Earnings Worries, U.S. Indexes 11-Year Low

123jump.com Staff
24 Feb, 2009
New York City

U.S. stocks fell sharply despite a surge in banks. The ongoing discussion between Citigroup and the U.S. Treasury only highlights the fragile nature of the U.S. banking system. The Treasury action, though welcome is not likely to solve the problem of distressed loans.

[R]5:00PM New York – 11:00PM Frankfurt, 4:00AM Sydney – U.S. stocks sold off in the final hour of trading as stocks face growing worries of the earnings persistent lack of action from the U.S. administration. The U.S. banks remain fragile and have not dealt with the growing losses in mortgage loans.[/R]

U.S. stocks fell sharply despite a surge in banks. The ongoing discussion between Citigroup and the U.S. Treasury only highlighted the fragile nature of the U.S. banking system status. The Treasury action, though welcome is not likely to solve the problem of distressed loans. Investors are still digesting latest earnings and most companies are still grappling with falling sales, high operating costs and tighter credit conditions.

Markets in South America, Asia and Europe declined as the world awaits action on the U.S. banks. The creeping nationalization of banks and banking system is another blow to the U.S. promoted free market system where financial companies were allowed to tack reckless leverage to the detriment of the economy.

Fifth Third Bancorp led gainers in the S&P 500 index with a rise of 41.5%. Campbell Soup Company second quarter profits fall 15%. Developers Diversified Realty Corporation slips to loss in fourth quarter. Broker views lifted Motorola and Expedia but ArcelorMittal falls.

Stocks in UK declined as persistent worries related banking sector remain on top of investors list. Northern Rock reports a loss of £1.4 billion. Royal Bank of Scotland to split into two units in the hopes that the segregating the troubled portfolio of loans will save costs.

European market indexes closed lower, despite an attempt by financial stocks to rally failed to lift indexes and sector stocks. Banks and auto led the decliners in Germany and France. Renault debt rating was lowered. France will invest capital to support the merger of two largest savings banks.

Stocks in Tokyo declined on active trading after SFCG filed for bankruptcy, the largest bankruptcy by a publicly traded company in seven years. In Tokyo trading Nikkei 225 index fell 0.5%. The convenience store sales increased 7% in January on rising sales of tobacco.

Hong Kong market indexes closed higher on the speculation that the U.S. may increase its stake in the troubled lender Citigroup. The benchmark index in jumped 3.8% and in Shanghai increased 3.4%. Macao gambling revenues in January declined 5.3%. Gold in the region traded above $1,000 price.

Stocks in Australia dropped on negative earnings outlook from Fairfax Media and a loss estimate from BlueScope Steel. In Sydney, ASX 200 index lost 1.5%. The mining giant, BHP Billiton reduced its headquarter count as the demand and prices of metals decline but operating costs remain high.

American Markets Reviews

Dow Jones Industrial Average decreased 250.9 or 3.41% to a close of 7,114.78, S&P 500 dropped 26.72 or 3.47% to 743.33, and Nasdaq Composite Index edged down 53.51 or 3.71% to a close of 1,387.72. In Toronto TSX Composite lost 302.32 or 3.8% to close at 7,647.67.

In Latin American trading, Mexico Bolsa Index declined 367.83 or 2.01% to 17,956.40 and Brazil Bovespa Stock Index dropped 1,015.69 or 2.56% to 38,714.64.

Argentina declined 3.73%, Chile declined 1.9%, Peru decreased 1.2% and Colombia edged lower 0.44%.

U.S. Stock Movers

Of the stocks in S&P 500 index, 26 increased, 464 declined and 10 were unchanged.

Humana Inc led the decliners in the S&P 500 index with a loss of 24% followed by losses in Genworth Financial with a loss of 15%, in United Health Group of 15%, in Huntington Bancorp of 14.9%, in MBIA Inc of 14.3%.

Fifth Third Bancorp led gainers in the S&P 500 index with a rise of 21% followed by gains in Citigroup Inc of 9.7%, in Ford Motor Company of 9.5%, in Lennar Corp of 7.5% and in SunTrust Banks of 7.2%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 40.22 or 0.54% to 7,376.16, Hang Seng index in Hong Kong increased 475.93 or 3.75% closed to 13,175.10, CSI 300 index in China higher 66.16 or 2.82% closed to 2,410.48. ASX 200 index in Australia decreased 51.20 or 1.50% closed to 3,351.20. The KL Composite index in Malaysia lower 1.88 or 0.21% closed to 887.83.

The Kospi Index in South Korea increased 33.60 or 3.15% to close at 1,099.55. SET index in Thailand closed higher 0.32 or 0.07% to 434.99 and JSE Index in Indonesia increased 15.50 or 1.19% closed to 1,312.44. The Markets of India were closed today.

Europe Markets Review

In London FTSE 100 Index closed lower 38.33 or 0.99% to 3,850.73, in Paris CAC 40 Index decreased 22.68 or 0.82% to close at 2,727.87 and in Frankfurt DAX index lower 78.21 or 1.95% to close at 3,936.45. In Zurich trading SMI decreased 54.09 or 1.11% to close at 4,797.12.

Commodities, Bonds and Currencies

Yields on 10-year bond decreased to 2.78% and on 30-year bonds decreased to 3.53%.

The U.S. dollar edged higher to $1.2738 to a euro and against the Japanese yen inched higher to 95.06 yen.

Immediate futures prices of Texas crude oil decreased $0.47 to $37.97 a barrel, for natural gas decreased $0.06 cent to $4.04 per mbtu and gasoline prices increased 0.36 cents to 104.69 cents a gallon.

Futures of corn decreased 2 cent to $3.4975, soybean decreased 1.750 cents to $8.74, sugar declined to 0.07 a pound to 12.99 and wheat decreased 1.25 cents to $5.20 a bushel.

In metals trading, copper prices decreased 1.35 cents to $1.43 a pound, gold decreased $7.30 to $987.70 per ounce and silver decreased 0.08 cent to $14.37.