Markets & Finance

Stocks Finish Mixed


Bank of America's first quarter earnings disappointed Wall Street, while National City slashed its dividend. Oil prices closed above $117, a new record

Most stocks fell on Monday after Bank of America (BAC), the U.S.'s largest bank, reported unexpectedly weak financial results.

Also raising worries about the banking system was National City (NCC), which posted disappointing results and slashed its dividend while raising $7 billion in capital. Several other firms, including drug makers and toy companies, reported first quarter results Monday, starting a major week of earnings news.

Bank of America shares fell 2.5% after it posted earnings of 23 cents per share, vs. $1.16 a year ago, as revenue dropped 6.3%. The bank took a provision expenses of $6.01 billion, and reported trading-related losses of $1.31 billion. The company expected minimal economic growth in the second quarter, with a slight pickup in the second half of the year.

National City shares plunged 28% on Monday. The bank secured $7 billion in capital, but reported a $171 million loss in the first quarter. Its dividend will go from 21 cents per share to just 1 cent per share. Standard & Poor's equity analysts downgraded the stock from buy to hold.

On Monday, the blue-chip Dow Jones industrial average fell 24.34 points, or 0.19%, to 12,825.02. The broader S&P 500 index lost 2.16 points, or 0.16%, to 1,388.17.

However, the tech-heavy Nasdaq composite index moved up 5.07 points, or 0.21%, to 2,408.04. The Nasdaq owed its strength partly to Apple (AAPL), which moved 4.4% higher on optimism about its first quarter results, due on Wednesday.

Trading in the stock market was slow, with 18 stocks lower for every 14 higher on the New York Stock Exchange. On the Nasdaq, the ratio was 16 to 13 negative.

In an effort to ease the credit crisis, the Bank of England said Monday it would allow banks to exchange up $100 billion in mortgage-backed securities and other investments for United Kingdom government debt. "The scheme aims to improve the liquidity position of the banking system and increase confidence in financial markets," the Bank of England said.

Oil again hit an all-time high on Monday, with May West Texas Intermediate crude oil futures reaching a peak of $117.76 per barrel before closing up 79 cents to $117.48. Action Economics blamed high oil prices on "a weaker dollar, Nigerian supply outages and reports of an attack on a Japanese tanker near Yemen."

Also Monday, gas prices hit an average of $3.50 per gallon at gas stations across the country, according to AAA and the Oil Price Information Service.

"Since the lion’s share of household energy expenditures are for gasoline, higher pump prices will subtract from spending and overall growth," said Chris Lafakis of Moody's Economy.com. High gas prices will add to "the drags on consumer spending from higher unemployment, falling household wealth, and tighter credit standards," Lafakis added.

Among stocks in the news, Merck & Co. (MRK) posted earnings of $1.52 cents per share, vs. 78 cents a year ago, despite flat sales. The pharmaceuticals maker expects 2008 earnings of $2.84 to $4 per share.

Eli Lilly & Co. (LLY) reported earnings of 97 cents per share, vs. 47 cents a year ago, as sales rose 14%. The company says it saw encouraging sales growth for its drugs Cymbalta, Cialis, Alimta, Forteo and Humalog.

Wells Fargo (WFC) was downgraded by Oppenheimer from perform to underperform.

Mattel (MAT) reported a loss of 13 cents per share, vs. earnings of 3 cents a year ago. Sales fell 2.2%.

Hasbro (HAS) reported earnings of 25 cents per share, vs. 19 cents a year ago, as revenue rose 13%.

Hanesbrands (HBI) posted earnings of 38 cents per share, vs. 12 cents a year ago, despite a 5% drop in sales.

Halliburton (HAL) reported earnings of 64 cents per share, vs. 54 cents a year ago, as revenue rose 18%.

Basic Energy Services (BAS) and Grey Wolf (GW) agreed to merge. For each share, Grey Wolf shareholders will receive $1.82 in cash and 0.25 shares of the new company, to be called Grey Wolf. Each Basic Energy shareholder will receive $6.70 in cash and 0.9195 shares of the new company.

Alliance Data Systems (ADS) officially ended its acquisition deal with Blackstone Group (BX), and filed a lawsuit against Blackstone accusing the private equity firm of breaching its buyout agreement.

Major European indexes were lower Monday. In London, the FTSE 100 index fell 0.06% to 6,053. Paris' CAC 40 index lost 1.03% to 4,910.35, and Germany's DAX index dropped 0.83% to 6,786.55.

In Asia, Japan's Nikkei 225 rose 1.63% to 13,696.55, while Hong Kong's Hang Seng index was up 2.17% to 24,721.67.

Treasury market

Treasuries were mixed Monday. The 10-year note eased 02/32 to 98-08/32 for a yield of 3.71%, while the 30-year bond rose 09/32 to 98-11/32 for a yield of 4.48%.

Steverman is a reporter for BusinessWeek's Investing channel.

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