Bank of America says their fourth quarter results will be "disappointing" and there are more write-downs coming due to exposure to collateralized debt obligations (CDOs). They will likely not be buying back stock until 2009. Down 2 percent pre-open.
Wachovia Bank will put aside about $1 billion to cover mortgage-related losses; down 2 percent pre-open.
The failure of the Fed to cut more than 25 basis pointswas one factor that caused Guy Moszkowski at Merrill Lynch to downgrade Bank of America. He also downgrades JP Morgan and Wachovia. He notes that Merrill is expecting a "consumer recession" in 2008, and that a firm like JPM will be hard-pressed to avoid the pain entirely.
If that's not enough of dumping on the banks, how about this one: Morgan Stanley named Citigroup as their top short idea for 2008. Their reasoning: "earnings are deteriorating, we expect new management to deliver a dividend cut, not a breakup, and we expect further hybrid issuance, diluting current shareholders."
1) More holiday cheer: Office Depot sees "continued erosion of sales and earnings" and that weakness it had seen in the third quarter in Florida and California appears to be spreading to other parts of the country.
2) Morgan Stanley downgrades the entire airline sector, talking about higher fuel costs and a weak economy. US Air,Northwest, Delta, and AMR downgraded, but Continental and Southwest are upgraded.