects its results to be on the high end of that range. Richard J. Dahl, Chairman of the Board, said: "IRF has done more than survive a difficult period - it has built a strong foundation for future growth. Having put our financial house in order, we have put in place new leadership, with a new strategy and organization. We have shown early progress on our strategic roadmap, and we are targeting a 45% gross margin and a 20% operating margin in that roadmap."
09:55 am Asian Central Banks Cut Rates
Central banks in South Korea, Hong Kong and Taiwan cut their benchmark interest rates in the face of increased economic risks, the Financial Times reports.
The move follows 50 basis point cuts made Wednesday morning by the Federal Reserve, European Central Bank, Bank of England, Swiss National Bank, Bank of Canada, and Sveriges Riksbank (Sweden) and a 27 basis point cut by China.
Taiwan lowered its rate by 25 basis points to 3.25%, Korea cut its rate 25 basis points to 5.00% and Hong Kong cut its rate by 50 basis points to 2.00%, following yesterday's 100 basis point rate cut.
In Asian trading, Japan's Nikkei fell 0.5%, Hong Kong's Hang Seng gained 3.3%, Korea's Kospi rose 0.6%, and Taiwan's Taiex fell 1.5%.
09:32 am SEC Short-Selling Ban Expires
At 11:59 ET Wednesday the SEC ban on short-selling on financial stocks was allowed to expire as planned -- three business days after the passage of the financial relief legislation.
The SEC's short-selling ban, implemented on Sept. 19, was to "protect the integrity and quality of the securities market and strengthen investor confidence" as the government worked on a financial relief package.
Short selling was originally banned on 799 financial stocks, and was later expanded to some nonfinancial companies, such as General Motors (GM 6.91).
The measure was set to expire on Oct. 2, but due to the lack of passage of the financial relief plan, the SEC extended the ban to the earlier of three business days after the enactment of the financial relief legislation or Oct 17.
Since the ban's implementation, the financial sector has fallen 23.5%. By comparison, the broader stock market has dropped 18.4%.
Most financial stocks are indicated higher this morning despite the renewed ability to short.
08:28 am IBM (IBM)
IBM (IBM 90.55) preannounced third quarter earnings above the average analyst estimate and stuck by its full year 2008 outlook.
IBM posted a 22% year-over-year increase in earnings from continuing operations to $2.05 per share, topping the consensus estimate of $2.02. Earnings growth was driven by a higher gross profit margin and most likely some share repurchases. Net income increased 20% year-over-year to $2.8 billion.
Revenue growth was less impressive, rising 5% year-over-year to $25.3 billion, which was short of the average analyst estimate of $26.5 billion. Revenue growth would have been only 2% excluding a favorable currency impact.
IBM said its third quarter results were due to a steady base of recurring revenue, investments in emerging markets, and a strong and flexible financial foundation.
CEO and Chairman Samuel Palmisano said "We remain confident in our full-year outlook." That full year outlook calls for earnings of at least $8.75 per share. Wall Street expects full year earnings of $8.76 per share.
IBM is up 4.9% in premarket trading, making it unchanged for the year -- handily outperforming the S&P 500's decline of 33% -- thanks to the company's solid cost controls and favorable currency benefits. However, the dollar has strengthened recently, so IBM may face currency headwinds going into next year.
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