American International Group (AIG) Market worries that balance sheet is tearing to pieces. Down to $11.49 from 52-week high of $70.13.
Lehman Brothers (LEH) Going out of business sale. Drops to $3.17 from 52-week high of $67.73.
Merrill Lynch (MER) Dragged into the whirlpool. Pushed down to $16.60 from 52-week high of $78.66.
PharmaNet Development (PDGI) Says it will miss guidance and loses half its value. Plunges to $9 from 52-week high of $43.05.
Douglas A. McIntyre
Wall St. might make the argument that GE (GE) has more exposure to the credit markets than most huge companies because of its financial division. But, the current hammering of the shares may have gotten out of hand.
GE’s stock is off 6% today to $26.47, not that far above their 52-week low.
AIG (AIG) as taken its turn in the penalty box today, joining Washington Mutual (WM), Lehman (LEH), and Merrill Lynch (MER).
After after three quarters of significant write-offs, AIG is down 25% today for having done little or nothing to improve the firm’s direction since it was clear that the credit and housing crisis were bleeding it out.
There are hundreds of thousands of jobs at stake if the current trends continue in the financial services sector. When you tally up the employment just at five troubled firms noted below, there are roughly 600,000 jobs. Add in all the smaller institutions not doing well and you have a major risk. Will all at-risk financial institutions fail? No, we seriously doubt that. But some may. Does that also mean all of these jobs are suddenly on the street? Doubtfully. We do not want to implant the thought of bread lines forming in front of the NYSE and it is obvious that many of these jobs would simply be added over at stronger competitors.
PharmaNet Development (PDGI), a clinical services company, lowered its 2008 forecast for the second time, projecting a loss of 25 cents to 58 cents per share on $358 million to $366 million in revenue.
Investors were unusually upset and sent the stock down 52% to $10.07, a new 52-week low. The period high was $43.05.
The company’s CEO Jeffrey P. McMullen does not have to worry much.
Oil refiners have had a very tough year. Since January, Marathon’s (NYSE:MRO) stock is off nearly 30%, Valero (NYSE:VLO) has plunged more than 50%, and Tesoro (NYSE:TSO) is off more than 60%. All got a bit of a boost yesterday as a result of the approaching hurricane and refinery shutdowns caused by the storm. Valero’s Port Arthur refinery (325,000 b/d), Shell’s (NYSE:RDS.A/RDS.B) Motiva refinery in Port Arthur (285,000 b/d), and Exxon’s (NYSE:XOM) Beaumont refinery (349,000 b/d) plan to shutter operations today. But the outlook could be stronger and longer term than that.
The Energy Information Agency’s weekly status report showed that commercial stocks of crude oil are down 6.7% from the same time last year, and 1.9% from a week earlier. Total gasoline inventories are also lower than last year by 3.5%. Refinery utilization was down to 78.3%.
Whatever sympathy there might have been for Lehman (LEH) is quickly slipping away. The calls for the federal government to stay out of the matter and let the investment firm fail on its own are increasing.
There may be an interesting trend in the IT outsourcing game, and one that will seem counter-intuitive if you have witnessed the currency trends and jobs migration trends since 2002. This isn’t exactly breaking news now that we have seen the U.S. dollar rebound after a six-year pounding.
There are surprisingly few analyst calls today, but these are some of the top positive calls and upgrades with more than two hours to the market open:
Jon C. Ogg
September 12, 2008
There are surprisingly few analyst calls today, but these are some of the top calls we have seen as downgrades with more than two hours to the market open:
Jon C. Ogg
September 12, 2008
The premise for Detroit going to Washington for $50 billion in loan guarantees is that the auto industry needs cheap money to retool factories that can build more fuel-efficient cars. US buyers don’t want SUVs anymore and GM (GM), Ford (F), and Chrysler may not have the capital to handle the long downturn in US car sales and rebuild their manufacturing infrastructure at the same time.
The case Detroit is making may be bogus. If gas prices keep falling the so-called Big Three might see enough of a renewed interest in their unattractive cars to hang on another year or two.
No one in his right mind wants to buy Washington Mutual (WM), but it does have some juicy pieces which would make nice additions at several other large financial firms. That leaves open the question of what happens to the bank’s mortgage business, but why confuse the situation with minor details.
The Western concept of recession is flawed. Two quarters of negative GDP growth and there it is. That notion is based on economies that have a normal state of growth of about 3%. Anything above that it a genuine boom.
China, and India for the matter, are economies where the status quo is GDP improvement of 10%. For these nations a 3% growth rate is a disaster.
According to Reuters, debt of Washington Mutual (WM) was cut to junk on a forecast of a $4.5 billion loss reserve.
Reuters says that concerns about Lehman (LEH) spread to Merrill Lynch (MER).
Reuters reports that the vice chairman of the Fed said he did not see home prices finding a bottom yet.
Reuters reports that the SEC is looking into the drop in shares of United (UAUA) caused by the erroneous bankruptcy story.
Markets in Asia were modestly higher.
The Nikkei rose .9% to 12,215. ANA rose 1.9% to 377.
The Hang Seng rose .3% to 19,439. BOC Hong Kong dropped on a Goldman downgrade. PetroChina (PTR) rose 2%.
The Shanghai Composite rose a fraction to 2,080.
Data from Reuters
Douglas A. McIntyre
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