Banking Woes Clobber Stocks

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In brokerage moves Tuesday, Stifel downgraded Bank of America to hold from buy.

Fox-Pitt reportedly cut its estimates for JPMorgan Chase, saying that JPMorgan Chase is not immune to the deteriorating credit environment. Fox-Pitt is keeping its outperform rating on JPMorgan Chase.

Friedman Billings Ramsey cuts its estimates and price target for Wells Fargo. FBR believes Wells will have to cut its dividend, if not this quarter, then sometime in the 2009 first half. FBR reiterated its underperform rating on Wells shares.

New York University economics professor Nouriel Roubini said Tuesday that the global banking system is technically insolvent, according to a Bloomberg report. Action Economics notes that Roubini has been a vocal "perma-bear" on the banking system, stocks and the economy.

The Wall Street Journal reports Italy's Fiat SpA and Chrysler LLC, in an attempt to revive two of the world's storied auto makers, are poised to announce a partnership as soon as today in which Fiat could take control of the U.S. company's operations, people familiar with the matter said. Under terms of a pact that is being hammered out, Fiat is likely to take a 35% stake in Chrysler by the middle of this year. It would have the option of increasing that to as much as 55%, these people said. Fiat, the stronger of the two, wouldn't immediately put cash into Chrysler. Instead it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S., these people said. Fiat would also provide engine and transmission technology to help Chrysler introduce new, fuel-efficient small cars, they said.

The New York Times Co. (NYT) raised $250 million from Mexican billionaire Carlos Slim after agreeing to pay an interest rate of more than 14%, the latest in a series of moves by the newspaper publisher to shore up its finances, according to the Journal.

The pound dropped to a record low against the yen and breached $1.40 for the first time since 2001 as the U.K.'s second bank-bailout plan in three months raised concern the global financial crisis is deepening. The government of U.K. Prime Minister Gordon Brown said it will spend an extra 100 billion pounds ($142 billion) to support the nation's banks and increase its stake in Royal Bank of Scotland Group Plc. The euro was down as a German survey showed investors remained pessimistic about the outlook for the European economy.

OAO Gazprom, Russia's natural-gas exporter, resumed shipments to the European Union via Ukraine, ending almost two weeks of supply disruption, Bloomberg and Reuters reported. Deliveries started through the pipeline at Sudzha on the Ukrainian border. Shipments have already arrived in Slovakia, RIA Novosti reported, citing an unidentified person at a gas-measuring station on the border with Ukraine. Naftogaz spokesman Valentyn Zemlyanskyi couldn't confirm that Slovakia was receiving Russian gas yet, he said by phone. Gazprom and Naftogaz signed a 10-year contract yesterday in a ceremony overseen by Russian Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Timoshenko. The agreement sent gas prices lower in the U.K., Europe's biggest market for the fuel, and pushed up Ukraine's hryvnia currency.

Among other stocks in the news Tuesday, Johnson & Johnson (JNJ) reported fourth-quarter EPS of 97 cents, vs. 82 cents one year earlier, despite a 4.9% drop in sales. The company set 2009 EPS guidance of $4.45-$4.55, which excludes the impact of special items but includes anticipated dilution of 3 cents-5 cents from the acquisition of Mentor Corp. (expected to close in January, 2009). J&J's guidance was seen as lower than expected, according to S&P MarketScope.

Forest Laboratories (FRX) posted third-quarter EPS of $1.03 (excluding items), vs. 96 cents one year earlier, on flat revenue. The company raised its $3.30-$3.40 fiscal 2009 EPS view to $3.35-$3.45.

Andrews is managing editor of the Investing Channel for BusinessWeek.com .