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| Market Summary |
The markets failed to extend yesterday's gains, with each of the major indices posting significant losses. The Dow Jones fell about 230 points, losing 2.5%, while the Nasdaq fell over 4%. Early in the trading session, losses were mild, as the Federal Reserve announced that they would begin the purchase of commercial paper. Later in the session, however, the indices fell as investors took in the day's earning reports. Many of the day's earning reports came from the technology sector, which is why the tech-heavy Nasdaq experienced a larger fall than the other major indices. Texas Instruments (TXN: Charts, News, Offers) posted a 3rd quarter profit that didn't quite meet expectations, as well as a 4th quarter forecast well below analysts' projections, sending their stock down over 6%. Additionally, just after the markets closed, Yahoo (YHOO: Charts, News, Offers) announced a 64% decrease in profit from last year, and plans to cut 10% of their workforce. Pfizer (PFE: Charts, News, Offers) managed to beat estimates, and remain optimistic for the future, keeping their investors happy. Crude oil futures fell, once again below $71 a barrel, and prices continued to fall at the pump. The dollar gained slightly against the major foreign currencies, while gold prices fell.
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| Market News |
Apple Inc. (AAPL: Charts, News, Offers) on Tuesday reported a fiscal fourth-quarter profit that rose 26% from a year ago on revenue of almost $8 billion and increases in sales of its Macintosh computers, iPods and iPhones.
Although earnings topped Wall Street analysts' estimates, Apple kept with its tradition and delivered a first-quarter outlook that fell below analysts' forecasts, potentially setting the company's stock up for a big decline on Wednesday.
Chief Financial Officer Peter Oppenheimer said in a statement that for Apple's fiscal first quarter, the company expects to earn between $1.06 and $1.35 a share on revenue in a range of $9 billion to $10 billion, for what is typically Apple's busiest business period. Such results could end up below what Apple reported in the same quarter a year ago, when it earned $1.58 billion, or $1.76 a share, on $9.6 billion in sales. (Source: MarketWatch) Full Story
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Yahoo! (YHOO: Charts, News, Offers) took another belt-tightening move Tuesday when it announced plans to reduce its workforce by at least 10% in the fourth quarter.
The announcement came as Yahoo! delivered a third-quarter earnings report that matched Wall Street estimates but fell short of revenue expectations.
The job cuts, part of a plan to reduce costs, will result in the elimination of 1,400 positions from Yahoo's total of 14,300, according to the Associated Press. The workforce reduction comes on top of the 1,000 job cuts it announced in January.
The company said its goal is to reduce its current annualized cost run rate of approximately $3.9 billion by more than $400 million before the end of 2008.
Yahoo! reported third-quarter profit fell to $54 million or 4 cents a share, from $151 million, or 11 cents a share, a year ago in the same period. (Source: TheStreet) Full Story
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Billionaire Kirk Kerkorian's investment firm said Tuesday it sold part of its stake in Ford Motor Co. (F: Charts, News, Offers), taking millions of dollars in losses on the investment and marking an abrupt about-face from the optimistic expectations he had for the automaker just four months ago.
But while the move doesn't bode well for Ford, industry observers said it may be more of a personal finance decision for Kerkorian, who has taken much larger losses on his majority stake in casino and hotel operator MGM Mirage Inc.
Tracinda Corp., which sold the 7.3 million Ford shares at an average price of $2.43, added that it plans to further cut what is now a 6.1 percent stake in the No. 2 U.S.-based automaker, for a potential total loss of more than half a billion dollars. The company said it may sell its remaining 133.5 million shares depending on market conditions.
Other investors followed Kerkorian's lead and sold their Ford shares amid a drop in the overall market. The automaker's shares fell 16 cents, or 6.9 percent, to $2.17. (Source: Yahoo Finance) Full Story
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| Market Analysis |
For stock investors, this earnings season is turning into the lost quarter.
This month, companies began unveiling their results from the 2008 third quarter, which included July, August, and September. And the next couple of weeks will be especially busy, with 136 members of the large-cap Standard & Poor's 500-stock index reporting earnings during the week of Oct. 20, and another 114 firms the following week.
Investors are watching earnings results closely, desperate for some insight into an economy at a crucial tipping point. "We're really trying to get a handle on to what degree the economy is beginning to falter," says Robert Bacarella, portfolio manager at Monetta Mutual Funds. (Source: BusinessWeek) Full Story
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Wall Street had it wrong: An investment bank's most precious asset isn't the army of employees who head down the elevators each day. It's the paychecks they take with them out the door.
You can imagine the devilish grins on the faces of Morgan Stanley employees last week, after the Treasury Department said it would pump $10 billion into the bank. Not only did we, the taxpayers, save their company, with the help of a Japanese bank named Mitsubishi UFJ Financial Group Inc. More importantly, we funded their 2008 bonus pool.
Morgan Stanley has accrued $10.7 billion of employee- compensation expense this year, almost twice as much as its pretax earnings. The vast majority of this remuneration hasn't been paid yet. Now it probably will be, assuming the firm survives through next month. Meantime, Morgan Stanley's stock- market value has dropped $34.7 billion, to $21 billion, since the company's fiscal year began. (Source: Bloomberg) Full Story
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The U.S. economy has weakened substantially in the past several weeks, and the National Bureau of Economic Research will eventually get around to declaring an official recession. Conventional wisdom believes that the current recession will be longer and deeper than any recession the U.S. has experienced since the early 1980s, continuing through 2009 and perhaps into 2010.
When the NBER picks the start date of this recession, we suspect that they will reach back to the fourth quarter of 2007, when real gross domestic product fell by a slight 0.2%. We do not agree that the U.S. was in recession then, or for that matter up through August 2008. Despite a horrible housing market, real GDP expanded at a 2.8% annual rate in Q2, while real GDP was basically flat in the third quarter.
Nonetheless, when the government releases its advance estimate of Q3 real GDP growth on Oct. 30, the report will probably show a slightly negative number, something in the -0.1% to -0.5% range. This will be based on some more-pessimistic-than-necessary estimates of data that are not yet available. When the final data comes in and GDP is revised, we expect that negative figure to move into slightly positive territory. (Source: Forbes) Full Story
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