JDfn Daily Digest - October 8, 2008
Treasury Secretary Henry Paulson said patience is needed because the ongoing financial market turmoil will not end quickly despite Congress approving a $700 billion bank rescue package. At the start of a press conference, Paulson said that the bailout plan and coordinated central bank interest rates could not end the crisis overnight. More banks are likely to fail in coming months and he stressed that Treasury now has the power to inject capital into banks, a step advocated by many economists.
The Federal Reserve led a coordinated round of global official rate cuts, easing by a half percentage-point, as did the European Central Bank, Bank of England and Swiss, Canadian and Swedish central banks. In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and also lowered its discount rate by the same amount to 1.75 percent.
The International Monetary Fund said in its annual World Economic Outlook, the world economy has entered a "major downturn" with significant risks of worsening. The fund said the forecast for global economic growth next year has been marked down to 3% in the latest forecast, with "the major advanced economies already in or near a recession.”
Americans' retirement plans have lost as much as $2 trillion in the past 15 months -- about 20 percent of their value. More than half the people surveyed in an Associated Press poll said they are concerned that they will have to work longer because the value of their retirement savings has declined. Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks.
Americans cut back their spending even more in September, resulting in weak sales for many retailers, as already nervous consumers grappled with the financial meltdown that's spreading around the globe. The weak reports are fueling more concerns about the holiday season and the overall economy, since consumer spending accounts for two-thirds of all economic activity.
Many Americans who are hoping to work in a store this holiday season could be in for a big disappointment. Because of an ongoing sales slump and expectations for a dismal shopping season, analysts expect retail chains will cut back on hiring temporary workers. John Challenger, CEO of outplacement firm Challenger, Gray & Christmas said he believes this could be the “weakest holiday hiring season since 2001.”
The National Association of Realtors reported that an index of sales contracts on previously owned U.S. homes rose 7.4% in August from the prior month, despite a credit crunch that has driven world central banks to slash interest rates. The index, which is considered a leading indicator of existing home sales, was up 8.8% from the prior year.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 2.2 percent in the week ending Oct. 3rd to 465.5 after falling 23 percent the prior week to the lowest level since the end of August. Mortgage rates declined last week. Lending conditions remain tight with global financial markets in chaos, crimping mortgage activity.
The American Petroleum Institute reported a rise of 9.4 million barrels in crude supplies for the week ended Oct. 3. The Energy Department had reported a climb of 8.1 million barrels for the latest week. Motor gasoline supplies were up 3.4 million barrels.
Wachovia Corp. (WB) is bracing for a split that may give most of the bank to Wells Fargo & Co. (WFC) with Citigroup Inc. (C) taking the rest, as regulators push the suitors to end their takeover fight. Wells Fargo may buy Wachovia and then sell parts to Citigroup.
Scheduled U.S. Economic Reports (Thursday)
Initial Jobless Claims (Week of Oct 4th), Wholesale Inventories (Aug)
In Earnings News
Alcoa Inc. (AA), the world's third-largest aluminum producer, reported a 52-percent drop in third quarter profit. Alcoa posted earnings of $268 million, or 33 cents per share. Analysts, on average, expected profit of 50 cents per share.
Costco Wholesale Corp. (COST) said its fiscal fourth-quarter profit rose 7 percent. Net income for the quarter rose to $397.8 million, or 90 cents per share. Analysts, on average, predicted profit of 93 cents per share.
MetLife (MET) said it expects to report income from continuing operations of $1.38 to $1.58 per share and premiums, fees and other revenues of $8.6 billion in the third quarter. The Company also said it plans to offer 75 million common shares to supplement the company's capital position.
Monsanto (MON) reported a near-doubling of its net income in 2008, to $2 billion. Earnings per share for 2008 were $3.62 on an as-reported basis and $3.64 on an ongoing basis. Earnings per share for 2007 were $1.79. Monsanto said it had record sales of $11.4 billion in 2008, 36% higher than 2007.
Wet Seal Inc. (WTSLA) backed its third-quarter profit prediction after reporting a September same-store sales drop inline with its expectations. Wet Seal said it still expects to post a profit of 5 cents to 7 cents per share for the period, while analysts expect, on average, a profit of 6 cents per share.
Mothers Work Inc. (MWRK) expects that its loss in its fiscal fourth quarter will be bigger than it previously anticipated. The company said it now projects that its fourth quarter diluted earnings per share will be between a loss of 77 cents and 83 cents.
Scheduled Earnings Reports (Thursday)
Bassett Furniture, International Speedway, Rocky Mountain Chocolate Factory, Saba Software
Stocks in the News
Target (TGT) said its September sales at stores open at least a year fell 3%.
Morgan Stanley (MS) is expected to report fiscal second-quarter earnings of 93 cents a share.
Kohl’s (KSS) said September same-store sales fell 5.5%, compared to the Thomson Reuters estimate for a fall of 6.1%.
H&R Block (HRB) said its board amended company by-laws to provide for a non-binding vote of shareholders on the pay and performance policies.
Staples (SPLS) said it received European Commission approval regarding its $2.6 billion takeover of Corporate Express NV.
Gannett Co’s (GCI) total advertising revenue fell 14.3% to $347.1 million in May from $404.9 million in May 2007.
Tyson Foods (TSN) and its subsidiaries were downgraded by Fitch Ratings because high grain costs are expected to cut into profits.
Nordstrom (JWN) announced that its sales at stores open at least a year fell 9.6%.
The Federal Reserve led a coordinated round of global official rate cuts, easing by a half percentage-point, as did the European Central Bank, Bank of England and Swiss, Canadian and Swedish central banks. In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and also lowered its discount rate by the same amount to 1.75 percent.
The International Monetary Fund said in its annual World Economic Outlook, the world economy has entered a "major downturn" with significant risks of worsening. The fund said the forecast for global economic growth next year has been marked down to 3% in the latest forecast, with "the major advanced economies already in or near a recession.”
Americans' retirement plans have lost as much as $2 trillion in the past 15 months -- about 20 percent of their value. More than half the people surveyed in an Associated Press poll said they are concerned that they will have to work longer because the value of their retirement savings has declined. Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks.
Americans cut back their spending even more in September, resulting in weak sales for many retailers, as already nervous consumers grappled with the financial meltdown that's spreading around the globe. The weak reports are fueling more concerns about the holiday season and the overall economy, since consumer spending accounts for two-thirds of all economic activity.
Many Americans who are hoping to work in a store this holiday season could be in for a big disappointment. Because of an ongoing sales slump and expectations for a dismal shopping season, analysts expect retail chains will cut back on hiring temporary workers. John Challenger, CEO of outplacement firm Challenger, Gray & Christmas said he believes this could be the “weakest holiday hiring season since 2001.”
The National Association of Realtors reported that an index of sales contracts on previously owned U.S. homes rose 7.4% in August from the prior month, despite a credit crunch that has driven world central banks to slash interest rates. The index, which is considered a leading indicator of existing home sales, was up 8.8% from the prior year.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 2.2 percent in the week ending Oct. 3rd to 465.5 after falling 23 percent the prior week to the lowest level since the end of August. Mortgage rates declined last week. Lending conditions remain tight with global financial markets in chaos, crimping mortgage activity.
The American Petroleum Institute reported a rise of 9.4 million barrels in crude supplies for the week ended Oct. 3. The Energy Department had reported a climb of 8.1 million barrels for the latest week. Motor gasoline supplies were up 3.4 million barrels.
Wachovia Corp. (WB) is bracing for a split that may give most of the bank to Wells Fargo & Co. (WFC) with Citigroup Inc. (C) taking the rest, as regulators push the suitors to end their takeover fight. Wells Fargo may buy Wachovia and then sell parts to Citigroup.
Scheduled U.S. Economic Reports (Thursday)
Initial Jobless Claims (Week of Oct 4th), Wholesale Inventories (Aug)
In Earnings News
Alcoa Inc. (AA), the world's third-largest aluminum producer, reported a 52-percent drop in third quarter profit. Alcoa posted earnings of $268 million, or 33 cents per share. Analysts, on average, expected profit of 50 cents per share.
Costco Wholesale Corp. (COST) said its fiscal fourth-quarter profit rose 7 percent. Net income for the quarter rose to $397.8 million, or 90 cents per share. Analysts, on average, predicted profit of 93 cents per share.
MetLife (MET) said it expects to report income from continuing operations of $1.38 to $1.58 per share and premiums, fees and other revenues of $8.6 billion in the third quarter. The Company also said it plans to offer 75 million common shares to supplement the company's capital position.
Monsanto (MON) reported a near-doubling of its net income in 2008, to $2 billion. Earnings per share for 2008 were $3.62 on an as-reported basis and $3.64 on an ongoing basis. Earnings per share for 2007 were $1.79. Monsanto said it had record sales of $11.4 billion in 2008, 36% higher than 2007.
Wet Seal Inc. (WTSLA) backed its third-quarter profit prediction after reporting a September same-store sales drop inline with its expectations. Wet Seal said it still expects to post a profit of 5 cents to 7 cents per share for the period, while analysts expect, on average, a profit of 6 cents per share.
Mothers Work Inc. (MWRK) expects that its loss in its fiscal fourth quarter will be bigger than it previously anticipated. The company said it now projects that its fourth quarter diluted earnings per share will be between a loss of 77 cents and 83 cents.
Scheduled Earnings Reports (Thursday)
Bassett Furniture, International Speedway, Rocky Mountain Chocolate Factory, Saba Software
Stocks in the News
Target (TGT) said its September sales at stores open at least a year fell 3%.
Morgan Stanley (MS) is expected to report fiscal second-quarter earnings of 93 cents a share.
Kohl’s (KSS) said September same-store sales fell 5.5%, compared to the Thomson Reuters estimate for a fall of 6.1%.
H&R Block (HRB) said its board amended company by-laws to provide for a non-binding vote of shareholders on the pay and performance policies.
Staples (SPLS) said it received European Commission approval regarding its $2.6 billion takeover of Corporate Express NV.
Gannett Co’s (GCI) total advertising revenue fell 14.3% to $347.1 million in May from $404.9 million in May 2007.
Tyson Foods (TSN) and its subsidiaries were downgraded by Fitch Ratings because high grain costs are expected to cut into profits.
Nordstrom (JWN) announced that its sales at stores open at least a year fell 9.6%.
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