Real Worry Among Traders Is Credit Markets
Stock futures rose this morning as Rep. Paul Kanjorski said on our air that the bailout bill is "almost a done deal."
Still, the real worries among traders continues to be in the credit markets.
1) GE , our parent company, down 4 percent pre-open as it cut its third quarter guidance for the quarter, to $0.43 to $0.49 from $0.50 to $0.54, "reflecting unprecedented weakness and volatility in the financial services markets."
It's taking steps to reaffirm its AAA rating, and is maintaining its dividend its $0.31 per share quarterly dividend through 2009. The stock buyback has been suspended so it can reduce GE Capital's leverage. GE down 5 percent pre-open.
Standard and Poor's affirmed GE's and GE Capital's ratings. Moody's called the action "appropriate and necessary."
GE, by the way, now has a yield over 5 percent.
2) Pilgrim's Pride , which was down 38 percent yesterday and halted at 3:28 yesterday for News Pending, announced that they have had operating losses (high grain prices, weaker demand for product) combined with a significant hedging loss (probably on corn futures).
Bottom line is that they are in violation of one of the financial covenants in their bank agreement. In this era of tight or impossible credit, it is a significant issue. They appear to have reached some kind of agreement with their lenders to continue to provide credit, at least temporarily.
It will resume trading this morning. Other meat processors continue to be weak as well; Tysonis down 7 percent pre-open.
3) Nike up 5 percent pre-open, they beat estimates, though net income was 10 percent below the levels of last year. Good numbers, considering.
4) The Europeans and the Asians are watching what is happening here with amazement, dread, and anger. Not surprisingly, some are predicting this is a game-changer. Peer Steinbruck, the German finance minister, said the U.S. was losing its role as the global finance superpower and that "this world will become multipolar" with the emergence of better capitalized centers in Asia and Europe.
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