Investors weighed news that Citigroup is selling off $12 billion in debt and a profit warning from UPS. Crude oil surged to $112 per barrel
Stocks fell on Wednesday as oil price surged to an all-time high, and Citigroup (C) tidied up its troubled balance sheet by unloading $12 billion in debt.
Citigroup is selling the leveraged loans and bonds in a deal with private equity firms, which will pay slightly less than 90 cents on the dollar for the debt, according to the Wall Street Journal.
Also, United Parcel Service (UPS) said business is suffering from the weak economy and high fuel costs. It cut predictions for first quarter earnings by about 10%.
Meanwhile, Boeing (BA) says it must delay the first flight of its 787 Dreamliner. The first delivery of the aircraft will be delayed from the first quarter of next year to the third quarter. Research and development costs will increase, Boeing says, but it made no change to its 2008 earnings guidance and still expects strong growth in 2009.
The global credit crunch has been a difficult time for private equity firms, but on Wednesday Apollo Global Management, a New York-based private equity outfit, filed plans for an initial public offering. The stock offering could raise $418 million.
On Wednesday, the Dow Jones Industrial Average fell 49.18 points, or 0.39%, to 12,527.26. The S&P 500 index lost 11.05 points, or 0.81%, to 1,354.49. The Nasdaq composite index fell 26.64 points, or 1.13%, to 2,322.12.
On the New York Stock Exchange, 22 stocks fell for every nine moving higher. On the Nasdaq, the ratio was 21 to 7 negative.
Oil prices jumped higher Wednesday after government data showed crude inventories unexpectedly fell by 3.2 million barrels from the week before. On the NYMEX, a barrel of WTI crude oil at one point hit a record $112.21 per barrel. It ended the day $2.39 higher to $110.89. The inventory report "brought buyers into the market en masse, though profit taking ultimately brought prices lower into the close," Action Economics says.
The profit warning from UPS and the spike in oil prices were both tough blows for the trucking industry, which fell 4.47% on Wednesday.
The International Monetary Fund says it expects the world's economy to grow at a rate of 3.7% this year, half a percentage point lower than a January estimate. The IMF also expects little acceleration in growth in 2009, and estimates there is a 25% chance the global economy could grow 3% or less in 2008 and 2009, which is effectively a world recession, the report says.
Among other stocks in the news, Circuit City Stores (CC) posted earnings of 34 cents per share, vs. a 4-cent loss a year ago. Lower expenses offset a 10% drop in same-store sales and a 7.7% fall in total sales. International sales, however, jumped 17%, helped by favorable foreign exchange rates.
Radian Group's (RDN) credit rating was lowered by Standard & Poor's Ratings Services from A- to BBB. The insurer has been caught with exposure to the subprime mortgage market.
Arctic Cat (ACAT) says all-terrain vehicle sales are slower than expected and the firm has suffered from a parts supply issue, meaning the company now expects a loss in 2008 of 20 to 28 cents per share.
Sealy Corp. (ZZ) reported better-than-expected earnings of 17 cents per share, vs. 26 cents a year ago as revenue fell 5%. The firm suspended its quarterly dividend.
Invesco Ltd. (IVZ) said its average assets under management during the first quarter fell 6.5% to $476.6 billion, from $509.9 billion last quarter, with the global downturn in equity markets the main culprit.
Honeywell International (HON) says it won a contract, valued at more than $23 billion over its life, to supply turbofan propulsion systems to new business aircraft manufactured by Embraer (ERJ).
American Commercial Lines (ACLI) expects first quarter earnings-per-share be in the low single digits. The marine shipping firm blamed higher fuel prices, weather-related delays and a weak U.S. dollar, which has reduced commodity imports. Also, the firm's chief operating officer resigned.
Motorola (MOT) named David Dorman, a former chief executive at AT&T, as its chairman.
AMR Corporation's (AMR) American Airlines cancelled 850 flights on Wednesday, the second wave of cancellations so that the airline can reinspect wiring on MD-80 jets.
Major European indexes fell Wednesday. In London, the FTSE 100 index was edged down 0.11% to 5,983.90. Paris' CAC 40 index fell 0.77% to 4,874.97, and Germany's DAX index lost 0.75% to 6,721.36.
Stocks also fell in Asia, with Japan's Nikkei 225 down 1.05% to 13,111.89 and Hong Kong's Hang Seng index off 1.35% to 23,984.57.
Treasuries rallied on speculation that the Federal Reserve is preparing for more interest rates, S&P's MarketScope says. The ten-year note rose 25/32 to 10-10/32 for a yield of 3.46%, while the 30-year bond surged 39/32 to 101-03/32 for a yield of 4.31%.