U.S. stocks finished mixed Thursday as profit taking and end-of-the-month position squaring pared solid gains won earlier in the session. Some of the selling was tied to Chrysler's midday bankruptcy filing -- which came as no surprise to investors but did serve as a reminder that many companies remain in trouble.
Traders also weighed some mixed data on the health of the U.S. economy, and better than expected corporate earnings. The stock market rallied Wednesday after the Federal Reserve indicated some optimism about the U.S. economy.
On Thursday at 3:10 p.m. ET, the 30-stock Dow Jones industrial average was higher by 25.16 points at 8,210.89. The broader S&P 500 index gained 3.14 points to 876.78. The tech-heavy Nasdaq composite index added 13.68 points to 1,725.62. On the New York Stock Exchange, 17 stocks were higher in price for every 14 that declined. Breadth on the Nasdaq was flat. Trading was active.
Volatility in Thursday's stock market action reflected some end-of-month portfolio adjusting, says S&P MarketScope.
Treasuries eased, with the yield on the 10-year note remaining well above 3%. The dollar index rose. Gold futures were lower. Energy futures were mixed.
There was little immediate reaction to reports initial jobless claims fell 14,000 to 631,000 but continuing claims rose 133,000 to a record 6,271,000; March personal income fell 0.3%, while consumption fell 0.2%; the first-quarter employment cost index rose only 0.3%; and the April Chicago purchasing managers' index jumped to 41.1 from 31.4.
Unable to get all of Chrysler's creditors on board with a restructuring of its debt, the automaker and the U.S. Treasury Dept. put the company into bankruptcy today, Apr. 30. President Barack Obama, in a White House statement delivered shortly after noon ET, said the Administration supported a bankruptcy filing and lambasted a group of Chrysler bondholders who held out for better terms.
Obama said the bankruptcy process will be "quick and efficient," and reassured car buyers that the government will back any new car warranties. The Treasury will provide financing for the company while it is in bankruptcy and pave the way for the automaker to reemerge from the process as a smaller, leaner company with Italian automaker Fiat as a major shareholder.
There was much debate Thursday morning over the future of Ken Lewis after Bank of America (BAC) shareholders voted Wednesday to strip him of his duties as chairman, weakening the embattled chief executive as he struggles to steady the troubled bank and fend off criticism of his rocky takeover of Merrill Lynch. BofA stock was indicated to open higher Wednesday. The Journal reported the largest U.S. bank, as measured in assets, said a shareholder proposal to split the chairman and CEO positions passed with 50.34% of the vote. The margin was so close that officials decided to recount ballots cast by shareholders.
BofA said Lewis would relinquish the chairman slot immediately but continue as president and CEO. The bank said the change doesn't indicate a loss of control or support for Lewis. Bank of America named Walter E. Massey, a longtime director and president emeritus at Atlanta's Morehouse College, its new chairman. The vote marked the first time that a company in Standard & Poor's 500-stock index has been forced by shareholders to strip a CEO of chairman duties, according to RiskMetrics Group.
Standard & Poor's Ratings Services lowered its ratings on American Express (AXP) to BBB+ from A, based on S&P Ratings' view that funding and liquidity will remain concerns for AmEx in the long term.
The global spread of swine flu, a pandemic, is highly likely, the World Health Organization said and raised its alert level to Phase 5, the next-to-highest level in the worldwide warning system. Phase 5 had never been declared since the warning system was introduced in 2005 in response to the avian influenza crisis. Phase 6 means a pandemic is under way. The health organization said its decision was based on the continuing spread of swine flu in the United States and Mexico, particularly the increasing numbers of unexplained cases among people not exposed to travelers or to institutions like schools or hospitals where many people have close contact with one another and high rates of transmission might be expected.
In other company news Thursday, Sequenom (SQNM) shares plummeted after the company said the expected launch of its SEQureDx Down syndrome test is delayed due to discovery by company officials of employee mishandling of R&D test data and results. Accordingly, Sequenom is no longer relying on previously announced R&D test data and results, and will now try to release a validated test in the 2009 fourth quarter. Also, Sequenom posted a $0.29 first-quarter loss per share vs. a $0.19 loss on 18% lower revenue.
MGM Mirage (MGM) shares jumped after the company said it entered into an amendment to its senior credit facility, including a waiver through June 30, 2009, of the requirement that it comply with the senior credit facility's financial covenants. Separately, MGM and Dubai World reached a deal with CityCenter's lenders to fully fund completion of CityCenter for its scheduled opening later this year.
In earnings news Thursday, Dow Chemical (DOW) posted $0.03 vs. $0.99 first-quarter EPS on a 39% sales drop. The company posted $0.12 first-quarter EPS, excluding certain items. Wall Street was looking for a loss of $0.20-$0.21.
NYSE Euronext (NYX) posted $0.40 vs. $0.86 first-quarter EPS from continuing operations on a 5.8% revenue drop.
JDS Uniphase (JDSU) reported a $0.03 third-quarter non-GAAP loss per share vs. $0.14 EPS on a 27% revenue drop.
Starbucks (SBUX) posted $0.16 vs. $0.18 second-quarter non-GAAP EPS on an 8% same-store sales drop and a 7.6% total revenue drop. Wall Street was looking for $0.15.
International Paper (IP) posted $0.08 vs. $0.41 first-quarter EPS from continuing operations (before special items) on flat sales. Wall Street was looking for a $0.04 loss per share.
Visa Inc. (V) posted $0.71 vs. $0.39 second-quarter GAAP EPS on 13% higher net operating revenue.
Cigna (CI) reported $0.69 vs. $0.93 first-quarter adjusted EPS from operations despite a 4.5% revenue rise. Wall Street expected EPS of $0.89-$0.91.
First Solar (FSLR) shares soared Thursday after the company posted $1.99 vs. $0.57 first-quarter EPS on a sharp revenue rise.
In economic news Thursday, U.S. jobless claims fell 14,000 to 631,000 in the week ended April 25, from 645,000 the week before and better than the 640,000 that markets had expected. The 4-week moving average fell to 637,250 from 648,000. However, continuing claims continued to surge, rising another 133,000 to 6,271,000 in the week ended April 18, and another weekly record high. The insured unemployment rate climbed 0.1% to 4.7%.
The BLS employment cost index rose a meager 0.3% in the first quarter, and is up only 2.1% from a year earlier. Both increases are the lowest since the series began to be collected on the current basis on 2000. The market consensus was for a 0.5% quarterly gain. Benefits rose 0.5%, while wages were up only 0.3%. Private compensation costs were up only 0.2%, but state and local wages proved recession-resistant, climbing 0.8%.
"The data show no sign of inflation, and in fact a bit of deflation risk in the private sector," says S&P senior economist Beth Ann Bovino. "The Fed clearly has room to keep interest rates low, given the wage inflation report."
The BEA reported that personal income fell 0.3% in March, while consumer spending dropped 0.2%. Because of tax cuts, however, disposable income was down less than 0.1%. The consensus was for declines of 0.2% and 0.1%, respectively, for income and spending. The decline in spending raised the saving rate to 4.2% from 4.0% in February.