Global recession also affecting luxury services

Market Recap

DJIA -2.70%, Nasdaq -3.24% and S&P -3.31%

Nikkei -3.12%

WTI Crude Oil USD 41.58

USD/EUR 1.2895

US equities sold off sharply, with the S&P, Nasdaq and Russell all seeing their four-day winning streaks come to an end. There were several drivers behind yesterday’s rout, though confusion and scepticism surrounding recent reports that the government will create a bad bank to purchase toxic assets seemed to present the biggest stumbling block.

U.S. News

3M reported good Q4 numbers, but cut its full year 2009 guidance.

Broadcom reported Q1 below market expectation 

Qualcom reported numbers below market expectations

Eli Lilly, Colgate and Amercian Electric reported numbers above market expectations

Black & Decker issued a profit warning on Q1

Royal Caribbean Cruises said Q4 profit fell 98% after it slashed ticket prices to stimulate demand in the global recession.

Amazon.com reported more Q4 profit and sales than analysts estimated.

European News

BNP agreed on a new deal on Fortis, Fortis Holding will retain 90% of Fortis Insurance.

Bulgari reports sales below market expectations and sees weak outlook.

Roche lowered bid on Genentech to USD 86.5 from USD 89.

Kuoni reports FY 2008 numbers broadly in line with expectation.

TF1 saw advertising sales falling by 16% since public-TV ban.

Air France-KLM and Boskalis will be included in the AEX as of March 3^rd.

Areva reported slightly better FY sales at EUR 13.2bn

Commerznbank sees no reason to request more money from the German state.

Danone ceo confirmed mid-long term targets, 8-10% lfl sales growth and improved operating margin.

Earnings Watch

USA: Chevron, Exxon Mobil, Honeywell, Procter & Gamble

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Agreement between BNPPARIBAS and FORTIS - DEXIA announced a 3 bn EUR loss for 2008 and will cut dividend

·       Roller coaster ride again: DJ -2.7%, S&P500 -3.3%, NASDAQ -3.2%, NIKKEI -3.1% and EUROSTOXX -2.3% down by 1% now.

·       DEXIA announced a 3 bn EUR loss for 2008 and will cut the dividend. Some 900 people will leave the bank on a total of 35000 (only 2.5% of the staff), what rather limited is.. The trading activity will be downscaled and rumour has it that this activity in Luxembourg might be transferred to Brussels. The share is down 8%.

·       The Belgian government, BNPPARIBAS and FORTIS found an agreement that still has to be confirmed at the next shareholders’ meeting.  According to a bank based in the Netherlands, FORTIS HOLDING would be around 2.8-2.9 EUR worth. A big discount must nevertheless be applied. Be careful : no rush but some hope.

·       Bob Dole (CIO with BLACKROCK) was yesterday in Luxembourg and gave his views on markets and the economy. He thinks that there is a 70% chance that we are in a deep recession (10% likelihood of a depression and 20% of a light recession). According to him, the US will see only 2% GDP growth over the coming years compared with 3.5-4.0% over the past 10 years. He is also convinced that the US car industry is not viable.

·       The volatility index VIX is up at 42.6. Gold is in great shape at 908 USD per oz and the oil price is as well at 44.5 USD. The USD is up against the EUR at 1.29. 10-2 years spread is normalizing further at 1.44. The 5 y CMS is at 3.06.

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$1 trillion to $2 trillion to help banks restore their health

Dour economic data and mixed earnings announcements gave market participants an excuse to sell stocks and take profits this session. Stocks finished 3.3% lower, ending a four-session streak of gains. Stocks are still up 1.6% week-to-date, though.

Thursday's mood wasn't helped by news that December durable goods orders declined 2.6%, marking the fifth straight monthly decline. Excluding transportation, orders were down 3.6%. The drop in both readings was also steeper than expected.

In other economic news, December new home sales declined more than expected, falling almost 15% from the prior month. The supply of new homes is at an all-time high of nearly 13 months, based on the pace of current sales. Demand for new homes remains weak as weak labor markets limit buyers. Initial jobless claims for the week ended Jan. 24 increased modestly to 588,000, which exceeded the 575,000 claims expected. Continuing claims climbed to 4.78 million, which is the highest level for continuing claims in 40 years.

To help stimulate the ailing economy, the U.S. House of Representatives has approved an $819 billion stimulus plan. Meanwhile, government officials have discussed spending a separate $1 trillion to $2 trillion to help banks restore their health, according to The Wall Street Journal.

With banks at the center of economic concerns, financial stocks continue leading the broader market. Financials tumbled 8.4% to finish at their session low. Losses were widespread in the sector, but life and health insurers (-11.4%) saw some of the worst selling as Allstate (ALL 23.50, -6.14) missed analysts' consensus earnings estimate. 

With a market cap that's more than double the collective market caps of the Dow's four financial firms, Exxon Mobil (XOM 77.00, -2.25) was the heaviest weight on the broader market this session. It was also a laggard in the Dow. Exxon reports its latest quarterly results ahead of tomorrow morning's opening bell. 

Fellow Dow component 3M (MMM 56.43, +1.01) posted better-than-expected quarterly earnings results, but lowered its 2009 earnings outlook. The revised outlook is still in-line with estimates, though. It finished the session as a relative leader.

In other earnings news, Qualcomm (QCOM 34.55, -2.27) fell short expectations, while Ford (F 1.95, -0.08) reported a loss, as expected, but is drawing on its credit lines. Eli Lilly (LLY 37.97, -1.12) and Colgate-Palmolive (CL 65.22, +1.37) both beat expectations, as did utilities American Electric (AEP 32.70, +0.94) and Dominion (D 36.21, +0.52). Amazon.com Inc. (AMZN) advanced 13 percent to $56.63. The largest Internet retailer reported more fourth-quarter profit and sales than analysts estimated after promotions and discounts lured consumers to its Web site. Reports Q4 EPS $0.52 vs Reuters $0.39. Company reports revenues of $6.70B vs Reuters $6.43B. Guides Q1 revenues to $4.525-$4.925B vs Reuters $4.51B.

Without any true leadership, the stock market finished near its session lows. All 10 sectors in the S&P 500 finished in the red.

Investors now turn their focus to the advance fourth quarter GDP report, which is due tomorrow morning (8:30 AM ET). Given the challenges facing the economy, the consensus forecast calls for a 5.5% annualized fourth quarter decline in GDP.

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Fortis, BNP and the Belgian government could announce a new deal as early as today

Market Recap

DJIA +2.46%, Nasdaq +3.55% and S&P +3.36%

Nikkei +1.79%

WTI Crude Oil USD 41.60

USD/EUR 1.3107

U.S. stocks stage an impressive rally on the back of President Obama’s plan to set up a bad bank to buy toxic assets from the banking industry.

The FOMC left rates unchanged and said that they would be prepared to buy Treasury securities to pump up lending.

U.S. News

Qualcom reported 56% drop guided Q1 revenue close to consensus, but gave no EPS guidance.

Wells Fargo beat analyst expectations and also reported a USD 37.2bn write-down to Wachovia’s portfolio. The company will not need additional TARP funding.

Starbucks reported Q1 results below market estimations.

European News

Xstrata intends to raise £ 4.1bn with rights offer at 210p

Swatch reports sales below market expectations, no buyback and sees challenging H1.

Cookson launche a rights issue for £ 240m at 10p

H&M reports strong Q4 numbers and will create 7000 new job during 2009

Royal Dutch Shell Q4 profits are below market estimations.

Zurich CEO James Schiro will step down end of 2009

Deutsche Telekom Q4 subscribers slowed.

Moody’s downgrades ING rating to A1 from Aa3

Essilor reports Q4 sales slightly lower.

Suez Environnement reports FY sales and dividend in line with consensus. CEO says the waste business is hurt by slow economy.

Fortis, BNP and the Belgian government could announce a new deal as early as today.

Santander reports FY net profit in line with estimates

RWE is not planning any further large acquisitions following the acquisition of Essent.

Earnings Watch

USA: 3M, Autoliv, Colgate, Eli Lilly, Ford, Altria, Intl Paper, Amazon, Broadcom, Eastman

Europe: Astra Zeneca, Total, Bulgari, Ericsson, SKF

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Economic stimulus package approved - "Bad bank" to absorb toxic investments

Ø       US markets close higher, S&P500 on a 4 day bull run: S&P+3.36%, DJIA +2.46%, NSDQ +3.55%.

Ø       US House approves Obama's proposed $816 bio economic stimulus package.

Ø       Financial stocks rally on news that Obama is prepared to set up a so-called "bad bank" to absorb toxic investments. No details yet on how this will work but investors are relieved by the thought that the toxic debt will be removed from banks' balance sheets. Citigroup +18%, Bank of America +13%, S&P500 Financials +13%.

Ø       As expected Fed leaves rates at close to 0 and says it will keep rates at "exceptionally low levels" for some time.

Ø       Asian stocks rallied for a third day, led by banks and commodity producers. Optimism that lower global rates and US stimulus package will revive the economy.

Ø       CB of New Zealand lowers rates more than expected: cutting 1.5% to a level of 3.5%. NZ$ drops to a six year low

Ø       ECB's Trichet says that the next "important" meeting will be in March, suggesting that there will be now interest rate cut at the meeting next week.

Ø       € weakens vs $ (1.3060) as the market does not appear to like the ECB's "wait and see policy".

Ø       IMF cuts its growth forecast for the eurozone, now predicts a 2% contraction this year.

Ø       Vix dips under 40, currently at 39.66. Oil price drops to $41.60. Gold slightly down @ 878.60.

Ø                          10-2yr spread stable @ 137bps. Euro 5yr CMS @ 3.04

Ø                          European markets start the day lower: -1%

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Fed funds target rate unchanged at 0.00% to 0.25%. The Federal Reserve continues to purchase large quantities of agency debt and mortgage-backed securities.

Market participants spent the session focusing on word the government may be close to creating a "bad bank" that will purchase risky assets from existing banks. Divesting risky assets would help banks protect against further asset write-downs, and increase cash on their books. That would help limit the need to raise additional capital, which can be dilutive to shareholders.

Helping financial companies restore their health is largely seen as the first step in repairing the financial system and the broader economy. The financial sector responded by gaining 13%, leading the broader market more than 3% higher.

Wells Fargo (WFC 21.19, +5.00) provided the most support to the financial sector and the broader market. It gained 31%, marking its best single-session performance in months. Wells Fargo won kudos after announcing it is maintaining its dividend, and has no plans to ask for additional TARP capital. Wells Fargo reported a loss of $0.79 per share including items, but a profit of $0.41 per share after excluding the items. The consensus called for earnings of $0.33 per share.

Dow components Boeing (BA 43.24, +0.02) and AT&T (T 25.91, -0.02) traded as laggards after reporting unimpressive quarterly results. WellPoint's (WLP 44.50, +1.88) latest earnings were in-line with expectations. Yahoo! (YHOO 12.24, +0.90) and ConocoPhillips (COP 50.16, +0.65) both topped earnings estimates. Yahoo, along with other large-cap tech names, helped drive gains in the Nasdaq. ConocoPhillips provided leadership to the energy sector, which was also helped by a modest rebound in crude oil prices.

Crude finished the session roughly 1% higher, just above $42.00 per barrel. Crude was actually down 2.4% in the wake of a larger-than-expected build in weekly inventories. That marked the fifth straight build for weekly inventories.

In its first session of the new year, the Federal Open Market Committee left its fed funds target rate unchanged at 0.00% to 0.25%, as expected. The target rate is likely to remain at exceptionally low levels and reflects the FOMC's view that the economy remains weak. In turn, the Fed says its focus is to support financial markets through open market operations and other measures.

The Fed also stated it continues to purchase large quantities of agency debt and mortgage-backed securities. Such a move helps put cash back into the system, and helps support the mortgage and housing markets. The FOMC stated it is prepared to purchase longer term securities if evolving circumstances indicate that it would be effective in improving conditions in credit markets.

Statements from the FOMC and word that a bad bank plan may be in order helped drive the stock market to its fourth straight gain. Stocks are up roughly 5.5% during that time.

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Volatility down before the Federal Reserve meets later on

·       There is hope: DJ +0.7%, S&P500 +1.1%, NASDAQ +1.0%, NIKKEI +0.6% et EUROSTOXX -0.1 and now up 2% now.

·       Profit taking yesterday amongst the financials in Europe but nice coming back in the US. Today, banks are in favour on Mainland. The terms of the agreement between BNPPARIBAS and the Belgian government have a good chance to be discussed again, depending on the issue of the shareholders’ meeting.

·       The FED will give us more details about their monetary policy tonight. No change is expected on the interest rates front, of course but the liquidity toolbox is still at hands and the FED is likely to go on buying treasuries in order to inject cash into the system. Rumour has it that Korea and possibly China might sell long term treasuries. They detain huge amounts of 30 years bonds.

·       Vix is down again 42.3. Gold is stable at 895 USD per oz and the oil price is down at 43.5 USD. The USD is stable against the EUR at 1.33. 10-2 years spread is stable too at 1.37.

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General Electric potential downgrade!!

Market Recap

DJIA +0.72%, Nasdaq +1.04% and S&P +1.09%

Nikkei +0.56%

WTI Crude Oil USD 42.18

USD/EUR 1.3248

U.S. stocks rise modestly on light volume as investors mull earnings and wait for today’s FOMC meeting.

U.S. News

Texas Instrument reported Q4 EPS above the market consensus. The company will cut 12% of its workforce to cut costs.

Valero reported Q4 EPS at USD 1.41 and took a USD 4.1bn goodwill write down on assets.

Verizon reported Q4 results in line, but the company said demand for its mobile phone business has slowed

Yahoo! reported Q4 above the market consensus with EPS at USSD 0.17 vs market consensus at USD 0.13

Newmont Mining announced positive 2008 operating results.

General Electric: Moody’s said it may downgrade the AAA rating of GE sending the conglomerate’s shares down sharply in after-hours trading.

European News

SAP has delivered a solid FY and Q4. Licences are in line. The company will cut 3500 jobs this year as recession curbs software demand

Novartis Q4 profit almost doubles on rebound in drug operation, but sales are still below market expectation. Plans to increase dividend by 25% to CHF 2.-

Germany may take 70% Hypo Real Estate stake after two government bailouts.

Santander will offer USD 1.8bn to end Madoff Investor claims and will close funds.

Schneider reports in line numbers, but near-term visibility is low.

Total is launching a bid for UTS Energy for CAD 617m.

STM reported in line Q4 numbers, but will cut 3500 jobs.

Earnings Watch

USA: AT&T, Boeing, Boston Scientific, Conoco, Starbucks, Wells Fargo

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Lack of conviction on the NYSE, as less than 1.2 billion shares traded hands

Action was choppy and trading volume was light this session, but stocks were able to close higher for the third straight session.

Financial stocks (+3.7%) finished as the best performing sector with gains being shared by big and small players alike. American Express (AXP 16.68, +1.48) was one of the strongest performers in the sector and the Dow, for that matter. Though the company missed analysts' quarterly estimates, and management expects write-offs to rise, investors were relieved the company didn't report any truly horrendous developments. Given the challenges facing financial companies and consumers, investors have become conditioned to expect lower earnings and higher accounting charges.

Such was the case with Zions Bank (ZION 14.08, +1.89), which reported a deeper-than-expected loss and increased reserves. Still, the stock logged its best single-session advance in three months, and provided support to regional banks (+3.6%).  Wells Fargo (WFC 16.19, +0.71) contributed the most leadership to the financial sector, though. The diversified bank reports its latest quarterly results tomorrow. Wall Street expects earnings of $0.33 per share.

Healthy gains were also had in the health care sector, which finished higher after Bristol-Myers (BMY 23.13, +0.88) and McKesson (MCK 45.22, +4.82) topped analysts' quarterly earnings estimates. Amgen (AMGN 53.09, -1.32), however, missed expectations.

Semiconductors also had a solid session, thanks to leadership from Texas Instruments (TXN 15.31, +0.54). Texas Instruments reported lower earnings, a reduced outlook, and plans to layoff 12% of its workforce, but the announcements weren't altogether surprising considering similar reports already made by Intel (INTC 13.81, +0.43).

Steel emerged as a strong performer after industry stalwarts U.S. Steel (X 31.49, +2.03) and Nucor (NUE 39.80, +2.34) posted better-than-expected results. Expectations were low in light of weak macro conditions. Steel stocks in the S&P 500 logged their best single-session advance in more than one month. However, AK Steel (AKS 8.64, -0.76) failed to participate in the bounce after it reported a deep loss.

The overall strength in steel helped advance the materials sector, where Rohm & Haas (ROH 58.75, +1.65) was a relative leader. Rohm & Haas fell Monday after Dow (DOW 13.19, -0.05) reported it would not be closing its offer for Rohm & Haas by today. Buyout hopes remain alive, though, according to comments by Dow's chief executive in a CNBC interview. Meanwhile, industry peer DuPont (DD 23.27, +0.09) posted a worse-than-expected loss for the latest quarter, and lowered its outlook. However, amid the collapse of the Rohm & Haas - Dow deal, investors were largely prepared for DuPont's results.

Retail stocks were among the session's weakest performers. The group traded lower as investors reacted to reports suggesting the National Retail Federation expects retail sales to fall a 0.5% from last year. Home improvement retailers (-2.6%) were hit especially hard.

Telecom stocks (-3.0%) logged the worst performance of any sector in the S&P 500. Verizon (VZ 29.96, -1.03) was a laggard in its space and in the Dow even though its earnings met expectations. AT&T (T 25.93, -0.90) traded lower in related weakness; the company is scheduled to announce its latest earnings results tomorrow morning.

Though the stock market was able to extend its winning streak with this session's advance, the move seemed to lack conviction as less than 1.2 billion shares traded hands on the NYSE. 

More than 35 companies will announce quarterly results ahead of tomorrow's opening bell, but market participants will be looking forward to the latest Federal Open Market Committee statement. Now that the fed funds target ranges from 0.00% to 0.25%, investors will be looking for hints regarding the committee's methods of steering the economy without using rate cuts.

The latest crude oil inventory data is also due tomorrow. Traders expect a build of inventory, given persistently weak demand. Demand concerns seemed to return to focus this session. After crude futures climbed more than 20% last week, traders pushed crude oil futures more than 9% lower this session. Crude finished near $41.60 per barrel.

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Market news: Financials, Health Care stocks, and existing home sales data

Financials threatened to undercut the broader market's gains, but stocks still posted a healthy advance amid a heavy flow of headlines Monday.

Financial stocks finished the session as the worst performing economic sector. They had been up more than 4% in the early going, but finished with a 2.1% loss. The initial advance seemed to come on the back of a rebound in European financial stocks, which have been dogged by profit concerns and fears of nationalization. Still, the gains proved unsustainable and as financials slipped so, too, did the broader market.

Health care (-0.2%) stocks finished modestly lower, weighed down by Pfizer (PFE 15.65, -1.80). The pharmaceutical giant is acquiring Wyeth (WYE 43.39, -0.35) for $68 billion, or $50.19 per share. The offer comes as a 29% premium to where WYE shares closed before The Wall Street Journal first reported the companies were in talks. Pfizer is looking to fund the offer with a mix of cash, stock, and debt.

Though the deal will help Pfizer bolster its portfolio and further develop its drug pipeline, investors were disappointed when the company announced that in connection with the transaction it will halve its quarterly dividend to $0.16 per share. Coupling that with downside guidance sent shares of PFE to new January lows. As for the latest quarter, Pfizer topped earnings expectations, but Wyeth fell short of the quarterly consensus earnings estimate.

Despite Pfizer's announcement, tight credit conditions are weighing on merger activity elsewhere. Dow Chemical (DOW 13.24, -1.09) announced this morning that it does not intend to close the pending acquisition with Rohm & Haas (ROH 57.10, -8.72) on or before tomorrow. The announcement wasn't a total surprise, though. Tighter credit and a severed deal between Dow and a Kuwaiti petrochemicals outfit put have had the deal on tenuous footing for weeks. Shares of DOW and ROH weighed on the materials sector (-1.5%), as did DuPont (DD 23.18, -0.98). DuPont, which is a Dow component, reports its latest results ahead of tomorrow morning's opening bell.

Caterpillar (CAT 32.28, -3.38) fell to a new multiyear low after reporting disappointing earnings and issued downside guidance. Challenging macro conditions have the firm looking to cut roughly 20,000 jobs.

One bright spot for the session, McDonald's (MCD 58.51, +0.49) bested the consensus quarterly earnings forecast and indicated that global comparable sales continue to be strong in January. Same-store sales increased more than 7% in the fourth quarter. However, many investors continue to question how long McDonald's can continue logging strong comparables.

Stocks began the session in a relatively quiet manner, but quickly climbed to a gain of 2.5% after it was announced December existing home sales increased 6.5% to an annualized rate of 4.74 million units. The December number was better-than-expected (consensus was 4.40 million). Though the headline alone qualifies as relatively good news, it was supported by a 9.3% drop in median home prices. That is the biggest drop since the 1930s. The month's supply of unsold homes at the current sales rate fell to 9.3 in December from 11.2 in November.

The Federal Open Market Committee begins its two-day meeting tomorrow. It will announce its latest monetary policy decision Wednesday. Tomorrow's focus, then, will be on earnings results from Verizon (VZ 30.99, +0.55), Bristol Myers Squibb (BMY 22.25, -0.14), Yahoo! (YHOO 11.17, -0.15), and a raft of other reports, which are tomorrow morning.

Leading indicators improving slightly

·       Inflexion point or do we still have to keep our breath ? : DJ +0.5%, S&P500 +0.6%, NASDAQ +0.8%, NIKKEI +5.0% and EUROSTOXX +3.7% and now up 0.3% at the opening.

·       Some leading indicators have improved slightly. The German business confidence index in particular inched up in December? The German authorities are willing to injecting money into the economy for a total amount equivalent to 1.6% of the GDP. Better late than never. In the US, existing home sales bounced back last December by 5% as buyers are bottom-fishing (keep in mind that 60% of the sales in California are fire sales)

·       Some financial institutions have already released preannouncements of the 2008 results. In Europe, the news was warmly received (ING, KBC, BARCLAY’S) as a kind of relieve. It is pretty clear that every one has to be extremely careful and that the final figures are likely to be very pessimistic. The present year must show a different face for the top managers who survived (no need to say that some paid for their mistakes, some did not and a third category just had to leave and we will definitely regret the latter!). This being said, the IMF has revised the global amount of likely write-downs upwards and only 2 thirds have been booked so far.

·       Vix is down 45.7. Gold is bouncing back (technical rebound) at 895 USD per oz (remains very volatile) and the oil price is up as well at 46.8 USD. The USD is weaker against the EUR at 1.33. 10-2 years spread is at 1.37.

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Freddie Mac announced that it will ask U.S. treasury for a further USD 35bn in aid.

Market Recap

DJIA -0.56%, Nasdaq +0.80% and S&P +0.54%

Nikkei -0.81%

WTI Crude Oil USD 45.52

USD/EUR 1.2926

Equity market ended the week lower on a volatile Friday. Market is recovering early losses on stronger commodities and bottom picking.

Happy Chinese New Year!

U.S. News

GE reported a collapse of 44% of its Q4 profit. Credit losses were USD 1bn over expectations.

Google reported much better Q4 profit than expectation.

Pfizer launched a bid on Wyeth. Discussions started months ago.

Freddie Mac announced that it will ask U.S. treasury for a further USD 35bn in aid.

European News

ING sees Full Year losses of around EUR 1bn and Q4 net loss EUR 3.3bn. ING is negotiating with the government over support for loan portfolios.
CEO Tilman will step down and will be replace by Jan Hommen. ING will cut 7000 jobs.

Credit Agricole and Société Générale agreed to merge their asset management operations with EUR 638bn under management. CA will own 70% of the entity and Société Générale 30%

Swiss Re may face more write downs.

Philips reported in line Q4 sales at EUR 7.6bn. The company will stop buyback program.

EADS will get EUR 5bn of French State aid for Airbus.

BNP reported FY 2008 results below market expectations

Tecnicas Reunidas and partners have awarded a USD 1.2bn oil and gas contract from Abu Dhabi National Oil.

Benelux Small-Mid Cap

IMTECH: Gets EU 60m worth in orders from E-Europe and seeks further growth there.

BESI: Buys 2 semiconductor units from OERLIKON, no fin details

ORDINA/LOGICA/BRUNEL: FD article on pressure on margins/mkt share & job cuts

BINCKBANK: Bought back 72,000 of its own shares

ONCOMETHYLOME: Appointed Renardel de Lavalette as COO as per Feb. 2

THROMBOGENICS: Get transfer success fee from ROCHE

Earnings Watch

US earnings announcements: Caterpillar, Covidien, Danaher, Eaton, Halliburton, Mac Do, Amex, Amgen, Texas Instruments.