Alcoa, Intel Drag on Dow as Jobs Report Looms
Stocks fell sharply Wednesday amid more dismal news on the employment front as Alcoa announced huge job cuts and Intel slashed its revenue forecast.
Alcoa was the biggest drag on the Dow, falling 9 percent at the open, after the aluminum maker said it would slash more than 15,000 jobs, halve capital spending and sell four businesses as it reduces aluminum production. The cuts come less than a week before Alcoa — the traditional earnings season curtain raiser — is scheduled to report its fourth-quarter results.
At the same time, both the ADP National Employment Report and a report from job-placement firm Challenger, Gray and Christmas indicated sharp declines in December payroll numbers, pointing to considerable weakness in corporate health.
The official December jobs report from the government comes out on Friday; economists expect to see half a million jobs vanish from payrolls.
ING went so far as to say that the U.S. could lose one million jobs per monthin the next few months.
Earnings season unofficially kicks off Monday with Alcoa and the profit warnings are already flooding in.
Intel was the second biggest decliner on the Dow behind Alcoa, falling 5 percent, after the chip giant cut its fourth-quarter revenue forecastto $8.2 billion to $8.7 billion. It had previously pegged the range at $8.7 billion to $9.3 billion.
Media giant Time Warner also issued a profit warning, saying it would post a net loss for 2008. Its shares fell 7 percent.
Three were a couple of encouraging reports on the earnings front: Agriculture giant Monsanto reported its profit more than doubled, boosted by strong herbicide and soybean seed sales in the United States and Latin America. The company also raised its full-year outlook.
Family Dollar Stores reported its profit shot up 14 percent, also raising its full-year forecast, as cash-strapped consumers flocked to the discount store — and spent more when they were there.
Retailers will be in focus this week as big chains report their December sales, which is expected to show one of the worst holiday seasons on record.
"I think we are going to see a whole new color of ugly," retail analyst Patricia Edwards of Storehouse Partners, told Reuters.
Wal-Mart , the star of the season, is expected to show a 2.8 percent increase in December same-store sales, while teen and children's retailers are expected to have done the worst with a 15-percent decline. Overall, retail sales are expected to have dropped 7.1 percent, according to Thomson Reuters.
Wal-Mart, which is working out its succession plan as CEO Lee Scott retires, today named the current head of it's Sam's Club division, Doug McMillon, as president and CEO of the chain's international division. He will assume the role after Mike Duke, who currently holds that post, takes over for Scott as CEO.
Investors are bracing for a new wave of store closings and bankruptcies in 2009. The International Council of Shopping Centers estimates that 73,000 stores will close in the first half, following 148,000 in all of 2008.
Asian stocks ended mostly higher as optimism over a massive stimulus package in the U.S. continued, while European stocks were dragged lower by energy stocks and banks.
Meanwhile, prominent bank analyst Meredity Whitney warned that U.S. banks are going to have to raise capital againin 2009 and that a sharp increase in credit-rating downgrades on mortgage-related securities will lead to further stresses on their capital.
Kenneth Lewis, Bank of America's chief executive, recommended that his board of directors not pay him a bonus for 2008, a tough year for the bank, according to press reports confirmed by a bank spokesman.
The bank, which is trying to raise cash to weather the financial storm, is selling a $2.83 billion chunk of its holding in China Construction Bank at a 12 percent discount, according to a Reuters report.
Oil stocks including ExxonMobil and Chevron skidded as crude oil dropped to around $45 a barrel after a report showed crude inventories ballooned by 6.7 million barrels last week.
Texas oil billionaire Boone Pickens predicted that oil prices will top $100 a barrelby the end of 2010 as the global economy recovers.
Still to Come:
WEDNESDAY: Weekly crude inventories; Earnings from Bed, Bath & Beyond after the bell; MacWorld (Jan. 5-9)
THURSDAY: ECB and BOE rate decisions; Chain-store sales; weekly jobless claims; consumer credit; Consumer Electronics Show begins (Jan. 8-11)
FRIDAY: Jobs report; wholesale trade; Earnings from KB Home
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