JDfn Daily Digest - September 16, 2008
The Federal Open Market Committee held its benchmark Fed funds rate at 2.0 percent. Analysts were divided about what the Fed would do after a stunning shakeup over the weekend with Lehman Brothers declared bankruptcy and Merrill Lynch moved to sell itself to Bank of America. Some said a rate cut was absolutely necessary, while others argued just as strongly that the Fed should hold steady. The vote was unanimous.
The Federal Reserve pumped another $70 billion into the nation's financial system to help ease credit stresses. The Federal Reserve Bank of New York's action came in two operations in which $50 billion and then another regularly scheduled $20 billion were injected in temporary reserves.
Barclays Plc (BCS) is in talks to acquire Lehman Brothers’ (LEH) core U.S. broker-dealer business. The bank is reportedly in talks to acquire the assets without liabilities and at this stage isn't interested in Lehman's wealth-management business.
American International Group Inc (AIG) fell after the insurer's credit ratings were cut. This week AIG asked the U.S. Federal Reserve for help, including a possible "bridge" loan to tide it over while it pursues asset sales and capital raising. A Credit Suisse analyst halved his price target on AIG to $3, citing a "heightened probability" of a bankruptcy filing.
Consumer prices in August posted the first monthly decline in nearly two years as Americans finally get a break from surging energy prices. The Labor Department reported that consumer prices edged down 0.1 percent last month, a significant improvement from a 1.1 percent price spike in June and a 0.8 percent rise in July.
According to Deloitte & Touche, the struggling U.S. economy should hurt the holiday shopping season this year. The company expects the 2008 shopping season will only see a 2.5% to 3% increase this year.
The National Association of Home Builders said U.S. home builders grew more confident about their business in early September, with builder sentiment rising for the first time in seven months. The builders' sentiment index rose to 18 in September, from a record low 16 in August.
OPEC lowered its forecast for world oil demand growth for 2008 to 1.02% from 1.17%. OPEC officials believe that world oil demand growth has been revised down by 100,000 barrels a day in 2008 and expected to grow by 900,000 barrels to average 86.8 million barrels a day and cited "an unexpectedly strong decline in oil demand in North America."
Scheduled U.S. Economic Reports (Wednesday)
Housing Starts (Aug), Current Account (2Q)
In Earnings News
Goldman Sachs (GS) reported third-quarter earnings plunged 70 percent. The company reported net income of $845 million, or $1.81 a share, for the quarter ended August 29, down from $2.85 billion, or $6.13 a share, a year earlier. Net revenue fell by half to $6.04 billion from $12.3 billion.
Best Buy (BBY) earned $202 million, or 48 cents per share, for the three-months ending Aug. 30. That's down from $250 million, or 55 cents per share, during the same period last year. The company's earnings results were below Wall Street forecasts.
Pall Corp (PLL) reported fiscal fourth-quarter profit quadrupled to $69.9 million or 57 cents a share. For the quarter ended July 31st, Pall said sales rose almost 12% to $723.2 million. Excluding charges, the company forecast fiscal 2009 earnings of $2.15 to $2.30 a share.
CBRL Group (CBRL) fourth-quarter earnings were $21 million, or 93 cents a share, compared with $28 million, or $1.13 a share, in the year-earlier period. Revenue fell to $602 million from $632 million. Analysts estimated 92 cents on revenue of $595 million.
Scheduled Earnings Reports (Wednesday)
Morgan Stanley, CKE Restaurants, Apogee Enterprises, General Mills, Herman Miller, Dress Barn, ComTech Communications
Stocks in the News
Washington Mutual Inc (WM) traded higher after S&P downgraded the ratings of the parent and Washington Mutual Bank.
General Motors Corp. (GM) Chairman and CEO Rick Wagoner unveiled the automaker's long-awaited electric car, the Volt, and said the turmoil in U.S. financial markets should not affect government loan guarantees.
Merrill Lynch (MER) traded higher after Fitch Ratings revised its review of the investment bank's ratings to evolving from negative following the $50 billion acquisition offer from Bank of America.
Hewlett-Packard (HPQ) said it would cut 24,600 jobs as part of its acquisition of Electronic Data Systems.
Dell Inc (DELL) is seeing further softening in global end-user demand in the current quarter. The company said it expects to incur further costs as it realigns its business, reduces manpower and invests in infrastructure and acquisitions.
Great Atlantic and Pacific Tea Co. (GAP), a supermarket operator, said that its balance sheet and liquidity were unaffected by Lehman Brothers filing under the bankruptcy laws.
Illinois Tool Works’ (ITW) operating revenue rose 10.1% in the three months ended Aug. 31st.
The Federal Reserve pumped another $70 billion into the nation's financial system to help ease credit stresses. The Federal Reserve Bank of New York's action came in two operations in which $50 billion and then another regularly scheduled $20 billion were injected in temporary reserves.
Barclays Plc (BCS) is in talks to acquire Lehman Brothers’ (LEH) core U.S. broker-dealer business. The bank is reportedly in talks to acquire the assets without liabilities and at this stage isn't interested in Lehman's wealth-management business.
American International Group Inc (AIG) fell after the insurer's credit ratings were cut. This week AIG asked the U.S. Federal Reserve for help, including a possible "bridge" loan to tide it over while it pursues asset sales and capital raising. A Credit Suisse analyst halved his price target on AIG to $3, citing a "heightened probability" of a bankruptcy filing.
Consumer prices in August posted the first monthly decline in nearly two years as Americans finally get a break from surging energy prices. The Labor Department reported that consumer prices edged down 0.1 percent last month, a significant improvement from a 1.1 percent price spike in June and a 0.8 percent rise in July.
According to Deloitte & Touche, the struggling U.S. economy should hurt the holiday shopping season this year. The company expects the 2008 shopping season will only see a 2.5% to 3% increase this year.
The National Association of Home Builders said U.S. home builders grew more confident about their business in early September, with builder sentiment rising for the first time in seven months. The builders' sentiment index rose to 18 in September, from a record low 16 in August.
OPEC lowered its forecast for world oil demand growth for 2008 to 1.02% from 1.17%. OPEC officials believe that world oil demand growth has been revised down by 100,000 barrels a day in 2008 and expected to grow by 900,000 barrels to average 86.8 million barrels a day and cited "an unexpectedly strong decline in oil demand in North America."
Scheduled U.S. Economic Reports (Wednesday)
Housing Starts (Aug), Current Account (2Q)
In Earnings News
Goldman Sachs (GS) reported third-quarter earnings plunged 70 percent. The company reported net income of $845 million, or $1.81 a share, for the quarter ended August 29, down from $2.85 billion, or $6.13 a share, a year earlier. Net revenue fell by half to $6.04 billion from $12.3 billion.
Best Buy (BBY) earned $202 million, or 48 cents per share, for the three-months ending Aug. 30. That's down from $250 million, or 55 cents per share, during the same period last year. The company's earnings results were below Wall Street forecasts.
Pall Corp (PLL) reported fiscal fourth-quarter profit quadrupled to $69.9 million or 57 cents a share. For the quarter ended July 31st, Pall said sales rose almost 12% to $723.2 million. Excluding charges, the company forecast fiscal 2009 earnings of $2.15 to $2.30 a share.
CBRL Group (CBRL) fourth-quarter earnings were $21 million, or 93 cents a share, compared with $28 million, or $1.13 a share, in the year-earlier period. Revenue fell to $602 million from $632 million. Analysts estimated 92 cents on revenue of $595 million.
Scheduled Earnings Reports (Wednesday)
Morgan Stanley, CKE Restaurants, Apogee Enterprises, General Mills, Herman Miller, Dress Barn, ComTech Communications
Stocks in the News
Washington Mutual Inc (WM) traded higher after S&P downgraded the ratings of the parent and Washington Mutual Bank.
General Motors Corp. (GM) Chairman and CEO Rick Wagoner unveiled the automaker's long-awaited electric car, the Volt, and said the turmoil in U.S. financial markets should not affect government loan guarantees.
Merrill Lynch (MER) traded higher after Fitch Ratings revised its review of the investment bank's ratings to evolving from negative following the $50 billion acquisition offer from Bank of America.
Hewlett-Packard (HPQ) said it would cut 24,600 jobs as part of its acquisition of Electronic Data Systems.
Dell Inc (DELL) is seeing further softening in global end-user demand in the current quarter. The company said it expects to incur further costs as it realigns its business, reduces manpower and invests in infrastructure and acquisitions.
Great Atlantic and Pacific Tea Co. (GAP), a supermarket operator, said that its balance sheet and liquidity were unaffected by Lehman Brothers filing under the bankruptcy laws.
Illinois Tool Works’ (ITW) operating revenue rose 10.1% in the three months ended Aug. 31st.
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