Dismal fourth quarter earnings from Citigroup and poor retail data pinch stocks
US Market wiped off all of yesterday’s gains and indices posted huge losses today, Tuesday, 15 January, 2008. Dismal earnings report from Citigroup and a disappointing retail data from the Commerce Department sent stocks bleeding for the entire day. Each of the ten economic sectors finished the day in negative territory. Financials, Energy, and Materials posted the largest losses.
Before the opening bell, Citigroup came put with its fourth quarter earnings report. The company reported a net loss of $9.83 billion on a 70% decline in revenues. The loss was led by a $18.1 billion write-down in subprime exposure and fixed income markets as well as a $4.1 billion increase in credit cost, primarily due to "higher current and estimated losses on consumer loans." The company also cut its dividend by 40%.
Also, the U.S. Commerce Department reported today that U.S. retail sales fell 0.4% (against expected figure of 0.1%) in December, the first decline in six months. The figure capped the weakest year since 2002. The December weakness followed an otherwise robust November when retail sales increased 1%.
The Dow Jones industrial Average ended the day with a huge loss of 277.04 points at 12,501.11. The Nasdaq Composite Index, finished lower by 60.71 points at 2,417.59. S&P 500 finished lower by 35.3 points at 1,380.95.
All thirty Dow stocks ended in the red today. The financials were the hardest hit. Accordingly, Citigroup, JP Morgan, AIG and American Express were the notable Dow laggards.
More delays expected in Boeing’s 787 Dreamliner deliveries
Among other economic data, the January New York Empire State Index, a manufacturing survey, was slightly lower than expected at 9.0 (consensus 10). It still indicated growth.
The major financial stocks (AIG, Amex, JP Morgan) all slipped by 35-5% today. Outside the Dow, there was more news in the financial sector. Bank of America announced that it would cut 650 jobs from its global investment banking and global markets businesses as part of a strategic review the bank began in October. The stock fell by more than 3%. On a positive note, Merrill Lynch announced a $6.6 billion cash infusion from several investors.
Among other major news in the market today, Wall Street Journal reported that Boeing is going to announce more delays in the delivery of the 787 Dreamliner. Boeing stocks closed almost 5% lower.
All the Indian ADRs ended in red today. ICIC Bank and HDFC Bank were the two topmost losers, each shedding more than 7%. They were followed by Tata Motors which also gave up 7%.
Crude slips down by more than $2
Crude prices fell by more than $2/barrel today after traders once again speculated a recession hitting US in the near term. Traders also speculated that tomorrow’s inventory report might show a build up in inventories for the first time in two months. Comments from Organization of Petroleum Exporting Countries official that the cartel is ready to increase production also led to softening of the price.
Crude-oil futures for light sweet crude for February delivery today closed at $91.98/barrel (lower by $2.22/barrel or 2.4%) on the New York Mercantile Exchange. Prices are 72% higher than a year ago.
On the New York Stock Exchange, trading volume topped 1.8 billion, while nearly 2.4 billion shares exchanged hands on the Nasdaq. Declining stocks overtook advancing issues roughly 3 to 1 on both exchanges.
Investors will have lots of economic data to focus upon for tomorrow’s trading. December's Consumer Price Index report is due which will help market assess whether inflationary pressures persist. It will be followed by the Industrial Production Index and the weekly inventory report by the Energy department.