JPMorgan $2 Billon Loss Weighs on Wall Street Trading

Arthi Gupta
11 May, 2012
New York City

U.S. indexes edged lower after JP Morgan announced a $2 billion trading loss. The producer price index fell 0.2% in April. The International Energy Agency lifted its global oil demand forecast. Panasonic reported net loss and Sony estimated lower than expected net in the current fiscal year.

[R]9:35 AM New York – U.S. indexes edged lower after JP Morgan announced a $2 billion trading loss. The producer price index fell 0.2% in April. The International Energy Agency lifted its global oil demand forecast. Panasonic reported net loss and Sony estimated lower than expected net in the current fiscal year.[/R]

U.S. indexes declined after the surprise announcement from JPMorgan Chase that it suffered $2 billion trading loss in the last six weeks after an ""egregious"" failure at the Chief Investment Office.

JP Morgan said its illiquid hedges in complex financial instruments known as derivatives that are stemming from its division that is focused to limit the bank’s risk exposure in financial markets with the help of investing its own surplus capital.

“The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought,” Chief Executive Jamie Dimon told analysts and reporters at a hastily arranged meeting. He added, “There were many errors, sloppiness and bad judgement.”

Dimon also added that $2 billion loss would not be banned by the so called Volcker rule which effectively bans proprietary trading and takes effect this summer and the Fed plans to enforce the rule in July 2014.

The European indexes traded after the European Commission projected high deficit for Spain in the current and next year.

Spain is also expected to announce a range of banking measures that includes higher reserves and may accelerate consolidation among weak banks. Spain is expected to ask banks set aside €30 billion more against bad debts in addition to €50 billion mandates in February.

In Greece, Evangelos Venizelos, the leader of Pasok party inched toward forming a new coalition government. Venizelos is the third person in less than a week mandated to form a new government.

Asian markets declined after China reported a flurry of economic data that suggested a slowing economy.

China''s industrial production growth slowed to 9.3% from a year earlier in April, the latest data from the National Bureau of Statistics showed.

Inflation eased to 3.4% in April from 3.6% in March and retail sales increased 14.1% from a year ago in April, slower than the 15.2% rise in March.

Panasonic Corp., the Japanese electronics firm reported a hefty loss for fiscal year 2012, citing deteriorated business conditions and blamed it on the supply chain problems linked to earthquake and tsunami in Japan last year and flooding in Thailand, European financial crisis and the record high yen.

U.S. Producer Prices Fall

The producer price index in the U.S. fell 0.2% in April after unchanged in March, driven by a notable drop in energy prices, according to a report released by the Labor Department today.

Excluding the drop in energy prices as well as a modest increase in food prices, the core producer price index edged higher 0.2% in April.

IEA Lifts Global Oil Demand Outlook

The International Energy Agency raised its global oil demand forecast for 2012.

The IEA, in its monthly Oil Market Report released today raised its 2012 oil demand growth forecast by 0.8 million barrels per day to 90 mbd.

Earnings Review

CA, Inc. ((CA)), the IT management software and solutions company said fourth quarter revenues climbed 5% to $1.19 billion compared to $1.13 billion a year ago. Net income in the quarter gained 13% to $211 million or 45 cents per diluted share compared to net income of $188 million or 37 cents per share last year.

For fiscal year 2012, total revenue was $4.814 billion, up 9% from $4.429 billion in fiscal year 2011. Net Income for the year climbed 14% to $938 compared to net income of $823 in the prior year.

McDermott International, Inc. ((MDR)), the engineering and construction company reported first quarter revenue decreased 19% to $727.68 million from $899.24 million in the same quarter last year. Net income in the quarter declined 11% to $62.76 million or 26 cents per diluted share compared to net income of $70.42 million or 30 cents per share in the prior-year quarter.

NVIDIA Corporation ((NVDA)), the technology company said first quarter revenue fell 3.9% to $924.9 million compared with $962.04 million in the earlier year quarter. Net income in the quarter plunged 55.3% to $60.44 million or 10 cents per diluted share compared to net income of $135.22 million or 22 cents per share a year-ago quarter.

Panasonic Corporation ((PC)), the Japan-based electronics manufacturer reported fiscal year 2012 net sales dropped 10% to 7.85 trillion yen from 8.69 trillion yen a year ago. Net loss for the year was 772.17 billion yen compared to a net profit of 74.02 billion yen reported last year. Loss per basic share was 333.96 yen compared to profit per share of 35.75 yen in the prior year.