Wednesday, January 16, 2008

Intel's outlook disappoints

Intel on Tuesday posted quarterly results and an outlook behind Wall Street targets, sending its shares down 15 percent and stoking concerns about a U.S. recession and further stock market sell-offs.

Strong evidence is emerging that consumer spending, a bulwark against recession, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.

IndyMac Bancorp said on Tuesday it is eliminating 2,403 jobs, or 24 percent of its workforce, to cope with deteriorating housing and capital markets.

Regional U.S. Banks May Report Record Drop in Quarterly Profits as bad loans spread to auto, consumer and commercial finance from mortgages. "We're in the early stages of this credit cycle and we're trying to get our arms around how severe it is.''

JPMorgan Chase said profit fell 34 percent, more than analysts estimated, after $1.3 billion of writedowns for subprime-mortgage investments. "We remain extremely cautious as we enter 2008,'' Dimon said.

Wells Fargo & Co., the biggest bank on the U.S. West Coast, said fourth-quarter profit fell 38 percent as borrowers fell behind on $1.56 billion of loans. Charge-offs for consumer loans, which include credit cards and automobile financing, rose 34 percent from the preceding quarter to $955 million. "We expect the environment to remain challenging in 2008, particularly in the consumer sector.''

Bank of America said on Tuesday it would eliminate 650 corporate and investment banking jobs and sell its equity prime brokerage business, as the second-largest U.S. bank retrenches in the face of difficult credit market conditions.

Ambac Financial will slash its dividend 67 percent and raise more than $1 billion in new capital to preserve its AAA credit rating. Chief Executive Officer Robert Genader will be replaced and the company said it will report another loss this quarter after writing down the value of securities it guarantees by $3.5 billion.

A top House Democrat said Congress and the White House can come to an agreement on an economic-stimulus package -- provided Republicans don't insist the plan includes making President Bush's signature tax cuts permanent.

Bondholders in structured investment vehicles suffered a 47 percent drop in the value of their investments, according to Moody's Investors Service. Net asset values declined to as little as 27.6 percent, while the highest for the 25 SIVs rated by Moody's was 80.3 percent.

Prices for contracts tied to the bonds of MBIA, Bear Stearns and Washington Mutual, which protect lenders and creditors against the possibility that debt payments won't be made, are higher for one year than for five, according to data compiled by Bloomberg. Longer-term protection is usually more expensive because the risk of nonpayment is greater. ..."We're going into an acute liquidity crisis for corporate borrowers.''

Progressive Corp., the first of the 10 largest U.S. insurers to report fourth-quarter results, said profit fell 41 percent as lower prices for auto coverage reduced premium revenue.

ABN Amro cut its forecast for European Central Bank interest rates, the third bank to do so since last week's threat by ECB President Jean-Claude Trichet to raise borrowing costs. Now the bank forecasts the ECB will keep the benchmark rate at 4 percent this year.

HSBC Holdings dropped the most in six years in Hong Kong trading on concern it may have to increase provisions for U.S. bad loans after Citigroup Inc. reported a record loss.

Oracle agreed to buy BEA Systems Inc. for $8.5 billion after a three-month fight, capitulating to the board's demands for a higher price.

The Bank of France cut its fourth- quarter growth forecast for a second month and its business confidence index fell to the lowest since September 2006. Gross domestic product may have increased 0.4 percent in the final three months of the year, down from the 0.5 percent anticipated in December.

Most European banks have appeared to do relatively well as their U.S. counterparts have reported tens of billions of dollars in losses on mortgage investments. In recent weeks, though, their outlooks have taken turns for the worse.

Northern Rock fell to an all-time low in London trading after Prime Minister Gordon Brown made his clearest indication yet that the bank may be nationalized.

China imposed price curbs on meat, eggs and cooking oil and ordered banks to set aside larger reserves to try to reduce inflation from an 11-year high.

U.K. Housing Market Was Worst Since 1992 in December. The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 49.1 percentage points, the Royal Institution of Chartered Surveyors said today in London. That compares with 40.6 points the previous month.

ASML Holding NV, Europe's largest maker of chip equipment, posted a surprise increase in fourth-quarter profit. ...declined to give a forecast for order bookings in the current quarter, citing "extreme uncertainty'' about the economy.

European car sales rose last year. Registrations advanced 1.1 percent to 15.96 million cars in Europe, after a 0.7 percent gain to 15.78 million in 2006. December sales rose 1.2 percent.

Bic SA, the world's biggest maker of disposable pens, said fourth-quarter sales fell 0.9 percent after the company's North American stationery business slowed more than expected. The shares dropped to a three-year low. Stationery sales in the fourth-quarter fell 6.4 percent to 163 million euros..."It is undoubtedly tied to the current economic climate in the U.S.''

Adidas fell the most in 14 months in Frankfurt trading as Goldman Sachs & Co. cut its rating to "sell.''...saying the stock "appears expensive and we see downside risk from high U.S. exposure.''

RNB Retail and Brands AB, the Swedish maker of Polarn O. Pyret children's clothes, fell the most in 6 1/2 years in Stockholm trading after profit dropped because collections failed to appeal to shoppers. Pretax profit fell 9.1 percent from a year earlier in its first quarter. Sales rose 3.8 percent to 923.7 million kronor.

X5 Retail Group NV, the biggest Russian grocery retailer, will exercise an option to buy Carousel Group, gaining 22 large-format superstores to tap the nation's rising consumer spending.

Approvals for Australian home loans grew 4 percent during November, as resilient conditions in the manufacturing and mining sectors keep labor markets tight and demand in the housing sector strong.

UK jobless claims dropped a greater-than-expected 6,400, helping to keep the jobless rate at the 1975 low of 2.5 percent. Average earnings growth was stronger than expected, remaining flat at 4 per cent including bonuses, and 3.6 per cent excluding bonuses.

Japan's machinery orders fell in November as companies pared spending in anticipation the U.S. slowdown will spread to Asia and hurt exports. Orders declined 2.8 percent from October, when they rose 12.7 percent.

Some 86.3 percent of consumers surveyed from Nov. 9 to Dec. 6 said they expect prices to climb this year, the highest since the Bank of Japan started asking people about inflation in 1997. In the previous period, 71.7 percent said prices may rise.

Brazil's retail sales in November rose at the fastest pace in three months as record low interest rates stoked demand for computers, telephones and home appliances.

Consumer prices in the U.S. increased 0.3 percent after a 0.8 percent gain in November. Prices excluding food and energy rose 0.2 percent, after climbing 0.3 percent a month earlier.

Euro-zone CPI figures rose 0.4 percent during the month of December, leaving the annual rate well above the ECB's 2 percent ceiling at 3.1 percent.

Japanese stocks fell for a fourth day on mounting concern the U.S. economy, the world's largest, is heading into recession. The Nikkei 225 Stock Average fell 468.12, or 3.4 percent, to 13,504.51, its lowest close since Oct. 28, 2005. The average has dropped 12 percent in eight days. The Hang Seng index plunged 1,386 points or 5.37 percent. The Shanghai Composite index was also lower down 153 points or 2.81percent.
European stocks slumped for a second day, led by technology and mining companies, after Intel Corp. forecast sales that fell short of analysts' estimates and metals prices retreated. Benchmarks fell in all of the 18 western European markets except Italy. The U.K.'s FTSE 100 slid 0.8 percent and Germany's DAX fell 1 percent. France's CAC 40 sank 0.3 percent. Austria's ATX sank 3.5 percent and entered a bear market.

U.S. overnight and premarket:

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