U.S. Stocks Drift Lower, Profit Worries

123jump.com Staff
11 Nov, 2008
New York City

U.S. market indexes faltered after a decline in home builders, insurers, retailers and real estate investment trusts. Starbucks reported a sharp decline in earnings, Tyco issued a cautious outlook. Insurance companies fell on the need for more capital.

[R]3:10PM New York – U.S. stocks dive on the profit worries. Insurers and home builders lead the decliners.[/R]

U.S. stocks declined on the worries that politicians and regulators are lagging the market reality and current turmoil in the financial markets is spreading to the wider economy. The list of companies looking for federal assistance is growing.

American Express joined the latest list of companies looking for federal help and General Motors and Ford Motor are inching towards once unthinkable bankruptcy protection.

Insurance stocks fell sharply on the worries that several leading companies may be forced to raise capital. Goldman Sachs comments on the sector drove the stocks in the sector lower. The late call from Goldman Sachs on the sector only reaffirms what most investors surmised weeks ago that Hartford and Prudential may need additional capital sooner than previously expected to preserve their investment ratings.

Hartford Financial ((HIG)) plunged as much as 33% before recovering to a loss of 25% to $10.99. Prudential Financial ((PRU)) declined 10% to $27.91.

Circuit City bankruptcy filing, the largest retailer to seek protection since 2002 filing by the retailer K Mart, has dragged stocks of several mall real estate operators. Las Vegas Sands is struggling under the mountain of debt to keep the expansion on track in China and declining visitors to Vegas casinos.

Starbucks Corporation ((SBUX)) reported weaker than anticipated earnings and forecasted annual earnings between 70 and 90 cents a share. Net earnings in the fourth quarter declined 97% to $5.4 million or 1 cent a share from $158.5 million or 21 cents a share. Not counting store closures the coffee house retailer earned 10 cents a share. Revenue in the quarter rose 3% to $2.52 billion and same store sales in the quarter declined 8%.

For the year the company earned 43 cents a share or $315.5 million compared to 87 cents a share or $672.6 million a year ago.

Crude oil declined 4.8% or $3.02 to $59.39 a barrel and natural has fell 55 cents or 7.6% to $6.70 mBtu.

European Markets Fall

In London FTSE 100 Index closed lower 157.23 or 3.57% to 4,246.69, in Paris CAC 40 Index decreased 169.34 or 4.83% to close at 3,336.41 and in Frankfurt DAX index lower 263.95 or 5.25% to close at 4,761.58. In Zurich trading SMI decreased 209.83 or 3.45% to close at 5,880.79.

Russia Plunges


Russian market plunged on the worries that ruble may decline sharply. The RTS Index plunged 10.7% to 725.90 after comments from the central bank. Net capital outflow from Russia reached $50 billion in October adding more pressure on ruble. Micex Index declined 13% to 647.50 at the end of the day and exchange halted trading for today and tomorrow and on trading on RTS was suspended at 12:35 p.m. Moscow time for one hour.

In Moscow trading, Luk Oil dropped 11%, Gazprom declined 15% and Rosneft fell 15.2%. Sberbank, the largest Russian bank that holds ruble deposits dropped 16%.