I noted earlier this week that one of the reasons the market has been drifting lower recently was the Street was in the process of lowering expectations for the second half of 2009.
That's what B of A CEO Ken Lewis essentially did this morning: he lowered his own forecast, going from expectations to a recovery in the second half to merely claiming that the economy would how "some potential signs of stabilization."
1) The Democrats unveiling their version of the stimulus has not resulted in any move up in any stock associated with infrastructure, healthcare, energy, or anything. Much of the early expectations and excitement about the stimulus' impact on the stock market has worn off as traders have realized that, for the most part; the impact will be comparatively small and is at least a half-year away.
2) Bank of America up 4 percent after reporting a loss of $0.48 (its first quarterly loss in 17 years). This was against expectations of a $0.08 gain; the difference was due to $4.6 billion of write-downs and $8.4 billion of provisions.
They have paid a steep price for taking $20 billion in TARP money to help on the Merrill Lynch losses: a shredded dividend of $0.01, down from $0.32.
B of A has also secured guarantees with the government against losses on up to $118 billion in troubled assets (B of A takes the first $10 bn of losses, after that 90% of losses taken by the government).
CEO Ken Lewis said there was a much higher deterioration in assets than anticipated late in the year, and they considered walking away from the Merrill deal in December, but Treasury was worried about systemic risk and offered to provide assistance.
3) Citi reported a loss of $2.44, vs. estimates of a loss of $1.31, on much bigger losses in investment banking, a big reserve build and restructuring costs.
Citi is realigning into two units, Citicorp and Citi Holdings. The latter will be made up of non core businesses, which will include retail asset management.
So why is the stock trading up, along with some of the preferreds?
a) They're finally splitting the company up, which is what the Street has wanted for years;
b) The FDIC plans to extend the bank debt guarantee from 3 years to 10 years, under certain conditions.
4) Fertilizer giant Terra Industries up 26 percent as they reported receiving a $2.1 billion all-stock proposal to be bought by CF Industries, a 23 percent premium over Terra's closing price Thursday. The combined companies would be the leading nitrogen producer in the world among publicly traded companies.
5) Estee Lauder down 10 percent as they guided lower for the quarter ending in December and the fiscal year ending June 30th, as results for the holiday season were worse than expected and they are uncertain about the next six months.
- BofA Gets $20 Billion, Merrill Loses $15 Billion
- McDonald's CEO Sees Robust '09, Despite Slowdown
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