Legion of Angels News Archive

NEW YORK (CNNMoney.com) – Stocks slumped Tuesday as mixed corporate earnings reports gave investors a reason to retreat after the previous session’s big rally.

The Dow Jones industrial average (INDU) lost 231 points or 2.5%. The Standard & Poor’s 500 (SPX) index lost 3.1% and the Nasdaq composite (COMP) lost 4.1%.

Lending rates continued to improve, helping to reassure investors that the efforts of world governments to try and stabilize financial markets are starting to work. But relief about the credit markets was countered by broader fears about a recession and the health of American corporations.

“The credit market is improving, which is good, but the problem is that everyone is focused right now on earnings as a representation of the economy,” said Greg Church, founder and president of Church Capital. “And while there will be exceptions, the overwhelming number of earnings reports won’t be positive.”

With 21% of S&P 500 companies already having reported results, third-quarter profits are currently on track to have fallen almost 10% from a year ago, according to the latest estimates from Thomson Reuters.

After the close, Yahoo (YHOO, Fortune 500) reported earnings of four cents a share, versus 11 cents a year ago and short of analysts’ forecasts for a profit of 9 cents per share. The company also said it will cut at least 10% of its workforce, or around 1,500 people, through the end of the year as a result of the weak economy.

Looking forward, Yahoo warned that 2008 revenue won’t meet its earlier forecasts. However, shares gained 7% in extended-hours trading.

Also after the close, Apple (AAPL, Fortune 500) reported fourth-quarter sales and earnings that jumped from a year ago due to strong sales of its new iPhone. Earnings topped forecasts, while sales missed expectations.

Looking forward, Apple forecast fiscal first-quarter sales and earnings that are short of analysts’ projections. The company said forecasting the December quarter was a challenge because of the weak economy. Shares gained 4% in extended-hours trading.

The Dow gained 413 points Monday on improved lending rates and comments from Federal Reserve Chairman Ben Bernanke that supported a second fiscal stimulus package. It was the Dow’s eighth-biggest one-day point advance ever, but did not spark a follow-up rally Tuesday.

“I think the tone in the stock market has been a little better recently with the credit spreads coming down,” said Robert Loest, portfolio manager at Integrity Funds. “But I’m reluctant to get too optimistic because the economy is going to continue to deteriorate both in the U.S. and abroad.”

Earnings: Dow component American Express (AXP, Fortune 500) reported weaker quarterly profit after the close of trade Monday. However, the results were better than expected and shares gained 8.4% Tuesday. (Full story)

Four other Dow components reported results Tuesday morning, including 3M (MMM, Fortune 500), which reported higher quarterly sales and earnings that topped estimates. Shares gained 4.8%.

DuPont (DD, Fortune 500) reported a big drop in earnings due to manufacturing disruptions in the wake of Hurricane Ike. The chemical giant also warned that full-year results won’t meet forecasts. Shares fell 8%.

Caterpillar (CAT, Fortune 500) reported lower earnings and higher revenue versus a year ago, and shares fell 5%. Pfizer (PFE, Fortune 500) reported higher quarterly earnings that topped estimates. Shares were little changed.

Texas Instruments (TXN, Fortune 500) reported reduced third-quarter profit after the close Monday and forecast fourth-quarter revenue would fall sharply, missing estimates. The chipmaker also said it is looking to sell part of its wireless operations. Shares fell 6.3% Tuesday.

Among other companies releasing results, troubled bank National City (NCC, Fortune 500) reported a bigger-than-expected loss Tuesday and said it was cutting 4,000 jobs. However, investors lifted the shares, which have been battered soundly over the last few months on fears about the firm’s solvency. The stock added 3%.

Citigroup (C, Fortune 500) slumped 6% in tune with the broader selloff and also in response to Goldman Sachs’ reinstatement of its sell rating on the company.

In other company news, Kirk Kerkorian’s Tracinda is dumping 7.3 million shares of Ford Motor (F, Fortune 500) and could end up selling the rest of his 6% stake in the automaker. Ford shares lost 6.9%.

A number of stocks that had led the advance Monday retreated Tuesday, including oil services firms Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), ConocoPhilips (COP, Fortune 500) and BP (BP).

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by over two to one on volume of 1.16 billion shares. On the Nasdaq, losers beat winners by five to two on volume of 2.17 billion shares.

Credit market: Lending rates continued to improve Tuesday, extending the weeklong recovery.

Libor, the overnight bank-to-bank lending rate, fell to 1.28% from 1.51% Monday, according to Bloomberg.com. That set the rate below the Fed’s benchmark lending rate of 1.5%, a good sign for the credit market. Libor hit a record 6.88% earlier this month at the height of the market panic.

The 3-month Libor rate, which banks charge each other to borrow for three months, fell to 3.83% from 4.06% late Monday.

The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed to 2.63% from 2.97% late Monday. The spread hit a record 4.65% earlier this month. The narrower the spread, the more willing banks are to lend to each other.

The improvement in bank lending over the last week is critical and analysts say it must continue to improve in the months ahead. Credit froze up in the wake of the housing market collapse, the subprime lending fallout and contraction in the bank sector.

The lack of available credit has punished the already weak economy, making it hard for businesses to function on a daily basis and for consumers to get loans.

The Federal Reserve and banks around the world have made potentially trillions of dollars available to lending institutions. On Tuesday, the Fed said it will start buying commercial paper from money market mutual funds. Commercial paper is a short-term funding source that companies need for daily operations.

Treasury prices rallied, lowering the yield on the 10-year note to 3.70% from 3.84% late Monday. Treasury prices and yields move in opposite directions.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, rose to 1.19% from 1.05% late Monday as investors began to pull money out of the safer investment and put it back in stocks.

Last week, the 3-month fell to below 0.2%. Last month, it reached a 68-year low around 0% as investor panic hit its peak.

Other markets: In global trade, Asian markets ended higher and European markets ended lower.

U.S. light crude oil for November delivery fell $3.36 to settle at $70.89 a barrel on the New York Mercantile Exchange after hitting a 13-month low last week.

Oil prices have been slowing since crude peaked at an all-time high of $147.27 a barrel on July 11. But the decline has been a mix of speculators leaving the market and investors betting that a slowing global economy means weaker oil demand. As a result, the falling oil prices haven’t helped stock investor sentiment much.

Gasoline prices fell another 3.4 cents overnight, to a national average of $2.889 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 34th consecutive day that prices have decreased - in the past month alone, they’re down more than 93 cents a gallon.

COMEX gold for December delivery fell $22 to $768 an ounce.

In currency trading, the dollar rose against the euro and yen.

Source — CNN

WASHINGTON - President Bush on Wednesday warned Americans and lawmakers reluctant to pass a $700 billion financial rescue plan that failing to act fast risks wiping out retirement savings, rising foreclosures, lost jobs and closed businesses. “Our entire economy is in danger,” he said.

His dire warning came not long after the president issued extraordinary invitations to presidential candidates Barack Obama and John McCain, one of whom will inherit the mess in four months, as well as key congressional leaders to a White House meeting on Thursday to work on a compromise.

“Without immediate action by Congress, American could slip into a financial panic and a distressing scenario would unfold,” Bush said in a 12-minute prime-time address from the White House East Room that he hoped would help rescue his tough-sell bailout package.

Bush explicitly endorsed several of the changes that have been demanded in recent days from the right and left. But he warned that he would draw the line at regulations he determined would hamper economic growth.

“It should be enacted as soon as possible,” the president said.

The bailout, which the Bush administration asked Congress last weekend to approve before it adjourns, is meeting with deep skepticism, especially from conservatives in Bush’s own party who are revolting at the high price tag and unprecedented private-sector intervention. Though there is general agreement that something must be done to address the spiraling economic problems, the timing and even the size of the package remained in doubt and the administration has been forced to accept changes almost daily.

Seeking to explain himself to conservatives, Bush stressed he was reluctant to put taxpayer money on the line to help businesses that had made bad decisions and that the rescue is not aimed at saving individual companies. He tried to address some of the major complaints from Democrats by promising that CEOs of failed companies won’t be rewarded.

“With the situation becoming more precarious by the day, I faced a choice: to step in with dramatic government action or to stand back and allow the irresponsible actions by some to undermine the financial security of all,” Bush said. “These are not normal circumstances.”

The president turned himself into an economics professor for much of the address, tracing the origins of the problem back a decade to a large influx of money into the U.S. system from overseas, low interest rates, the “faulty assumption” that home values would continue to skyrocket, easy lending by mortgage companies, over-borrowing by home owners and exuberant building by construction firms.

But while generally acknowledging risky and poorly thought-out financial decisions at many levels of society, Bush never assigned blame to any specific entity, such as his administration, the quasi-indepedent mortgage giants Fannie Mae and Freddie Mac, or the Wall Street firms that built rising profits on increasingly speculative mortgage-backed securities. Instead, he spoke in terms of investment banks that “found themselves saddled with” toxic assets and banks that “found themselves” with questionable balance sheets.

Intensive, personal wheeling and dealing is not usually Bush’s style as president, unlike some predecessors. He does not often call or meet with individual lawmakers to push a legislative priority.

But with the nation facing the biggest financial meltdown in decades, Bush took the unusual step of calling Democrat Obama personally about the meeting, said presidential spokeswoman Dana Perino. White House aides extended the invitations to Republican McCain and to GOP and Democratic leaders from Capitol Hill.

Obama spokesman Bill Burton said the senator would attend and “will continue to work in a bipartisan spirit and do whatever is necessary to come up with a final solution.” Senior McCain advisers said McCain will attend, too. The plans of the other invitees were unknown, and the exact details of the meeting, which Perino said was aimed at making fast progress to stem the biggest financial meltdown in decades, were still being set.

In another move welcome at the White House, Obama and McCain issued a joint statement urging lawmakers — in dire terms — to act.

“Now is a time to come together Democrats and Republicans in a spirit of cooperation for the sake of the American people,” it said. “The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail.”

The two candidates — bitterly fighting each other for the White House but coming together over this issue — said the situation offers a chance for politicians to prove Washington’s worth.

“This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe,” they said.

However, the Oval Office rivals were not putting politics aside entirely. McCain asked Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead.

Bush last gave a prime-time address to the nation 377 days ago, on Iraq. This one, carried live by all five major television outlets, could be the last of his presidency.

White House and administration officials have warned repeatedly of a coming “financial calamity.”

But that has not closed the deal, which for many recalls previous warnings of grave threats from Bush — such as before the Iraq war — that did not materialize. So Bush’s goal with his speech was to frame the debate in layman’s terms to show the depths of the crisis, explain how it affects the people’s daily lives and inspire the public to demand action from Washington.

He said that more banks could fail, the stock market could plummet and erase retirement accounts, businesses could find it hard to get credit and be forced to close, wiping out jobs for millions of Americans.

“Ultimately, our country could experience a long and painful recession,” Bush said. “Fellow citizens, we must not let this happen.”

But he ended on a positive note, predicting lawmakers would “rise to the occasion” and that the nation’s economy will overcome “a moment of great challenge.”

Through the crisis, the White House has struggled over how to deploy Bush.

As the problem mushroomed over the weekend of Sept. 13, Bush generally stayed out of the limelight, letting Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke take the lead with reporters, lawmakers and the public. Bush remained silent for days.

Since last Thursday, however, the president has talked about the crisis almost daily, although usually briefly, and yet he still has had trouble breaking into the debate. News coverage has barely mentioned Bush’s comments.

The decision to pull out perhaps a president’s largest available weapon — the ability to demand a presence on evening television screens nationwide, from a setting with the ultimate bully-pulpit power — is one sign that the rescue package still faced daunting hurdles.

With so many crises hitting the United States at once, the presidential race has taken a back seat and so has Bush’s involvement in politics. Bush canceled a fundraising trip to Florida on Wednesday to deal with the problem, the third time in a week that he has scrapped his attendance at out-of-town fundraisers, either because of the market turmoil or Hurricane Ike.

The economic crisis also is almost certain to overshadow the rest of Bush’s four months left in office and could hugely impact his legacy. It has been assumed that the long-term view of Bush’s presidency was to be shaped largely by Iraq, Hurricane Katrina and the Sept. 11, 2001, attacks. Now, the dire economic problems and the aftermath of the government’s attempted solution will certainly be added to that list.

Source — Yahoo!

SAN DIEGO - Barack Obama said Saturday there is “little doubt we’ve moved into recession,” underscoring the country’s need for a second economic stimulus package, swift steps to shore up the housing market and a long-term energy policy to reduce reliance on foreign oil imports.

The Democratic presidential contender also said removing U.S. forces from Iraq won’t be “perfectly neat,” yet a call from Iraqi Prime Minister Nouri al-Maliki for a withdrawal timetable supports his position more than the longer term presence favored by rival John McCain or his fellow Republican, President Bush.

Bush and the Arizona senator have chided Obama for proposing to withdraw U.S. forces within 16 months of taking office. McCain, a Vietnam War veteran, has even suggested it exhibits naivete by his rival, a freshman senator from Illinois.

“John McCain and George Bush both said that if Iraq, as a sovereign government, stated that it was time for us to start withdrawing our troops, then they would respect the wishes of that sovereign government,” Obama told reporters as he flew from Chicago to California.

Hagel, Reed to go to Iraq with him
In addition, Obama lifted the veil on the trip he will make next week to European capitals and U.S. battlefronts in Iraq and Afghanistan.

He said he would be accompanied by Sen. Chuck Hagel, R-Neb., and Sen. Jack Reed, D-R.I. Despite their differing political parties, each has been mentioned as a potential Obama vice presidential running mate.

Hagel served as an Army sergeant in Vietnam and was twice wounded in 1968, earning two Purple Hearts. Reed, a West Point graduate, was a former Army Ranger and paratrooper.

“They’re both experts on foreign policy. They reflect, I think, a traditional bipartisan wisdom when it comes to foreign policy. Neither of them are ideologues but try to get the facts right and make a determination about what’s best for U.S. interests — and they’re good guys,” Obama said.

The senator also said he hoped to resolve concerns expressed by German Chancellor Angela Merkel about using Brandenburg Gate as a backdrop for a speech during his visit to Berlin. Merkel questioned the propriety of a foreign political figure using such a historic backdrop as that former Communist demarkation point to deliver a campaign speech.

“I want to make sure that my message is heard as opposed to creating a controversy,” Obama said. “So, you know, our goal is just for me to lay out how I think about the next administration’s role in rebuilding a trans-Atlantic alliance, so I don’t want the venue to be a distraction. What I want to do is just work with folks on the ground to find someplace that’s appropriate.”

Recession, mortgage giants, Jackson
During his first conversation with his traveling press corps in five days, Obama:

—Delivered perhaps his most definitive judgment to date on the health of the U.S. economy, according to aides.

“I have little doubt that we’ve moved into recession at this point, and the sooner we can get money into people’s pockets, the sooner that we can stabilize the housing market, and the sooner that we can send a message to the markets that we’re serious about creating an energy policy that will create greater energy efficiency over the next decade or so, I think the sooner we’re going to get our fundamentals right,” he said.

—Said he has been closely monitoring the financial health of mortgage providers Fannie Mae and Freddie Mac. Concerns falling home values may require a government bailout prompted a Wall Street sell-off Friday before markets recovered.

“There are a lot of different definitions of what a `bailout’ would look like,” Obama said. “There are issues related to the short-term liquidity — can they borrow money? — versus issues related to whether the underlying assets of the two corporations are really unsound. And I think we need to watch carefully and see how it plays out before we make a decision about which steps need to be taken.”

—Said he hadn’t spoken with the Rev. Jesse Jackson since the civil rights leader spoke into an open microphone that he wanted to castrate Obama for delivering a speech about fatherhood that Jackson thought spoke down to black men.

“I had spoken to him before, a few days before what he said was released, and, we had actually discussed some of the concerns that he had raised about my fatherhood speech, and I told him that I absolutely believe that we have structural inequalities that have to be dealt with,” the senator said.

He said he told Jackson he is committed to better education, health care and community reconstruction to benefit black families, but fatherhood must also be discussed when half of black children grow up without their father.

“My argument is simply that it’s not an either/or proposition; it’s a both/and proposition,” Obama said. “I won’t back up one bit in asserting that that’s a problem that we have to be honest about.”

—Said he hoped both the U.S. and Iraqi governments would soothe Shiite fears of Sunni reprisals by the country’s Shiite majority.

“I don’t expect that a withdrawal will be perfectly neat,” Obama said. “I think that we’ve got to do a lot of legwork and we’ve got to make sure that we are ramping up both diplomatic efforts and reconstruction efforts and humanitarian efforts in Iraq, and that we have to make sure that Sunnis have some assurance that they’re going to be legitimate partners in the government process.”

—Drew the line at negotiating with al-Maliki or making any promises to the Iraqi foreign minister.

“We have one president at a time,” said Obama. “I’m there to listen.”

Source — MSNBC