U.S. Stocks Drop on Negative Credit Outlook; Citi Net Plunges 32%

Arthi Gupta
18 Apr, 2011
New York City

U.S. indexes traded lower after a rating agency raised an alarm on the lack of consensus among U.S. politicians. Baxter agreed to acquire Prism Pharma for $338 million. Bombardier inked $867 million contract with DB Regio. Citigroup net slid 32% despite lower credit-loss provisions.

[R]11:00 AM New York – U.S. indexes traded lower after a rating agency raised an alarm on the lack of consensus among U.S. politicians. Baxter agreed to acquire Prism Pharma for $338 million. Bombardier inked $867 million contract with DB Regio. Citigroup net slid 32% despite lower credit-loss provisions.[/R]

European markets slumped after sovereign debt worries resurfaced and a meeting of G-20 finance ministers failed to produce another round of global economic stimulus.

Asian markets traded mixed after China raised banks' reserve ratio requirements by 50 basis points.

The People's Bank of China announced over the weekend that it is lifting the reserve requirement for banks by 50 basis points to a record 20.5%, effective April 21st. The announcement came after last week's inflation data that showed a 5.4% increase in the consumer price index for March.

Hungary's central bank on Monday decided to leave its benchmark base rate unchanged at 6 percent for the third straight month, despite a rise in inflation.

S&P Lowers U.S. Outlook

Standard & Poor's cut its ratings outlook on the U.S. to negative from stable today but kept its Triple-A rating on the world's largest economy. The rating agency also noted that there is one-in-three chance that the rating may be lowered in the next two years as the Democrats and the Republicans remain divided in stemming rising debt. President Obama’s plan will require government debt ceiling increased to $20.8 trillion and the Republican plan will lift it to $19.5 trillion by 2016.

Rating agencies have been slow in lowering credit outlooks of the U.S. and other developing nations and not laid out stricter guidelines to control debt unlike the harsher views taken on the emerging market debts. The U.S. debt has ballooned in the last ten years on three wars and unpopular bailout of banks that has driven the commodities prices to record high in three decades.

Chevrolet Q1 Sales Surges

General Motors Co. announced that Chevrolet sold 1.1 million vehicles worldwide in the first quarter, a 15% increase over prior year. Chevrolet sold 150,652 Cruze sedans during the quarter, a 117% increase over first quarter of 2010.

Baxter Acquires Prism Pharma

Baxter International Inc. agreed to acquire privately-held Prism Pharmaceuticals, Inc. for a total consideration of up to $338 million.

Under the terms of the deal, Baxter will pay cash payment of $170 million at closing of the transaction and up to $168 million in future sales-based milestone payments.

Bombardier Inks Contract with DB Regio

Bombardier, Inc.'s railway division Bombardier Transportation signed a nine-year frame contract DB Regio AG valued at about 600 million euros or $867 million for 200 Bombardier TRAXX diesel locomotives with game-changing multi-engine propulsion.

Earnings Review

Citigroup Inc. ((C)), the diversified financial services holding company reported first quarter total revenues decreased 22% to $19.73 billion compared with $25.42 billion in the prior-year quarter. Net income in the quarter fell 32% to $3 billion or 10 cents a share compared with net income of $4.43 billion or 15 cents per share in the same period last year.

Eli Lilly and Co. ((LLY)), the drug maker reported first quarter total revenue grew 6% to $5.84 billion from $5.49 billion a year ago. Net income in the quarter declined 15.2% to $1.06 billion or 95 cents per diluted share compared to net income of $1.25 billion or $1.13 per share last year.

Halliburton Company ((HAL)), the oilfield services provider reported first quarter total revenue surged 40.4% to $5.28 billion from $3.76 billion in the same quarter last year. Net income in the quarter soared 148% to $511 million or 56 cents per diluted share compared to net income of $206 million or 23 cents per share in the prior-year quarter.

Park National Corporation ((PRK)), the bank holding company reported first quarter net income rose 3.1% to $19.9 million from $19.3 million for the year-ago quarter. On a per-share basis, earnings for the quarter were $1.29 compared with $1.30 last year, on a higher share count in the reporting period.

Net interest income rose 2.9% to $69.3 million from $67.4 million.

TD Ameritrade Holding Corp. ((AMTD)), the brokerage services provider reported second quarter net revenues grew 13% to $718.23 million from prior year's $635.43 million. Net income in the quarter grew 5.6% to $171.67 million or 30 cents per diluted share compared to net income of $162.55 million or 27 cents per share last year.

W.W. Grainger, Inc. ((GWW)), a broad line supplier of maintenance, repair and operating products reported first quarter sales grew 13% to $1.88 billion from $1.67 billion in the previous year. Net earnings in the quarter increased 59% to $157.93 million or $2.18 per diluted share compared to net earnings of $99.17 million or $1.31 per share a year ago.