Minyanville's Market Recap: Dollar Plunge, GM Shock, Financial Woes, Markets Succumb
The markets could not withstand a lethal cocktail from GM and the Financials. Dow falls 360 points.
The markets suffered a broad-based sell-off today. The Dow Industrials fell –360 points, or –2.64% to 13300, the S&P 500 fell –44 points, or –2.94% to 1475, and the Nasdaq Composite fell –76 points, or –2.70% to 2748.
The financials led the way to the downside again today. The FT reported the likelihood of a sale of forced assets was increasing after downgrades by the major ratings agencies pushed the debt vehicles into default. Standard & Poor's and Moody's was reported to have received default notices of $5 bln worth of collateralized debt obligations (CDOs) in recent weeks, giving investors with senior tranches the right to sell assets. For more on another ratings agency, read Professor Shedlock's article Any Credibility Left At Fitch?
Furthermore, the $80 bln Superfund, proposed by the major investment banks and backed by Treasury Secretary Hank Paulson, was reported to be suffering complications due to the recent turmoil with Citigroup (C). Citi shares continued to slide, down –4.7% to $33.41 closing slightly above a new 52-wk low. Professor Macke noted on the Buzz at one point shares of Citigroup were down –18% since first hitting a 52-wk low 5 days ago. Other financials followed. Lehman Brothers (LEH) fell –5.7%, Bear Stearns (BSC) fell –5.3%, and Goldman Sachs (GS) fell –4.0%. Read Toddo's Random Thoughts for more on the financials.
Also compounding the pressure was news of General Motors (GM) posting a record $39 bln quarterly loss on deferred tax charge signaling the company was unlikely to generate enough income to use such benefits. Dr J was baffled, noting on the Buzz that the loss was valued at $2.80 per share versus expectations of $0.25! GM fell –6.11%. Professor Macke noted the sentiment affected related plays: Avis Budget Group (CAR) –19.06%, Hertz (HTZ) –7.53%, and Dollar Thrifty Automotive (DTG) -14.94%.
In currencies, the dollar plunged to new lows after Chinese officials hinted of plans to diversify the country's $1.4 trln of foreign exchange reserves. Officials of China's National People's Congress stated the dollar is losing its status as the world currency and that China will readjust accordingly. Read Professor Depew's Five Things You Need To Know and Toddo's Fire on the Mountain.
In commodities crude oil fell –0.33 to 96.37 after the weekly petroleum report showed levels declined less than expected. The figure sparked a slight sell-off in the rest of the commodities space with silver losing –0.055 to $15.325, and copper futures losing –8.25 to 325.90. Gold held steady closing up +10.10 to 833.50.
In other economic data, Productivity rose to 4.9% versus 3.1% consensus. Consumer credit was also released coming in at $3.7 bln versus $9.0 bln consensus.
For more summaries, please click on Minyanville's Buzz Bits and Professor Tuttle's Winners & Sinners.
Cisco (CSCO) reported 1Q $0.40 EPS versus $0.36 consensus on revenues $9.55 bln versus $9.53 consensus.
McDermott (MDR) reports 3Q $0.61 EPS versus $0.54 consensus on revenues $1.32 bln versus $1.4 bln consensus.
Eagle Bulk Shipping (EGLE) reports 3Q $0.37 EPS versus $0.35 consensus on revenues $33.9 mln versus $34.5 consensus.
First Solar (FSLR) reports $0.49 EPS versus $0.20 consensus on revenues $159 mln versus $120 mln consensus.
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: LULU, CYBS, LDK, NEM, OPXT, RVBD, JBL, FITB, FHN, SNV, DTV
Some bearish trade or investment ideas: SPX, GE, DRYS, EXM, WYNN, LVS, WM, AMG, VMW, CAR, HTZ, DTG, C, NILE, APKT
Have a great night, Minyans! We'll see you bright and early tomorrow morning!
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