Stocks Start Off At New Lows
A big pharmaceutical deal is doing nothing to help stocks pre-open. Once again stocks overseas are being led down by banks.
The weakest links are HSBC, down 11 percent pre-open on capital concerns, and Lloyds Bank, which said over the weekend that the British government was taking a 77 percent stake after agreeing to underwrite 260 billion pounds of risky assets.
The World Bank isn't helping things, as they say the global economy is likely to shrink this year for the first time since World War II.
1) The dollar index is rallying again it's near the highest level since April 2006. On days when the dollar is particularly strong, commodities and often stocks are weaker.
2) In a normal market, the $41 billion merger between Merck and Schering Plough would be a major story. Schering shareholders will receive 0.5767 shares and $10.50 in cash for each share of Schering; based on Friday's close, the deal values Schering at $23.61, a premium of about 34 percent to Friday's close. Merck says they are committed to maintaining their dividend.
Problem is, this is not a normal market. Rather than taking this as a sign of strength, of the ability of two big companies to get a deal done in a difficult environment, cynics say this is merely a cost-savings move by both companies, because the market for branded drugs is not as strong as it used to be.
This follows Pfizer's $68 billion purchase of Wyeth.
3) McDonald's continues to post positive same store sales, though not as strong as recent months. February global same store sales were up 1.4 percent, while the U.S. was up 2.8 percent. Remember, February 2008 had an extra day because it was a leap year. They also noted the dollar's strength would hurt revenues and earnings.
4) Fertilizer maker CF Industries down 5 percent pre-open as they rejected an unsolicited bid from Agrium, and reiterated its desire to merge with Terra Industries. Recall that Agrium made a $3.6 cash and stock offer last month for CF.
4) Aflac down 10 percent pre-open, cut to sell at UBS
5) Capital One joined most other financial institutions in cutting its dividend 87 percent, to $0.05. They expect to save about $500 million a year. Wells Fargo and our parent GE both cut their dividends recently.