Intel's Drop Will Drag S&P Down With It
With the Intel disappointment, S&P futures are trading below August lows and we are now certain to see the S&P 500 -- but not the Dow -- trade at 52-week lows.
Notable drops in overseas markets: Hong Kong down 5.4 percent, Russia down 4.9 percent, U.K., France and Germany down fractionally.
While Intel's Q4 was roughly in line, it is the outlook for the first quarter that is dropping the shares last night and this morning, with the company guiding sequential revenue down.
Intel down 15 percent pre-open, with other techs weak: Advanced Micro Devices down 5 percent, Hewlett-Packard and Texas Instruments each down 3 percent.
The word "challenging" pops up in comments from both JPMorgan Chase and Wells Fargo this morning.
JPMorgan Chase reported earnings of 86 cents per share, a tad below expectations of 92 cents; revenues were above consensus. As expected, the losses were in investment banking, where there was a writedown of $1.3 billion on subprime mortgages. The consumer home equity portfolio also was weaker than expected.
Still, asset management, commercial banking, and private equity all produced strong results. And their subprime exposure, at $2.7 billion, is way below Citigroup's exposure of almost $40 billion.
All in all, not a bad report. Traders are waiting for the conference call to see if consumer charge-offs and provisioning will need to rise, as they did for Citi.
Wells Fargo reported 41 cents per share, in line with expectations -- bear in mind analysts were expecting them to earn 69 cents less than two months ago. The company took a reserve of $1.4 billion, primarily for home equity losses.
Both JPMorgan and Wells Fargo are trading up slightly.
1) Bond insurer Ambac announced plans to raise capital by cutting its dividend (from 21 cents to 7 cents) and issuing $1 billion in additional equity.
It needs to shore up its capital base to maintain a critical AAA credit rating. Down 19 percent pre-open; MBIA down 12 percent.
2) Dubai World is increasing its joint tender offer for MGM to 15 million shares from 10 million shares -- that's about 5 percent of the company. Price is also increased to $80; previous offer was a range of $75 to $80.
3) Marine Max lowering earnings guidance. The recreational boat builder says current retail and economic environment weaker.
4) Some good news: mortgage refinancings jumped dramatically last week, finally responding to lower mortgage rates. The MBA reported refis were up 43.4 percent and are up 120 percent in the past two weeks, to the highest level since Mar '04. The 30-year fixed rate mortgage average is 5.87 percent.
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