A handful of downbeat earnings guidance commentary, and continuing weakness in Citigroup, is again weighing on stocks.
1) Financials are weaker: Citigroupdown another 7 percent this morning after dropping 17 percent yesterday. Our Charlie Gasparino reporting that the Citi-Morgan Stanley brokerage deal is likely to be announced after the close today . European banks like Lloyds, Credit Suisse and UBSUBS are also down 5 to 8 percent.
JP MorganJP Morgan has pushed up its earnings to this Thursday from January 21. While the consensus still calls for a gain of 2 cents, don't kid yourself: it's likely they will report a substantial loss, the first loss since this credit downturn began. We know that credit and M&A activity has dried up. What we don't know is what the contribution will be from the WaMu acquisition--this is the first quarter we will see this. It's likely to be negative.
2) Alcoa) Alcoa reported an adjusted loss of $0.28, which is worse than consensus estimates of a loss of $0.10.
Why was the Street so far off? Pricing and volume pressure cut margins more than expected, and that will likely continue to be the case, despite lower costs. Due to lower aluminum and alumina prices, many analysts now expect Alcoa to lose money in the first quarter and in 2009 as a whole.
3) Railroad giant CSXCSX announced preliminary fourth quarter adjusted earnings of $0.90, below consensus of $0.98, despite lower fuel costs.
4) Printer company Lexmarkdown 8 percent as they project fourth quarter earnings below already-lowered expectations.
5) Sony Sony down on light volume as the Nikkei newspaper said that Sony might report an operating loss of 100 billion Yen, and possibly as much as 200 billion yen, in fiscal 2008. Sony had said it might have a profit of 200 billion. The earnings are decline is due to slumping sales of TVs and digital cameras, as well as inventory valuation losses, and restructuring charges.
6) Liz Claiborneup 10 percent, though they too lowered their guidance but they lowered their outstanding debt and amended its credit agreements.
7) The decrease in commodity prices will be putting pressure on farmers to buy less equipment, which will be an issue for companies like Deere, according to a report from JP Morgan, which reduced its rating on the company.
8) The ICSC reported a 2.2 percent decline in retail sales for the week ending January 10th compared to the same period a year ago. Looks like consumers really did take advantage of all the discounts and bought fewer gift cards.
9) Ben Bernanke, speaking at the London School of Economics, has highlighted the need to quarantine the 'toxic assets' on bank balance sheets which, as Peter Boockvar and others have noted, was the initial priority of the TARP. He notes that the Feds could buy the bad assets, guarantee them or setting up 'bad banks' that would hold them. He also notes more capital injections and asset guarantees may be necessary.
- Citi's Move to Shed Broker Fails to Stem Cash Worries
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