Market Recap: Markets Tank on Bad Cocktail
Citigroup, Merrill, Boeing, Apple... markets couldn't survive this lethal cocktail. Stocks tumble.
Citigroup (C) shares fell to multi year lows after the bank reported, this morning, quarterly earnings below expectations. The company announced $18 bln in subprime-related writedowns and cut its dividend 41%.
Yet foreign investments couldn't save the financials today. The Government of Singapore said it would buy $6.9 bln of the $12.5 bln preferred stock Citigroup was issuing. Also Merrill Lynch (MER) received a $6.6 bln infusion from Korean and Kuwaiti sovereign wealth funds. Citigroup closed -7.62% to $26.85. MER closed -5.29% to $53.01.
"In terms of both the Merrill and Citigroup, convertible transactions are 'ratchet' provisions," Minyan Peter said on the Buzz. "It gives the security holder the right to obtain better terms in the future under certain conditions. For existing Citigroup/Merrill shareholders, should such a further capital raise occur at a lower stock price, their dilution will be significantly compounded because of the ratchet... Shareholders in troubled financial services companies should not take this lightly."
The broader Philadelphia Bank Index closed -4.20% to $80.69. Other notables included JP Morgan (JPM) -5.29% to $39.17, Bear Stearns (BSC) -5.17% to $77.57. and Lehman Brothers (LEH) -5.90% to $55.71. For more, read Minyanville Editor Andrew Jeffery's Citi Underpins Consumer Struggles and Toddo's Answers I Really Wanna Know.
Tech stocks took a painful drubbing. Apple (AAPL) fell to its lowest level in two months after the company failed to impress investors at the company's Macworld expo. The stock lost -8.23% to $169.04. Other stocks included Research in Motion (RIMM) -9.0% to $87.67, Google (GOOG) -4.46% to $624.00, and Baidu (BIDU) -9.35% to $308.27.
In economic data, U.S. retail sales disappointed investors as well with figures declining -0.4% vs. Street expectations of 0.0%. Inflation data was also released. PPI month-over-month decreased -0.1% versus +0.2% consensus with core figures coming in inline with expectations. For more analysis, read Professor Depew's Five Things You Need To Know.
The final straw was possibly Boeing (BA). Late in the session the WSJ reported the company would likely announce additional delays in its 787 Dreamliner program. The news sent BA to a new 52 week low before the stock settled -4.67% to $77.86. The weakness spread to Boeing's subcontractors. Spirit Aerosys (SPR) fell -5.04% to $26.78. Allegheny Tech (ATI) lost -6.29% to $75.04; Precision Castpart (PCP) lost -5.83% to $117.24, and Goodrich (GR) closed -2.14% to $62.99. For insight on this topic, read Professor Bloudek's column written earlier this month, Boeing's 787 Production Concerns.
For more summaries, click on Minyanville's Buzz Bits.
Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.
Some bullish trade or investment ideas: SNCR, FXI, AAPL, C, LM, REGN, DBA, JGP, SDTH, FCSX, AMAT, INTC, EMC, PDGI, WLT
Some bearish trade or investment ideas: AAPL, C, SPX, BOBE, JWN, NFLX, RIMM, PCU, BKX, financial preferreds (GS, LEH, BSC, X, MWR)
Tomorrow's Hump Day! See y'all in the morning!
GET THESE INSIGHTS AND MORE IN REAL-TIME. CALL 212-991-9357 FOR A 14-DAY FREE TRIAL TO THE BUZZ & BANTER OR CLICK BELOW.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter