From Briefing.com: Weekly Recap - Week ending 09-Jan-09 News and economic data were mostly negative this week -- the unemployment rate surged to a 16 year high, December retail sales were awful, and several major companies issued earnings warnings -- resulting in sharp losses for the major indices.
In terms of economic reports, the ADP report Wednesday, which measures private nonfarm employment, foreshadowed the government's report on Friday. According to ADP, private employers slashed 693,000 jobs in December, which was much worse than the expected drop of 495,000 and reflects a very weak labor market.
The December nonfarm payrolls reading Friday confirmed the ADP report, showing a drop of 524,000 jobs. This matched the 525,000 decline as forecast by economists, which was revised downward following the ADP reading. The total workweek fell 0.2 hours to 33.3. This is not a good sign for future employment trends, as employers tend to cut hours before workers.
The unemployment rate jumped to 7.2% from 6.8% in part because of a drop in employed, but was also boosted by a surprising drop in the labor force. The employment numbers confirm an economy with downward momentum and there is no doubt that these numbers are weak.
Several major companies, including three Dow components issued warnings and/or cut jobs.
In response to weak demand due to the slowing global economy, Alcoa (AA) is cutting its workforce by more than 13,500 employees, or 13% of its worldwide workforce by the end of 2009. In addition, Alcoa said it would eliminate 1,700 contractor positions and institute a global salary and hiring freeze. The aluminum company also said it is "stopping all non-critical capital investment." Shares of Alcoa fell 10.7% for the week.
Intel (INTC) said its fourth quarter revenue will be lower than previous expectations, citing further weakness in end demand and inventory reductions by its customers. The company now projects fourth quarter revenue of $8.2 billion compared to the $8.74 billion First Call consensus. Intel is scheduled to report its fourth quarter earnings after the close on Jan. 15. Shares of INTC fell 6.9% for the week.
Wal-Mart (WMT) said that same-store sales increased 1.7% in December. The Briefing.com consensus expected sales to increase 2.9%. Shares plunged 9.8% as many traders thought Wal-Mart would perform better as cash strapped consumers looked for deals.
Meanwhile, leading electronics retailer Best Buy (BBY) reported a 6.5% drop in December same-store sales as strong TV sales were offset by weakness in digital cameras, video games, movies and music.
WMT and BBY were among many retailers reporting dour December results -- of the 31 retailers reporting same store sales that Briefing.com covers, only six had positive sales and nine issued downside guidance.
Consumers are also avoiding major purchases, with December auto sales at GM (GM) and Ford (F) dropping 32.4% and 31.4%, respectively.
Other notable companies that gave negative earnings/revenue outlooks include Time Warner (TWX), Macy's (M), Gap (GPS), Coach (COH), and TJX (TJX).
In commodity trading, crude oil futures had massive swings. Prices surged 8.9% to $46.34 per barrel as the the unrest in the Middle East continued. The gains did not last long, however, as crude ended the week with a 12.6% loss at $40.49 per barrel after the weekly energy inventory report on Wednesday showed more evidence that the global economic slowdown is causing demand destruction.
The S&P 500 is now 20% above its multi-year low that was reached in November. It is down 38% from its 52-week high and down 44% from its all time high reached in October 2007.
--Ryan McShane
**The S&P 400 Midcap Index, which isn't included in the table below, lost 3.8% this week and is and is down 1.4% year-to-date.
Index Started Week Ended Week Change % Change YTD %
DJIA 9034.69 8599.18 -435.51 -4.8 -2.0
Nasdaq 1632.21 1571.59 -60.62 -3.7 -0.3
S&P 500 931.80 890.35 -41.45 -4.4 -1.4
Russell 2000 505.82 1223.01 717.19 141.8
2:42PM Rambus confirms that the court declared its patents in suit unenforceable in Micron Delaware case (RMBS) 11.57 -6.93 : Co confirmed that the U.S. District Court of Delaware in the patent infringement matter with Micron Technology (MU) has found that Rambus cannot pursue its claims against Micron due to spoliation. The judge determined that Rambus executed its document retention policy during a time when it anticipated litigation. "We respectfully, but strongly, disagree with this opinion, and at the appropriate juncture plan to appeal," said Tom Lavelle, senior vice president and general counsel at Rambus. "This opinion is highly inconsistent with the findings of the Court in the Northern District of California which looked at the same conduct and found there was nothing improper with our document retention practices. We are confident in the strength of our position and will continue to vigorously pursue fair compensation for the use of our patented inventions."
7:53AM TrimTabs estimates all equity mutual funds post inflow of $6.4 billion in week ended Wednesday, January 7th : TrimTabs Investment Research estimates that all equity mutual funds posted an inflow of $6.4 billion in the week ended Wednesday, January 7th, versus an outflow of $1.2 billion in the previous week. Equity funds that invest primarily in U.S. stocks posted an inflow of $5.8 billion, versus an inflow of $1.7 billion in the previous week. Equity funds that invest primarily in non-U.S. stocks had an inflow of $613 million, versus an outflow of $2.9 billion in the previous week. In addition, bond funds had an inflow of $5.5 billion, versus an outflow of $2.8 billion in the previous week, and hybrid funds had an inflow of $1.7 billion, versus an outflow of $877 million in the previous week. Separately, TrimTabs reports that exchange-traded funds that invest in U.S. stocks posted an inflow of $909 million, versus an outflow of $1.3 billion in the previous week. ETFs that invest in non-U.S. stocks had an inflow of $1.8 billion, versus an outflow of $207 million in the previous week.
7:45AM On The Wires : ASM International N.V. (ASMI) announced that it plans for a major restructuring of ASM Europe. Co expects the proposed measures will have a positive impact on Front-end gross margins and will lower the operating break-even level for Vertical Furnaces by at least 30%. Anticipated initial benefits in 2009 in terms of lower Vertical Furnace costs are expected to be ~EUR 7 mln. Reorganization charges of ~EUR 25-30 mln are expected to be included in accounts, mainly in 2009... Tri-Continental (TY) announced changes to its distribution policy and stock repurchase program. Co has eliminated its level rate distribution policy and adopted an earned distribution policy. Co also renewed a modified version of the Corporation's stock repurchase program... Gartner (IT) announced a reduction in its workforce of 117 employees as part of its efforts to manage operating expenses. Co committed to this action in December 2008, and as a result will incur pre-tax expenses of ~$8.5 mln in the fourth quarter of fiscal 2008, related principally to cash severance costs for terminated employees. |
