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Equity Markets
U.S. stocks fell, extending losses from the market’s worst week since November, as investors speculated Alcoa Inc. will kick off a disappointing earnings season
for commodity producers and banks.
Alcoa, the aluminum producer that began profit reports among Dow Jones Industrial Average companies today, dropped 6.9 percent as Deutsche Bank AG recommended selling the shares because of a worsening profit outlook. Citigroup Inc. plunged 17 percent, the most in six weeks, on concern plans to combine its brokerage unit with Morgan Stanley’s will crimp future earnings. ConocoPhillips
fell 2.9 percent after crude sank below $38 a barrel on expectations demand will decrease amid the recession.
The Standard & Poor’s 500 Index slipped 2.3 percent to 870.26, extending its 2009 slump to 3.7 percent. The Dow average retreated 125.13 points, or 1.5 percent, to 8,474.05. The Russell 2000 Index slumped 2.6 percent. Stocks in Europe and Asia declined.
The S&P 500 slumped 4.5 percent last week as companies from Alcoa to Intel Corp. and Wal-Mart Stores Inc. spurred concern earnings will deteriorate, while
the unemployment rate in the U.S. climbed to the highest level in almost 16 years.
Profits for companies in the S&P 500 probably fell 20 percent in the fourth quarter of 2008, according to analysts’ estimates compiled by Bloomberg. That would
mark the sixth straight period of declining earnings, the longest stretch on record.
Income probably declined 65 percent at raw-materials producers and 53 percent
at financials firms.
Alcoa lost 75 cents to $10.06. The shares slumped 11 percent last week after the
company said it will cut 13 percent of its 107,000 employees and reduce capital
spending by half. Deutsche Bank downgraded Alcoa to “sell” from “hold” and
reduced its price estimate on the shares 20 percent to $8.
After the close of trading, Alcoa posted its first net loss in six years because of
plunging prices and demand.
Citigroup plunged $1.15 to $5.60 for the steepest drop in the Dow. Citigroup,
which had to get $45 billion of rescue funds last year from the U.S. government,
may book a gain of as much as $10 billion by selling control of its Smith Barney
unit to Morgan Stanley, a person familiar with the talks said.
Bank of America Corp. lost $1.56, or 12 percent, to $11.43. The lender that
completed its purchase of Merrill Lynch & Co. earlier this month may post a $3.6
billion loss in the fourth quarter and slash its quarterly dividend, Citigroup analyst
Keith Horowitz said. JPMorgan Chase & Co. dropped $1.06, or 4.1 percent, to
$24.91.
Financial shares in the S&P 500 slumped for a fourth straight day, losing 5.7
percent as a group, even as a gauge of money-market stress favored by former
Federal Reserve Chairman Alan Greenspan fell to the lowest level since the
collapse of Lehman Brothers Holdings Inc.
The Libor-OIS spread, the difference between the three- month London interbank
offered rate, or Libor, for dollars and the overnight indexed swap rate, dropped to
98 basis points. The last time it closed below 100 basis points was Sept. 12, the
final working day before Lehman filed for bankruptcy, causing credit markets to freeze worldwide
S&P 500 energy shares declined 3.1 percent as a group as crude sank 7.8
percent to $37.65 a barrel in New York on concern production cuts by the
Organization of Petroleum Exporting Countries will fail to counter a slump in
demand. ConocoPhillips retreated $1.52, or 2.9 percent, to $50.47. Exxon Mobil
Corp., the world’s largest oil company, slipped 1.3 percent to $76.54, while
Chevron Corp. retreated 2.8 percent to $70.82.
Life insurers are pushing regulators to grant looser reserve standards after
investment losses depleted capital across the industry. The National Association
of Insurance Commissioners rejected an industry request to approve reform by
Jan. 16 and plans to hold a hearing at the end of the month before taking a vote,
Susan Voss, the vice president of the group, said late on Jan. 9.
Obama asked the Bush administration to notify Congress that he plans to seek the remaining $350 billion in financial-rescue funds, and Bush agreed to the request, White House spokeswoman Dana Perino said.
The request will trigger a 15-day period when Congress can vote to deny the release. It comes as Obama’s aides draft plans for broadening the program beyond the Bush administration’s focus on buying stakes in banks.
The changes, being coordinated with the Democratic majority in Congress, are likely to include a new initiative to stem mortgage foreclosures; some analysts also advocate removing assets from banks’ balance sheets and making further injections of capital into financial companies.