U.S. Stocks Decline on Rising Credit Losses

123jump.com Staff
29 Feb, 2008
New York City

U.S. stocks fell sharply at mid-day after UBS analyst raised his estimate for credit market related lossses to $600 billion. The current reported losses are $165 billion. Separately, the Commerce Department reported that personal consumption in January rose 0.4% in January from December, which was revised higher to 0.3% from 0.2%. AIG reported lts largest loss in nine decades. Dell fourth quarter revenue rose 10% and earnings per share were 31 cents.

[R]11:30AM New York – U.S. stocks trade lower and weak dollar and UBS estimate of credit market losses rising to $600 billion.[/R]

Personal consumption in January rose 0.4% from December after the December data was revised higher to 0.3% from 0.2%. Prices, excluding food and energy, increased 0.3%, compared with an increase of 0.2% in December. The total index including food and energy has come to be viewed as a more indicative of the real cost increases for the consumers and most people.

Personal income increased $32.2 billion, or 0.3%, and disposable personal income increased $46.6 billion, or 0.4%, in January, according to the Bureau of Economic Analysis.

Personal consumption expenditures (PCE) increased $39.9 billion, or 0.4%. In December, personal income increased $54.0 billion, or 0.5%, DPI increased $46.0 billion, or 0.4%, and PCE increased $32.0 billion, or 0.3%, based on revised estimates.

UBS analyst Geraud Charpin in a research note to clients suggested that the losses related to credit market may rise as high as $600 billion. So far declared banks have declared $165 billion in losses and as recently as German Finance Minister had suggested that losses can reach as high as $400 billion in a conference after the G 7 meeting. Leveraged loans and mortgage securities continue to unwind in the wake of illiquid markets the values of these securities keep falling.

AIG ((AIG)) reported that its net income for full year 2007 was $6.20 billion or $2.39 per diluted share, compared to $14.05 billion or $5.36 in 2006. Net income, as reported, includes the effect hedging activities.

Full year 2007 adjusted net income was $9.31 billion or $3.58 per diluted share, compared to $15.41 billion or $5.88 in 2006.

The net loss for the fourth quarter of 2007 was $5.29 billion or $2.08 per diluted share, compared to net income of $3.44 billion or $1.31 per diluted share in 2006. The adjusted net loss for the fourth quarter of 2007 was $3.20 billion or $1.25 per diluted share, compared to adjusted net income of $3.85 billion or $1.47 per diluted share in 2006.

AIG stock dropped 7% or $3.35 to $46.80.

Dell ((DELL)) today reported results for its fourth quarter of fiscal year 2008, with revenue up 10% year-over-year to $16 billion, unit growth of 19%, operating income of $776 million and earnings per share of $0.31. Revenue for the full fiscal year was $61.1 billion, an increase of 6% year-over-year and earnings per share grew 15 percent to $1.31.

Revenues in the North and South America were up 7% for the quarter and shipments increased 13% driven by a 22% increase in revenues from Americas International. Revenue in Brazil, a key emerging country for Dell, grew 52%.

Dell maintained its No. 1 position in the U.S. commercial segment with 35% of all units shipped in the quarter, according to industry analyst estimates