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U.S Market Update

Thu, Nov 13 2008, 16:54 GMT
by Trade The News Staff

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- Before the bell US equity futures recouped some of yesterday's losses, but since the NYSE open stocks have struggled to hold onto gains. Intel's lowered sales guidance is weighing on the NASDAQ, while rumors surrounding GE's dividend have sent the stock to $15, levels not seen since the mid 1990's. Pessimism about the global economy reigns supreme following the worse-than-expected weekly unemployment claims reading, the OECD's predictions for a 2009 recession in G7 economies and Germany confirming it is officially in recession. The US weekly jobless numbers hit their highest level since Sept 2001, the four-week moving average was the highest since March 1991 and the continuing claims reading hit its highest level since 1983. The slight uptick in the overnight and three-month LIBOR is striking a cautious chord as well. Front-month crude is holding steady around $57 as OPEC begins to sound the alarm over declining prices by hinting of a late, full November meeting. Other commodities are firmer. While the Baltic Dry bulk index resumed its extended declines, the Handysize rate rose 2.4%, its first increase since August.

- Dow component Wal-Mart disclosed Q3 results in line with analysts' expectations this morning, although the retail giant lowered its full-year forecast by a hair and guided below targets for the coming quarter. Same-store sales held up in the quarter, and the firm believes it will maintain positive SSS in the next quarter as well. WMT's CEO noted that he remains optimistic about the holidays, making him somewhat of a rarity among retail executives regarding this critical part of the year. Doctor Pepper Snapple missed earnings targets, taking a hit from charges stemming from its separation from Cadbury, while revenue met expectations. But shares of DPS are suffering from weak guidance for the year, which was well below analysts' estimates. Apparel maker Perry Ellis slashed its guidance for the full year and the coming quarter thanks to the economic slowdown.

- Semiconductor names are making gains despite all the bad news overnight. Yesterday after the close Applied Materials beat the Street on the top and bottom lines in its fourth-quarter report, but also said it saw falling margins in the quarter and that it would launch a major restructuring program to help it deal with an expected 30% drop in orders in Q109. In addition, AMAT halted its stock buyback program and offered dismal EPS and revenue guidance for Q1. Intel weighed in with its own grim view, noting that it sees business in the current quarter below expectations, slashing its revenue guidance and anticipated R&D spending. According to Intel, revenue is being affected by significantly weaker than expected demand in all geographies and market segments. In addition, the PC supply chain is aggressively reducing component inventories. To cap things off, an industry report noted that global silicon wafer area shipments contracted about 3% q/q in the third quarter of 2008, reflecting the increasing conservative mood in the industry.

- In other equity news, Wells Fargo briefly broke the print price ($27/shr) for its $11B stock offering this morning ahead of its expected closing later today. Citigroup is under intense pressure after the Wall Street Journal reported that the firm's directors may replace Chairman Sir Win Bischoff due to dissatisfaction over his performance. Overnight the New York Times discussed the possible benefits of bankruptcy for GM, noting that while bankruptcy would be painful, it may be preferable to a government bailout that may only delay the steps GM needs to take to become a stronger company. A Goldman analyst suspends his ratings and price target on GM, noting the automaker needs $22B in capital to bring operations to positive free cash flow. Google fell below $300/shr yesterday, and this morning Citibank pulled GOOG from its Top Picks Live List and Jefferies cut its price target to $420 from $551, citing further deterioration in e-commerce and online advertising. South Korea's SK Telecom scrapped a plan to create a business tie-up with Sprint Nextel due to worsening business environment. Raymond James cut numerous home builder names. WCG delayed its 10-Q filing and retained Goldman Sachs to review financing alternatives

- The greenback has been mixed in a trading session wracked by multiple cross currents as traders try to determine which sector of the global economy has been least impacted by the slowdown. The consensus view is certainly that the financial malaise has continued to deepen, exhibiting unprecedented intensity, scope and complexity. The dollar price action in the session has been more or less dictated by European crosses, with EUR/GBP hitting fresh all-time highs near 0.85. Dealers are also noting some repatriation flows back into the euro as Germany's Henkel converts USD to EUR following its Ecolab divestiture. The headline US trade deficit showed a slight improvement, but the data is clearing better for all the wrong reasons as both imports and exports declined.

Published on  Fri, Nov 14 2008, 10:38 GMT

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